Central Pennsylvania industrial market leads growth in region

Despite high fuel costs and supply chain issues, Newmark Real Estate said the I-81/78 industrial market remains strong, with the central Pennsylvania market showing the strongest activity. 

Demand for warehouse and distribution space shows no signs of slowing, the company said in its second quarter report that looked at Central Pennsylvania, Lehigh Valley and the Greater Philadelphia regions. 

Newmark said proximity to a strong labor pool and easy access to consumers remain the top considerations for tenants in their efforts to minimize supply chain and transportation costs.  

Demand for newly constructed warehouse space remains robust, with over 30.0 million square feet of new construction underway, the report said. 

Speculative construction continues to be leased at a rapid pace, typically before the delivery of a building or shortly thereafter, causing land prices to soar, the report said. 

Strong momentum noted in the first three months of 2022 carried into the second quarter. The overall vacancy rate declined by 60 basis points quarter-over-quarter from 6.3% to 5.7% in the second quarter. 

 Overall net absorption was positive at 5.7 million square feet for the second quarter alone, bringing the year-to-date total to 12.0 million square feet.  

Average asking rents declined slightly from $5.31 per square foot in the first quarter to $5.26 per square foot in the second quarter. That is up from $5.04 per square foot a year ago. 

Currently, 30.5 million square feet is under construction. Overall vacancy declined to 5.7% in the second quarter, down from 6.3% in the previous quarter.  

Central Pennsylvania continues to lead the three submarkets which comprise the I-81/78 industrial corridor, with 5.5 million square feet of absorption year-to-date.  

Notable tenants that recently took occupancy and contributed to the boost in absorption include: 

•  Rubbermaid which moved into 1.2 million square feet of space at 3419 Ritner Highway in Newville;  

• Hershey took possession of its new 800,000-square-foot building at 745 Killinger Road in Anneville;  
•  D&H Distributing took occupancy of its newly constructed distribution facility at 1011 Rosedale Avenue in Middletown totaling 745,000 square feet.  

The overall vacancy rate in Central Pennsylvania declined to 4.3% this quarter, down from 5.8% in the first quarter. Asking rental rates for warehouse and distribution space increased to an average of $5.24 per square foot, up 3.1% quarter-over-quarter, the report said.  

New construction activity remains strong in the Central Pennsylvania submarket with nearly 15.0 million square feet currently underway.  

The largest lease signed throughout the I-81/78 distribution corridor this quarter was in the Central Pennsylvania submarket where Geodis leased the 752,673-square-foot building at 939 Centerville Road in the Penn Commerce Center in Newville. 

 The new building is scheduled to deliver in the first quarter of 2023.