Summerdale tract sale could signify renewed mixed-use interest in Central Pennsylvania
The Cumberland County Industrial Development Authority's pending sale of a large vacant property known as the Summerdale tract to a Connecticut developer has many people in the real estate business optimistic the midstate could see a surge in mixed-use development.
But there's caution considering the slow pace at other large sites in the region.
"I think that, when you look at these sites, they're desirable, but developers are sitting on the sidelines," said Jonathan Bowser, economic development director for the Cumberland Area Economic Development Corp., which manages the industrial development authority.
The IDA last week said it's selling the Summerdale tract, a 45-acre site at First Street and Valley Road in East Pennsboro Township, to New England Retail Properties Inc. That company is contemplating retail and other commercial development, with a large swath of land — as much as two-thirds of the tract — intended for a few hundred multifamily units once the sale closes in the coming months.
"When dealing with much larger sites, the days of the really large big-box and power-center type developments are few and far between," said Joe Baranowski, a New England Retail broker. "Lots of projects we're looking at have a mixed-use element."
The deal could mean increased interest in other sites, but headwinds still exist in the market, particularly on the office side, where you need to lease the majority of a building before construction, real estate professionals said.
Any mixed-use development is likely to have some issues with office space, said Thomas Posavec, vice president of East Pennsboro Township-based Landmark Commercial Realty Inc. Build too much office and you could stifle the market with the open space.
"The market has completed its recovery and it's gaining speed," Posavec said. "What you don't want to do is dump 250,000 square feet on the market that you're going to have trouble leasing."
The other issue is the vacancies in existing office spaces around the West Shore communities, he said. If you have a lot of office space that could be subleased, it makes new construction more damaging to the overall leasing rates.
"One building is fine," he said. "Three or four buildings with all this other space is not."
The office market could be improving, but it isn't easy, said Eric Clancy, executive vice president of Hampden Township-based Delta Development Group Inc. The company is marketing Delta Pointe, a mixed-use office park in Silver Spring Township.
One of the issues is the nature of Central Pennsylvania's commercial makeup, he said.
"There's still a clamor for industrial space, and that's driving the market," Clancy said.
The midstate's highway and rail hubs make it ideal for warehousing and trucking operations, and new construction continues along those lines around the area.
Smaller retail lots could have more potential, but even that market is soft, Posavec said.
Central Pennsylvania is becoming a mature market for big-box stores like Target and Wal-Mart, so there are fewer strong anchors for retail development, Clancy said.
Bowser said there is enough development in nearby Summerdale that he's enthusiastic about the prospects for a broad mixed-use development.
Harrisburg-based PinnacleHealth System is building a hospital in the Cumberland Technology Park in nearby Hampden Township, where Delta has its offices.
There's also retail development cropping up off Valley Road near Wertzville Road with development of new Giant and Weis grocery stores.
"(New England) really saw the potential of development going there," Bowser said.
Planning officials have long been advocating for the advancement of more mixed-use and infill development projects that create walkable communities while making better use of available infrastructure.
"We're in our infancy of really trying to use mixed-use in our area," said Timothy Reardon, executive director of the Tri-County Regional Planning Commission, which covers Cumberland, Dauphin and Perry counties. "In creating just residential development, we've put ourselves behind the eight ball with regards to transportation."
The Summerdale tract, which was previously marketed as an office and retail park, took on the residential component last year.
"It says a lot about where the suburban office market is soft," said William Aiello, senior vice president in the Harrisburg office of Colliers International, the firm marketing the tract for New England Retail.
Adding multifamily was "critical" to the overall master plan of this project, he said, anticipating more than 220 apartment units and 100-plus townhomes.
Multifamily development has been on the rise, including in East Pennsboro Township with The Overlook luxury apartment complex. The township is ideally located along the Susquehanna River and surrounded by major thoroughfares such as Interstate 81.
"For the right locations, there seems to be opportunity to do that," Aiello said.
Baranowski said chances are high that New England Retail would get the entire site approved and work with a residential builder to develop the back section of the tract. It's too early in the process to say how much residential could work there.
"The apartment market is very strong right now," he said. "Up and down the whole Northeast, it seems to be something where there is demand for it. Do I see it becoming more a part of larger developments? Yes."
Planning officials and real estate professionals don't expect a prevalent shift. It makes sense if the area is zoned properly, because it creates a built-in retail audience, said Bill Gladstone of Wormleysburg-based commercial real estate firm NAI CIR.
"I think that is the wave of the future and the way things will be done," Rick Jordan II, CEO of Lower Allen Township-based Smith Land & Improvement Corp., said of mixed-use.
