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Central Pennsylvania’s Largest Retail, Industrial and Office Lease Deals in 2015

Posted on March 23, 2016 by Mike Kushner in Blog, CPBJ Articles, Local Market, Trends No Comments

Note: This article was originally published by the Central Penn Business Journal. Click here to read the original version.

The New Year is well under way, but before we get too far into 2016, it’s worth taking a look back at the largest commercial lease deals that occurred in the Central Pennsylvania market in 2015. These deals represent significant trends and help predict where the market may be headed in future quarters.

Each sector within the commercial real estate market – retail, office and industrial – experienced a unique trend worth noting. Without further ado, let’s take a closer look at the largest lease deals that occurred in Dauphin, Cumberland, York, Lancaster and Lebanon counties for the retail, office, and industrial markets in 2015.

Largest Retail Lease Deals

1. Community Aid leased the first floor of a Class B retail space located at 25-31 Rohrerstown Road, Lancaster from Urban Edge Properties. The 40,712 square-foot lease was signed in January 2015 and began in June 2015.

retail 1

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

2. Blue Mountain Thrift Store leased the first floor of a Class B retail space located at 2-22 North Londonderry Square, Palmyra from Lavipour & Company. The 38,669 square-foot lease was signed in May 2015 and began in August 2015.

retail 2

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

3. HomeGoods leased a Class B retail space located at 5084-5098 Jonestown Road, Harrisburg from Cedar Realty Trust, Inc. The 31,436 square-foot lease was signed in June 2015 and began in November 2015.

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

4. Tractor Supply leased a Class B retail space located at 100 Noble Blvd, Carlisle from Broad Reach Retails Partners, LLC. This 30,173 square-foot lease was signed in September 2015 and began in February 2016.

retail 4

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

Trends Worth Noting

Two of the top four largest retail lease deals of 2015 were thrift stores and HomeGoods is also a discount retailer, making 75% of the top leases related to discount shopping. Additionally, fourth quarter 2015 finished strong with a net absorption of 227,275 square-feet. Finally, the vacancy rate dipped below 5% (4.9%) for the first time since before the “Great Recession.” Combined, these trends tell us that the local market is recovering and absorbing 2^nd generation space specifically for thrift-type retailers that budget-conscious consumers tend to prefer.

Largest Office Lease Deals

1. Pennsylvania College of Health and Science leased a specialty office space located at 850 Greenfield Road in Lancaster. This 213,000 square-foot lease was signed on January 2015 and began on January 2016.

office 1

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

2. Deloitte leased a Class A office space located at 100 Sterling Parkway, Mechanicsburg from Hoffer Properties. This 172,792 square-foot lease was signed on November 2015.

office 2

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

3. United Concordia Companies, Inc leased a Class A office space located at 4401 Deer Path Road, Harrisburg from DeSanto Realty Group. This 102,000 square-foot lease is a renewal and began on June 2015.

office 3

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

4. P.E.M.A. leased a Class A office space located at 2605 Interstate Drive, Harrisburg from Corporate Office Properties Trust. This 86,660 square-foot renewal was signed on June 2015 and began on January 2016.

office 4

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

Trends Worth Noting

Two of the top four largest office lease deals in 2015 were renewals (United Concordia and P.E.M.A). Additionally, the fourth quarter was a lackluster, producing only 15,921 square feet of net absorption. Finally, the vacancy rate is rising slightly. Combined, these factors tell us that the office market is not performing as strong as the other commercial sectors. More than half of the largest leases were from existing businesses, as opposed to new businesses moving into the area. A low net absorption and rising vacancy rate also tells us the market still remains slightly volatile.

Largest Industrial Lease Deals

1. Chew.com LLC leased a Class B industrial space located at 40 E. Main Street, New Kingston from SK Realty Management. This 600,000 square-foot lease is a renewal and began on January 2015.

Industrial 1

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

2. A business (not named) leased a Class A industrial space located at 950 Centerville Road, Newville from KTR Capital Partners LP. This 570,000 square-foot new lease was signed in May 2015 and began on November 2015.

