Wednesday, April 29, 2020

Logistics in Harrisburg Could Buttress Market in Uncertain Times

By Ben Atwood Market Analysts, Costar

CoStar’s latest forecasts appear optimistic about the Harrisburg industrial market, thanks to heavy demand for shipping.

Pennsylvania’s state capital is an ideal location for shipping goods across the country, and the market has experienced a surge of supply over the past decade. During that time, developers added more than 15 million square feet of industrial space, expanding the inventory pool by more than 17%.

The market has absorbed this supply fairly well. But the market was softened by the completion of multiple projects shortly before the shutdown brought the commercial real estate world to a near standstill.

Vacancies were near 10% at the start of March, and the base case model predicts that vacancies will briefly spike into the low double digits before declining rapidly. In the severe downturn model, the pain is slightly sharper and rates return to historical averages within a matter of quarters.

Local commercial real estate professionals remain optimistic the newly completed space will still fill relatively quickly.

“Retail’s been on the decline for years. COVID-19 will accelerate that decline, but e-commerce will only pick up as people are essentially being forced to adapt to online shopping.”

While Harrisburg will likely continue to play second fiddle to Lehigh Valley for Pennsylvania shipping, its location is strong enough that the rapid growth of e-commerce would fill up vacant spaces quickly, and possibly warrant more construction.

Before the virus, retail experts said online shopping had eaten into about 10% of brick-and-mortar sales and predicted that figure would eventually hit 20%. Logistics construction was some of those most active across the country pre-shutdown, and a surge in demand could result in construction picking back up again sooner than forecast.

Kushner also said he believes that trucking jobs could prove to be an easy transition for many out-of-work retailers and manufacturing employees, and could even bring in residents from areas of Pennsylvania that are harder hit by the shutdown. Cumberland County is one of the fastest-growing regions of the state, and a big part of the reason is the shipping node near Carlisle.

This theory will soon be put to the test, as Pennsylvania is set to commence reopening on May 1.

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