The New Year is well underway, but before we get too far into 2016, it’s worth taking a look back at the largest commercial lease deals that occurred in the Central Pennsylvania market in 2015.
These deals represent significant trends and help predict where the market may be headed in future quarters.
Each sector within the commercial real estate market — retail, office and industrial — experienced a unique trend worth noting.
1. Community Aid leased the first floor of a Class B retail space located at 25-31 Rohrerstown Road, Lancaster, from Urban Edge Properties. The 40,712-square-foot lease was signed in January 2015 and began in June 2015.
2. Blue Mountain Thrift Store leased the first floor of a Class B retail space located at 2-22 N. Londonderry Square, Palmyra, from Lavipour & Co. The 38,669 square-foot lease was signed in May 2015 and began in August 2015.
3. HomeGoods leased a Class B retail space located at 5084-5098 Jonestown Road, Harrisburg from Cedar Realty Trust Inc. The 31,436-square-foot lease was signed in June 2015 and began in November 2015.
4. Tractor Supply leased a Class B retail space located at 100 Noble Blvd., Carlisle, from Broad Reach Retails Partners LLC. This 30,173-square-foot lease was signed in September 2015 and began in February 2016.
Two of the top-four largest retail lease deals of 2015 were thrift stores, and HomeGoods is also a discount retailer, making 75 percent of the top leases related to discount shopping.
Additionally, the fourth quarter finished strong with a net absorption of 227,275 square feet. Finally, the vacancy rate dipped below 5 percent for the first time since before the Great Recession. Combined, these trends tell us that the local market is recovering and absorbing second-generation space specifically for thrift-type retailers that budget-conscious consumers tend to prefer.
1. Pennsylvania College of Health and Science leased a specialty office space located at 850 Greenfield Road in Lancaster. This 213,000-square-foot lease was signed on January 2015 and began on January 2016.
2. Deloitte leased a Class A office space located at 100 Sterling Parkway, Mechanicsburg, from Hoffer Properties. This 172,792-square-foot lease was signed on November 2015.
3. United Concordia Companies Inc. leased a Class A office space located at 4401 Deer Path Road, Harrisburg, from DeSanto Realty Group. This 102,000-square-foot lease is a renewal and began on June 2015.
4. PEMA leased a Class A office space located at 2605 Interstate Drive, Harrisburg, from Corporate Office Properties Trust. This 86,660-square-foot renewal was signed on June 2015 and began on January 2016.
Two of the top-four largest office lease deals in 2015 were renewals (United Concordia and PEMA).
Additionally, the fourth quarter was lackluster, producing only 15,921 square feet of net absorption.
Finally, the vacancy rate is rising slightly. Combined, these factors tell us that the office market is not performing as strongly as the other commercial sectors.
More than half of the largest leases were from existing businesses, as opposed to new businesses moving into the area. A low net absorption and rising vacancy rate also tells us the market still remains slightly volatile.
1. Chewy.com LLC leased a Class B industrial space located at 40 E. Main St., New Kingston, from SK Realty Management. This 600,000-square-foot lease is a renewal and began on January 2015.
2. An unnamed business leased a Class A industrial space located at 950 Centerville Road, Newville, from KTR Capital Partners LP. This 570,000-square-foot new lease was signed in May 2015 and began on November 2015.
3. Unisource Worldwide Inc. leased a Class B industrial space located at 4501 Westport Drive, Mechanicsburg, from I & G Direct Real Estate 33K LP. This 502,446-square-foot lease is a renewal and began on February 2015.
4. GENCO leased a Class C industrial space located at 221 S. 10th St., Lemoyne, from GIC Real Estate International Pte Ltd. This 489,213-square-foot lease is a renewal and began on June 2015.
Central Pennsylvania maintains its role as a dominant player among logistic markets. Industrial buildings will continue to set new records for scope, as distribution centers greater than 1 million square feet become more prevalent.
Last year, the local industrial market experienced a total of 7.8 million square feet of net absorption and 3.5 million square feet of space was under construction at close of 2015. We can expect continued growth throughout 2016, which is great news for businesses and professionals impacted by local industrial real estate.
Mike Kushner is the owner of Lower Paxton Township-based Omni Realty Group.