Industrial 2

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

3. Unisource Worldwide Inc. leased a Class B industrial space located at 4501 Westport Drive, Mechanicsburg from I & G Direct Real Estate 33K LP. This 502,446 square-foot lease is a renewal and began on February 2015.

Industrial 3

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

4. GENCO leased a Class C industrial space located at 221 S. 10^th Street, Lemoyne from GIC Real Estate International Pte Ltd. This 489,213 square-foot lease is a renewal and began on June 2015.

Industrial 4

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

Trends Worth Noting

Central Pennsylvania maintains its role as a dominant player among logistic markets. Industrial buildings will continue to set new records for scope, as distribution centers greater than one million square-feet become more prevalent. Last year, the local industrial market experienced a total of 7.8M square-feet of net absorption and 3.5M square-feet of space was under construction at close of 2015. We can expect continued growth throughout 2016, which is great news for businesses and professionals impacted by local industrial real estate.

What largest lease deal in Central Pennsylvania in 2015 do you find to be the most impressive or telling of future market trends? Share your insights by commenting below!

Note: This article was originally published by the Central Penn Business Journal. Click here to read the original version.

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New Sales, Construction and High Rental Rates Keep Industrial Market Active in Q3 2015

Posted on January 20, 2016 by Mike Kushner in Blog, Local Market, Trends No Comments

2015 continued to be a prosperous year for industrial real estate. Locally here in Central Pennsylvania, the market maintained the burst of growth it received in the second quarter and the quoted rental rates even increased yet again to a recent record high. New sales and construction projects have also kept the market quite busy, while indicating a healthy, growing economy.

Let’s take a look at all the activity that took place throughout the third quarter in the Central PA industrial real estate market!

Select Year-to-Date Deliveries:

Three of the top 10 Select-Year-to-Date Deliveries were delivered into the Central Pennsylvania submarket in third quarter 2015. The Nordstrom Distribution Center sits at the top of the list. This project began in first quarter 2014 by developer H & M Company, Inc. and contributed an RBA of 1,142,000 square-feet. It is 100% occupied. In spot number four, Prologis Carlisle – Building I delivered 1,029,600 square-feet of industrial space to the market and is not currently occupied. Finally, the project at 1 Ames Drive, Carlisle delivered 595,000 square-feet of space and is also not currently occupied.

Select Top Under Construction Properties:

Three new construction properties broke ground this quarter in the Central Pennsylvania area. In Union Township, Lebanon County, MRP Realty broke ground on their 500,000 square-foot project located at 575 Old Forge Road. It is expected to be delivered in first quarter 2016. The Susquehanna Logistics Center also broke ground this quarter and will deliver 423,300 square-feet to the market in first quarter 2016. Finally, a project at 196 Kost Road, Carlisle broke ground and will deliver 483,990 square-feet in fourth quarter 2015. None of these projects are currently pre-leased.

Select Top Sales:

Three of the select top sales from third quarter 2015 occurred in the Central Pennsylvania submarket. Ranking number two on the list, the Carlisle Pike Distribution Campus sold for $45,300,000 to STAG Industrial Management, LLC. Ranking number three, the Harrisport Business Center in Middletown sold to American Capital Corporation for $43,466,000. And ranking number four, SK Realty/HSRE PA Industrial Portfolio in Mechanicsburg sold to High Street Realty Company for $39,250,000.

Absorption and Demand:

Net absorption remains in the black, but has decreased since last quarter. The market absorbed 1,279,455 square-feet this past quarter, compared to second quarter’s 2,688,332 square-feet. Still, net absorption serves as an overall indication of a healthy economy considering we have not seen a negative net absorption since second quarter 2013

Vacancy:

Looking at the Central Pennsylvania submarket, vacancy rates have popped back up to 5.0% in third quarter 2015. This is a 0.5% increase from the previous quarter’s 4.5%. The industrial market’s vacancy rate is back to where it began the year in first quarter 2015, but it is still lower than previous years’ which have spiked as high as 8.4%, such as in fourth quarter 2011.

