The Central Pennsylvania Retail Real Estate Submarket, which includes Adams, York, Lancaster, Perry, Dauphin and Cumberland Counties, experienced a surge of growth in second quarter 2014. Where did this growth occur? What was the cause? And what does this mean for the local economy? Let’s first take a closer look at what the numbers are telling us.
Second quarter 2014 experienced the most square-footage absorbed in one quarter since first quarter 2011. Total net absorption for this quarter was 298,553 square feet. This was a 237,473 square foot increase from first quarter 2014 which had a net absorption of just 61,080 square feet. After taking a major hit in second quarter 2012, net absorption has been slowly (and unsteadily) recovering; however, this is the highest spike it has seen in more than three years.
Vacancy rates dropped to 5.9 percent in the second quarter, falling from the previous quarter’s 6.2 percent. This is the lowest vacancy rate Central Pennsylvania has seen since before third quarter 2010. In correlation to the decrease in vacancy rates, rental rates increased by $0.27. At $11.47 per square foot, this is the highest rental rates we have seen since second quarter 2012.
Additionally, second quarter 2014 brought Central Pennsylvania some of its top retail leases as existing businesses changed locations and new businesses entered the area. Some highlights include White Oak Furniture’s 38,869 square-foot lease in North Londonderry Square, Palmyra. Get Air signed a 24,300 square-foot lease in Union Square, Harrisburg. A new Aldi location in Mill Creek Square, Lancaster took 17,594 square feet of retail space off the market in second quarter 2014. Finally, Sky Zone moved into a 24,045 square foot space in Gateway Square, Hampden Township. Combined, this is a total of 104,808 square feet of retail rental space absorbed by just four locations in a single quarter.
The Central Pennsylvania retail real estate market finished second quarter 2014 with encouraging indicators of growth. New and expanding businesses are requiring more space, pushing rental rates higher and vacancy rates lower than they have been in years. This growth is also sure to have a positive impact on the local economy as these businesses create more jobs and bring new revenue streams to the area.
No real estate class is more closely tied to economic recovery than the retail sector. While facing other obstacles such as the loss of major shopping center tenants, migration of retail users to pad sites, lack of new-format retailers and competing internet sales, the next six months will see continued recovery of gross retail sales as consumers increase household debt and feel more financially secure with restructured housing payments and more retirement equity. Continued housing market stability remains the key metric in the fate of local retail growth.
Have you experienced any benefits or drawbacks related to the burst of growth in the Central Pennsylvania retail real estate market? Share your insights by commenting below.