Monday, August 23, 2021

Investors Spending Big on Lancaster County Industrial Properties

 By Ben Atwood CoStar Analytics 

Data shows investors have taken quite an interest in the industrial assets in Lancaster County, Pennsylvania, this year.

They've spent over $315 million buying them over the course of 2021, which is already the highest figure ever recorded in this small central Pennsylvania market. Their interest speaks to the strengths of both the logistics sector and Lancaster itself.

The coronavirus pandemic fueled an absolute surge in demand for shipping, leading to preposterous levels of industrial leasing activity across the country's major shipping nodes. This effect is particularly pronounced across central and northeast Pennsylvania, where markets such as Scranton and Lehigh Valley continue posting some of the nation’s strongest levels of demand and rent growth.

Lancaster's position on the supply chain is nowhere near as strong as either of those markets. While this county does offer direct access into Philadelphia's wealthier suburbs, it lacks the north/south highway routes that many of its neighbors offer.

But that doesn't mean there isn't demand for Lancaster space. The market's vacancies are nearly nonexistent, and there'd probably be quite a bit more leasing activity if it were easier to build here. Unfortunately for warehouse builders, Lancaster County’s residents are big on preserving their agrarian heritage and have it made it rather difficult to bring large-scale projects on line.

Barring some drastic change to local politics, there likely won't be a supply surge in Lancaster like what's being experienced in Lehigh Valley, Scranton or Reading. So, with limited supply and nearly endless demand, it's no surprise at all that prices are going up.

Take a look at this transaction involving 601 Stony Battery Road. It was completed in February 2021, and the 250,000-square-foot asset was completely vacant when it sold shortly after coming online. TA Realty out of Boston bought the property for $23.7 million, or nearly $95 per square foot.

Those prices are significantly higher than the market’s three-, five- and 10-year averages, and what’s even more interesting is TA Realty sold this same property in July. It was still completely vacant, and they weren’t marketing it for sale. But industrial investor and developer Dalfen Industrial made an off-market bid too good to pass up.

Equally curious is the fact that other markets along the North Atlantic Trade Corridor are not experiencing this same surge in investment. Sales volume for 2021 has notably dropped in Scranton, Lehigh, Harrisburg, York and Reading.

There are still four months left in the year, so obviously all of that could change. But right now, Lancaster appears to be the hottest industrial investment market in Pennsylvania.

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