Build it ... because they're already comingDevelopers add warehouse space along I-83, expect strong 2016
What's the recipe to feed a hungry distribution company seeking to expand its product channels?
Start with one part low warehouse vacancy rates.
Then add a densely populated region, sprinkle in attractive leasing costs and finish with a heavy dose of highway infrastructure.
Blend it all up.
What you end up with are growing pockets of speculative distribution projects along Central Pennsylvania's interstates.
Interstate 83 in York County is seeing its fair share of the industrial buffet right now with warehouse projects near Glen Rock and spec buildings underway or teed up in Manchester and East Manchester townships.
There's also heavy development at interstates 78 and 81 in Lebanon County and current industrial space available near Harrisburg International Airport.
A decade of developing I-83
Development within the last 10 years along I-83:
• Greenspring Industrial Park: More than 120-acre park with nearly 1.2 million square feet (of space) (tenants include United Natural Foods, Unilife, Crane Freight and LKQ)
• Susquehanna Business Park: More than 235-acre park with 1.7 million square feet (ES3)
• Orchard Business Park: More than 278-acre park with nearly 1.8 million square feet (tenants include Southwire, Bunzl, Starbucks expansion, GEA and Ollie’s Distribution)
• Fairview Business Park: More than 170-acre park with 1.5 million square feet (tenants include Amazon.com, A.G. Mauro, AlphaBroder and CEVA)
• Stonebridge Business Park: More than 200-acre park with 213,995 square feet (tenants include Home Depot, 1 retail center and Baltimore Steel)
• Farmbrook Industrial Park: More than 125-acre park with 79,500 square feet (Kinsley flex building)
• Morgan Industrial Park: More than 70-acre park with 133,739 square feet (tenants include Shiloh Veterinary Hospital, Hocking International and Moove-in Self Storage)
• Raintree Business Park: More than 70-acre park with 737,200 square feet (tenants include Federal Mogul and York P-B Truss)
Current development along I-83:
• Johnson Controls at Stonebridge Business Park
• York Waste Recycling Center at Morgan Industrial Park
• Susquehanna Logistics Center at 2nd Amendment Drive near Glen Rock: 423,300-square-foot facility under construction, with delivery in first quarter 2016
• Trade Center 83 at 1605 Bartlett Drive in East Manchester Township: 1.2-million-square-foot facility under construction, with delivery in first quarter 2016
• Orchard Business Park Phase II at East Canal Road and I-83 in East Manchester Township: Build-to-suit development project with a proposed warehouse of 780,000 square feet, and a second proposed at 150,000 square feet
Parcels for sale recently along I-83:
• 90 Zions View Road, Manchester: 890 acres
• Heritage Business Park: 483,000 square feet of proposed industrial space on a 41-acre site at Board Road and Shady Lane (across Board Road from I-83 Business Park)
• 245, 265 and 285 Steamboat Blvd.: More than 26-acre parcel adjacent to the Brickyard Industrial Park
• 145 Mundis Race Road: More than 336 acres for industrial development
• 2670 Springwood Road: More than 50 acres for commercial and industrial development
• 1-83 and Route 114 (Lewisberry Road): More than 84 acres for office, flex or retail development
• Chestnut Commerce Center: More than 41 acres and more than 47 acres for commercial and industrial development
• 13147 Wolfe Road: More than 55-acre parcel adjacent to Stonebridge Business Park for development
Source: York County Economic Alliance
“Without a doubt, we need more inventory,” said Darrell Auterson, president and CEO of the York County Economic Alliance. “The development community is seeing demand certainly outpace supply.”
Large tenants looking to grow in certain markets don't always have time to wait for construction, so they gravitate to completed spec buildings that fit their needs, commercial real estate professionals said.
A lot of the existing inventory that was built before the last recession has filled up in recent years, clearing a path for a new wave of development, they said.
The 423,300-square-foot spec warehouse off the Glen Rock exit of I-83, announced in March, is part of the wave.
“Our hope is we'll be leased at or soon after we complete the building,” said Chris Ciliberti, a partner with Ridgeline Property Group, the developer behind the project.
Construction on the cross-dock facility is slated to wrap up by the end of February. And Ridgeline is already considering a similar project on another Central Pennsylvania tract it hopes to acquire, he said.
“There are a tremendous amount of prospects in the market that are still finalizing plans to try and acquire additional space. We know that,” Ciliberti said. “We'll probably see next year a tremendous amount of pent-up demand in the form of leasing. It's not a question of if, it's a question of when.”
Blaze Cambruzzi, COO at York-based Rock Commercial Real Estate LLC, agreed. “People want space that is ready to grab off the shelf.”
If you build it here, they will come, he added. And if you don't build it, they will come anyway because someone else will build it.
Filling up that local building supply with demand from outside the region is a net gain, he said.
Look at the lease signed last year for the First Logistics Center @ I-83 in Manchester Township by Michigan-based Federal-Mogul Holdings Corp.
The center is a 708,000-square-foot spec space off Exit 24.
The criss-crossing interstates in Central Pennsylvania and lower cost of living here are major factors, Cambruzzi said. And other corridors don't have as much development potential as they once did, which opens up I-83 for more growth now, Auterson said.
Also in the works
Manchester Township recently designated the 41-acre Heritage Business Park, a tract with three potential buildings totaling 483,000 square feet, under the state Local Economic Revitalization Tax Assistance Act.
Kinsley Properties, meanwhile, has 100 acres in its Orchard Business Park in East Manchester Township that it is marketing as a build-to-suit opportunity for warehouses spanning 780,000 and 150,000 square feet. Work already has been done to get sites ready for future tenants, said Pat McBride of Cushman & Wakefield, who is marketing the property.
“Market activity feels very solid,” he said, citing a county vacancy rate of 2.5 percent for industrial space, which includes warehousing.
Not far away is the Trade Center 83 project undertaken by Hillwood Investment Properties. That building, also done on spec, will be 1.2 million square feet.
Anthony Amadeo, vice president of Woodmont Industrial Partners, owner of the Capital Logistics Center near HIA off the Pennsylvania Turnpike in Lower Swatara Township, said favorable vacancy rates and a strong labor market here can't be overlooked. “There's no shortage of it. It's easy to bring a third-party logistics company in.”
It's also cheaper to build here with quick access to major metropolitian markets on the East Coast, he said.
Woodmont recently completed redevelopment of 200 Capital Lane, a 400,060-square-foot building that is available for lease in the Capital Logistics Center. That building, with 36-foot clear heights, has a silver designation from the U.S. Green Building Council's Leadership in Energy and Environmental Design, or LEED, program.
“Soon there will be a point of time when spec comes online and competes with our Class A product,” Amadeo said.
Matt Crocker, his counterpart and regional asset manager at Woodmont, said the “sweet spot” for tenant demand seems to be around 200,000 square feet or up in the 700,000-plus range.