Rental Rates:

The quoted rental rate continued to increase this quarter by a total of three cents. Currently at $4.09, this is the highest quoted rental rate the Central Pennsylvania submarket has seen since prior to fourth quarter 2011. It is also only the second quarter that it has been in the $4 range during that time.

Our Summary/Analysis:

Third quarter 2015 was a critical moment for the industrial real estate market in Central Pennsylvania. After experiencing a burst of growth in second quarter 2015, specifically with its increase in net absorption and quoted rental rate, it could be anticipated that the market would flux a bit downward in the following quarter. Rather, third quarter 2015 did a good job maintaining this trend to a reasonable degree. Even with a lower net absorption rate, comparatively, the recent record high rental rate balanced the positive with the negative. Overall, the local industrial real estate market continues to be very favorable for businesses, landlords and developers.

Looking toward 2016, the data from third quarter 2015 further backs up our prediction that the local industrial real estate market will experience robust growth. As employment expands, manufacturing increases and oil prices remain favorable, we can look forward to a healthy and growing industrial economy here in Central Pennsylvania.

With all the activity going on in the Central PA industrial market, what factor do you find to be the most beneficial for business? Share your personal insights by commenting below!

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Robust Growth Predicted in 2016 for Central PA Industrial Real Estate Market

Posted on January 8, 2016 by Mike Kushner in Blog, Local Market, Trends No Comments

Are you ready to start off 2016 with some good news? The industrial real estate market in Central Pennsylvania is riding a wave of robust economic growth and all signs point to a continuing boom that could be the greatest in the sector’s history!

Looking at the fourth quarter data, our latest research confirms that the industrial sector of the local real estate market has now absorbed over 8.5 million square feet of warehouse space since first quarter 2015. With virtually every industrial sector experiencing increased demand—from data processing hubs to distribution space and manufacturing centers—the four quarters of 2015 saw more demand for industrial space than compared to the last 20 years.

What exactly is driving this demand and what other trends can we expect to result from this economic growth? Let’s take a look!

Three factors driving this high level of industrial demand:

Employment: Across the nation, the real GDP has been expanding at a better than 4% growth rate since April of 2014 (nearly 150 bps higher than the historical norm). The faster rate of growth has triggered a burst of new hiring across nearly all job sectors and geographies. The U.S. economy created 2.9 million net new nonfarm jobs in 2014, and more specifically, industrial employment grew by 442,000 net new payrolls in 2014 – the most industrial-related job growth in 17 years.

Looking specifically at Harrisburg-Carlisle MSA, the unemployment rate is 3.5 percent as of November 2015 and the lowest it has been in recent months. We also closed the year with 294,626 nonfarm jobs which is nearly 7,500 more jobs than last year at this time and among the highest we have seen throughout 2015.

Manufacturing: Adding to the good news is the ISM Manufacturing Index, which has been in solid expansion mode for 25 consecutive quarters. Such robust trends have led to a 5.2% year-over-year increase (nationally) in industrial production—a rate of growth that went unmatched throughout the 2000’s.

Again looking locally, Harrisburg-Carlisle MSA, Lancaster MSA and York-Hanover MSA each rank among the top 10 regions in the state for manufacturing jobs. Combined, these areas (that correlate with CoStar’s Central PA submarket) employ a total 89,356 people in this industry alone, as of second quarter 2015. Manufacturing jobs continue to trend upward after recovering from a major dip in 2010.

Oil Prices: The past six months of continually falling oil prices have given the bulk of the U.S. economy an additional boost and will provide another tailwind for growth moving forward. Since June of 2014, crude oil prices (WTI) have declined more than 50%, making the national average gas price $2.17 per gallon as of mid-January, 2015. Most consumers and businesses are responding favorably to the drop in energy prices, and consumer spending has ramped up for vehicle sales, durable goods, building materials, clothing and accessories, food and beverage, etc.

