Industrial sales power Pennsylvania capital's real estate market

 

By Brenda Nguyen CoStar Analytics

Pennsylvania's capital has experienced significant growth in its commercial real estate market over the past decade, with total commercial sales volume increasing from approximately $501 million in 2014 to $861 million so far this year. After adjusting for inflation, this represents a growth of over 30% during this period for Harrisburg.

However, the industrial sector continues to dominate the local landscape. That area has led sales totals over the past decade, averaging more than $300 million annually. In contrast, retail sales have averaged $158 million, office sales at $147 million and multifamily sales at $82 million.

Already this year local industrial sales hit an annual record, partly thanks to EQT Exeter’s acquisition of Building 1 at Core5 in Middletown for $170.5 million — the highest single-building transaction in Harrisburg’s history. Institutional players like EQT Exeter have played a pivotal role in the city's industrial rise. Other prominent national players, such as Prologis, GIC, Blackstone, Brookfield and XPO, are among the most active buyers in the traditionally tertiary market.

Meanwhile, private buyers and owner-users have led retail, office and multifamily transactions. While institutional investors can access vast pools of pension funds, endowment money and other institutional capital at relatively low costs, private buyers typically rely on traditional bank financing and personal wealth, which comes with higher interest rates and more stringent lending requirements. Subsequently, private buyers typically need more upfront capital to close on nine-figure deals.

For instance, in Harrisburg’s retail market, the highest-valued transaction in the last five years was locally based Prasavi Group’s mid-2021 acquisition of the Camp Hill Shopping Center, valued at $89.7 million — only 53% of the value of EQT’s recent industrial purchase.

For the office market, the highest-valued sale was the University of Pittsburgh Medical Center’s acquisition of the Tech Park Office Center in Mechanicsburg, valued at $45 million.

And for multifamily, Philadelphia-based Westover Companies’ $23 million acquisition of Shippensburg Village Townhomes, a 174-unit garden-style student housing complex, was the largest apartment sale in the last five years.

As investment continues to flow into this tertiary market, Harrisburg has an opportunity to highlight its retail, multifamily and office segments. The adage "location, location, location" is particularly relevant here, as the city's placement between major Northeast markets has the potential to draw more attention from national retailers, white-collar companies and prospective residents.

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