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Commercial Real Estate’s Impact on Last Mile Logistics

Posted on July 15, 2021 by Mike Kushner in Blog, Commercial Real Estate, Industrial, Retail No Comments

Logistics is the relay race that materials and goods compete in every day moving across land, sea, and air cargo to the end-user, and commercial real estate is the field on which it all plays out.

The ability for the items we need to make it from the place in which they are created to where the end-user can access them is essential to our existence. When logistics are inefficient or disrupted on even the smallest scale, it takes virtually no time until the world feels the impact of delayed goods. At a minimum, it’s an inconvenience, but it can quickly escalate into a global panic where progress is delayed and prices skyrocket.

We need no better example as to how this plays out in real life than to look at the impact of COVID-19 on the world’s shipping and distribution, specifically here in the United States. The challenges we continue to face with shipping and receiving items overseas, combined with unprecedented labor shortages have caused scarcity, unlike anything our modern world is used to. And the ripples caused by this disruption left virtually no industry unscathed.

This also shines a spotlight on the importance of last mile logistics, which is the final step of the delivery process from a distribution center or facility to the end-user. Many items delayed by COVID-19 were within miles of reach, but without labor and infrastructure to deliver these items within their usual time frame, basic building materials and household items couldn’t be restocked fast enough to keep shelves full.

Shifting the Modern Logistics Model

How does this relate to commercial real estate? Redundancy and the ability to process disruption are two key elements required to support the fast-moving, high-volume requirements of modern-day logistics. And that is particularly true of the “shop-online-and-deliver-to-me” era in which we find ourselves.

Based upon the challenging lessons learned from the global pandemic, logistics are shifting toward a new model that replaces the decades-old “just-in-time” supply-chain model rooted in tens of thousands of physical retail stores in order to meet the demands of a “shop and take home” economy. Therefore, we should expect to see a disruption in commercial real estate demand and use. There will be less dependency on physical stores and more on modern eCommerce warehouses that will be increasingly automated with less reliance on labor.

The Golden Triangle

We can then expect the rapid continuation of traditional retail big-box stores being replaced by hundreds of millions of square feet of eCommerce warehouses in an effort to follow the modern logistics infrastructure. These new eCommerce warehouse locations are being developed in what some economists have coined as the “Golden Triangle.” The Golden Triangle refers to an area of the East Midlands that has become renowned for its high density of distribution facilities and being home to some of the biggest names in retail.

The Golden Triangle is the epicenter of last mile logistics. This area that makes up the nation’s logistics infrastructure has never been more vital in a post-WWII era, and this includes a dependency on commercial real estate. As thousands of retail stores shutter their brick and mortar locations in the coming months, the demand for commercial real estate space shifts from retail to industrial with thousands of new logistics and eCommerce fulfillment warehouses opening and expanding within the Golden Triangle.

Impact of Current Events

These trends in commercial real estate and logistics will be further exacerbated by current events such as Biden’s plan for a “go-broad” infrastructure bill. This plan proposes a massive $2.25 trillion to fix America’s rundown infrastructure, “green up” the economy and invest in new technologies. Furthermore, there is the pending mega rail merger between Kansas City Southern and Canadian National that will create the first true Class 1 railroad in North America extending from the deep interior of Canada, down through the center of the United States, and on south to the most vital ports and manufacturing regions in Mexico.

And if that wasn’t enough to ensure massive changes coming down the line that will impact commercial real estate and logistics, there is also the industrial REIT merger between Monmouth MREIC and Sam Zell’s EQC in which he is trading in his office commercial real estate model for a new hybrid-powered industrial real estate model that is going all-in on logistics.

What we’re witnessing is a shattered economy that is rapidly adjusting in order to right the many ships that have veered off course in the wake of the pandemic. While there are many unknowns, what we can be sure to expect is widespread, lasting changes sweeping the commercial real estate market – some we’ve seen coming for quite a while, and others that will completely take us by storm.

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Central PA’s Top Commercial Real Estate Leases in 2020

Posted on February 22, 2021 by Mike Kushner in Blog, Commercial Real Estate, Industrial, Local Market, Office Leasing, Trends No Comments

In spite of 2020’s black swan event (COVID-19), leasing activity in Central Pennsylvania continued with mixed results. Normally insulated from strong economic downturns, the coronavirus tested the Central Pennsylvania Region and there are reasons for both concern and optimism.

On the negative side: massive job losses in retail and a significant manufacturing base could cause serious disruption. Roughly 30,000 people were employed in the retail sector in March, and close to that number were also employed in manufacturing. Though manufacturing’s future remains less clear and the market could be buoyed by the region’s deep presence of food production, retail has been hard hit by the shutdown.

While being the state’s capital will provide some shelter in the coming months, Pennsylvania’s fiscal situation is a mess. Financial troubles could portend future government layoffs and by the third quarter, the state had already cut 2,500 government jobs.

There’s little chance the economy doesn’t cool in Central Pennsylvania but the market does have some factors working in its favor. BLS data shows the market has lost about 5% of its total non-farm employment levels since March. While this is obviously a significant reduction, it does compare well with nearby Lehigh Valley and Pittsburgh. While Harrisburg’s demographic gains won’t raise any eyebrows, the region does stand out in Pennsylvania. Cumberland County is one of the fastest-growing counties in the state, likely aided by the growing logistics and warehouse presence along the Carlisle Corridor.

The logistics sector is expected to hold up well and perhaps even grow as e-commerce continues its acceleration. An Adobe report from June showed that online spending was up 77% year over year, representing growth in e-commerce that experts were not forecasting the country to reach until 2026. Central Pennsylvania’s location is prime for shipping, and such a scenario could lead to more jobs and perhaps fuel additional growth in population.

Additionally, Central Pennsylvania is also trying to evolve into a knowledge-based economy and has adopted business-friendly incentives that have helped create nearly two dozen tech startups, which have generated 1,000 jobs. Education and health services jobs, which now track evenly with government jobs in the state’s capital, grew by more than 4% annually.

How does the ever-shifting economy impact the commercial real estate market, particularly as it pertains to commercial leases?

It comes as no surprise that industrial real estate leases in 2020 carried the largest square footage, with the top lease coming in at more than 1.1M SF to Lowes Distribution Center in Shippensburg. Additionally, Bob’s Discount Furniture will be moving into the former Best Buy in Lancaster, and Hershey will be getting a new Big Lots in the Hershey Square Shopping Center. The top five flex leases also provided businesses with hundreds of thousands of Class B Flex Space. Keep reading to view the top 5 leases from 2020 for office, retail, industrial, and flex space.

Top 5 Office Leases

#1 – 1929 Lasalle Ave – Bldg 134, Lancaster, PA 17601

High Associates Ltd. leased out the 29,000 SF Class C Office Building built in 1974 to Equipment Depot beginning in January of 2020 for a 1-year term. It had previously been vacant for 164 months.

#2 – 1803 Mt Rose Ave – Bldg B, York, PA 17403

Kinsley Properties leased out the 23,704 SF Class C Office Building built in 1988 to IDS, LLC beginning in February of 2021 for a 5-year term. It had previously been vacant for 13 months.