In the Harrisburg-Carlisle MSA, oil prices are down about 18.6 percent from last winter, beating the U.S. Energy Information Administration’s prediction of a 15 percent drop this winter. The average for heating oil was $2.999 on Dec. 1, according to the Energy Information Administration, compared with $3.683 a year ago. Local Marcellus Shale production has helped keep oil prices low while also adding jobs to the economy.

Final Takeaways

All of these factors bode well for industrial real estate, even as the rising value of the dollar and weakening economic conditions abroad present headwinds for the year ahead.

Additionally, new construction activity is showing no signs of slowing as there is currently 3.5 million square feet under construction in the Central Pennsylvania Submarket, of which 98% is being constructed on spec. The majority of new spec inventory is expected to deliver in the first quarter of 2016 and will push the overall vacancy rate northward for the market.

Despite the large amount of spec space coming online next quarter, tenant demand has been particularly strong in new inventory constructed over the past two years, evidenced by the market’s low vacancy and strong positive absorption.

The new space that has come into the market at the end of 2015 should continue this trend and generate a significant amount of activity in the near-term.

Which of the market factors discussed do you believe will be most powerful in 2016 and beyond? Join in the conversation by commenting below!

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5 Reasons You Should Work with a Real Estate Broker Who Is a CCIM

Posted on December 3, 2015 by Mike Kushner in About Us, Blog, CCIM No Comments

You may or may not be familiar with the term CCIM. This stands for Certified Commercial Investment Member, and simply put, is a designation that recognizes experts within the commercial and investment real estate industry.

This is a strong point of differentiation among real estate brokers. As you likely know, when you go to find a broker in your area, you are inundated with options. It can be hard to narrow them down and know who will offer you a superior level of service and expertise. Looking for a CCIM designation is a great place to start.

Just like you would carefully consider the various levels of education and certifications of your lawyer or doctor, you should also consider the education and certifications of your real estate broker. A CCIM is will bring to the table valuable qualities that can contribute to an overall more positive working relationship.

Let’s take a look at five reasons you should work with a real estate broker who is a CCIM.

It demonstrates commitment to the industry

You can be a real estate broker without being a CCIM; it’s not required. It takes extra drive and commitment to seek out this designation and successfully complete it. Just as someone pours a lot of time and resources into earning their graduate degree, a CCIM has also worked hard and invested a lot to earn such a title.

Don’t these sound like the same qualities you want to see in your real estate broker? Someone who is driven, committed, hardworking and not looking for “the easy way out” is a person who will also likely work tirelessly on your behalf to seek out all available options to deliver success.

It places them within an elite group of real estate professionals

There are more than 150,000 commercial real estate professionals in the United States alone, but only an estimated 6 percent hold the CCIM designation. Narrowing down your selection of potential brokers by their CCIM designation will quickly identify this elite group and help you to see who rises to the top.

It provides access to an impressive professional network

A CCIM designation provides independent brokers with access to a professional network of over 13,000 CCIM’s in 1,000 markets across the United States and in 30 other countries. It’s like an exclusive society of real estate professionals who all share the same level of education, experience and commitment and who stand ready to help their “brothers” out whenever needed. This is a powerful professional network that is not easily replicated. As a client, it’s also a network you want to have access to!

It ensures you are working with the latest tools and technology

CCIM brokers have access to an exclusive suite of online technology and tools. Such resources would be cost prohibitive or too much work for an independent broker to seek out on his or her own. But with the direction and connections of the CCIM Institute, all CCIMs are provided with access to tools that help them stay ahead of trends and find answers to solve unique problems on behalf of their clients.

It requires competency and experience

In order to become a CCIM, you have to do a lot more than fill out a form or pay dues. The designation is awarded to professionals who complete over 160 hours of graduate level courses and who pass a comprehensive exam covering financial analysis, market analysis, user decision analysis and investment analysis. Additionally, a CCIM must prepare a portfolio demonstrating practical real world experience. It’s truly a combination of competency and experience – one without the other is not enough to make you a CCIM.

