Commercial real estate market still busy in York County

The York County commercial real estate market showed signs of strong activity in the third quarter, although the once-frenetic pace has cooled.

“We’re seeing some slowing,” said Kevin Hodge, brokerage adviser with Rock Commercial Real Estate, which prepared the Q3 report covering the industrial, office and retail sectors.

But by no means is the market sluggish. People are just “a little more cautious,” he said.

Vacancy has fallen below 2% in the York County industrial segment, though the rate of decline dropped for the second consecutive quarter following the rapid absorption of 2021. Nationally, a slowdown in e-commerce growth led vacancy rates to rise 20 basis points, which could signal a coming trend.

The York County pipeline, however, is pretty full, with 3.4 million square feet under construction and an additional 4.3 million square feet planned. Logistics 83, a 670,390-square-foot warehouse at 825 Locust Point Road, York, is scheduled for completion by the end of this year.

The report noted that 38.5% of remaining construction should be finished in the second quarter of 2023. According to Rock’s Demand Index, 87.5% of industrial users are seeking space less than 100,000 square feet. There remains a shortfall of at least 300,000 square feet of available space to meet that demand, even though inventory increased in Q3.

Hodge noted that lease rates “are absolutely still climbing,” a sign that demand is still there. They continue to increase with new construction, asking upwards of $8.50 per square foot.

Industrial lease transactions in the third quarter included Hanover Terminal Inc. renting 37,500 square feet at 1649 Broadway, Hanover, and Southland Insulators of PA LLC renewing its lease for 17,800 square feet at 3635-3725 Board Road, York.

One of the major sales transactions was CKT Holdings LLC’s purchase of 61,250 square feet at 101 Sinking Springs Lane, Emigsville, for $2.7 million from Hercon Pharmaceuticals LLC.

In the office market, leasing is stronger than sales, with the medical subsector quite active.

Absorption remains positive for the year, meaning more square feet has been leased than vacated.

Construction is been minimal but recent completions include 18,000 square feet of medical office space at Westgate, an office complex next to UPMC Memorial Hospital, and 10,000 square feet of professional office space at 3190 E. Prospect Road. Phase II of Westgate,

providing an additional 95,000 square feet of professional/medical office space, should be available next year.

Transactions last quarter included WebFX, a digital marketing provider from Harrisburg that leased 3,370 square feet at 316-320 N. George St., York.

On the sale side, EK Commerce Center LLC purchased 16,682 square feet at 221 W. Philadelphia St., Suite 2EB, York, from Westwood Properties LLC for $1.8 million.

Turning to the retail sector, vacancy fell 28 basis points to 4.06%, and sales volume is at a five-year high, exceeding $160 million through the third quarter.

This market continues to perform well, despite the economic uncertainty from Federal Reserve interest rate hikes, inflation, supply chain disruption, labor shortages and rising energy costs.

“A steady stream of leasing volume, positive absorption, decreasing vacancy and increasing lease rates are providing a positive outlook heading into the year end,” the report said.

Retail leasing activity has already surpassed last year’s total by 12,296 square feet, and York County lease rates have risen 59 cents over the past 12 months. Year to date, the average lease rate is $17.39 per square foot.

A big transaction last quarter was when Interiors Home leased 38,192 square feet at Manchester Crossroads, York.

“There’s still money in the market sloshing around,” Hodge said. A lot of the sales are “investment-type stuff.”

Over the past three years in York County, sales volume has increased 131.85% while the average sale price has increased 63.76%.

Among the third-quarter highlights was the $11.5 million sale of 109,615 square feet at 693 Lombard Road, Red Lion, to America’s Realty LLC by Northville Green Associates LLC.

Paula Wolf is a freelance writer