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A Wave Of New Construction Could Make Philly A Contender For More Manufacturing

Philadelphia is not known as a leading manufacturing hub — at least not yet. But that could change thanks to ongoing and upcoming construction that puts it near the top of the nation's largest metros for new activity.

A rendering of DH Property Holdings' two-building, 760K SF distribution center at 5000 Richmond St. in Philadelphia, which broke ground in May 2023

The Philadelphia metro area ranks 16th out of 20 major metros across the nation set to benefit from an explosion in U.S. manufacturing, according to a new report from Yardi’s Commercial Cafe. In the long term, however, the city’s status could climb, since the same report indicates the city is undergoing the fifth-largest expansion of manufacturing space in the nation.

Commercial Search researched 100 metro areas with the most industrial manufacturing space as of April 2024 to gauge where they sit now as “most promising markets for a manufacturing resurgence.” In that respect, Philadelphia ranked relatively low among peer cities.

But with some 2.6M SF of manufacturing space now under construction, a period of stagnation could come to an end. Manufacturing construction accounted for only 0.7% of new space over the past five years, but Philly and other cities are about to get a boost from the need to produce semiconductor chips and other components for technology.

The region is also benefiting from pickup in the life sciences market and a push to move manufacturing closer to home, spurred by pandemic-era supply chain issues and a Biden administration push.

“We've definitely seen an influx of users looking throughout the Philadelphia area for manufacturing sites,” JLL Philadelphia Vice Chairman Larry Maister told Bisnow. “We've seen that as a result of macroeconomic conditions and the desire to onshore.”

Among manufacturing square footage being built or already present in the region, life sciences takes up a strong percentage, Douglas Ressler, Yardi's manager of business intelligence, wrote in an email.

“More than a million square feet of lab space are under construction to accommodate the region’s leading life sciences companies and biotech entrepreneurs,” Ressler's email states.

For example, bioMérieux, a French in vitro diagnostics company, will move to a new spec facility at Philadelphia’s Navy Yard this year to begin manufacturing gene-based tests. The site will include a 137K SF research and development lab and an office hub.

Adaptive reuse is more common than those projects built on speculation, though, JLL's Maister said. 

New York-based Plymouth Group acquired a former auto body stamping shop in North Philadelphia in 2019. But construction had not started for a planned 2.5M SF life sciences campus as of late last year, according to the Philadelphia Business Journal. Plymouth is waiting for interest from tenants first, it told PBJ.

Philadelphia's manufacturing industry has struggled of late. The Federal Reserve’s Philadelphia Manufacturing Index last month indicated that activity in the region had declined into the negative range for the first time since February. In addition, employment and shipments both declined.

Maister said a strong turnaround is dependent on not just building new facilities but strengthening its underlying fundamentals.

“Folks will pay for what you've given them and what they asked for,” he said. “It really comes down to the labor, the infrastructure, the proximity and then the ability to meet their timing with a custom facility. That's it.”

While Philadelphia's emerging status as a life sciences hub is spurring local interest, overall demand for manufacturing space across the nation is being driven by technological advances in artificial intelligence and other areas.

Dallas ranked first in Yardi's list of top manufacturing metros. The city is particularly poised to profit from the growth of tech as Siemens, Ballard Power Systems and GlobiTech join area chip giant Texas Instruments in expanding their production capabilities in the metro.

Chicago ranked second and Phoenix ranked third for their manufacturing industries overall, the report shows.

Back in Philly, the report noted that Boeing's base there and the presence of other defense firms would be helpful to the area's long-term manufacturing base.

“The space industry is seeing a rise in new entrants and startups, leveraging investor interest to fund product roadmaps and become first movers in commercial opportunities in space, EV’s and associated technology,” Ressler wrote.

And the defense industry, closely tied to space, is also considering sticking with manufacturers within their respective regions, as “reshoring capital is and will be deployed as part of the U.S. Defense strategy and returning greater manufacturing content to the U.S.”