#3 – 990 Peiffers Ln – NRG Engine Services, Harrisburg, PA 17109

Campbell Commercial Real Estate leased out the 23,382 SF Class B Office Building built in 1987 to UPS Midstream Services Inc. beginning in February of 2020 for an unspecified term.

#4 – 1770 Hempstead Rd – Greenfield Corporate Center, Lancaster, PA 17601

High Associates Ltd. leased out the 16,088 SF Class B Office Building built in 1990 to an unnamed leasee beginning in November of 2020 for unspecified term. It had previously been vacant for 19 months.

#5 – 200 Corporate Center Dr – 200 Corporate Center Dr, Camp Hill, Camp Hill, PA 17011

Cushman & Wakefield leased out the 11,655 SF Class A Office Building built in 1986 to an unnamed leasee in August of 2020 for an unspecified term. It had previously been vacant for 52 months.

Top 5 Retail Leases

#1 – 3975 Columbia Ave, Columbia, PA 17512

The 86,100 SF Class B Retail Building built in 1992 was leased to U-Haul, as the single tenant, beginning in June of 2021.

#2 – 1801 Hempstead Rd – Former Best Buy, Lancaster, PA 17601

Bennett Williams Commercial and ShopCore Properties leased out the 45,915 SF Class B Retail Building built in 2009 to Bob’s Discount Furniture beginning in September of 2020 for a 10-year term. It had previously been vacant for 23 months.

#3 – 921 E Main St – Mount Joy Square Shopping Center, Mount Joy, PA 17552

Bennett Williams Commercial leased out the 44,761 SF Class B Retail Building built in 1989 to an unnamed business beginning in March of 2021. It had previously been vacant for 25 months.

#4 – 1130-1170 Mae St – Hershey Square Shopping Center, Hummelstown, PA 17036

Bennett Williams Commercial leased out the 38,202 SF Class B Retail Building built in 1994 to Big Lots beginning in June of 2020 for a 10-year term. It had previously been vacant for 12 months.

#5 – 4075 E. Market St – York, PA 17402

The Flynn Company leased 27,000 SF Class C Industrial/Manufacturing Building built in 1972 to No Piston, LLC beginning in October of 2020 for a 5-year term.

Top 5 Industrial Leases

#1 – 1 Walnut Bottom Rd – Shippensburg 81 Logistics Center, Shippensburg, PA 17257

Colliers International leased out the 1,100,500 SF Class A Industrial Building completed in 2020 to Lowes Distribution Center beginning in February of 2021. It had previously been a vacant shell space for 160 months.

#2 – 200 Goodman Dr – Building 2, Carlisle, PA 17013

CBRE leased out the 938,828 SF Class A Industrial Building built in 2017 to Syncreon beginning in December 2020. It had previously been vacant for 44 months.

#3 – 951 Centerville Rd – Penn Commerce Center – Building A, Newville, PA 17241

Cushman & Wakefield leased out the 807,998 SF Class A Industrial Building to an unnamed leasee. It had previously been vacant for 5 months.

#4 – 4875 Susquehanna Trl – ES3 LLC Bldg 1, York, PA 17406

The 790,042 SF Class B Industrial Building was leased to ES3, a Professional, Scientific, and Technical Services company, beginning in February 2020 for an unspecified term.

#5 – Centerville Rd – Penn Commerce Center – Building B, Newville, PA 17241

Cushman & Wakefield leased out the 753,000 SF Class B Industrial Building to an unnamed lease beginning on January 2021. It had previously been vacant for 3 months.

Top 5 Flex Leases

#1 – 60-64 Industrial Rd, Elizabethtown, PA 17022

Cushman & Wakefield leased out the 113,720 SF Class B Flex Space completed in 1992 to WillScot beginning in September of 2020. It had previously been a vacant shell space for 13 months.

#2 – 1740 Hempstead Rd – Building 380, Lancaster, PA 17601

High Associates, Ltd. leased out the 34,000 SF Class B Flex Space completed in 1964 to an unnamed business beginning in January of 2021. It had previously been a vacant shell space for 92 months.

#3 – 6400 Flank Dr, Harrisburg, PA 17112 – Harrisburg Area East Ind Submarket

NAI CIR leased out the 32,212 SF Class B Flex Space completed in 1987 to an unnamed business beginning in June of 2020. It had previously been a vacant shell space for 3 months.

#4 – 1000 Kreider Dr – Building A, Middletown, PA 17057

CBRE leased out the 12,030 SF Class B Flex Space completed in 2006 to an unnamed business beginning in August of 2020. It had previously been a vacant shell space for 8 months.

#5 – 3545 Marietta Ave – Silver Spring Center, Lancaster, PA 17601

Prospect Leasing & Management leased out the 7,192 SF Class B Flex Space completed in 1997 to an unnamed business beginning in January of 2021 for a 5-year term. It had previously been a vacant shell space for 6 months.

With so much square footage having exchanged hands in Central PA in 2020, it will be interesting and important to keep an eye on how these businesses impact the region. There were quite a few properties that made it to this list that had sat vacant for years. Now with new tenants, this will drive jobs and contribute to the local economy. And with some of these leasing terms for 5, even 10 years, these businesses have made a commitment to being here long-term.

Among all the top leasing deals that took place in 2020, which sector – office, retail, industrial, or flex – do you think will have the largest and most immediate impact on the Central PA region? Share your thoughts by leaving a comment below.

*Data of the top commercial real estate sales provided by CoStar.

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Central PA’s Top Commercial Real Estate Sales in 2020

Posted on January 15, 2021 by Mike Kushner in Blog, Commercial Real Estate, Industrial, Local Market, Retail, Trends No Comments

2020 was quite the year, but even a global pandemic did not halt the exchanging of commercial real estate. In Central Pennsylvania, the sale of commercial real estate continued well through the end of the year with hundreds of millions of square-feet being bought and sold. As to be expected, the largest commercial real estate transactions in both square feet and price was industrial space. More than 3.5 million SF of industrial space exchanged hands in 2020 with the most taking place in York and Carlisle which are major distribution destinations along the I-81 corridor.

The top 5 multifamily sales in Central PA ranged in price in location, from 160 Class A units in one transaction and 663 Class C units in a Manufactured Housing/Mobile Home Park in another. The largest exchange of space in a single transaction was 339,612 SF in a townhouse complex in Marietta.

Three of the top five office sales exchanged hands between the same two parties. AR Global purchased 50,800 SF of office space, primarily occupied by health centers, from RVG Management and Development Company. In retail sales, the Blackstone Group L.P. sold 274,764 SF of York retail space to a joint venture between Triple Crown Corporation and J.C. Bar Properties, Inc. in three separate transactions.

Keeping reading for a full list of the top 5 commercial real estate transactions, for office, retail, industrial, and multifamily, that took place throughout Central Pennsylvania in 2020.

