Why York, Pennsylvania, Is an Industrial Market Worth Monitoring in 2021

By Ben Atwood CoStar Analytics

York, Pennsylvania’s industrial market finds itself is in an interesting place at the end of the first quarter.

Occupancies in this small central Pennsylvania market are close to 95%, a totally healthy figure, notable only because it has risen in the past two quarters.

That softening differentiates York from most of its neighbors along the North Atlantic trade corridor. Nearby markets such as Reading, Harrisburg and Lehigh Valley all saw overall vacancies decline or hold steady through 2020, even though these markets saw much heavier levels of new supply come online.

This is somewhat peculiar because on the face of it, York should have benefited from last year’s demand surge. It has a deeper labor pool than most of its neighbors, which is crucial for logistics tenants. It also offers quick access to Interstates 81 and 78. While York is not positioned as ideally as Lehigh Valley, Harrisburg or Scranton, these are the same routes which make these markets so prominent on the supply chain.

One of the reasons York's vacancies softened is because of its deep base of manufacturing. Close to 16.5% of the market's workforce is employed in that sector, compared to a statewide average of just 9%. This left York slightly more susceptible to downsizing within the market and multiple manufacturers reduced their shipping footprint due to the coronavirus.

These moveouts are partly why York's overall occupancies have softened, but this region also struggled somewhat in the years leading up to the coronavirus. Since 2018, developers were building heavily along I-83, just north of York proper and south of I-78. They added about 3 million square feet of logistics space during that time; but in March 2021, roughly 50% of it is unoccupied, and almost all of the space that delivered in 2020 remains empty.

This empty existing space is now competing with the 1.2 million square feet of speculative space that's currently underway. That's what makes 2021 such an interesting year for the market, even if it is not seeing the levels of construction that Lehigh or Reading is experiencing.

If demand for e-commerce continues to surge, as many believe it will, then these projects should quickly fill. But many are beginning to warn that central Pennsylvania markets are at risk of being overbuilt, and the recent data for York suggests the area might be susceptible to that.

While vacancies remain totally manageable, and industrial leasing shows no signs of slowing, this market, like nearby Reading, is now a barometer for industrial demand across central Pennsylvania. And its success or struggles will be well worth following in 2021.

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