Harrisburg/York, Pennsylvania Industrial Market


Necessity has been the mother of invention in the industrial sector of Harrisburg and York, Pennsylvania. Owners and landlords have found that tenants require features such as cross-dock configured warehouses, higher clear heights, ESFR sprinklers, upgraded dock packages and energy efficient construction that are just not found in older, second-generation buildings. Most of these and other amenities are now standard features in new construction to appeal to larger, long-term tenants.

Rental rates in Central Pennsylvania average between $3.65 and $4.10 per square foot while rental rates for older, second-generation buildings are as low as $2.75 per square foot. Added amenities in new Class A facilities have allowed landlords to obtain $0.50 to $0.85 per square foot more on an average basis. The leasing market has remained in-line with demand, and Class A buildings are seeing the most activity from potential occupiers.

Much like rental rates, vacancy rates vary throughout the market depending on location and amenities offered in the facility. Vacancy rates in Cumberland County have decreased for buildings above and below 200,000 square feet; however, Dauphin County has seen the exact opposite trend over the last four quarters. Franklin County has seen a slight increase in vacancy among larger buildings, yet a decrease in those under 200,000 square feet; the opposite has occurred for Lancaster County. Vacancy in York has decreased over the last year for larger buildings, yet remained the same for smaller facilities. In Lebanon, vacancy rates have fluctuated very little in the past year.

The area’s industrial developments serve a variety of tenants, including retailers, manufacturers, distributors and third-party logistics companies. Developers are planning new facilities and industrial parks around the “super-regional” user, trying to attract larger, national tenants such as manufacturers, retailers and food companies and distributors that want to establish regional centers. Thus, the interstate corridors have become the hot spots for the majority of the development in the Harrisburg/York market.

Central Pennsylvania’s extensive highway system allows suppliers to ship goods throughout the Northeast in less than a day’s drive, a feature that makes the market a bull’s eye for major retailers, big-box distributors and third-party logistics companies. Many of these companies are actively seeking space in the Interstate 81 corridor in particular, and industrial development is growing rapidly as far south as Chambersburg and north to Scranton to meet the demand. Development is also occurring at the Interstate 83 corridor, due to the movement of goods directly out of the Port of Baltimore and into central Pennsylvania. Interstate 78 corridor, which stretches from Harrisburg through Allentown, points east and unites the region’s web of highways, is another area that developers and industrial companies have their eye on.

Multiple industrial developments are occurring in the area. A 675,000-square-foot Class A building signals the completion of the initial phase of First Industrial Realty Trust’s development of Greenspring Industrial Park in northern York County. Upon completion the industrial park will include three distribution facilities totaling 1.2 million square.

Liberty Property Trust has constructed a speculative 837,540-square-foot Class A industrial warehouse at Liberty at Chambersburg in Franklin County. Situated on 55 acres, the facility is designed for warehouse, distribution, light manufacturing and office uses.

In addition, Higgins Development has completed construction on Key Distribution Center, a speculative 602,500-square-foot warehouse distribution facility located approximately 1 mile off of Interstate 81 at Exit 44 in the central Pennsylvania submarket. Situated on 46.3 acres, the front-loaded building features 50-foot by 50-foot column spacing and immediate highway access to the Northeast corridor. Higgins is also constructing a 602,500-square-foot facility in the market.

Other significant industrial developments include an 800,000-square-foot building and a 231,000-square-foot building, which were both built by DP Partners and recently acquired by ProLogis. In addition, AEW, a new developer in the Harrisburg/York market, is developing a 342,500-square-foot building. Other new developers include Lauth, Verus Partners, Trammell Crow, AMB and Hillwood.

As more high-end developments hit the market, tenants are making the move to obtain the new space. Two significant leasing transactions occurred in third quarter 2007. Whirlpool leased an 800,000-square-foot distribution center owned by ING/Exel in Carlisle. In addition, R.R. Donnelly & Sons leased 685,000 square feet at the York Business Center, which is owned by Brasler/New Boston Fund.

As the I-81 Corridor in and around both Harrisburg and the Wilkes-Barre/Scranton areas continue to fill up with new development, activity is anticipated to move to the smaller more rural towns along Interstate 81. Chambersburg and Franklin County have undergone rapid growth as companies such as Target, and Staples have built distribution facilities there.

As growth surges in the Harrisburg area, activity has spilled over into Lebanon County where the new Lickdale Industrial Park is currently under development. The push away from Harrisburg has also sent industrial growth south along the I-83 Corridor into York County. The Greenspring Industrial Park is under development in this submarket and several other sites are currently in the approval process.

Bethel in Berks County is another area where industrial activity has augmented. The county has two new parks in the planning stages. As this trend continues, it is projected that more companies will follow the likes of Sara Lee and Wal-Mart, which both recently completed distribution facilities in more rural Schuykill County.

— Michael Hess is a senior associate at CB Richard Ellis | Harrisburg.

©2008 France Publications, Inc. Duplication or reproduction of this article not permitted without authorization from France Publications, Inc. For information on reprints of this article contact Barbara Sherer at (630) 554-6054.

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