Top 5 Office Sales

#1 – 1171 S Cameron Street, Harrisburg, PA 17104

Olcam Corporation sold the 121,518 SF Class C Office Building built in 1989

to Boyd Watterson Asset Management on July 22, 2020 for $20,500,000 ($168.70/SF). At the time of sale, the property was 100% occupied by the Pennsylvania Department of Labor & Industry.

#2 – 300 Corporate Center Drive – Camp Hill Corporate Center, Camp Hill, PA 17011

LNR Partners LLC sold the 173,296 SF Class A Office Building built in 1989 (renovated in 2005) to Linlo Properties on July 6, 2020 for $14,394,731 ($83.06/SF). At the time of sale, the property was 62.5% occupied by Deloitte and Pennsylvania Health & Wellness, Inc.

#3 – 805 Sir Thomas Court – Arlington Place – Old English Gap Professional Park, Harrisburg, PA 17109

RVG Management and Development Company sold the 24,800 SF Class B Medical Building built in 1994 to AR Global Investments, LLC on January 16, 2020 for $7,812,000 ($315.00/SF). At the time of sale, the property was 100% occupied by Pennsylvania Spine Institute and PinnacleHealth Express.

#4 – 2140 Fisher Road, Mechanicsburg, PA 17055

RVG Management and Development Company sold the 15,000 SF Class C Office Building built in 1990 (renovated in 2016) on January 16, 2020 to AR Global Investments, LLC for $5,394,000 ($359.60/SF). At the time of sale, the property was 100% occupied by PinnacleHealth Shepherdstown Family Practice.

#5 – 5400 Chambers Hill Road – Swatara Medical Center, Harrisburg, PA 17111

RVG Management and Development Company sold the 11,000 SF Class B Office Building built in 1988 (renovated in 1993) to AR Global Investments, LLC on January 16, 2020 for $5,394,000 ($490.36/SF). At the time of sale, the property was 100% occupied by Chambers Hill Family Med Center and Select Physical Therapy.

Top 5 Retail Sales

#1 – 2449 E Market Street – Lowe’s – York Marketplace, York, PA 17402

The Blackstone Group L.P. sold the 125,353 SF Retail Freestanding (Community Center) Building built in 1955 (renovated in 2004) to Triple Crown Bar York Marketplace, LLC on November 3, 2020 for $13,916,926 ($111.02/SF). At the time of sale, the property was 100% occupied by Lowe’s.

#2 – 2415 E Market Street – Giant Food – York Marketplace, York, PA 17402

The Blackstone Group L.P. sold the 74,541 SF Retail Supermarket (Community Center) Building built in 1994 to Triple Crown Bar York Marketplace, LLC on November 3, 2020 for $11,939,079 ($160.17/SF). At the time of sale, this property was 100% occupied by GIANT.

#3 – 2501-2555 East Market Street – York Marketplace, York, PA 17402

The Blackstone Group L.P. sold the 74,870 SF Retail Storefront (Community Center) Building built in 1994 to Triple Crown Bar York Marketplace, LLC on November 3, 2020 for $11,407,972 ($152.37/SF). At the time of sale, this property was 95.2% occupied by 13 tenants: Firehouse Subs; Gamestop; Kids First Swim School; Market Street Viet Thai Cafe; MyEyeDr.; Oreck; Pet Valu; PLCB Wine & Spirits Store; Red Lobster; Starbucks; Super Shoes; Verizon Wireless; VIP Nail & Spa.

#4 – 1360 Columbia Avenue – Stone Mill Plaza, Lancaster, PA 17603

Brixmor sold the 76,056 SF Retail Supermarket (Community Center) Building built in 1988 (renovated in 2007) to Tristate Ventures, LP on March 13, 2020 for $10,772,036 ($141.63/SF). At the time of sale, the property was 88.5% occupied by GIANT and Great Clips.

#5 – 1278 S Market Street – GIANT – Elizabethtown Shopping Center, Elizabethtown, PA 17022

Frist City Company sold the 65,146 SF Retail Supermarket (Neighborhood Center) Building built in 1982 to James Gibson on November 30, 2020 for $7,338,000 ($112.64/SF). At the time of sale, the property was 100% occupied by Citizens Bank, GIANT Food Stores of Carlisle, and Starbucks.

Top 5 Industrial Sales

#1 – 3419 Ritner Highway – Ritner Logistics Center, Newville, PA 17241

Artemis Real Estate Partners sold the 1,215,240 SF Class A Distribution Building built in October 2019 to Exeter Property Group on October 1, 2020 for $85,000,000 ($69.95/SF). At the time of sale, the property was unoccupied.

#2 – 4875 Susquehanna Trail – ES3 LLC Bldg 1, York, PA 17406

C&S Wholesale Grocers, Inc sold the 790,000 SF Class B Distribution Building built in 2002 to Ahold Delhaize on February 11, 2020 for $75,665,684 ($95.78/SF) as a sale leaseback. At the time of sale, the property was 100% occupied by ES3 (also the seller).

#3 – 4875 Susquehanna Trail – ES3 LLC Tower 2, York, PA 17406

C&S Wholesale Grocers, Inc sold the 705,000 SF Class B Distribution Building built in September 2009 to Ahold Delhaize on February 11, 2020 for $64,234,316 ($91.11/SF) as a sale leaseback. At the time of sale, the property was 100% occupied by ES3 (also the seller).

#4 – 192 Kost Road – Silver Springs Distribution Center, Carlisle, PA 17015

Black Creek Group sold the 422,400 SF Class A Warehouse Building built in June 2016

to Prologis, Inc. on January 8, 2020 for $30,218,510 ($71.54/SF). At the time of sale, the property was 100% occupied by Acme.

#5 – 100 Louis Parkway – Carlisle Distribution Center, Carlisle, PA 17015

Black Creek Group sold the 400,596 SF Class A Warehouse Building Built in 2006 to Prologis, Inc. on January 8, 2020 for $28,658,651 ($71.54/SF). At the time of sale, the property was 100% occupied by Overstock.

Top 5 Multifamily Sales

#1 – 2035 Patriot Street – The View at Mackenzi, York, PA 17408

Morgan Communities sold the 224 Unit, 242,323 SF Class B Apartments Building built in 2006 to Larken Associates on March 2, 2020 for $28,058,244 ($115.79/SF; $125,260/Unit). At the time of sale, units were 90.6% occupied.

#2 – 310 Honeysuckle Drive – The Villas of Castleton, Marietta, PA 17547

Keystone Custom Homes sold the 160 Unit, 339,612 SF Class A Apartments Building built in 2009 to Steinman Real Estate LLC on February 28, 2020 for $25,191,760 ($74.18/SF; $157,448/Unit). At the time of sale, units were 96% occupied.

#3 – Fox Run Road – Chesapeake Estates of Grantville, Grantville, PA 17028

David Sherrill sold the 663 Unit Class C Manufactured Housing/Mobile Home Park built in 1987 to RHP Properties on October 29, 2020 for $21,040,000 ($18,785.71/SF; $60,634/Unit).

