Industrial Market Outlook Is Strong in Scranton PA

Scranton Pennsylvania's industrial market is in a position to weather the coronavirus fairly well, according to latest forecasts.

Both the base-case and severe downturn scenarios show vacancies spiking in the near future, but recovering fairly quickly over the following quarters. The region’s shipping market is abnormally strong, thanks to its prime location, which draws in major tenants from across the country.

This location is why developers were confident building on spec, and close to 5 million square feet was under construction before Pennsylvania Governor Tom Wolf’s shelter-in-place order at the end of March brought an end to construction across the state.

Local owners acknowledge that vacancies will likely spike as the shutdown brings some businesses to a close, and that the new supply might take some time to fill. Mericle remains confident in the market’s ability to absorb the space, and in the shipping industry in general.

“Several of our tenants have said they have never been busier, and product comes in one door just to go out the other,” he said.

The firm is one of the largest developers in Lackawanna and Luzerne counties, and currently own about 16 million square feet of warehouse and shipping space.  90% of Mericle tenants are still open, and many shipping companies fall under the essential services designation. Cummings also said tenants have been open about their need for new employees, and he believes they will be able to weather the storm.

Optimism could be warranted for developers like Mericle, as the forecasts show rents will recover relatively soon. The severe downturn predicts that rates dip over the next six quarters, but turn positive again in 2023. This could be too negative, given how well shipping appears poised to handle the crisis, and the base-case forecast shows rents flat lining for a few quarters before owners see growth again.
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