Activity in the Interstate 81/78 and greater Philadelphia industrial markets continued at a healthy pace in the third quarter, despite a drop-off in demand from the year before.
The two reports from Newmark Real Estate show lease rates are still rising as vacancy rates fall.
In the I-81/78 corridor, which includes the central Pennsylvania, northeastern Pennsylvania and Lehigh Valley submarkets, 29.6 million square feet is under construction, as land prices climb to peak levels. “With demand slowing, it will be interesting to monitor how much of the available speculative space coming online will be pre-leased before completion,” the report noted.
Positive absorption totaled just under 7 million square feet, bringing the year-to-date number to 19.1 million square feet.
Third-quarter vacancy fell to 5.3%, down from 8.6% a year ago. On average, asking rental rates for all industrial property types rose to $5.31 per square foot, an increase of 3.9% year over year.
Central Pennsylvania leads the way
Vacancy in the central Pennsylvania region was just 3.7%, lowest of the three I-81/78 submarkets. It also led in positive absorption, with 8.6 million square feet year to date, 3.1 million of that in the third quarter.
Among the major tenants taking occupancy were UPS moving into its newly built 775,000-square-foot East Zone Regional Hub at 2110 N. Union St., Middletown; Life Technologies Corp. relocating to Greencastle Logistics Center at 1611 Ebberts Spring Court, Greencastle; and Sun Run occupying 423,000 square feet in Susquehanna Logistics Center at 10874 Second Amendment Drive, Glen Rock.
Newmark reported that asking rents for warehouse and distribution space in central Pennsylvania are up 8.9% year over year, averaging $5.14 per square foot.
The real estate company also noted that 13 million square feet of the 29.6 million square feet under construction in the I-81/78 corridor is in central Pennsylvania.
Boohoo signed the largest lease of the quarter, for nearly 1.1 million square feet at 2771 N. Market St. in the First Logistics Center @ 283, Elizabethtown. In addition, Amazon leased 551,030 square feet at 121 Commerce Ave. in the Matrix I-81 Logistics Center, Greencastle, and Bowman Logistics renewed its lease for 447,000 square feet at 2294 Molly Pitcher Highway, Chambersburg.
Lots of activity in Lancaster County
In the second Newmark third-quarter report, for greater Philadelphia, Lancaster County is included in the southeastern Pennsylvania coverage area and saw some major tenants lease space.
Tyreflow Environmental Inc. moved into a 250,320-square-foot building at 1905 Horseshoe Road, Lancaster, and Ahold Delhaize occupied the newly constructed 250,000-square-foot cold storage building at 3800 Hempland Road, Mountville.
And once it’s completed later this year, the 325,500-square-foot building under construction at 2222 N. Reading Road, Denver, will be home to PureCycle LLC.
This quarter’s largest investment sale in southeastern Pennsylvania was in also in Lancaster County, with Dalfen Industrial buying the 251,250-square-foot warehouse at 791 Stony Battery Road, Landisville, for $29 million from Catalyst Commercial Development LLC. That comes out to $115 per square foot.
The overall vacancy rate in the southeastern Pennsylvania submarket fell to 3.9% from 4.7% a year earlier, with Lancaster County coming in at 1.5%, the lowest of the six counties in the coverage area.
Paula Wolf is a freelance writer