#4 – 1 Chesapeake Estate – Chesapeake Estates of Thomasville, Thomasville, PA 17364

David Sherrill sold the 663 Unit Class C Manufactured Housing/Mobile Home Park built in 1986 to RHP Properties on October 29, 2020 for $19,800,000 ($19,800.00/SF; $62,658/Unit).

#5 – 200 South Court Street – Mulberry Station Apartments, Harrisburg, PA 17104

AION Partners sold the 100 Unit, 116,667 SF Class B Apartments Building built in 1987 (renovated in 2020) to Post Road Management on January 16, 2020 for $12,100,000 ($103.71/SF; $121,000/Unit). At the time of sale, the property was 100% leased.

In the coming months and years, it will be important to keep an eye on the top commercial real estate sales in the region. As office, retail, industrial, and multifamily real estate exchanges hands, the businesses who own this space, and their tenants stand to have a great impact on the local, and global economy moving forward.

Among all the top transactions that took place in 2020, which do you think will have the largest and most immediate impact on the Central PA region? Share your thoughts by leaving a comment below.

*Data of the top commercial real estate sales provided by CoStar.

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COVID-19 Shines Spotlight on Value of E-Commerce and Industrial Real Estate

Posted on November 16, 2020 by Mike Kushner in Blog No Comments

As we approach the holiday season, and with holiday shopping already in full swing, it’s become a glaring truth that COVID-19 has divided retail companies into two distinct groups: those with functioning e-commerce businesses, and those without.

During the first 10 days of the holiday shopping season, U.S. consumers spent $21.7 billion online, a 21% year-over-year jump, according to Adobe Analytics. This likely stems from the fact that 63% of consumers are avoiding stores and buying more online, with health concerns due to the pandemic driving that decision for 81% of shoppers. Furthermore, U.S. consumers are poised to spend $198.73 billion with online retailers this holiday season. That would be a 43.3% year-over-year jump from $138.65 billion for the same November-December period in 2019.

What this means for businesses hoping to get in on some of these holiday shopping dollars is that they need to have an easy and efficient way for consumers to buy their products online and have them quickly delivered to their doorstep. For many businesses that don’t already have this infrastructure in place, they could sustain a huge blow this holiday season that may be too much to recover from. In contrast, businesses like Amazon and Walmart who are leading the charge in e-commerce are set to have a banner year when it comes to online holiday shopping.

Central PA Region Boasts Strong Market for Industrial Real Estate

In order to support a thriving e-commerce business, it requires ample and functional industrial real estate space to store and distribute massive amounts of inventory. Right here in Central Pennsylvania, Amazon and Walmart remain the most active industrial real estate leasees for Q3 2020. And it makes sense as to why. Amazon is by far the leader of the pack with nearly 13 million square feet of industrial space in this market alone. Coming in second is Walmart with 3 million square feet, and all other players in the field far behind that. This shows just how much of an e-commerce monster Amazon really is and how well prepared they are to take full advantage of this holiday season’s online retail.

And it’s no coincidence that the leading e-commerce businesses have chosen to take stock in the Central Pennsylvania region. The I-81 corridor is widely recognized as a hot spot for industrial real estate, warehousing, and distribution. With easy access to all the major markets and highways, it’s obvious why the Lehigh Valley ranks #7 and Harrisburg ranks #18 on the national list of net absorption as share of inventory. Additionally, Lehigh Valley’s rent growth came in at 4.9% year-over-year, making it among the top 20 cities in the nation.

Industrial Real Estate Trends and Tracking

When we look at the largest industrial leases in Pennsylvania, we can quickly identify the strength of the Central Pennsylvania region and the I-80 Corridor, much of which is occupied by e-commerce businesses.

What’s also interesting to see when mapped out is how the most concentrated industrial real estate markets tend to follow the major roadways, which is what fuels manufacturing, warehousing, and distribution. Quick and convenient access to these roadways is essential for e-commerce businesses who need to deliver product to customers quickly and efficiently.

And with one more graph, we can appreciate the peaks and valleys of constantly shifting vacancies in industrial real estate throughout the Central PA region, the most volatile being Lebanon and most steady being York.

Major Takeaways

The longer the pandemic drags on, the more likely that consumers stick to their new habits. Companies are racing to adapt. The stakes are high, especially for small businesses that were slow to embrace the e-commerce trend and are now desperately trying to catch up. Previously, many retailers might have said e-commerce is a relatively small part of the overall business, maybe 10%. Now that’s grown dramatically to 30% or 40% plus for many retailers and heading into the holiday season with most likely record-setting online sales, businesses who relied on foot-traffic are not likely to rise with the tide.

Even e-commerce giants can’t afford a misstep. This is a pivotal year for all retail and industrial businesses wh rely on manufacturing, storage, and distribution of product to bolster sales. Those who were not prepared for the major shift to online shopping this holiday season will feel it in their bottom line. For those who have not already adapted, the best time is and will always be ‘now.’

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COVID-19 Prompts Manufacturing Companies to Make Long-Term Changes

Posted on October 28, 2020 by Mike Kushner in Blog, Commercial Real Estate, Industrial, Trends No Comments

According to a new study, more than 90% of companies expect the disruption of global supply chains caused by the pandemic to have long-term effects on their businesses. This has caused manufacturers to closely examine various aspects of their businesses and consider what may need to change, possibly permanently, to adjust to the new COVID-19 reality we are living in.

Furthermore, businesses have begun to realize the importance of continuously monitoring their suppliers, especially those overseas, for risks and disruptions as they try to accommodate many personnel issues, supply chain disruptions, and uncertainty in general.

Keep reading to learn what this new survey and other news sources are reporting about the change to manufacturing and supply chain businesses as the result of the pandemic, and how these changes stand to impact the commercial real estate market.

Widespread Impact in a Variety of Areas

Respondents to the survey estimated that on average about 43% of their entire supply chain suffered some kind of interruption. For the majority of respondents, this was due to fluctuation in supplier pricing and safety restrictions causing orders to be paused or slow to fill. The next most common interruption was the need to find suppliers in other geographic regions due to import/export restrictions, followed by the challenge of suppliers going bankrupt. Many manufacturing businesses didn’t experience just one of these interruptions, but a combination of several which made for an exceptionally chaotic time when COVID-19 first hit. Now that the world has gone on to accept where we are the new reality, at least for the foreseeable future, manufacturing and supply chain industries are shifting from short-term considerations to long-term changes that will make them more stable in the future to sustain a global event in the future.

What this means for commercial real estate: As businesses are reacting to the widespread impact of COVID-19 on manufacturing and supply chain operations, there is a valuable opportunity for commercial real estate owners and investors here in the United States to position their properties as solutions for addressing these changing needs. Businesses may need more space, or a different configuration of space to accommodate their new systems and processes. The more flexible CRE professionals can be with their space, the more they will be able to attract new tenants and even expand their portfolio.

Shift to Reshoring and Nearshoring

In an effort to learn from what this pandemic has already taught us, manufacturing businesses have shifted their focus toward solutions that stand to reduce risk and protect against future shocks as of the likes of COVID-19. Many businesses are taking steps toward retooling their supply chain, and one major shift in mindset is reshoring or nearshoring manufacturing that was once offshore. Reshoring is the process of bringing back overseas supply chain operations to the country of origin and nearshoring is the process of bringing supply vendors closer to the point of origin, from farther overseas destinations. Reshoring and nearshoring an operation’s most vital materials reduces the risk of being held hostage by offshore suppliers.

