24C — May 27 - June 9, 2016 — Industrial / Distribution Centers — M id A tlantic
Real Estate Journal
www.marejournal.com
I ndustrial R eal E state & D istribution C enters
By Michael Hanes, Lee & Associates of Eastern PA The Central Pennsylvania industrial market draws attention
C entral Pennsylvania is an integral part of the Philadelphia Region,
out the Northeast and Mid- Atlantic United States, and practical same-day service
USAA, Dermody, Cabot, High Street and others have made numerous investments in Cen-
attractive investment. While Central Pennsylvania is considered a submarket of the overall Philadelphia industrial market, it could easily stand on its own. Boast- ing over 250,000,000 s/f of standing industrial stock, it accounts for approximately one quarter of the total stock within its parent PHL market and, along with the Lehigh Valley, routinely accounts for the vast majority of the leas- ing activity. The bulk of the activity is driven by need for larger warehouse and distri- bution space, with tracked requirements averaging well
over 250,000 s/f. In an effort to keep our finger on the pulse of the market, Lee & Associ- ates of Eastern Pennsylvania focuses our research efforts on warehouse and distribution buildings 100,000 s/f or larger. Unsurprisingly, that “Core Group” subset, consisting of approximately 125 million s/f of existing space, represents well over 25% of the parent market’s core stock, as well as a dis-proportionately large share of ongoing development and construction activity. It should be no surprise that the market continues to draw the attention of investors and developers. At the close of the first quarter, Central Penn- sylvania vacancy stood below structural levels at 5.96% and over the last 12 months the market recorded 4.8 million square feet of positive ab- sorption. Assuming that pace continues, current construc- tion activity (5.5 million s/f of speculative starts) represents a little over a one year supply of space. All indications with regard to demand are posi- tive – leasing activity focused on warehouse and distribution space remains above normal, with amajority of that demand primarily driven by the 3PL, Consumer Goods and Food and Beverage industries. A large portion of demand is new to the market, which explains the strong positive absorption the market has experienced over the last 12 months. Because of its unique geo- graphical position and trans- portation infrastructure, the Central Pennsylvania market will continue to be a desired location for industrial invest- ment and development. Look- ing ahead, Lee & Associates is actively following a significant number of future development projects in Central Pennsylva- nia. These projects range from concept plans to pad ready sites, and collectively represent approximately 25 million s/f of potential supply. Approximate- ly half of that total is currently planned along Interstate 81, which stretches from the mar- ket’s eastern edge in Lebanon County southto the Maryland border, reinforcing Central Pennsylvania’s importance as a vital link connecting the Northeastern United States to the Mid-Atlantic region. Michael Hanes leads re- search for Lee &Associates of Eastern Pennsylvania, LLC. n
one o f the largest and most active i n d u s t r i a l markets in t h e c o u n - t r y . Span - ning roughly 5,200 square mi l e s and
“Because of its unique geographical position and transportation infrastructure, the Central Pennsylvania market will continue to be a desired location for industrial investment and development.”
into coastal markets fromNew York to Virginia. The largest of the Phila- delphia submarkets, Central Pennsylvania is widely held, with both private and public equity well represented. Multi- market players such as Indus- trial Property Trust, Liberty Property Trust, Clarion, Hill- wood, Exeter Property Group,
tral PA. International players such as Prologis, and Global Logistic Properties hold mar- ket leading positions, and new entrants like Australia-based developer Goodman Birtcher, who recently broke ground on a new Class A+ campus of two million square feet at Exit 44 on I-81 in Carlisle, PA, con- tinue to find the area to be an
Michael Hanes
eight counties, this critical submarket includes a rare combination of rail, road and parcel infrastructure that is uniquely capable of project- ing one-day service through-
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