ROCK Commercial Real Estate publishes quarterly market reviews designed to survey and gauge the state of commercial real estate conditions in Central Pennsylvania. The publications offer thoughtful, forward-looking insight into trends in the local office, industrial, and retail markets.
YORK COUNTY INDUSTRIAL | VACANCY SPIKE IN Q4, NEW CONSTRUCTION CONTINUES
950,820 SF of completed construction in 2020 remains unleased.
Vacancies between 150,000-350,000 SF constitute 51.88% of available square feet. An additional 1.7 MSF is proposed to be built in this size range, potentially triggering a glut in the market.
Although increasing throughout 2020, vacancy is projected to flatten and then decline throughout 2021 as speculation building slows and absorption picks up.
97% of leased square feet was located in the region of Greater York West with an average unit size of 18,900 SF in Q4. The average unit size in 2020 was 53,075 SF.
Demand for warehousing is expected to remain high to keep up with online order fulfillment, as e-commerce continues to become the desired means to shop.
YORK COUNTY OFFICE | LEASING ACTIVITY ON THE RISE, DOWNSIZING DRIVING DEMAND
Leased square feet has been on a downward trend, although lease activity overall has been on the rise. We expect this metric to remain for the foreseeable future. Though companies are returning to their offices, users are re-evaluating their needs and downsizing accordingly.
The average office unit size has decreased 31.3% since 2016.
Swings in vacancy remain tight and remain well below the national average of 15.5%.
56% of sales dollar volume in Q4 was attributed to medical office space. The sale of Mountain View OB/GYN at 20 North Street, Hanover contributed over $1.3M.
YORK COUNTY RETAIL | POSITIVE NET ABSORPTION IN 2020 DESPITE COVID-19 CHALLENGES, MORE SQUARE FEET LEASED THAN VACATED
Despite disruptions from COVID-19, more space was leased than placed on the market in 2020. Absorption finished positive overall in 2020 potentially indicating that the initial “shock” from COVID-19 has ended.
Big box redevelopment remains in the pipeline at the York Galleria. The former Bon-Ton space remains under contract with plans in place to become a self-storage facility. The former Sears space remains under construction to become a casino with plans to open in Q4 2021.
Shopping center vacancy is 1.77% higher than the national average. York County shopping center vacancy was 9.67% at the close of Q4.
At year-end, 29 national retailers filed for bankruptcy in 2020. In many instances, retailers are using bankruptcy as an opportunity to re-invent themselves and adapt to evolving consumer demands.
LANCASTER COUNTY INDUSTRIAL | LEASE RATES INCREASE FOR FOURTH CONSECUTIVE QUARTER, VACANCY 1.24% BELOW NATIONAL AVERAGE
Average lease rates are expected to continue to increase throughout 2021. The 12 month rolling average of $6.27/SF is slightly behind the national average of $6.76/SF.
Vacancy remains below the national average of 5.2%.
63.4% of leases in Q4 were for units 10,000 SF or above. This was the only quarter in 2020 where a majority of industrial leases were not less than 10,000.
The average unit size leased this quarter was 19,400 SF; above average for the year where average unit size was 17,698 SF.
Over 1 MSF is currently under construction with 72% already preleased or to be owner occupied.
80% of total active construction projects are to be 230,000-250,000 SF in size.
LANCASTER COUNTY OFFICE | VACANCY SHRINKS FOLLOWING SHARP INCREASES THROUGHOUT 2020
Vacancy decreased slightly in Q4 well below the national average of 15.5%. Vacancy in 2020 represents a five year high at 6.08%. However, the swing in vacancy remains tight varying no more than 0.73% over the past five years.
Although leased square feet is down compared to the past five years, demand is seeing a shift from larger to smaller units as large office users contemplate mitigating building expense through downsizing.
With more inventory placed on the market than was leased, net absorption finished negative at -55,885 SF, by year-end.
LANCASTER COUNTY RETAIL | LEASED SQUARE FEET ONLY 1% SHY OF 2019 LEVELS, VACANCY RATE OF INCREASE CONTINUES TO DIMINISH
Lancaster vacancy of 6.23% sits below the national average of 11%.
The rate of increase for vacancy has diminished over the past year increasing only 0.01% in Q4. With absorption also recovering to only -25,000 SF, this could be a positive sign that the initial “shock” from COVID-19 has ended.
As referenced in the latest Economic Intelligence Report from the Lancaster County Economic Development Company, it is important to note that impacts of the pandemic are not felt equitably across all retail sectors. Entertainment, hospitality and food service continue to experience hardships that retail shops may not feel as significantly.
Retailers selling essential products and discounted goods, including grocers, home supply stores, value stores, and bulk item stores continue to fare the best during the pandemic. Restaurants able to sustain a steady flow of drive-thru and curbside pickup are also faring well.
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