In that same survey, 97% of respondents said they agree that better visibility into their suppliers is imperative. When various components of a business are broken up and distributed all across the globe, it can be nearly impossible to keep your thumb on all aspects of operations and it can make it harder for these points of operations to communicate effectively with one another. Now more than ever, businesses are seeing the value of keeping their operations within the same country, if and when it’s possible.

What this means for commercial real estate: For commercial real estate owners and investors, this means the demand for industrial space is going to rise. As businesses look to retool their supply chain and bring components back to the United States, they will inevitably seek more warehousing and manufacturing space to accommodate their growing needs.

The Smartest Businesses Are Acting Now

In such a challenging environment, the most forward-thinking businesses are not wasting time addressing vulnerabilities in their supply chains. Many respondents (98%) are planning to take some kind of action to build resilience against future disruptions – and the top courses of action are identifying and employing alternative suppliers, continuous monitoring, and increasing reshoring capabilities. Additionally, diversifying or localizing supply chains are a way to reduce costs, as well as better prepare for future economic disturbances.

What this means for commercial real estate: Now is the time to position your CRE assets as solutions for manufacturing and supply chain businesses. If your space is a fit for such needs, you should market it as such. Be direct in the unique benefits your space can provide a business. For industrial businesses, this means a large and functional space located conveniently for transportation. The Central Pennsylvania region is accessible to major cities and transportation hubs on the East Coast. Commercial real estate space along the I-81 and I-83 corridors will benefit from any beefing up of supply chains and logistics in this area.

With the impact of COVID-19 causing many manufacturing businesses’ to change how and where they make, store, and transport goods, the silver lining is that the Central Pennsylvania is likely to experience an increase in demand for industrial and manufacturing space. This will in turn drive new construction, bring more jobs to the area, and strengthen the overall economy. This is not to overlook the many significant challenges the pandemic has caused to all industries, but it’s at least one path that is headed in the right direction, particularly for industrial real estate in Central PA.

Do you have a question or idea related to manufacturing, commercial real estate, and COVID-19? Join the conversation by leaving a comment below.

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The Good, the Bad, and the Unbelievable: How the Pandemic Has Forever Changed Industrial Real Estate

Posted on October 13, 2020 by Mike Kushner in Blog, Industrial, Trends No Comments

Industrial real estate had been booming for the last five years, mostly propelled forward by e-commerce and changes in consumer behavior. If that wasn’t enough for industrial real estate owners to adapt to, a global pandemic hit and impacted the way just about everything worked previously. As we adjust to this new reality, there’s one looming question: can industrial success last in the age of COVID-19?

While every sector of the market has challenges right now, there’s good reason to think industrial will continue to thrive. But tenant demands will continue to shift under the mounting pressures of the pandemic. From understanding the current state of leasing activity and e-commerce to getting in front of emerging trends like grocery deliveries, there are a lot of things that need to be considered, monitored, and adjusted.

Here are the main areas impacted by COVID-19 and what industrial owners need to know to meet tenant demand now and into the future. Take a look!

Construction Delays

Construction delays caused by COVID-19 are becoming increasingly common and many industrial real estate owners are having trouble securing permits. That’s ultimately forcing a slowdown of expansion efforts, something that needs to be overcome considering the continued growth of e-commerce.

The industrial sector ended Q1 of this year at a high point with near record lows hovering below 6%, and rents growing 8.8% year-over-year while leasing velocity accelerated. There’s no doubt the pandemic has slowed markets down, but experts anticipate the trends supporting them to stay fundamentally intact.

That’s not to say the industrial sector isn’t experiencing headwinds. Across the market, industrial owners recognize that many tenants are still facing serious risks, and bankruptcies are expected. As a starting point to protecting themselves against risk, some owners are considering COVID-19 clauses in future leases to help them navigate these situations again in a possible future outbreak.

Accelerated E-commerce Growth

E-commerce is one of the few sectors of the market to actually benefit from COVID-19, and it’s well-positioned to lead the recovery. That’s according to JLL’s report COVID-19: Global Real Estate Implications, which said the pandemic will likely boost demand for manufacturing and logistics facilities that e-commerce needs to continue expanding. The report also said the pandemic will accelerate many existing trends, including the growth of online retail as more of the economy moves to online sales.

In our new economy, a retailer might not necessarily need a storefront to succeed anymore, but it does need a robust supply chain strategy. To meet the growth in demand, industrial owners in major metro areas will likely have to look further afield for suitable sites as demand outpaces local supply levels. This isn’t anything new for industrial markets, but the trend is only going to accelerate.

Increase in “Safety Stock”

It’s expected that e-commerce demand is growing given that people are looking for the safest and most convenient shopping options that allow for social distancing, but the pandemic has caused something else unexpected. Many occupiers of industrial spaces are planning a 3-5% increase in their safety stock levels to help safeguard against the rampant supply shortages experienced at the start of the pandemic. These measures will add additional demand for warehouse space to keep larger quantities of key items in storage.

Unprecedented Demand for Food Storage

While still a relatively foreign concept to much of America, COVID-19 is driving major demand growth for online grocery orders. In early May, CNBC reported that only 3-4% of grocery spending in the U.S. was online before the pandemic, but now online grocery orders have surged to account for between 10-15% of all grocery spending. While online grocery orders are expected to recede after the worst of the pandemic subsides, experts expect U.S. online grocery sales to stay between 5-10% moving forward.

This is a huge opportunity for industrial owners. But to really capitalize on the trend, owners need to invest big in cold storage. A challenge is that this niche is operationally complex and requires specialized knowledge to succeed. Because most first-generation facilities are designed, owned, and already in use by grocery and foodservice companies, second-generation spaces offer the biggest opportunities for industrial investors.

A Local Perspective

It comes as little to no surprise that Central Pennsylvania experienced a sharp drop-off in absorption, which is what we are seeing everywhere. According to CoStar, Harrisburg has a slight uptick in vacancies, but that’s not troubling because there was spec space coming online and leasing activity has slowed. See below for the local probability of leasing commercial space a few months from now, which helps to show how quickly properties are likely to lease in the region moving forward.

It’s also worth noting that there is no negative absorption in Harrisburg through 2020. This is a positive sign for the local commercial real estate market because it means major tenants have not left, or if they did leave, the vacated space was instantly filled. That’s not normally much of a win, but in Coronatimes is a big deal.

And then there’s construction. Specifically, in Central PA there has not been a surge in construction in the region, but there are still millions that broke ground after the pandemic began, which testifies to the level of confidence in the local shipping market because most elsewhere construction has flatlined.

