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!