Now that you know more about what it takes to become a CCIM, you’re likely wondering “How do I work with one?” Finding a real estate broker in your area who is a CCIM is simple. Go to www.ccim.com and click the “Networking tab” then click “Find a CCIM.”

…Or you can simply contact Omni Realty Group. Owner, Mike Kushner has earned his CCIM and exemplifies these five valuable assets of working with a CCIM with every client!

Do you have any other questions about the CCIM designation or how it differentiates real estate brokers? Join in the conversation by commenting below!

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Manufacturing Continues to Grow in Central Pennsylvania: What’s Going On and Why It Matters

Posted on October 27, 2015 by Mike Kushner in Blog, CREDC Articles, Local Market, Trends No Comments

This article has been featured by the Capital Region Economic Development Corporation (CREDC) and can be also viewed on their website.

Manufacturing Continues to Grow in Central Pennsylvania According to the PA Manufacturers Association, manufacturing and its affiliated businesses contribute $11 Billion to the economy in south-central Pennsylvania alone, providing our community with an estimated 110,000 jobs. This industry is a huge part of our local economy and its growth impacts the growth of many other businesses.

It should come as good news that the demand for manufacturing space is on the rise. Central PA is considered one of the premier “Big Box” industrial and multi-tenant logistics markets because of the area’s affordable cost of living, raw land and non-union labor. Additionally, the governmental approvals required for warehousing and distribution are comparatively easy and straightforward compared to other states or regions

As for location, this area is a central hub where products, after being manufactured, can be easily distributed throughout the northeast United States (via I-81, I-83, and I-78). Central PA also offers easy access to Port of Baltimore, MD and Port of Elizabeth, NJ and is within a one-day drive to 40% of the nation’s population.

For businesses who need to manufacture and distribute their goods far and wide, Central Pennsylvania is an obvious choice for setting up shop. No matter your particular business or industry, this growth matters to you too! It’s important to understand these trends and the various ways they will likely impact your business. Let’s take a look.

Current Market Trends Worth Noting:

Six more manufacturing buildings entered the market in the last quarter alone, giving us the highest RBA we have seen in more than two years at 62,988,707 square feet. Among this space, 60,527,229 square feet are currently occupied which showcases the high demand for manufacturing space in Central Pennsylvania.

Net absorption has also shown tremendous improvement since the 2013. Just two short years ago, net absorption was in the red by hundreds of thousands of square feet. The lowest point occurred in 2013 Q2 when net absorption was negative 403,861 square feet. The very next quarter, net absorption shot up to a positive 598,898 square feet. Though there has been some fluctuation in the market since, we have remained mostly in the black and currently have a net absorption of 30,468 square feet.

Additionally, Central Pennsylvania’s vacancy rate for manufacturing space has shown significant improvement from the 5.6% we saw in 2013 Q3. A steady decrease has brought this rate down nearly two whole percentage points to the 3.9% we see today.

Finally, the average rental rate has declined approximately $.20/SF since 2013, but has stabilized at approximately $3.50/SF in 2014 and 2015.

What this means to the Central Pennsylvania region:

To the many businesses that are directly and indirectly impacted by the manufacturing industry, the current real estate market is a positive indicator that other markets will follow this favorable trend. Growing manufacturing companies produce more jobs which spur growth in almost every other aspect of the economy from office and residential space to restaurants and shopping centers.

To the 110,000+ people who are employed by the Central Pennsylvania manufacturing industry, the market shows positive signs that these businesses continue to grow and also offers the potential of even more manufacturing businesses being drawn to the area.

Overall, Central Pennsylvania maintains its reputation for being a hub for manufacturing and distribution. The industrial real estate market, specifically for manufacturing space, reflects the strong and steady growth would we expect to see in this region.

View the original article on the CREDC website here.