Looking Ahead

The industrial real estate market has been a remarkable success story both in Central Pennsylvania and beyond. And while the near future is likely to carry its fair share of challenges as the market faces tenant bankruptcies and construction delays, this sector is well-positioned to emerge from the pandemic less unscathed than others in the commercial real estate industry. Owners and investors who successfully navigate these challenges while getting ahead of evolving tenant demands, like grocery delivery and cold storage, will be the strongest moving forward.

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Beyond the Bio with Mark Disanto from Triple Crown

Posted on October 21, 2019 by Mike Kushner in Blog, Guest Blogger No Comments

For more than four decades, Triple Crown Corporation has shaped Pennsylvania real estate through construction, land acquisition, and residential and commercial property management. The company has built an impressive portfolio of properties ranging from warehouses, office and retail space, rental communities, and even vacant lots that can be developed into just about anything to need.

At the heart of Triple Crown Corporation is its people. As part of the senior leadership team, Mark Disanto, the company’s CEO offers valuable insight into the industry, and the vision for the company. Mark has built a successful career from a blend of hard work, knowledge, and experience. But beyond his professional resume, there is a lot we can learn from Mark on a more personal level.

Take a look as Omni Realty Group goes “beyond the bio” and asks Mark for answers to questions you’re not likely to read on his Linkedin profile.

Omni: Describe a “typical” work day for you.

Mark Disanto: A typical day for me starts around 5:30 or 6:00 AM. I either exercise at home or play tennis in the morning. I am usually at the office between 7:00 and 8:00 AM and very rarely leave before 6:00 PM. Throw in a couple nighttime meetings with municipalities and extra time on Saturdays and in the evenings and the work week is usually 60 to 70 hours.

Omni: What is the best part of your job?

Mark Disanto: I have great flexibility in my job. I have time in the office. I have time inspecting job sites and looking at new acquisitions. I like the flexibility. However, the best part of my job is watching the company grow and seeing the new leadership expand the company both in the property management and construction divisions as well as our geographical footprint.

Omni: What has been the most difficult part of your job?

Mark Disanto: The continued regulation of our industry is probably the most troublesome and difficult part of our business. There are so many regulations in the building codes, the land development and subdivision codes, other state permitting processes, as well as federal regulations. None of these take into account the reasonableness of the burdens placed upon the builder and developer, cost versus benefit and time delays. We continue to hear about a shortage of affordable housing and the reason for this is strictly due to the regulatory environment we live in today.

Omni: If your career never took you into real estate, what else would you likely be doing?

Mark Disanto: I would probably be on Wall Street running a hedge fund and giving Ray Dalio a run for his money.

Omni: What has been your favorite Triple Crown project, and why?

Mark Disanto: I think I have two. The first was done about 17 years ago in Silver Spring Township. Georgetown Crossing was our first large apartment community containing 400 townhome and flat stack apartments. It is a beautiful property off route 114 in Silver Spring Township and our premier community. We still own it and will probably never sell it.

More recently Blue Ridge Village tops the list. This is an exciting mixed use community in lower Paxton Township that combines retail, commercial, apartments, townhomes and single-family homes along with a 32 acre park. This is a true livable, walkable community. The approval process was collaborative and respectful of the community and the Township. It took a lot of effort on our part, but I can assure the residents that this will be a premiere community that will significantly enhance the township.

Omni: What project has been your biggest failure or disappointment?

Mark Disanto: We bought a property out of market about 20 years ago at an auction and did not have sufficient due diligence completed upon it. When we went to the township for the first time it was like walking into a hornets’ nest. We eventually decided to cut our losses and re-sold the ground at auction for a loss. Out of the hundreds of developments and projects that we have done, we’ve only lost money on two deals. We are pretty proud of this.

Omni: What motivates you?

Mark Disanto: I just like to be engaged and like to see the company and the employees succeed. We set our strategy for three-year time frames and have quarterly meetings with our strategy review team and make sure we are all rowing the ship in the same direction. When everybody has purpose and they are all heading to the same goal line and supporting one another along the way, it makes for a very fun journey. I don’t need to work as hard as I do, I just have too much enjoyment with it to slow down.

Omni: Do you have any pet peeves?

Mark Disanto: I don’t think so. I get very frustrated when my volleys are not crisp on the tennis court!

Omni: When you’re not in the office, where can you most likely be found?

Mark Disanto: When I am in Harrisburg, it is usually with the family which includes the five grandkids, or working around the house and in the garden in the summertime, or in a tree stand in the fall trying to find the elusive big buck, or on the tennis court 2 to 4 days a week. If out of Harrisburg it could be anywhere in the world!

Omni: And finally, what career advice would you give to your younger self?

Mark Disanto: I would say, do not doubt your abilities. If you have an idea you want to execute then write it down and write a plan on how to achieve it. Review the plan both upstream and downstream with your staff. If you don’t have a staff, take it to people you respect and really try to poke holes in it. Once it’s well vetted, then work diligently and hard at it. A lot of people say this person was “lucky.” That’s usually not the case; a lot of strategic thought and hard work creates what people call luck.

Omni Realty Group thanks Mark for such candid and thoughtful answers to these questions. There is a lot of inspiration that can be found “beyond the bio” and on a more personal level. You can learn more about Triple Crown Corporation and its services by visiting them at https://www.triplecrowncorp.com or on Facebook and Twitter @TripleCrownCorp.

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Power Landlords Part II: Who Owns the Most Industrial Space in Central PA?

Posted on July 8, 2019 by Mike Kushner in Blog, Industrial, Local Market No Comments

You might think that Central Pennsylvania is defined by its natural resources or agriculture, or maybe you don’t think we’re known for much of anything. The truth is that there is a lot this region brings to the economy with our industrial market being one of the country’s top core industrial markets.

If this surprises you, consider the following. This particular region is well positioned along the nationally-recognized I-81 transportation corridor with immediate connections to I-78, I-76, I-83 and I-80, as well as immediate access to major deep-water ports at New York/New Jersey, Philadelphia and Baltimore. With our ability to provide manufacturers and distributors access to nearly 70% of the total consumer markets in North America within one day’s drive, the region has benefitted from significant demand, especially most recently with the emergence of the e-commerce which promises customers even faster ship times.

Additionally, nearly 8 million square feet of new Class A regional and super regional distribution facilities are under construction. Even with this much new space entering the market, vacancy rates remain right around 5% which is well below the historical market standard of 7%. Combine all of this with a backlog of millions of square feet of new tenant requirements in the market, and you can see why Central PA’s industrial real estate market is ripe for opportunity among investors and landlords.

So, who owns the most industrial space in the market? The combined square footage of the top 5 landlords in Central PA is 32,820,237 square-feet of space. Moreover, the combined vacant square-footage for all of this space is just 2,448,898 square-feet or 7%. So, who are these power landlords and what buildings account for most of this space? Let’s take a deeper dive.

Prologis Inc.

It should come at no surprise that Prologis Inc. tops this list with its portfolio of 22 industrial buildings. Combined, this accounts for 11,242,938 square-feet of real estate. The largest building, which is Key Logistics Park located at 950 Centerville Road in Newville, is home to 1,170,000 square-feet of industrial space.

