The Central PA Industrial Market Recap & Forecast 2008/2009…
The Central PA / I-81 Corridor industrial sub-market experienced an unusual slow down of big box warehouse leasing activity throughout 2008. In addition, numerous speculative construction projects came online in the second half of the year as national developers positioned themselves for a rebound in late 2009. USAA, First Industrial Realty Trust, AMB, Higgins, Liberty Property Trust, Lauth Property Group, Seagis, Exeter Property Group, Verus Partners, AEW, High Street Equities, IDI, Lexington Property Trust, ProLogis, Conewago Contractors and Exel/ING have over 14,000,000 SF of vacant Class A & B product in the Central PA / I-81 Corridor sub-market adding to the overall vacancy rate of the market which currently hovers around 10.25%.
Still there were bright spots within the Central PA / I-81 Corridor industrial sub-market in 2008. Significant 2008 lease transactions included the following deals: United Natural Foods (675,000 SF), APC, Inc. (1,140,000 SF), LTS Logistics (440,000 SF), Dentsply International (207,000 SF), Amazon.com (615,000 SF & 250,000 SF) and The Wiremold Company (220,000 SF). In addition, investment capital continued to find its way into the Central PA market despite the current economic climate with KTR Capital Partner’s sale-leaseback acquisition of the 735,600 SF SuperValu regional distribution center in Harrisburg, PA, Equity Industrial Partner’s purchase of the multi-tenant 1,500,000 SF York Business Center in York, PA, DCT Industrial Trust’s 500,000 SF transaction in Mechanicsburg, PA and various acquisition deals done by Exeter Property Group, L.P. affiliates including a state of the art 240,000 SF Class A distribution facility in Hazleton, PA, a newly constructed 342,000 SF Class A cross dock warehouse facility in York, PA, a 300,000 SF Class B cross dock warehouse facility in Harrisburg, PA, and a 650,000 SF Class B warehouse facility in Mechanicsburg, PA 100% leased to Exel Logistics.
Class I big box leasing activity waned as we navigated through the volatile 3rd & 4th quarters of 2008 and market expectations are that the first half of 2009 could be a challenging industrial leasing market due to overall vacancy indicators up, total absorption rates significantly down and new Class A speculative construction projects and 2 nd generation Class B vacancies plentiful. The leasing market appeared to be somewhat tighter in the flex warehouse and Class II warehouse segment as we saw multiple deals inked in 2008 including: Bodybuilding.com (70,493 SF), Stellar Distribution (147,000 SF), Western Power Sports (144,000 SF), List Industries (32,069 SF), Rite Aid Corp. (154,304 SF), KENCO Logistics (37,700 SF), Allen Distribution, Inc. (129,183 SF), Serpro Logistics (26,000 SF), AP Wagner, Inc. (88,334 SF), Kane Warehousing (154,000 SF), Scientific Games (20,000 SF), Good Publishing Inc. (38,908 SF), Sloan Valve Co. (42,493 SF), Simplex Grinnell, L.P. (16,686 SF), and CODI (20,400 SF).
In 2009 higher vacancy rates and lower rental rates will translate into excellent lease opportunities for credit tenant prospects looking to expand their distribution network within the market or new relocations seeking a presence along the nationally recognized I-81 distribution corridor. The region has seen significant growth in the past few years and continues to surprise with its quick rebounds from market down turns.
For an expanded market study analysis or to obtain a market survey of available opportunities in the Central PA / I-81 Corridor market please contact:
Jason Grace, CCIM, SIOR
Vice President - Sales & Leasing
Corporate Brokerage Services
717-731-1990 ext. 3011
717-421-1943 mobile
jgrace@landmarkcr.com
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