Wednesday, October 30, 2019

Logistics and Manufacturing Demand Fuels Harrisburg's Hot Industrial Market

Harrisburg's industrial market remained healthy through the third quarter, as sustained demand for logistics and manufacturing space kept vacancies tight, even as heavy levels of new supply arrived in market.

Occupancies are right at historic norms, even though over 2 million square feet of new supply arrived over the past 12 months. Harrisburg's prime location offers distributors easy access to major ports in Philadelphia and New York, and produces exceptionally strong demand for logistics space.

Smucker’s filled the most space in the third quarter, occupying close to 1.2 million square feet of space at 801 Centerville Road, a speculative facility completed earlier this year.
The market’s tight occupancies have enabled owners to see strong rent growth for several years in a row. Historically, the market has supported an annual increase of about 2%, but this figure has been surpassed for four years running, and year-over-year gains were over 4.5% at the end of third quarter.

Logistics properties are the market’s strongest performers. These assets have seen growth of over 5.5% in the past 12 months, and during the past four years, routinely eclipse all other industrial property types.

The strong growth continues to attract investor attention. Year-over-year volume at the end of the third quarter was close to $315 million, nearly double historic expectations. Several major deals finalized during this time, the most notable being the acquisition of 5500 Linglestown Road. The 88,000-square-foot facility sold in August to a private buyer for $4.8 million, or nearly $55 per square foot.

The fourth quarter is off to a strong start as well, thanks to the acquisition of a 55,000-square-foot warehouse on Fisher Street in Halifax, which closed in mid-October.

"Harrisburg is very attractive to industrial users in the logistics/distribution industries largely because of the infrastructure, which offers access to approximately 40% of the U.S population and 45% of the Canadian population in a day’s 11- hour truck drive."

"These factors are advantageous to users in manufacturing and specialized industries as well, who further benefit from the long-standing history of manufacturing in the area, availability of skilled labor and existing heavy-industrial properties that offer economical price points."

"We have a friendly tax structure, and within an hour can be on I-80, I-99, I-81, or the turnpike. A lot of demand is for the million-square-foot logistics centers, but we have more than enough demand for smaller specialized facilities, too. So much so that we are hard pressed to find space for tenants."

 Harrisburg shows very little space available in specialized industrial assets, and with most construction accommodating the logistics sector, this will likely remain an owner’s market for the next few years.

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