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Warehouses getting larger as demand in Central Pa. remains strong

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The big boxes are getting bigger in Central Pennsylvania, as demand for new warehouses along the industrial corridor of Interstate 78 and Interstate 81 remains strong.

Over the last decade, the average warehouse in the region has increased in size by 29 percent to 555,236 square feet, according to CBRE Research, an arm of real estate firm CBRE Group Inc.

The need for larger industrial buildings is being driven mainly by growing demands for e-commerce facilities. Third-party logistics companies continued to snap up space to close out 2017, along with building material suppliers, wholesalers and retailers.

The I-78/I-81 corridor overall — which CBRE defines as Central Pennsylvania, the Lehigh Valley and Northeast Pennsylvania — saw nearly 12 million square feet of space occupied last year.

Central Pennsylvania, which has more than 165 million square feet of industrial space, accounted for about 6.6 million square feet of that absorbed space.

"Demand for logistics product as a result of shifting supply chain strategies fueled most of this activity," CBRE said in its year-end market report.

Despite that demand, rents remained stable last year. The average asking lease rates across the corridor at the end of the fourth quarter was $4.34 per square foot, down from $4.42 in the third quarter but up from $4.30 in the second quarter.

The Lehigh Valley had the highest average rent at $4.92 per square foot, while Central Pennsylvania averaged $4.20, according to CBRE.

Meanwhile, construction activity is still surging to keep up with demand.

There was 14.2 million square feet of new product under construction at the end of the year, including 11 million of speculative space. Central Pennsylvania and the Lehigh Valley each accounted for about 5.7 million square feet of the total.

"The volume of tenants with large requirements currently touring the market indicates the corridor will continue to see strong leasing activity in 2018," CBRE said.

The firm is currently tracking tenants in search of more than 16 million square feet of space. CBRE also said it expects that future technologies such as self-driving cars, artificial intelligence and greater warehouse automation will help drive warehouse growth in the coming years.

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Jason Scott

Jason Scott

Jason Scott covers state government, real estate and construction, media and marketing, and Dauphin and Cumberland counties. Have a tip or question for him? Email him at jscott@cpbj.com. Follow him on Twitter, @JScottJournal.

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