Hanover commercial real estate “in its own world”

The industrial real estate market in the greater Hanover area was very tight in the first half of 2022, with a vacancy rate of less than 1%.

Meanwhile, the lease rates for retail space keep rising.

Those are some of the highlights from a midyear report on this geographic submarket, compiled by Rock Commercial Real Estate.

Drew Steffens, Rock’s director of data services, said, “Hanover is its own world” when it comes to commercial real estate, which the report divides into industrial, office and retail sectors.

The vacancy for industrial space is even lower than in York County as a whole, he said.

For purposes of the report, the greater Hanover area includes the boroughs of Hanover, McSherrystown, New Oxford and Abbottstown and the townships of Union, Conewago, Oxford, Berwick, Penn, West Manheim, Heidelberg and Manheim.

They all have businesses and consumers “that identify with the Hanover market,” the report stated.

Steffens said the greater Hanover area is ideal because it’s close to the Maryland line and has access “to a considerable amount of employees.”

Total industrial inventory was 20.07 million square feet; the low vacancy rate was across Class A, B and C space.

Logistics operators are searching for more room “to store materials and alleviate supply chain interruptions,” according to the report.

Though demand is elevated, there’s not much newly built space available because construction costs are so expensive, Steffens said. “A lot of the growth we’re seeing is existing facilities wanting to expand.”

So lease activity has been minimal – due to a lack of supply, not a shortage of demand.

Two major projects in the area are the addition of 175,493 square foot of refrigeration space at Hanover Foods, 1175 Wilson Ave., and AquaPhoenix’s approximately 80,000-square-foot warehouse expansion at 860 Gitts Run Road.

Yazoo Mills Inc. also has completed construction of 60,000 square feet of warehouse space at 800 Gitts Run Road, the report said.

One of the bigger industrial sales in the first half of the year was 262 Church St., Conewago Township, an 81,793-square-foot property purchased for $3.3 million by Church Street Equities LLC. The seller was Eash & Gilbreath Family LP.

On the leasing side, 10,734 square feet at 9 Barnhart Drive, Penn Township, was rented to Hanover Terminal Inc.

The report noted that the market is tight in the much smaller office sector as well, where total inventory is 1.73 million square feet.

Vacancy is just over 3%. Steffens said many office space renters are staying where they are, “content with what they have.”

One of the major transactions in this segment was a 6,823-square-foot suite in the Eichelberger Professional building that sold for more than $1.11 million to BSSF Properties LLC. The seller was RLH Hanover Real Estate LLC.

The office lease transactions in the first half of 2022 included State Farm Insurance’s renting 1,600 square feet in Hanover Crossing.

In the greater Hanover area retail market, a higher ratio of Class A leases accounts for spike in average lease rates in 2020 and 2022.

Overall retail square footage is 7.1 million square feet, and absorption indicates demand is keeping pace with supply, the report said.

Helping absorption was the sale of the 34,854-square-foot Wolf’s Furniture showroom/warehouse along the Golden Mile (371 Eisenhower Drive) for $2.85 million to furniture and mattress retailer Raymour & Flanigan.

Not much big box retail space is still available, Steffens said, with the exception of a former Bon-Ton department store.

Among restaurants, the report noted that Jersey Mike’s leased 6,700 square feet of Class A space in Gateway Hanover. And Steffens mentioned Primanti Bros. Restaurant & Bar’s new location on Eisenhower Drive.

“Hanover historically has very high retail spending,” he said. “They like to go out to eat.”

Paula Wolf is a freelance writer