Although his company specializes in commercial development, Jordan said he is looking for opportunities to create sites that blend first-floor retail with residential uses.
"It's certainly worth watching, but it's not a done deal yet," he said of Summerdale. "I think that site has some possibilities."
New England Retail is in its due diligence phase. Baranowski said he expects the firm will have a better idea of its plans by the summer or fall. The approval process would follow, and he's hoping for construction by spring 2014, he said.
Aiello and his partner, George Lulos, already have had several inquiries from national, regional and local parties.
"There has been interest from different categories and definite interest in multifamily," Aiello said.
Commercial progress report
It's been 21 months since the Swatara Township commissioners approved tax increment financing for the proposed Swatara Plaza at The Concourse, a 164-acre retail and office park on Route 322. But activity could be on the horizon.
"We would like to see stuff happening by 2014, if we could. Something inked this year or the beginning of 2014, that would be great," said Rick Jordan II, CEO of Lower Allen Township-based Smith Land & Improvement Corp., owner of the tract.
The developer is required to make about $22 million in offsite road, sewer and water improvements along the heavily used Route 322 corridor. A major part of this project includes reconfiguring the intersection at Route 322, Grayson Road-Milroy Road, Pine Street, Chambers Hill Road and 82nd Street.
The TIF was approved by the Central Dauphin school board. It still needs final approval from Dauphin County, which the developer plans to pursue once it is ready to move forward.
All offsite improvements are expected to take 12 to 18 months, Jordan said: "Once we start, it will break loose."
The developer has seen pretty steady retail movement in Cumberland County at its Silver Creek Plaza on the Pike in Hampden Township.
Jordan said a 1,900-square-foot retail space is still available and an 1,800-square-foot addition with a drive-thru is likely to be added at the 9-acre site.
"This center has been so successful," he said.
Notable tenants include a joint Toys R Us/Babies R Us store and Buffalo Wild Wings.
Other projects, such as Sterling Place in Silver Spring Township, have been slow to take off. Dauphin County-based Hoffer Properties acquired the former PHICO building and 50 acres in 2004, renovated the main building and last year prepared the site for offices and retail locations.
"There's a lot of chatter for the office component, as well as the retail," said Thomas Posavec, the property's leasing agent and vice president with Landmark Commercial Realty Inc.
One of the first companies expected to grace the Sterling Place site, even before the two 120,000-square-foot office buildings, is CarMax. The car dealership chain said in 2011 that it could take up to three years for a new dealership to open in Cumberland County.
Everything is in place for it, but CarMax takes its time with its stores, Posavec said. Three additional sites are available for banking, retail and restaurants along the Carlisle Pike. When the first office building is more than half leased, construction could start on that along Route 114, he said.
There's renewed interest, but it's not quite there yet, Posavec said, with the possibility for deals to materialize in the near future.
Similar status exists for Delta Development Group's Delta Pointe, an 85-acre tract at the intersection of Route 114 and Interstate 81. Since 2007, Delta has been readying the land for development, but only one company — engineering firm Gatter & Diehl Inc. — has since built there.
In November, Delta hired New York-based Newmark Grubb Knight Frank, one of the largest real estate services and investment firms, to market Delta Pointe.
"We're working with them to find a national-level tenant," said Eric Clancy, Delta's executive vice president.
It's still tough to get office projects together, especially lining up tenants, project planning, principals and financing, he said.
"No part of this is easy," Clancy said.
—Jim T. Ryan and Jason Scott
Cumberland County IDA searching for next development
After finding a buyer for the Summerdale tract in East Pennsboro Township, the Cumberland County Industrial Development Authority is seeking the next big development opportunity that could transform vacant or brownfield lands into a retail, office or housing center.
"We're excited to sell this site and move on to the next opportunity," said Jonathan Bowser, economic development director of the Cumberland Area Economic Development Corp., which manages the IDA.
It's looking at other properties in the area, but no deal is in place yet, Bowser said. There could be another announcement in coming weeks.
And it doesn't necessarily have to look like the Summerdale deal. There, the IDA acquired the property from the state in 2011 for $2 million, worked with the township on zoning and infrastructure issues, and worked with real estate professionals to refine the property. Last week, IDA said it has a deal with a Connecticut company to buy the property.
"It has to make sense for us and make sense for the property," Bowser said.
That could mean a similar scenario in which the IDA buys a property to get it ready for development or one in which it merely assists
others on environmental cleanup, with grants and loans for infrastructure or planning and marketing functions, he said.
The IDA is working with the Cumberland County Planning Department and the Redevelopment Authority on their brownfields listing project to see if any former industrial properties are ready for this, he said.
"That's somewhere that we can fill the void," Bowser said.
—Jim T. Ryan