Median rents in central Pa. near 30% threshold

The good news: In central Pennsylvania, the median renter is not yet cost burdened when it comes to housing costs, as defined by the latest census data.

The bad news: That could change – in at least one county – if a shortfall in housing stock is not addressed. According to the 2017-2021 American Community Survey five-year estimates released last month, over 19 million U.S. renter households spent more than 30% of their income on housing costs in 2021. Households are considered cost burdened when they spend at least 30% of their income on rent, mortgage and other housing needs. The situation was especially dire in some of the nation’s largest counties where housing is more expensive, or in areas where incomes are low.

The ACS collects a variety of housing cost information for renters, including monthly rent and utility bills, and for homeowners, including mortgage principal and interest, real estate taxes, homeowner’s insurance, utilities, mobile home costs, second mortgage payments and condominium fees (if applicable).

In most of the U.S, homeowners had a lower median cost burden than renters.

The median housing cost ratio for renters in five counties in central Pennsylvania, the ACS reported, was 28% in Lancaster (estimated 60,449 occupied rental units); 28.9% in Lebanon (estimated 15,406 occupied rental units); 26.8% in Dauphin (estimated 40,459 occupied rental units); 29.2% in York (estimated 41,983 occupied rental units); and 26.6% in Cumberland (estimated 28,988 occupied rental units).

Greg Bardell, past president of the Lancaster County Association of Realtors, said homeowners tend to have less of a housing cost burden than renters because most of them took out fixed-rate mortgages with low interest rates.

It’s all a matter of supply and demand with rental units, he said. “Very, very few” rental properties in the county are sitting empty, as occupancy rates are in the high 90s.

A recent study by the Economic Development Company of Lancaster County’s Center for Regional Analysis should alarm county and municipal officials, Bardell said.

It concluded that current housing stock is not sufficient to meet the needs of the county’s population.

Two factors contribute to this:

· New housing is not compensating for existing stock that is aging.

· Existing and new housing is not keeping up with the county’s changing household composition.

There’s “not enough housing for people who live alone or households without children,” the report said. The “market is responding but there is still a significant shortfall of efficiency apartments and one-bedroom units.”

One reason people want to move to central Pennsylvania is because it is relatively affordable compared with denser metro areas, Bardell said. But “if we don’t get more housing stock,” that advantage is going to disappear.

“Officials have to make a decision,” he said. At this point, the cost to get approval for housing projects is very expensive, and “no one seems to be able to do anything about it.”

“It’s incredible what rental rates have risen to,” with some renters even offering to pay more because they’re desperate for housing, Bardell said.

“We could see ourselves above 30%” in median housing cost ratio, he explained, unless something changes.

Paula Wolf is a freelance writer

Central Pa. rents rise slightly but overall trend down from pandemic highs

Central Pennsylvania rents inched up slightly in November but are still less than they were a year ago, according to the newest report from Apartment List.

This drop from pandemic highs follows a national trend.

In the three-county Harrisburg metro area of Cumberland, Dauphin and Perry counties, median rents rose 0.4% from October to November while falling 0.9% over the previous 12 months.

The latest median rents in the region were $1,040 for a one-bedroom apartment and $1,337 for a two-bedroom unit, the report said.

Rob Warnock, a senior research associate with Apartment List, wrote in an email, “Like most other parts of the country, central Pennsylvania has experienced a swift slowdown in rent growth during 2022. Prices today are slightly lower than they were one year ago, following dramatic increases the year before that.

“While it is a welcomed relief, rents are still up more than 30% since the start of the pandemic (March 2020), so the current market slowdown is not undoing much of the affordability concerns that have developed over the past couple years. The slowdown has been attributed to broader economic worries and lower consumer confidence, as people have been putting off big, expensive decisions like moving, buying a house or starting a family.”

Apartment List’s national rent index fell by 1% in November, the third straight monthly drop and the largest single monthly dip in the history of the index, which dates from 2017.

As Warnock noted, reasons for the cool down appear to be tied to economic factors, rather than just the typical seasonal trend.

Over the course of the year, rent growth continues to outpace pre-pandemic levels, but by smaller and smaller margins, the report said. Through November of 2022, rents are up 4.7%, “which is much closer to the … rates we saw in 2018 and 2019 than it is to the astronomical 18% growth that we saw at this point last year.”

Accompanying the slowdown in rent growth is a rise in unoccupied units. Nationally, the Apartment List vacancy index is 5.7% through November, after gradually climbing from a low of 4.1% last fall.

