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East Shore warehouse market tightens

Dauphin County’s industrial-real-estate sector is highly competitive. The county boasts a low vacancy rate of 6.5 percent, according to a report from CB Richard Ellis, a commercial and industrial real estate firm with an office in Harrisburg.

Dauphin County’s industrial-real-estate sector is highly competitive. The county boasts a low vacancy rate of 6.5 percent, according to a report from CB Richard Ellis, a commercial and industrial real estate firm with an office in Harrisburg. This makes it a tight market, meaning available space is limited.

“There are only a few opportunities in the city of Harrisburg. There are some older-style buildings built in the late 1970s and early ’80s, but they don’t feature lighting, loading areas and sprinkler systems that are up to today’s standards,” said Michael A. Hess, sales associate with CB Richard Ellis.

A vacancy rate between 5 percent and 7 percent is a good, steady number, said Jack Shepley, partner at the Wormleysburg-based Industrial Properties Group of NAI/CIR. When the number is too low, there isn’t enough space to shop around to potential buyers. When the number is too high, there aren’t enough investors interested in the market.

“Right now, in the 150,000 (square-foot) to 300,000 (square-foot) marketplace, supply outweighs demand across the region,” Shepley said. “For all other segments, demand outweighs supply. We (Central Pennsylvania) always worked with a 5 to 7 percent structure. It’s never been like the Pittsburgh industrial market that collapsed in the late 1970s to early ’80s.”

When old, large warehouses sit empty, it can skew vacancy rates in a county, said Michael Alderman, director of leasing at DP Partners’ Harrisburg office. For example, there is an empty, approximately 400,000-square-foot warehouse along Industrial Road in Harrisburg. Even though big Class-B and Class-C sites such as this are not viable options for today’s big-box tenants, the buildings are included in market studies. So even though almost all Class-A space (the most expensive kind) in the county is occupied, the other handful of outdated buildings could paint a different picture, Alderman said.

“You need to mine into the data,” Alderman said. “Quality of buildings is a large determinant. Tenants have a heightened awareness of safety and security.”

Class-A warehouses are at least 32 feet high, have concrete perimeter walls and feature high-tech, high-end sprinkler systems, Alderman said.

Companies looking for a large amount of Class-A warehouse space in Dauphin County will most likely have to build, Alderman said. Normally, it takes at least 20 acres to construct a warehouse between 20,000 square feet and 100,000 square feet. That much open, industrially zoned land in Dauphin County is hard to find, Alderman said.

There are new projects coming to the county, though. Equilibrium Equities Inc. of Conshohocken, Montgomery County, is building a 150,000-square-foot warehouse along Milroy Road in Swatara Township, Hess said.

DP Partners may consider building more warehouses in the county based on the success of Blue Mountain Logistics Park, an industrial warehouse park the company developed in West Hanover Township. The park features three buildings totaling 1.5 million square feet.

“It filled pretty quickly,” Alderman said. “And tenants said they would be interested in more space if we developed it.”

Although older warehouses in Dauphin County are not up to snuff for most large tenants, the buildings present redevelopment opportunities, said Adam Campbell, vice president and industrial agent for Campbell Commercial Real Estate Inc. in East Pennsboro Township.

Companies are hesitant to pursue build-to-suit options or purchase properties because of the high cost of building materials, Campbell said. That may give second-generation warehouses a new life.

There are lease opportunities in Dauphin County for companies looking for warehouses between 20,000 square feet and 100,000 square feet.

“Industrial investors are still looking,” Campbell said.”

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