B — May 31 - June 13, 2013 — Industrial / Distribution Centers — Mid Atlantic Real Estate Journal www.marejournal.com I ndustrial R eal E state & D istribution C enters Newmark Grubb Knight Frank Central Pennsylvania industrial market overview R ecovery is well un- derway within the warehouse market in cupancy losses posted during and shortly after the last re- cession have been recovered, built-to-suit construction un- derway, this estimate seems easily attainable.
ning of 2012 when nearly 3 million s/f of new product was under construction. Another over-development scenario in the short term seems un- likely as demand growth kept pace with construction additions enough to see va- cancy decrease recently. This assertion is supported by the fact that the overall vacancy rate for buildings added to the inventory since 2008 was at just 11% in mid-2012 and only recently grew to 28.1% when 40 Logistics Drive was added to the market in late 2012.
From a demand perspec- tive, given the low levels of consumer confidence created during the financial collapse, wholesalers and retailers opted to out-source portions of supply chain operations over the past four years in or- der to mitigate the potential risk of demand deterioration. This allowed third-party logistics companies to domi- nate tenancy growth in re- cent quarters. “As we look around the market, logistics provid- ers still account for a sig- nificant portion of current requirements”, noted Tim Brogan , senior managing director, Global Logistics for Newmark Grubb Knight Frank . “At the same time, there has been a return of active requirements for wholesalers, specifically in the corporate capital and durable products arenas, underscoring consumer con- fidence’s slow, albeit steady, recovery.” As consumer confidence rises, expect retailers to re- turn to market. Given the sluggish pace of consumer confidence recovery, however, we don’t anticipate retailers returning to the market in full force until 2014 at the earliest. An eye toward asking rents reveals a soft performance over the past four years initi- ated from the previous over- supply conditions. This trend is somewhat misleading in recent quarters. Asking rents had been artificially high since mid-2009, a strategy that landlords implement- ed to retain some leverage during lease renewal nego- tiations. A look at new or relocation leases around that time reveals contract rents at significantly lower levels than asking. “As warehouse supply in Central PA diminished, first year rents rose closer to ask- ing rents – a sign of rent sta- bilization in recent quarters”, according to Steve Bonge , senior managing director, Global Logistics Newmark Grubb Knight Frank. If de- mand persists along its cur- rent trajectory, expect both asking and contract rents to show signs of recovery over the next few quarters. n
along with another 4.4 million s/f of gains. D e m a n d growth over the past six q u a r t e r s a v e r a g e d
Concerning construction in the Central PA region, the spike in vacancy occur- ring from the end of 2007 to the middle of 2009 largely resulted from overdevelop- ment rather than demand deterioration. Fully 6.5 mil- lion s/f of new product came to market during that time frame in conjunction with only 1.2 million s/f of nega- tive absorption. The con- struction pipeline began refilling toward the begin-
the greater Harrisburg region. Over 5.6 million s / f o f o c - c u p a n c y growth since the end of the reces - sion pushed
Tim Brogan
Steve Bonge
around 500,000 s/f per quar- ter, portending another 1.5 million s/f of positive absorp- tion during the remainder of 2013. With over 750,000 s/f of
that sector’s overall vacancy down 240 basis points from its peak in the third quarter of 2009 to its present level of 14.0%. Furthermore, all oc-
New Kingstown Business Park 192 Kost Road, Carlisle, PA 17015
499,800 SF Build-to-Suit / leaSe availaBle
PrelimiNary laNd develoPmeNt PlaNS are aPProved 38.7 acres zoned light industrial (L-1) 499,800 SF build-to-suit / lease Conveniently located less than 2 miles from exit 52 off I-81 in Carlisle, PA Adjacent to Norfolk Southern Rail For more information visit www.192kost.com or contact: timothy Brogan | Senior Managing Director | Newmark Grubb Knight Frank | 610.879.4507 | tbrogan@ngkf.com James J. Clymer, leed aP | Managing Partner | Key Development Group | 610.416.1776 | jclymer@keydevelops.com
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