Stats show region is dominant logistics hub
Central Pennsylvania isn't just a hub for logistics activity, it is a dominant hub.
First quarter market statistics from CBRE Group Inc. show that the six-county region (Cumberland, Dauphin, Franklin, Lancaster, Lebanon and York) boasts an inventory of 159.4 million square feet of space dedicated to warehouse and distribution, including some overlap with light manufacturing, assembly, packaging and related activities.
No other region even comes close in the eastern part of the state: The midstate nearly harbors as much square feet as the Philadelphia (111.6 million) and Northeast (50.8 million) regions combined, according to CBRE research. Its nearest eastern competitor, the Lehigh Valley region, has 67.9 million square feet. Head west, and the contrast is even more profound; the greater Pittsburgh market has about 140 million square feet.
And Central Pennsylvania is not about to lose its edge.
With an additional 4 million square feet under construction in the region, what factors continue to make it attractive to prospective builders? What challenges does the sector face? Are some counties more attractive than others?
The simple answer: Location, location, location. But of course, there’s more to it than that.
We spoke with three area observers who weighed in on the warehouse economy’s strengths and weaknesses: Blaze Cambruzzi, COO at York-based Rock Commercial Real Estate LLC; Cumberland Area Economic Development Corp. CEO Jonathan Bowser; and David Black, president and CEO of the Harrisburg Regional Chamber and Capital Region Economic Development Corp. Here are some of their insights.
1. See the big picture
First, why come to the midstate at all? The key numbers shouldn’t surprise anyone: 78, 81, 83 and 76 — as in the region’s confluence of interstate highways, and their connection to many of the nation’s major markets.
As Black puts it, “companies look at the maps on a macro scale.”
“They want to be in the mid-Atlantic,” he said, and that puts South Central Pennsylvania at an advantage.
“You could drop a pin anywhere in the Susquehanna Valley and be within a four-hour drive of 45 million people,” Cambruzzi said, including Philadelphia, Washington, D.C., Baltimore, all of New Jersey and much of New York.
“That’s really unprecedented,” he added.
Move farther north, and you’re headed away from some of the big population centers. Move south or east, and you’re closer but the prices start to climb as land availability goes down. And, Cambruzzi noted, the mountainous region immediately west of here leaves fewer spaces for large facilities.
“We’re nestled in a sweet spot,” he said.
As for price, the region is certainly competitive: $4.17 per square foot per year is the average asking price for leases in the midstate, CBRE found, vs. $4.26 in Southeastern Pennsylvania and $4.45 in the Lehigh Valley.
Northeast Pennsylvania comes in lower, at $3.62. But as Cambruzzi notes, the midstate has another distinct advantage over some areas to the north and east: less disruption due to weather — particularly snow days, which don’t just tie up trucks but make it harder for warehouse employees to get to work.
2. Cumberland and York rule
Back to comparisons. Cumberland County alone has nearly as much space (47.9 million square feet) as the four-county Northeast region (50.8 million). In the midstate, York is a close second with 45.7 million square feet.
3. Don't count the others out
The dominance of two counties shouldn’t be taken as a reflection of what is happening with their neighbors.
Lancaster County has nearly 35 million square feet of space, although, as Cambruzzi notes, legacy facilities are still a major presence both there, and in parts of York County.
Lebanon County, with its 4.6 million square feet, has seen much growth in recent years as infrastructure blossomed around the I-81/78 split in Union Township and other warehouse hotspots across the region get more crowded.
4. A capital perspective
Dauphin County, with 14.2 million square feet, is a major player whose contribution transcends the amount of space.
“Dauphin was early in the warehouse trend along I-81 up to the I-78 split. There are more warehouses than meet the eye,” Black said.
Centers on Fulling Mill Road cater to companies like TE Connectivity and Phoenix Contacts. The county also hosts Fed Ex and UPS hubs, which also use Harrisburg International Airport, he said.
“Many people forget how busy HIA is at night loading the very large Fed Ex and UPS planes that are in and out of there. Obviously this drives a lot of truck traffic,” Black added.
The county’s intermodal advantage also extends to railroads, with huge Norfolk Southern facilities, in particular the Rutherford Yard in Swatara Township.
So in Black’s view, Dauphin was the region’s original logistics hub, and was first to approach build-out.
“These newer 1 million square foot-plus facilities are being built down I-83, up I-78 and I-81 because there is available land there,” he added.
5. So, about Carlisle
The area around Cumberland County’s seat is fertile with logistics centers on and around Allen Road, notably the Amazon.Com facility. Nearby, the 2-million-square-foot Goodman Birtcher warehouse project, which straddles three Cumberland County municipalities, is under construction.
But, Bowser pointed out, a shift in focus is underway.
“Allen Road is pretty much saturated,” he said.
More facilities are starting to appear farther out on I-81, in the Newville and Shippensburg areas, he said.
For businesses whose needs are less time-sensitive, that’s not a major concern. But Bowser expects those really looking to capitalize on short lead times to major eastern markets are more likely to seek spots around Carlisle and eastern Cumberland County rather than farther west.
Likewise, geographic orientation plays a role for surrounding areas, Cambruzzi explained.
With easy highway access to the Baltimore/Washington area, York County is a natural destination for firms with an eye on those markets, he pointed out.
6. Assembling a workforce
One of the challenges in more rural areas — and to a certain extent for Cumberland County generally — is building up a workforce for logistics facilities when those developments are in areas where affordable housing and public transportation are in short supply, Bowser noted.
That’s one of the reasons his agency has worked with Capital Area Transit on tailoring bus routes to connect Amazon and other Allen Road facilities with Harrisburg and West Shore communities where many workers live.
Another challenge to recruitment is relatively low unemployment, though Cambruzzi pointed out that it’s also a sector that has been largely automated, and workers can be recruited from a diverse range of fields without extensive re-training. And he believes the region’s workforce stacks up well in terms of wages, availability and skills against neighboring areas.
“York, Lancaster, Lebanon, Harrisburg all are very, very strong markets,” Cambruzzi said.<