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Commercial development could be slow, but it is not dead

Chalk up another stalled project to the economy.

Chalk up another stalled project to the economy.

In July, Duke Realty Corp., a large commercial developer
based in Indianapolis, pulled out of a planned land deal near Shippensburg with
two economic-development companies. The reason: A slow economy made the
proposed commercial park just over the Cumberland
County line in Franklin County
less attractive than other options.

The question is: Will other business parks suffer the same
fate in the next year?

Some businesspeople said no, the deal in Shippensburg was an
isolated incident and development in Central Pennsylvania
should continue, even if some sectors slow down. Others said logistics parks
could suffer even though the region’s supply of warehouses is less than a total

Deal or no deal

In 2006, the Chambersburg Area Development Corp. and the Shippensburg Area Development
(SADCO) thought they had a good thing going when they offered up about 256
acres near exit 24 of Interstate 81 to be built into a business park.

Together, the two companies are known as Cumberland Valley Regional Development Corp. (CVRDC).

Under most scenarios, the park – known as United Business
Park – would house mostly
logistics companies with other commercial offices and possibly some
manufacturing, said Brad Everly, SADCO president, as well as senior vice
president and chief financial officer for Orrstown Financial Services Inc. in

Since 2006, Duke Realty was talking with the development
corporation to develop the site.

“The idea was that we could have developed the property
faster if Duke took over the project,” Everly said.

Some improvements were under way at the site before Duke was
brought in, he said. Then in July, Duke pulled out, even though CVRDC expected
the developer to take control.

“They felt it was no longer viable,” Everly said.

That’s one way of saying it.

The other way is that the timing was wrong, there are
significant development costs to the site, Duke has other priority projects,
and the current economic conditions are wrong, said Joel Reuter, a Duke Realty

A decision on the land purchase had to be made by July, he
said, but Duke could not commit at that time.

It’s the economy

“My feeling is you might see more of that,” said Vincent
Ranalli, an associate for industrial properties with Los Angeles-based real
estate firm CB Richard Ellis Inc. Ranalli works out of the company’s Philadelphia office. The
company has a large presence in Central Pennsylvania.

There are fewer tenants in the market to lease space in
commercial parks and warehouses, Ranalli said. That means if a new park is to
be developed, the builders and leasing agencies need to find more tenants up
front to make sure the project is viable.

Part of that has to do with tighter credit markets for big

In a stronger economy, a developer could close on a property
with fewer tenants because the open space could be leased later. As long as you
had a couple anchor tenants, the project was good, Ranalli said.

‘No reason to panic’

“Right now people are cautious,” said Gregg Schwotzer,
president of Crossgates Inc., a commercial developer based in McMurray, Washington

Crossgates has a large presence in Central
Pennsylvania, including a Harrisburg-area office where Schwotzer
works. The company developed TecPort Business Center
in Swatara Township,
Dauphin County. The business park houses the
offices of notable businesses such as Commerce Bank/Harrisburg and Capital BlueCross.

Schwotzer said developers need clients lined up before they
advance on business parks. No one is rushing into anything though, he said.

Crossgates could find a tenant for the last nine-acre lot in
TecPort within six to nine months. That’s still three years ahead of schedule
to fill the business park, Schwotzer said.

“We continue to work on a number of other opportunities,” he

Crossgates is eyeing a 30-acre industrial park in Lower Paxton
Township, Dauphin County.
The company is in a due-diligence period on the property, and nothing is
finalized, he said.

“Central Pennsylvania is
still a good market, and we’re ready to weather the storm,” Schwotzer said.

Although a project here or there could be stalled, the
warehousing industry and commercial parks in Pennsylvania are good indicators that some
things are holding fast, Ranalli said.

Logistics companies continue to relocate to the state from New Jersey. Central Pennsylvania warehouses are benefitting. Only
about 8 percent are vacant, he said. That’s better than the Lehigh Valley,
where some are about 15 percent vacant.

“Still,” he said, “there’s no reason to panic.”

United Business
Park will go forward

When Indianapolis-based Duke Realty Corp. pulled out of a
planned deal to develop 256 acres in Franklin
County into a commercial
park, it did not spell doom for the project.

“We’re working on revisiting the plan. It won’t be the plan
that Duke walked away from,” said David Sciamanna, executive director of the
Chambersburg Area Development Corp. (CADC).

The economic-development group and the Shippensburg Area
Development Corp. co-own the property on Route 696, immediately off exit 24 of
Interstate 81 in Southampton

The two groups, known as the Cumberland Valley Economic
Development Corp., expect to have new plans for the United Business
Park in two months,
Sciamanna said.

One change is that the business park will include more than
350 acres. The economic-development group acquired 95 acres in Decem-ber.

The group also has a $7 million loan from the state to
develop the property and $3 million from the federal government for
transportation improvements to bridges and roads that front the property.

Sciamanna expects the economy to turn around and the project
to go forward again, even if it was temporarily stalled.

“You’re going to see a lot happening at that exit next
year,” he said.

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