First Quarter 2015 Shows Growing Industrial Real Estate Market in Central PA
Industrial real estate market in Central PA is off to a strong start this year! In First Quarter 2015, we have seen signs of positive growth that has the momentum to make this year one of the best in a while for the market.
Central Pennsylvania gained three newly built properties that were delivered in this quarter alone. Combined, they added an additional 1,564,560 square-feet. This growth was met by a strong demand as the vacancy rate dropped and the quoted rental rate did not waver from its two-year-high it rose to last month. And that’s not all!
To better understand what this means for the local industrial real estate market now and into the future, let’s take a closer look at what the numbers are saying and how they stack up against the performance of past quarters.
Top Select Year-to-Date Deliveries:
Three of the top 8 Select Year-to-Date Deliveries occurred in the Central Pennsylvania submarket. Number one on the list is the Urban Outfitters Gap Distribution Center 2 that has an RBA of 1,140,000 square-feet and is 100% occupied. Third on the list is Capital Logistics Center, Building 200 that has an RBA of 400,060 square-feet, but is not occupied at this time. The final Central Pennsylvania industrial space on the list, coming in at number 8, is “8 Brooks Avenue” that has an RBA of 24,500 square-feet and is not occupied at this time.
Top Under Construction Properties:
Additionally, three of the top five Select Top Under Construction Properties are located in the Central Pennsylvania submarket. Number one on the list of ProLogis Shippensburg with an RBA of 1,400,000 square-feet, is 100% pre-leased and is expected to be delivered in Fourth Quarter 2015. Second on the list is Nordstrom Distribution Center with an RBA of 1,142,000 square-feet, is 100% pre-leased and is expected to be delivered in Third Quarter 2015. Finally, number five on the list is ProLogis Park Carlise II – Building I with an RBA of 1,029,600 square-feet, is not pre-leased and is expected to be delivered in Third Quarter 2015.
Vacancy and Availability:
The first quarter of the New Year ended with 13,928,491 square-feet of vacant industrial space in the Central Pennsylvania submarket and a vacancy rate of 5.6%. This is a decrease from the 14,772,913 square-feet of vacant space and 6.0% vacancy rate we saw in Fourth Quarter 2014. Additionally these are the lowest numbers we have seen since before Second Quarter 2011.
Three new building were delivered this quarter increasing the total RBA from 246,152,030 square feet in Fourth Quarter 2014 to 247,716,590 square feet. This is the highest total RBA (and largest number of buildings) the market has seen since before Second Quarter 2011.
Absorption and Demand:
In First Quarter 2015, the industrial market in Central Pennsylvania experienced a positive net absorption of 2,408,982 square-feet. This is a healthy jump from the 689,636 square-feet we saw in Fourth Quarter 2014 and we are getting closer to the 3+ year record high net absorption of 3,953,706 square-feet that we experienced in Third Quarter 2014.
This quarter’s quoted rental of $3.94 did not budge a cent from where it left off in Fourth Quarter. This is good news for the market because it is the highest quoted rental rate the Central Pennsylvania industrial commercial real estate submarket has experienced in two years.
Looking forward into 2015, there are multiple developers who are commencing speculative projects ranging from 200,000SF to 1 MSF+. If all of the proposed projects commence, there will be approximately fifteen new projects totaling over 11MSF. The actual number of speculative projects will likely be impacted by the leasing activity during the first half of the year. We anticipate that demand will absorb a significant quantity of the new product with only a modest rise in vacancy.
The continuing economic recovery, ongoing evolution of e-commerce and resurgence in domestic manufacturing have generated resiliency in the industrial sector. Trends in industrial real estate supply and demand are favorable in the Central Pennsylvania market. We expect that the shifting demand and service paradigms, demographic market forces and global dynamics will support continuing growth in industrial real estate.