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New Construction in Central PA Predicted to Increase Office Space Vacancy

Posted on October 21, 2015 by Mike Kushner in Blog, Construction, Local Market, Trends No Comments

In third quarter 2015, the Central Pennsylvania submarket for commercial office space showed some positive trends for growth and demand. We have four projects under construction that will deliver more than 400,000 square-feet to the market within the coming year, with a majority of this space already preleased.

However, this promising news for the market is tempered by the fact that many tenants will vacate other office space within the Central Pennsylvania market to occupy these newly constructed office buildings. How will this impact net absorption and vacancy rates? Let’s first take a look at the data for third quarter 2015 and apply this toward what we can expect to see in the future.

Select Top Under Construction Properties

Currently four different commercial office properties are under construction in the Central Pennsylvania submarket. The Cornwall Health Center, located in Harrisburg Area East, broke ground in fourth quarter 2014 and is scheduled to be delivered in fourth quarter 2015. It has an RBA of 54,234 square-feet and is 100% preleased. The TecPort Business Campus – Building A broke ground this quarter and is scheduled to be delivered in third quarter 2016. It has an RBA of 7,590 square-feet. It is not preleased and its quoted rental rate is listed as negotiable.

Additionally, a Class A office space project is under construction at the intersection of Carlisle Pike and Hogestown Road. The two buildings that make up this project have a combined 259,000 square-feet of space are expected to be completed in spring 2016. Finally, there is Class B office space at 1250 Camp Hill Bypass that is under construction. Its 82,000 square-feet of space is 100% preleased.

Select Deliveries this Quarter:

Although four of the top 15 Select Year-to-Date Deliveries in 2015 were from the Central Pennsylvania submarket, just one was newly delivered in third quarter 2015. The Vista Plaza consists of three floors and 32,500 square-feet of office space. It is 45% occupied and is currently priced at $21.23 per square-foot. ECI Constuction, LLC completed the new addition to Vista Plaza on Manor Drive in Mechanicsburg, PA. The addition nearly doubled the original square footage of the building by adding a new wing to match the existing wing. Some of the current tenants include Duck Donuts and MS Consulting, Inc.

Rental Rates:

This quarter showed an increase in quoted rental rates. The current price of $17.14 per square-foot is a $0.07 increase from last quarter and the highest rate we have seen since prior to 2011.

Vacancy:

In third quarter 2015, the vacancy rate in the Central Pennsylvania submarket for office space decreased from 7.8% to 7.5%. The vacant square-footage also decreased from 4,120,331 square-feet to 3,962,599 square-feet.

Absorption and Demand:

With one more building being delivered to the market this quarter, the total RBA increased to 52,581,663 square-feet. Net absorption also experienced a substantial increase, more than tripling last quarter’s 50,466 square-feet to the 190,232 square-feet that closed out third quarter 2015. But take note, both net absorption and vacancy rates will soon be greatly impacted by the 400,000+ square-feet that will be delivered to the market in the next year!

Our Summary/Analysis:

Central Pennsylvania has four under-construction office space projects that have a combined 402,824 square-feet of space that is soon to be delivered to the market. As new inventory is added, with many tenants vacating existing space in Central Pennsylvania to do so, we can expect this to impact net absorption and vacancy rates significantly.

It will be important to closely watch this data over the coming quarters as some of these large projects reach completion. As a result, we expect net absorption to drop back into the negatives. Also, we expect vacancy rates to rise as high as 8.1% (assuming no outside business move into the market or existing businesses expand which has not been the trend in 2015, but was in 2014). Quoted rental rates may also dip because of this increase in vacancy.

While new construction certainly has its benefits, adding this much square-footage in such a short amount of time to the market can have some not so desirable effects from the standpoint of landlords and sellers. On the flip side, businesses looking to move or expand within Central Pennsylvania should be encouraged by the larger and more competitive selection of space available.

How do you anticipate new office space construction impacting the Central Pennsylvania market into the future? Share your personal insights – or ask a question by commenting below!

