Construction activity was historically high in the third quarter, with 14.1 million square feet underway.
But CBRE said speculative development has picked up and, even as rents rise, third-party logistics companies are snapping up the space.
The average asking lease rate across the I-78/I-81 corridor in the third quarter was $4.42 per square foot, up from $4.30 in the second quarter. CBRE’s data covers Central Pennsylvania, the Lehigh Valley and Northeast Pennsylvania.
Lease rates in Cumberland County rose to $4.62 per square foot in the third quarter, the highest rate in the midstate. That was up from $4.58 in the second quarter.
The Lehigh Valley, by comparison, posted an average rent of $4.85 per square foot, up from $4.61 in the second quarter.
The midstate accounts for 4.7 million square feet of occupied space overall. That’s nearly half of the corridor’s total, which was about 9.7 million square feet.
And there is still nearly 6 million square feet of warehouse space under construction in Central Pennsylvania. Most of that construction is in Cumberland and Franklin counties, according to CBRE.
CBRE said more tenants are looking for spaces of 500,000 square feet and greater, which threatens supply and raises prices. E-commerce growth over the last five years has led to a boom in warehouses of over 1 million square feet.
“Given the number of active requirements in the market, vacancy is expected to remain low, further driving up rents,” CBRE said in its third-quarter report.
That said, the corridor is expected to see construction completions this year approach last year’s record-breaking mark of 16.9 million square feet, according to CBRE.
Here’s a snapshot of Q3 warehouse activity in Central Pennsylvania:
The total vacancy rate in Central Pennsylvania was 5.4 percent in the third quarter, down from 6 percent in the second quarter. The total inventory in the midstate is about 165 million square feet, with about 6 million square feet under construction.
By comparison, there is about 75.8 million square feet of space in the Lehigh Valley, with 6.2 million square feet under construction.