“Today’s vacancy rate still remains below the pre-pandemic norm but could get back to that benchmark as early as next spring, if the current rate of easing continues,” according to the report.

From April through August, vacancy ticked up 0.2 percentage points, from 5.1% to 5.3%. But from August through November, the index rose 0.6 percentage points, reaching the current 5.7%.

“After a prolonged period of skyrocketing rent growth, and with non-housing-related costs also getting more expensive as a result of broad-based inflation, it seems that some Americans are moving back in with family or roommates, or delaying striking out on their own,” Apartment List explained.

Meanwhile, new apartment construction is getting back on track after encountering delays during the pandemic. “This combination of slowing household formation and rising inventory,” the report noted, “is driving the recent shifts that we are seeing in both our rent growth and vacancy indexes.”

Paula Wolf is a freelance writer

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

Former midtown Harrisburg department store turned into apartments

Gerber’s Department Store at 1507 N. Third St. PHOTO/PROVIDED

After he moved to Harrisburg from Manassas, Virginia, in 2014, attorney Nate Foote decided to buy a pair of duplexes to renovate into rentals.

He was told by some, however, that it wasn’t a good investment.

But Foote believed in the revitalization potential of the capital city, and went ahead with the projects.

Today, he sees a metro area alive with redevelopment. And Foote has embarked on a new initiative, turning the long-vacant former Gerber’s Department Store at 1507 N. Third St. in midtown Harrisburg into five market-rate apartments.

The century-old building, on which the “Carpets and Draperies” sign still hangs on the façade, will have a commercial space and two one-bedroom units on the first floor; a two-bedroom, one-bath apartment and a two-bedroom, two-bath apartment on the second floor; and a 1,655-square-foot two-bedroom unit covering the top floor.

Foote, a partner in Andreozzi + Foote, which specializes in child abuse litigation, plans to reside in the third-floor rental, he said. The others start at 600 square feet, and one of the one-bedroom apartments comes with a bonus space that could be a second bedroom.

Rents are yet to be determined. “It depends on the interest,” Foote said. “It’s a cool, historic building.”

The total square footage is about 5,500, and 800 or so of that is the retail unit that will be occupied by Broad Street Market vendor Raising the Bar, which will operate a bakery/café. “It’s going to be really nice,” he said.

Owners Casey Callahan and Timishia Goodson opened their market stand, which they will keep, in 2016. As the business has grown, finding a larger production space became a priority.

The new location of Raising the Bar will offer the couple’s staples, including breads, baguettes, croissants, dessert bars, cookies, meals and seasonal menu items – made with local ingredients – and expand to sell sandwiches and coffee.

Raising the Bar is moving in shortly, Foote said, and he plans to start leasing the rentals Sept. 1. Showings will begin next month.

Two of the apartments, out the back, will have decks, and two in the front will boast floor-to-ceiling windows as a centerpiece. The repainted “Carpets and Draperies” sign will also be lit up.

Another highlight is a large, abstract, multi-story wall mural by Harrisburg artist Tara Chickey, of Sprocket Mural Works, featuring splashes of pink, yellow, purple and blue.

Inside, the units are equipped with stainless-steel appliances and tile bathrooms. Harrisburg Commercial Interiors is the contractor for the renovation.

Gerber’s Department Store at 1507 N. Third Street today. PHOTO PROVIDED.

Urban areas being rediscovered

In doing research on Gerber’s Department Store, heralded as “The Pride of Upper Harrisburg,” Foote discovered a newspaper ad announcing the business’ October 1922 grand opening.

The building housed other commercial enterprises in the intervening years, but had been empty since the mid-2000s, falling into blight and disrepair.

“It’s been on the market for years but was not quite big enough get the interest of a large-scale developer,” Foote said.

With the new federal courthouse being constructed just a few blocks away, there are a lot of mixed-use projects proposed for that area, he said.

“I’m in the heart of it all,” Foote said. In the next five to 10 years, midtown “is going to be a very different place.”

He paid $180,000 for the building, purchasing it from Mussani & Matz Co., Schnecksville, and expects to invest more than $700,000 overall. The project received letters of support from, among others, the Historic Harrisburg Association’s preservation committee, Harristown Enterprises Inc. and the nearby Susquehanna Art Museum.

Before coming to the area, Foote said he saw Washington, D.C., become transformed as people rediscovered neglected neighborhoods there and elsewhere.

Now this urban trend has arrived in smaller cities, which are more affordable than their larger counterparts, one of just many benefits they offer, he said.

In some small way, with his investment in midtown, Foote said, “I want to be part of that coming to Harrisburg.”

Paula Wolf is a freelance writer