Colliers: Warehouse demand still high in the midstate

With white-hot leasing activity, demand for new warehouses in the midstate isn't expected to slow down anytime soon, according to a new report from Colliers International Group Inc.

The New Jersey, Lehigh Valley and Eastern Pennsylvania markets, which include Central Pennsylvania, collectively posted 18.4 million square feet of leased space in the first half of the year, the most of any core market in North America.

Over the last year, 22 big-box warehouses have been built, with more than 15 million square feet of additional space under construction in the second quarter. 

With continued demand from logistics and e-commerce users, who arich trying to keep up with consumers who are buying more with mobile devices, vacancy rates have dropped while rental rates have increased by more than $1 per-square-foot to $5.34 from $4.32 a year ago, according to Colliers.

A big-box warehouse is a building with more than 300,000 square feet that is primarily used for distribution and has ceiling heights of 28 feet or more.

The Lehigh Valley submarket, driven by growth along Interstate 78, has led the way across the broader regional market, according to Colliers. That submarket posted 8 percent growth in warehouse activity in the first half of the year, while the York/Lancaster area grew by 4 percent.

A notable local deal was expansion of the Starbucks Corp. distribution center in East Manchester Township, York County. The Seattle-based coffee chain is adding more than 1.2 million square feet of space in York County, with that new facility claiming the title as the largest Starbucks distribution center in the world.

Colliers cited location, available land for more development and increased demand from the Panama Canal expansion as primary reasons for continued growth in the regional warehouse sector.

"Development, absorption and rental rate increases are all directly correlated to e-commerce demand," according to Colliers. "In many ways, including supply chain management, e-commerce is still in its infancy. Distributors are evaluating locations, inventory levels and building amenities necessary to quench demand from consumers who are putting a premium on the rapid delivery of goods."

The U.S. Census Bureau reported in August that more than 8 percent of all retail sales in the U.S. come via e-commerce.

Source: Central Penn Business Journal