Global Logistics Properties, Ltd. (GIC Real Estate)

Next on the list is Global Logistics Properties, Ltd. with 19 buildings and 7,075,922 square-feet of real estate. The largest of these buildings is Lemoyne Industrial Park located at 221. S. 10^th Street in Lemoyne which is 885,802 square-feet of industrial space.

Clarion Partners

With 10 buildings totaling 5,676,191 square-feet, Clarion Partners ranks number three on our list of “Power Landlords” in Central PA. Their largest building, located at 1 True Temper Drive in Carlisle, is 1,226,525 square-feet in size.

First Industrial Realty Trust, Inc.

At number four we have First Industrial Realty Trust, Inc. Their portfolio of 15 buildings accounts for 4,804,210 square-feet of industrial real estate. The largest building, 1,100,000 square-feet in size, is located at 5197 Commerce Drive in York.

Liberty Property Trust

Coming in at number five on the list is Liberty Property Trust with 7 buildings totaling 4,020,976 square-feet of industrial space in the Central PA region. Their largest building, which is the Carlisle Distribution Center located at 40 Logistics Drive in Carlisle, is 972,000 square-feet.

It can be hard to wrap your head around these numbers and the amount of industrial space that is located right here in Central PA. Often, these are huge buildings we drive by daily but fail to notice unless we pay attention. The products that are made in and shipped from these facilities impact the global economy and provide us with every item imaginable, from basic essentials to toys and tools to match a wide variety of hobbies. So the next time you drive by the Key Logistics Park in Newville or the Carlisle Distribution Center, you now have a little more intel into who the power landlords are behind these massive facilities.

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High Rental Rates, Low Vacancy Define Central Pennsylvania Industrial Market

Posted on August 27, 2018 by Mike Kushner in Blog, Industrial, Local Market, Trends No Comments

Central PA’s submarket clusters for industrial real estate have some of the lowest vacancy rates and highest rental rates we have seen in recent years.

It’s the news that every commercial real estate developer and investor want to hear – the industrial real estate market in Central Pennsylvania ended Q2 2018 with some of the highest rental rates and lowest vacancy rates the market has experienced since 2014.

Now, it hasn’t been a steady climb over the last four years. Rather there’s been quite a bit of volatility in the market, with numbers bouncing up and down and up and down. However, it does appear that the extreme peaks and valleys have evened out and a more stable, yet steadily growing industrial real market has emerged in Central PA – at least for the present moment.

Let’s take a closer look at some of the most interesting trends and numbers reported from CoStar’s Q1 2018 report for Harrisburg/Carlisle, Lancaster and York/Hanover Submarket Clusters.

Harrisburg/Carlisle Submarket Cluster

Vacancy – The industrial vacancy rate for the Harrisburg/Carlisle Submarket Cluster fell significantly from Q1 2018 where it was previously 9.4% to its now 7.9%. This is the largest drop between a single quarter that the market has seen since prior to Q3 2014. In fact, starting with Q2 2017, the industrial vacancy rate for the Harrisburg/Carlisle Submarket Cluster has been quite volatile, swinging up and down by sometimes more than one percentage point in a quarter.

Absorption – The pattern of volatility in the Harrisburg/Carlisle Submarket Cluster continues with its net absorption. Though the market ended 2017 at a positive 2,692,866 square-feet, in Q1 2018 this dropped to a negative (2,132,086) square-feet, mostly due to a single building of 1,100,000 square-feet that was delivered that same quarter. Now in Q2 2018, net absorption is back in the positive at 1,385,445 square-feet with no new buildings delivered this quarter.

Rental Rates – The average quoted asking rental rate for available industrial space is $4.98. This has been steadily increasing ever since it experienced a drop in Q2 2017 where it dropped from $4.61 to $4.46 in one quarter. Now at almost $5.00 per square foot of space, the Harrisburg/Carlisle Submarket Cluster’s rental rates for industrial space is the highest it has been since prior to Q3 2014.

Inventory – As mentioned above, no new buildings were delivered this quarter, or in all of 2018. Three buildings are currently under construction, totaling 2,951,468 square-feet of new space. It’s estimated that these properties will not be delivered until early 2019.

Lancaster Submarket Cluster

Vacancy – The vacancy rate for the Lancaster Submarket Cluster in Q2 2018 held steady at 1.9%, the same as it was in Q1 2018. In fact, it has changed minimally from the 2.0% that Q4 2017 ended with. Previous to these last three quarters, there has been a lot more change from quarter to quarter in the Lancaster Submarket Cluster’s vacancy rate. To be this low, and this consistent for three quarters indicates a stable market with supply and demand near evenly matched.

Absorption – As for net absorption, Q2 2018 ended with a positive 2,723 square-feet. This is a drop of 127,888 square feet from Q1’s net absorption of 130,611 square-feet. After experiencing two quarters of negative net absorption in Q2 and Q3 2017, and rebounding to positive 354,056 square-feet in Q4, this is now the third quarter that net absorption has continued to drop, though still a positive number – for now.

Rental Rates – The quoted asking rental rate for available industrial space in the Lancaster Submarket Cluster took a hit this quarter when it dropped from $4.74 to $4.57 per square foot. The trend in rental rates have been up and down and up and down over the course of the last four years. While it peaked at $5.15 per square foot in Q4 2016, it has never been able to return to that high and is now trending downward, inching closer to the numbers we saw in early 2015.

Inventory – One new building was delivered this quarter, adding 35,768 square-feet of new space to the industrial market. There are no other buildings currently under construction in the Lancaster Submarket Cluster.

York/Hanover Submarket Cluster

Vacancy – The industrial vacancy rate for the York/Hanover Submarket Cluster dipped ever so slightly this quarter from 4.4% in Q1 2018 to its current 4.3%. This is the lowest vacancy has been in over a year when it was also 4.3% in Q1 2017. From that point, the vacancy rate was on the rise, peaking at 5.0% in Q4 2017, then dropping 0.6% points to 4.4% in Q1 2018.

Absorption – Q2 2018 ended with a net absorption of 125,766 square-feet. Looking at Q1’s net absorption of 396,112 square-feet, this is a drop of 270,345 square-feet in a single quarter. Between these two quarters only one new building of 30,000 square feet was delivered to the market.

Rental Rates – The Lancaster Submarket Cluster ended Q2 2018 with a quoted asking rental rate of $4.28. This is $0.14 higher than it was in Q1 and $0.22 higher than in Q4 2017. In fact, this is the highest rental rate this submarket cluster has seen since prior to Q3 2014 with it near steadily rising during that entire period.

Inventory – Only one new building was delivered in Q2 2018 and that added 30,000 square-feet of industrial space to the market. There are currently no new buildings under construction at this time.

Key Takeaways

Given all the activity taking place in the various Central PA submarket clusters, there are particular insights that are important to note. First, we can expect vacancies to remain at record lows for the remainder of 2018, despite a further uptick in new construction. Additionally, E-commerce sales grew 15.2% in Q2 2018, compared with the same time last year and now represent 9% of total sales. E-commerce will continue to be a driving force in the foreseeable future.

