Without a careful eye, you might think that the data for Second Quarter 2014 was simply copied and pasted from the First Quarter. In reality, you wouldn’t be too far off. The Second Quarter for the Industrial Market did not bring about too many changes or advancements. Much like the Office Market, changes were minimal, yet still important to note.
More of the Same
The market’s existing inventory, delivered inventory, under construction inventory and vacancy did not move with any degree of significance. However, net absorption fell from 583,945 square feet to 58,704 square feet. This is a continuing trend from Fourth Quarter 2013 when net absorption was 1,783,592 square feet and fell to one-third of this number by the following quarter. This is also the lowest we have seen net absorption since one year ago at this time.
Additionally, there was a slight change in quoted rental rates which fell from $3.91 last quarter to its current $3.86. This is the lowest rate we have seen all year.
While most of Second Quarter 2014 brought us more of the same for the local industrial market, there are some exciting signs of growth for the not too distant future. Let’s take a closer look at some of the top under construction properties and top industrial leases for this quarter to analyze the growth and movement of new industrial businesses into the Central Pennsylvania submarket.
Central Pennsylvania ranks highest with Top Under Construction Properties of the quarter
Three of the Top 5 Under Construction Properties in CoStar’s Philadelphia Industrial Market are located in the Central Pennsylvania submarket. Number one on the list is Liberty at Shippensburg on Olde Scotland Road. This building has an RBA of 1.7 million and is 100 percent preleased. It is expected to be delivered in third quarter 2014. Third of the Top 5 is the Nordstrom distribution center on Zeager Road which has an RBA of more than 1.42 million and is 100 percent preleased. This will be delivered in first quarter 2015. Fourth of the Top 5 is a building located at 766 Brackbill Road in Kinzers and leased by Urban Outfitters Inc. It has an RBA of 1.14 million, is 100 percent preleased and will be delivered in first quarter 2015.
The local market is also a leader among Top Industrial Leases
Three of the Top 5 Industrial Leases (based on lease square footage for deals signed in 2014) in CoStar’s Philadelphia Industrial Market are located within the Central Pennsylvania submarket, specifically Harrisburg West. Number two of the Top 5 is a building located at 40 E. Main Street with 242,520 square feet. Number three of the Top 5 is a building located at 6 Doughten Road with square feet that was leased by KENCO. And number five of the Top 5 is a building located close to number two at 34 E. Main Street and has 180,333 square feet of space. This building was leased by Allen Distribution.
Is this a sign of good things to come?
Central Pennsylvania continues to be a dominant player among major logistics markets. “Large” is indeed big right now. Industrial buildings are setting new records for scope, as distribution centers greater than one million square feet become more prevalent. The need to improve supply chain efficiency to save time, money and fuel is a driving force behind the rise of giant distribution centers. It seems likely that the market for industrial space should remain resilient, which allow companies to experiment with different fulfillment strategies and respond to the demands of high-turnover online retailing.
What’s most important to consider is the inherent conflict between the need for space and the availability of such space in major markets. Mega distribution facilities and the operations within them often require significant land parcels to accommodate larger truck courts and parking areas. However, major parcels, in major markets, closer to an urban core are limited and, ultimately, finite.
What are your expectations and predictions for the Central Pennsylvania Industrial market over the coming months and years? Share your own insights by commenting below!