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Top Commercial Real Estate Projects to Impact Central PA

Posted on February 26, 2018 by Mike Kushner in Blog, Commercial Real Estate, Construction, Local Market No Comments

There is a lot of different commercial construction activity taking place in Central Pennsylvania. Looking at the top commercial real estate projects to be delivered in 2018, there are two retail projects and 4 Class A industrial projects that will enter the market, bringing with them new businesses, jobs and consumers. Let’s take a closer look at these top projects to better understand the likely impact they will have on Central Pennsylvania’s economy both now and into the future.

RETAIL

Lancaster County has two retail real estate projects under construction that are projected to have a significant impact on jobs and the economy. The anchor stores for each of the two projects are supermarket brands we have come to know and love – and ones that will surely attract consumers far and wide.

The smaller of the two projects is the Crossings at Conestoga Creek, located on U.S. Route 30 in Lancaster. The 90,000 square feet of retail space being developed will be anchored by Wegmans which will become the county’s second largest supermarket, trailing only Shady Maple Farm Market in East Earl, which is 150,000 square feet. With annual sales of $7.4 billion, Wegmans is the nation’s 32nd largest supermarket chain.

The Crossings, which sits on a 90-acre site between Toys R Us and the Lancaster Post Office, is being developed by High Real Estate Group. This new retail space will create a substantial number of jobs and attract shoppers from surrounding counties. The Wegmans store anticipates the creation of 500 to 550 new jobs, and they have already begun hiring for their grand opening in 2018.

Project at 206 Rohrerstown Road.

Lancaster’s Manheim Township has exciting news of its own as it prepares to welcome the grand opening of a Whole Foods market in 2018. The proposed $130 million Belmont housing and retail project includes the market, other retail stores and homes on farmland just south of Route 30.

Rendering of Belmont retail and housing project.

Anchoring the retail portion of the 110,508 square-foot project will be the 40,000-square-foot Whole Foods market. Additional tenants will be Two Farms, Inc. Panera Bread, Metro Diner, Fuddruckers, Citadel Federal Credit Union and Mod Pizza. The retail portion of Belmont will create nearly 1,000 jobs, while Belmont overall will generate millions of dollars in tax revenue for Lancaster.

INDUSTRIAL

Four new industrial real estate projects are also under construction in Central Pennsylvania. Though much larger in size, these spaces will have a slightly different impact on our local jobs and economy than Lancaster’s retails spaces.

The largest is the Class A industrial space located at 100 Goodman Drive in Carlisle. This is part of the Goodman Logistics Center Building 1. It was announced in August 2017 that the tenant for this 1,007,868 square-foot space will be syncreon, a global third-party logistics company headquartered in Michigan. From this prime industrial location, syncreon will have access to more than 40 percent of the population of the United States.

Project at 100 Goodman Drive.

Another Carlisle Class A industrial space soon to enter the market is the warehouse at 100 Carolina Way. This 805,600 square-foot space, currently not pre-leased, is located next to Keen Transport, U-Pack and ABF Freight. The third industrial construction project is the 738,720 square-foot space located at 112 Bordnersville Road in Jonestown (First Logistics Center – Building A). Situated in the heart of the I-78 and I-81 industrial distribution corridor, the industrial park is designed to accommodate two Class A distribution centers. The second space will be delivered in Q3 2018.

Project at 100 Carolina Way.

Project at 112 Bordnersville Road.

The final Class A industrial space which is under construction in Central PA is the Ace Hardware expansion located at 139 Fredericksburg Road, Fredericksburg. With 225,875 square-feet of space, this expansion will turn the building’s existing space into a combined 1.1 million square-feet of distribution space located at Lebanon Valley Distribution Center.

Rendering of the ACE Hardware expansion.

As Central Pennsylvania’s warehousing and distribution industry grows through the delivery of these new buildings, to what extent do you feel this will impact our local jobs and economy?

Also, which of Lancaster’s two new retail spaces do you feel will gain more traffic – short term but also long term?

Join in the conversation by leaving a comment below!

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Hundreds of Thousands of Square-Feet of New Office Space Coming to Central PA in 2016

Posted on August 1, 2016 by Mike Kushner in Blog, Local Market, Trends No Comments

Two new construction projects, located at the intersection of Carlisle Pike and Hogestown Road in Mechanicsburg, will deliver 258,000 square-feet of office space to Central Pennsylvania this year. Silver Spring Township is calling this construction “Class A Office Space Project” and are confident that, by attracting new businesses to the area, this space will benefit the entire community and its existing businesses.

Here’s a look at how the market has responded to this new space, as well as our analysis of the long-term trends that are yet to come.

Select Year-to-Date Deliveries/Top Under-Construction Properties:

In Q2 2016, Central Pennsylvania had just one building delivered, but it was substantial. Ranked number one on the Greater Philadelphia list of Year-to-Date Deliveries is the office space located at 974 Hogestown Road, Building 200, Mechanicsburg. It is Class A office space that is 100% occupied. Another 129,000 square-feet building, also located on Hogestown Road is under construction and projected to be completed in Q3 2016.