While indicators point to strong demand, there are headwinds increasing from labor shortages and tariffs. With the economy at or near full employment, site selection decisions and supply chain nodes may be driven out to secondary and tertiary markets. Finally, it is too early to predict the exact impact of tariffs on the industrial market, but we can look for potential declines in import and export levels.

Looking at the comparison of the three Central Pennsylvania submarket clusters, which do you feel has the strongest industrial real estate market right now? What changes do you anticipate taking place throughout the rest of 2018?

Share your ideas by leaving a comment below!

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10 Facts Any Commercial Real Estate Investor Should Know about Central PA’s Industrial Market

Posted on April 30, 2018 by Mike Kushner in Blog, Commercial Real Estate, Industrial, Local Market No Comments

10 Facts Any Commercial Real Estate Investor Should Know about Central PA’s Industrial Market

Central PA’s industrial real estate market is unique for a variety of different reasons. Taking into consideration its geographic, demographic and economic factors, we’ve compiled a list of what we feel are the most important facts worth knowing about our local industrial market.

If you are a commercial real estate investor, or simply someone who wants to know more about Central Pennsylvania’s commercial real estate market, you are sure to find this list of top 10 facts both valuable and interesting. Let’s take a look!

Harrisburg-York-Lebanon CSA is 3rd most populous in PA and 43rd most populous in U.S.

The Harrisburg-York-Lebanon Combined Statistical Area (CSA) is made up of six counties and includes four metropolitan areas in Central Pennsylvania. In 2010, the CSA’s population was 1,233,708 people, making it the 3^rd most populous CSA in PA and the 43rd most populous CSA in the U.S. The Harrisburg-York-Lebanon CSA includes the following Metropolitan Statistical Areas (MSAs): Harrisburg-Carlisle, Lebanon, Gettysburg and York-Hanover.

Harrisburg area puts up strong competition against Lehigh Valley.

Though Lehigh Valley is commonly recognized as Pennsylvania’s leader in warehousing and distribution, Harrisburg delivered only 600,000 SF less than Allentown in 2017, while also generating roughly the same rent growth. Additionally, companies such as Whirlpool, Amazon, Ace Hardware, FedEx, Kohler, and Lindt Chocolates have set up large-scale warehouse and distribution centers in Harrisburg – and those tenants account for just a portion of more than 16 million SF of net absorption.

Harrisburg-Carlisle and Lancaster Ranked Among Leaders in National Job Growth

Of the 25 metro areas with the fastest job growth, as of August 2017, both Harrisburg-Carlisle and Lancaster placed on this competitive list. Lancaster ranked number 24 for its steady growth as it diversifies its economy and renovates its downtown and industrial areas. In six months Lancaster added 3,100 new jobs, bringing its total employment to 252,400 and 2017 growth rate to 1.23%. Harrisburg-Carlisle ranked number 8 on the list with 6,200 new jobs added in the first two quarters of 2017, bringing total employment to 346,100 and 2017 growth rate to 1.82%. Noted was the area’s diverse group of healthcare, technology and biotechnology businesses.

Prime location for warehousing and distribution.

Central Pennsylvania is a premiere market for industrial space for several compelling reasons. For businesses who need easy and affordability storing and shipping of products, the areas offers a great roadway system, an abundant work force, relatively inexpensive and available raw land, and the ability to reach 70 to 80 percent of the U.S. population in 24 hours. Additionally, our government regulations on warehousing and distribution are comparatively easy and straightforward compared to other nearby states or regions.

Four of the 10 Select Top Industrial Leases in Q4 2017 took place in the Harrisburg market.

According to CoStar’s Q4 report for 2017, Harrisburg east and west markets represented the majority of top industrial leases signed that year. Prologis Carlisle (1,029,600 SF), Goodman Logistics Center Carlisle (1,007,868 SF), Prologis Harrisburg (623,143 SF) and Carlisle Distribution Center (575,000 SF) were all leased to different businesses who were looking to grow their industrial real estate space in Central Pennsylvania. This activity indicates economic growth and interest in Central PA’s industrial real estate market, both from businesses and real estate investors.

Lancaster market has the highest quoted rental rate for industrial space in Central PA at $4.69 per SF.

Even though Lancaster’s quoted rental rate for industrial space decreased by $0.45 per SF than where it was at the end of Q4 2016, it still comes in higher than Central PA’s other surrounding submarkets. At $4.69 per SF, Lancaster is $1.41 per SF higher than Lebanon, $0.03 per SF higher than Harrisburg/Carlisle, $0.08 per SF higher than Gettysburg and $0.67 per SF higher than York/Hanover based on Q4 2017.

Lancaster also has the lowest vacancy rate for industrial space in Central PA at just 2.0%.

Lancaster ended Q4 2017 with the lowest vacancy rate of all surrounding submarkets. Compared to Lancaster’s vacancy rate of 2.0%, Lebanon came in at 15.8%, Harrisburg/Carlisle at 6.8% and York/Hanover at 4.9% based on Q4 2017. Though Gettysburg did end 2017 with a vacancy rate of 0.4%, it’s important to note this submarket has just 78 buildings with a combined 4,372,179 SF of existing inventory which places it at a much different level than the other submarkets, comparatively.

Within the MSA, Harrisburg/Carlisle has the largest SF of industrial space under construction at 1,813,468 SF.

Two significantly large industrial projects will soon result in the addition of 1,813,468 SF to the Harrisburg/Carlisle submarket. Comparatively, Lebanon has three buildings under construction with a combined 1,310,195 SF of space, Lancaster has two buildings under construction with a combined 76,486 SF of space, York/Hanover has two buildings under construction with a combined 895,000 SF of space and Gettysburg has no new industrial space under construction. For Central PA as a whole, that equals 4,095,149 SF of new industrial space that will soon be delivered to the market.

Harrisburg/Carlisle’s ended 2017 with a positive net absorption of 2,700,108 SF.

According to CoStar’s Q4 2017 industrial market report, Harrisburg/Carlisle ended the year with the highest, positive net absorption we’ve seen since prior to 2014. At 2,700,180 SF, this is significantly higher than any other quarter that year, especially Q2 where the net absorption dropped to negative 499,576 SF. Additionally is Q4 2017, one new building was delivered to the market, adding 1,100,000 SF of space. Even with this influx of inventory, the net absorption rose by 2,083,756 SF. The new building that was delivered is Whirlpool’s new distribution facility located at 100 Fry Drive, Mechanicsburg.

Influx of State and Federal dollars will continue to improve transportation in and around Central PA.

The Trump administration has recently been touting a $1.5 trillion, 10-year public-private plan to improve roads, bridges, ports and other infrastructures across the nation. Central Pennsylvania has plans to utilize some of this federal funding to bolster its priority projects which include fixing structurally deficient bridges and widening interstates. Improvement to our roadways and infrastructure will improve public safety, create construction jobs and make Central PA an even more attractive location for warehousing and distribution.

After reading through these top 10 facts any commercial real estate investor should know about Central PA’s industrial market, you are likely to have some comments or questions of your own.

Start a discussion by leaving a comment below!

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