In the first quarter of 2022, vacancy continued to fall across the industrial, office and retail segments of the York County commercial real estate market, with the industrial sector setting a record low.
The 2.08% industrial vacancy rate is down 85 basis points from the previous quarter and is the lowest “since we’ve been tracking it,” said Kevin Hodge, brokerage adviser with Rock Commercial Real Estate.
“We’re basically full,” he said. “It’s just amazing how much is going on right now.”
Most industrial construction in York County is on a larger scale, Hodge said.
Rock’s report noted that real estate developer CRG sold its 311,920-square-foot warehouse at 950 Woodland View Drive, Manchester Township, for $45.5 million. The facility is 40% occupied and accounted for 64% of sales volume in the county last quarter.
The highest demand is among users seeking space less than 10,000 square feet. There’s a deficit of approximately 125,000 square feet for this size category and “possible opportunity for landlords willing to carve up larger units,” the report said.
In this tight market, the York County submarkets with the lowest first-quarter vacancy were South Western (Hanover area at 0.64%), Northern (Dillsburg/Lewisberry at 0.81%) and South Eastern (Brogue at 0.73%).
According to the report, which compiles data from a number of sources, Hodge said, 4.2 million square feet of industrial space is under construction, with an additional 3.7 million square feet proposed. Most projects built on speculation are immediately absorbed upon completion, driving down vacancy rates further.
Three-quarters of the new construction is on the Interstate 83 corridor, from Lewisberry in the north to Shrewsbury in the south.
Expansion projects last quarter included Hanover Foods Corp. at 1175 Wilson Ave., Penn Township (175,493 square feet of freezer storage); Yazoo Mills Inc. at 800 Gitts Run Road, Penn Township (approximately 60,000 square feet of warehouse space); and Ollie’s Bargain Outlet at 3300 Espresso Way, East Manchester Township (approximately 200,000 square feet of warehouse space).
Switching to the York County office sector, there’s definitely strong demand among smaller users, Hodge said. The market for bigger spaces is softer, as larger companies tend to have employees working remotely.
It can be hard to find Class A and B office product in smaller increments these days, he said. “The higher quality stuff is thinner,” so Class C space in places like York city is getting repurposed.
Class A units in the county are leasing upwards of $20 per square foot. Among the highest lease rates were York Executive Center (2555 Kingston Road) and 220-224 St. Charles Way, which are Class A facilities near busy retail corridors.
In the first three months of this year, 240,000 square feet of office space sold, the highest performing quarter since the start of the pandemic. Vacancy is at a five-year low, dropping 53 basis points to 4.08%.
“Although unemployment remains on the decline, effects from inflation, labor shortages, interest rate increases, supply chain disruptions and threats from global conflict continue to work against economic recovery,” the report said. “Despite these challenges, demand is predominantly focused on smaller unit sizes less than 5,000 square feet.”
Ninety percent of leases in the first quarter were in this size range. An example is 2951 Whiteford Road, Springettsbury Township, a 4,758-square-foot unit leased by McLean Mortgage Corp.
There is 586,000 square feet available throughout York County, with units 5,000 square feet or less making up 41% of the vacant square footage.
“Tenants are also taking advantage of the current environment to not only move to new space but also negotiate to maintain their current lease rates,” the report explained.
Class A projects under construction include 18,000 square feet of professional/medical office suites at Westgate Plaza, next to UPMC Memorial Hospital, and 10,000 square feet of professional office space at 3190 E. Prospect Road, Windsor Township.
In the York County retail sector, first-quarter vacancy declined 56 basis points to 5.1%.
“We’re still seeing decent activity,” Hodge said. Finding employees to fill jobs remains a problem, but new business starts continue to be strong.
Sale volume is at its highest level since the fourth quarter of 2020. Earlier this year, Raymour & Flanigan acquired the former Wolf’s Furniture at 380 N. Northern Way, Springettsbury Township, for $5.25 million, the report noted. This is one of three showrooms the Syracuse-based furniture and mattress retailer is opening in the midstate.
In addition, Haines Road LLC purchased the 55,817-square-foot Haines Acres Shopping Center, Springettsbury Township, for $6.5 million. The new owner intends to renovate the façade of the complex, anchored by Ollie’s Bargain Outlet, beginning later this summer.
Total leased square feet was also higher than average in the first quarter, the report said.
Two transactions accounted for 59% of that: 32,200 square feet leased to Fun City Trampoline Park at 1200 Greensprings Road, Conewago Township, and 30,447 square feet leased to WellSpan Health at Queensgate Shopping Center, York Township.
Paula Wolf is a freelance writer