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Back in Black: Central PA Retail Market Increases Net Absorption, Rental Rates in Q2

Posted on September 23, 2015 by Mike Kushner in Blog, Local Market, Trends No Comments

It is a good time to be building or renting retail space in Central Pennsylvania!

Second quarter 2015 closed out with the highest quoted rental rate we have seen since at least 2011. Retail businesses are willing to pay the $11.75 per square foot – and more – to move into highly sought after space in Harrisburg, Lancaster, York and the surrounding areas.

Combine this with the fact that the market absorbed a combined 144,318 square feet of space, bringing us back into the black with net absorption, and you can see why we’re hopeful that this is the start of a healthy and prosperous trend in Central PA real estate.

Let’s take a deeper dive into what the numbers are telling us about second quarter 2015 and what we can expect for the future of retail real estate in the Central Pennsylvania submarket.

Select Top Retail Leases

Properties all across the Philadelphia retail market continue to change hands as businesses exit and enter leases. Looking specifically at the Central Pennsylvania submarket, there are several retail leases that occurred in second quarter 2015 that are worth noting.

Blue Mountain Thrift Store now occupies the space at 2 N. Londonderry Square in Harrisburg Area East. In Harrisburg Area West, Peebles moved into the Shippensburg Shopping Center. And finally York County welcomed CSL Plasma into its Eastern Boulevard Plaza.

Select Year-to-Date Deliveries:

Three of the top 10 year-to-date deliveries in the Philadelphia retail market occurred in the Central Pennsylvania submarket. The Messina Highlands project in Shrewsbury was completed this quarter with an RBA of 30,000 square feet and a quoted rental rate of $26.06. A ton of popular shops including AT&T and Panera Bread will occupy this space. Currently, 32% of the space is still available for rent.

Another retail property located at 2108 S. Queen Street, York was delivered this quarter with an RBA of 16,000 square feet and is 100% occupied. Finally, the construction project at 750 Lititz Pike, Lititz was also completed in Q2. This property has an RBA of 10,820 square feet and its quoted rental rate is $17.

Select Top Sales:

Among the top select sales in Q2, the Central Pennsylvania submarket had two of the top nine on the list. The Shoppes at Susquehanna Marketplace in Harrisburg came in at number three. Clarion Partners purchased this from Stanberry Development, LLC for $44,000,000. In Lancaster, the Manor Shopping Center was sold by the Real Estate Equity Company, LLC to Wharton Realty Group for $34,990,000.

Vacancy:

This quarter, the vacancy rate dipped ever so slightly from 5.6% to 5.5%. These numbers have remained fairly stable ever since first quarter 2014 which is the last time we saw it at 6.0% or higher. The vacant square feet also reflected this small change in vacancy rate, decreasing by 93,642 square feet.

Rental Rates:

Looking at the quoted rental rates, Q2 experienced a $0.20 raise from $11.55 to $11.75. This is the highest rental rate we have seen in the Central Pennsylvania retail submarket since third quarter 2011.

Absorption and Demand:

Last quarter, the net absorption dropped into the red at negative 160,861 square feet. In second quarter 2015, we are back in the black with 144,318 square feet. This significant change was certainly a reflection of the 3 new buildings that were delivered this quarter.

Our Summary/Analysis:

The Central Pennsylvania submarket experienced some exciting changes in second quarter 2015 that indicate a healthy and growing retail industry. Returning to a positive net absorption and increasing quoted rental rates to the highest they have been in more than four years demonstrates the demand for retail space in the local area. Additionally, three new buildings delivered to the market, with two more under-construction, are signs that Central Pennsylvania retail businesses are demanding more space to grow!

The retail industry is a strong indicator of economic health. At the local level, there is a lot we can take from this quarter’s numbers and apply them toward predicting the growth and changes in our overall economy. Retail businesses are investing in this area, moving and expanding into new spaces that are driving up net absorption and the quoted rental rate. We should enjoy this growth and excitement, as it is sure to catch the attention of other retail businesses who may also consider making Central Pennsylvania “home” for some of their stores.

