Economy
Total employment across the PA Distribution Corridor increased 0.5% year-over-year (YOY) in Q3 despite continued economic uncertainty and uneven consumer demand. The regional unemployment rate declined 50 basis points (bps) YOY to 4.1%, 10 bps below the national average. Manufacturing remained an important component of the regional economy, accounting for 12.4% of total employment, 280 bps above the national share.
Supply And Demand
The Corridor’s vacancy rate increased by 60 bps quarter-over-quarter (QOQ) to 8.2% in Q3, largely driven by additional vacant space in the Split following departures by consumer electronics and automotive firms. Vacancy declined in the Lehigh Valley and Northeastern PA.
Despite the increase in overall vacancy, year-to-date (YTD) leasing activity totaled 15.9 million square feet (msf), already surpassing the 2025 annual total by 12.8%. Central PA and Lehigh Valley accounted for 71.0% of Q3 leasing. Thirteen new leases exceeded 100,000 square feet (sf) in Q3, including one larger than 1.0 msf, with e-commerce, logistics, and food and beverage users driving the largest transactions. YTD net absorption totaled 5.2 msf, with the Lehigh Valley and I-81S each recording more than 1.0 msf of net occupancy gains.
Occupiers have already committed to more than half (52.5%) of the product delivered YTD through build-to-suit (BTS) construction or preleasing, limiting newly delivered vacant space. The active construction pipeline increased to 18.1 msf in Q3, as 6.6 msf of new starts outpaced 2.6 msf of deliveries. This included 2.9 msf of BTS projects underway in Q3—down from 4.2 msf one year prior—while speculative development strengthened.
Outlook
Industrial market fundamentals are expected to remain resilient, supported by healthy leasing and additional occupancy gains anticipated in Q4. While geopolitical uncertainty and elevated costs may continue to influence occupier decisions, the Corridor remains well-positioned due to its proximity to major population centers, labor reach, and diverse industrial inventory.
