Eastern Pennsylvania's industrial real estate market, including Central Pennsylvania, had one of its lowest second-quarter vacancy readings since before the Great Recession started, according to commercial real estate advisory firm Newmark Grubb Knight Frank.
Vacancy rates in what New York-based NGKF terms the I-81/I-78 market were just 8.2 percent in the last quarter, down from 8.8 percent a year ago and 9 percent in the first quarter, according to the report.
However, it looks like the lower regional rate is driven by industrial space being filled more rapidly in the smaller northeast and Lehigh Valley sub-markets, according to NGKF. The Central Pennsylvania vacancy rate was 9.2 percent for the quarter, while the Lehigh area’s was 6.4 percent and the northeast rate was 8.2 percent.
There is almost 152 million square feet of inventory in the midstate market, nearly double the Lehigh Valley and almost triple the size of the northeast part of the state. There was 1.5 million square feet of industrial buildings under construction.
“Occupancy growth along the backdrop of measured, prudent development should drive expansion over the next several quarters,” NGKF said in the report.
Total corridor net absorption, or the amount of space companies are filling for warehousing, manufacturing and other industrial operations, was 2.2 million square feet, up slightly from a year ago, according to NGKF.
The amount of space companies are filling has been growing steadily since the fourth quarter of 2011. The exception is the third and fourth quarters of last year when it dipped some.
Central Pennsylvania absorbed 1.5 million square feet of industrial space in the quarter, while the Lehigh Valley absorbed 970,000 square feet. The northeast shrank.
“Support of supply chain operations expanded within the two submarkets, driving these gains,” NGKF wrote in the report. “Growth in consumer spending, relatively lower fuel costs compared to historical highs and ample developable space continue to be the underlying story for this market in general.”
NGKF also mentioned Industrial Income Trust’s purchase of York County property where Ollie’s Bargain Outlet Inc. has a warehouse as the type of stable investment that is driving market improvement around the region.