How will the growth of the local retail real estate market impact you or your business? Share your personal insights – or ask a question by commenting below!

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Q2 Shows Why Central PA’s Industrial Real Estate is a Premiere ‘Big Box’ Market

Posted on August 18, 2015 by Mike Kushner in Blog, Local Market, Trends No Comments

To the hundreds of thousands of people who call Central Pennsylvania home, we have found countless reasons to fall in love with the area from our beautiful blend of distinct cultures to the Capital city and Hershey’s Chocolate World.

But to industrial businesses that rely upon the ease and affordability of shipping their products to make a living, Central Pennsylvania has an entirely unique list of reasons why planting roots in this area makes sense.

Looking at how our industrial real estate market performed in Q2 2015 provides us with some clear insights into why Central PA is such an attractive location for “Big Box” warehouse and multi-tenant logistics users around the world – and growing! Let’s take a look at what the numbers tell us.

Select Top Under-Construction Properties

Four of the top five Select Under-Construction Properties this quarter are located in the Central PA submarket. Combined, ProLogis Shippensburg, Nordstrom Distribution Center, ProLogis Carlisle – Building 1 and LogistiCenter Carlisle – Building 2 total more than 4 million square feet of new industrial space that will be delivered to the market between next quarter and Q2 2016. These high profile projects are an exciting sign of a growing and thriving industrial market here in Central PA.

Select Year-to-Date Deliveries:

Year-to-date, the Central Pennsylvania submarket has delivered over 1.7 million square feet of new industrial space. The property delivered specifically this quarter is located at 561 S. Muddy Creek Road in East Cocalico Township, Lancaster. This is the new location of Pet Food Experts’ $12 million, 197,000 square foot facility that is 100% occupied.

Vacancy:

In Q2, we experienced a substantial decrease in vacancy that resulted in a vacancy rate of 4.7%. Having fallen from 5.2% last quarter, this dip is the first we have been below 5% since 2008. In fact, back through 2011 we have most commonly seen vacancy rates in the high 7% and low 8%. This trend is sure to have impact in other areas of the market as well.

Absorption and Demand:

The net absorption decreased from last quarter’s 2,908,709 square feet to 1,423,990 square feet this quarter. Given last quarter delivered three new buildings and this quarter delivered just one, this is an appropriate net absorption for the quarter that does not signal a red flag

Rental Rates:

For the first time since Q4 2009, the quoted rental rate has exceeded $4.00 a square-foot, coming in at $4.07 for Q2 2015. This $0.13 increase to last quarter’s quoted rental rate of $3.94 is certainly connected to the decrease in vacancy that is also at a recent record low.

Our Summary/Analysis:

Central PA is considered one of the premier “Big Box” industrial and multi-tenant logistics markets because of the area’s affordable cost of living, raw land and non-union labor. Additionally, the governmental approvals required for warehousing and distribution are comparatively easy and straightforward compared to other states or regions

As far as location, it is a central hub where products can be easily distributed throughout the northeast United States (via I-81, I-83, and I-78) and has seen significant capital invested for expansion of its intermodal system. Central PA also offers easy access to Port of Baltimore, MD and Port of Elizabeth, NJ and is within a one-day drive to 40% of the nation’s population

Now having gained an understanding of just why Central PA makes such an attractive spot for industrial businesses, we can connect the dots as to what the market growth and demand we experienced in the second quarter means for our overall economic health.

Most importantly, this data means that businesses are continuing to move into the area, particularly “Big Box” businesses that rely heavily on distribution. With over 4 million square-feet currently under construction and the highest rental rate in six years, this trend has lasting power. These growing businesses will likely fuel the local area with jobs, spending and an increase in transportation along our highways. Overall, we should feel excited and hopeful about these market trends. Any cons to industrial growth will most certainly be outweighed by the pros!

How will the growth of the local industrial real estate market impact you or your business? Share your personal insights – or ask a question by commenting below!

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