Supply, demand, price, repeat
Large warehousing in Central Pennsylvania is poised to rebound well this year based on statistics from 2012.
There's some anecdotal evidence that 2013 is heading in that direction. Industrial Development International is planning three warehouses with 2.4 million square feet on 163 acres in Penn Township, Cumberland County. The plan needs rezoning approval before it can move forward.
New York-based real estate company Cushman & Wakefield Inc. has some interesting stats in its fourth quarter 2012 report on the Interstate 81 and I-78 markets. Consider some of these stats for warehouses of more than 100,000 square feet:
• Price per square foot was down to a five-year low of about $3.80.
• Companies leased 9.7 million square feet last year, the most in five years.
• Vacancy rates edged up slightly from 2011 to about 11 percent.
So the first two stats make sense. If rates are low, you can expect more leasing activity in the market, because companies that need distribution and warehousing facilities would find the market a deal next to more expensive locations.
Then if leasing activity is up, why is vacancy up, too?
"The slight increase in vacancy rates for 2012 can be attributed to the new, large speculative construction," said Adam Campbell from Cushman & Wakefield's office in Susquehanna Township, Dauphin County.
Essentially, vacancy rates are hovering because slightly more warehousing was built compared with what was leased marketwide, which includes northeastern Pennsylvania and the Lehigh Valley. Campbell pointed at two warehouses worth more than 1.6 million square feet near Carlisle that were added to the market in the second half of 2012.
However, leasing activity in Central Pennsylvania alone was up 55 percent. That means it won't be long before it outpaces new buildings and prices climb with increased demand.
"Our belief if that rental rates will continue to rise in 2013 for quality industrial product in our market," Campbell said.
Even if rezoning farmland for three gargantuan warehouses seems unnecessary to some considering vacancy elsewhere, there might just be the market demand for it.
Jim T. Ryan covers Cumberland County, manufacturing, transportation and workforce issues. Have a tip or question for him? Email him at firstname.lastname@example.org. You can also follow him on Twitter, @JimTRyanCPBJ.