Absorption and Demand:

In Q2 2016, the net absorption has almost doubled since Q1 2016 and is nearly six times larger than it was in Q4 2015. In Q4 2015 it was 50,949 square-feet, increasing to 162,531 square-feet and further increasing this quarter to 301,337 square-feet. This is the largest net absorption we have seen in over a year, compounded by the fact that Central Pennsylvania’s last four years of net absorption has been varied and volatile. One new building delivered this quarter contributed 129,000 square-feet of pre-leased space to the market. There are 2 more buildings currently under construction and they are expected to deliver 136,590 square-feet of space to the market later this year.

Vacancy:

The vacant square footage decreased from 3,705,257 square-feet (Q1) to 3,532,920 (Q2). The vacancy rate also decreased to 6.5% (down 0.3% from last quarter). This is the lowest vacancy rate we have seen since prior to Q3 2012 and is only the second time it’s dipped into the 6.0% range, with last quarter being the first time. Though the vacancy rates have bounced slightly between increasing and decreasing each quarter since 2012, the overall trend has been a decrease.

Rental Rate:

This quarter, the quoted rental rate decreased from $17.32 (Q1) to $17.25. This is the first decrease that we have seen since Q3 2013. However, the fact that the price per square foot still remains above $17.00 makes it a higher price point than the market has experienced between the years of 2012-2015.

Employment:

Pennsylvania’s unemployment rate rose to 5.6% in June. The local labor force declined by 4,000 from May’s record high level of 6.54 million. The Pennsylvania Department of Labor reported that nine of the 11 sectors actually posted job increases in June; however, the two sectors that posted a loss, mining and logging and trade, transportation and utilities, were enough to cause the unemployment rate to rise. They each posted job losses of 600.

Our Summary/Analysis:

Silver Spring Township’s “Class A Office Space Project” is drawing new business into Central Pennsylvania. With 129,000 square-feet of 100% occupied space delivered to the market this quarter and another building of the same size to be delivered next quarter, there is a proven demand for this space. Furthermore, this spur of activity has the potential to draw even more businesses into the area who want to be part of the growing business community. This would come at an opportune time as the local market is experiencing a rise in unemployment.

What trend this quarter do you think will have the greatest impact on the Office Real Estate market moving forward? Share your insight 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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Second Quarter 2014 Shows Central PA Industrial Market Preparing for Growth

Posted on October 13, 2014 by mike.kushner in Blog, Commercial Real Estate, Local Market, Trends No Comments

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!

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Top 5 Growing Industries in Central Pennsylvania

Posted on October 1, 2014 by mike.kushner in Blog, Local Market, Trends No Comments

In some way, shape or form, we have all felt the impact of a struggling economy as it tries to heal itself. While data shows that things are heading in the right direction, it will not be a quick or instant fix. Luckily several industries in the Central Pennsylvania region have begun to see a small burst of growth and are projected to lead the way now through 2020 as the top growing industries.

What does the current health of our local workforce look like? And what top five industries are expected to see the most growth over the coming years? Let’s take a closer look at the statistics provided by the Pennsylvania Department of Labor and Industry.

Current Unemployment in Central Pennsylvania and the Commonwealth

As of August 2014, the unemployment rate in Harrisburg-Carlisle, PA MSA was 4.8 percent or an estimated 13,800 people currently without jobs. For the entire commonwealth of Pennsylvania, the current unemployment rate is 5.8 percent or an estimated 367,000 people currently without jobs. From one year ago at this time, this is a 1.6 percent improvement in the Commonwealth’s unemployment rate. What this data is telling us is that things are moving in the right direction, particularly in Central Pennsylvania, just perhaps at a rate slower than what we would prefer.

As this growth continues, it’s important to keep a pulse on the industries that are growing the fastest and how this might impact other areas of our economy, including commercial real estate. Here are the top five growing industries in Harrisburg-Carlisle, PA MSA based upon the highest estimated total employment change for the 2010-2020 time period.

Source: Pennsylvania Department of Labor and Industry

Administrative and Supportive Services

In 2010, it was estimated that there were 14,780 people employed as Administrative and Supportive Professionals. By 2020, this is projected to increase to 18,230 with a total employment change of 3,450 jobs.

Ambulatory Health Care Services

For Ambulatory Health Care Services, it was estimated in 2010 that 12,250 people were employed in this industry. By 2020, this is projected to increase to 14,690 with a total employment change of 2,440 jobs.

Professional, Scientific and Technical Services

In 2010, it was estimated that 14,120 people were employed by the Professional, Scientific and Technical Services industry. By 2020, this is projected to increase to 16,370 with a total employment change of 2,250 jobs.

Food Services and Drinking Places

In 2010 it was estimated that 18,190 people were employed by the Food Services and Drinking Places industry. By 2020, this is projected to increase to 19,890 with a total employment change of 1,700 jobs.

Hospitals

In 2010, it was estimated that 13,980 people were employed by hospitals. By 2020, this is projected to increase to 15,470 with a total employment change of 1,490 jobs.

What this means for the Central Pennsylvania Commercial Real Estate Market

Overall, strong job creation is expected to have a positive impact on the multifamily sector. As for commercial real estate, the demand for office space may also increase, but employers continue to pare per-employee space requirements, carefully considering space needs because of changing technology.

Job reductions in retail and branch banking, largely due to changes in consumer behavior and online technology, will take a toll on housing. This trend may benefit the apartment sector, but could negatively impact the retail real estate sector.

Do you find these growing industries to be expected or surprising? Share your insights by commenting below!

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