Mark Chubb, senior managing director/principal, Colliers International (photo composite)

PHILADELPHIA, PA—The industrial markets in Central and Northeast Pennsylvania and the Lehigh Valley grew an average of four percent in the first nine months of the year and absorbed 8.5 million square feet of space, according to new research from Colliers International.

“Eastern PA is on track to see another year of solid market growth,” says Mark Chubb, senior managing director/principal.,”Of note this year is the scale and location of development and occupier activity. In the first three quarters of this year, there were 10 construction starts greater than 500,000 square feet, double the amount seen in 2017.”

Chubb says developers are moving to less developed areas in the Central Pennsylvania and Northeastern submarkets, but the appetite for space shows no signs of slowing down.

“The uptick was well-timed with above-average activity among occupiers seeking 800,000 or more square feet,” he says. “Due to land constraints in the market's historical core areas, new development has become more dispersed along I-81 & I-78 corridors, filling in the areas between established big-box neighborhoods in Allentown-Bethlehem, Harrisburg-Carlisle, and Hagerstown, MD. Even with the increase in large-format supply, year-end absorption will top last year's and we've yet to see any downward pressure on rents.”

In the third quarter, Colliers says 2.6 million square feet of new occupier deals were completed, bringing the year-to-date total to just under 10 million square feet. At this time last year, 13.6 million square feet of new deals had completed. Despite a relatively quiet third quarter, Colliers believes year-end transaction volume will top 15.6 million square feet.

In the Lehigh Valley submarket, deliveries and construction starts were notably above average during the third quarter, especially in Berks County. Current development in Berks is more spread out than in Lehigh & Northampton counties and almost exclusively large format, averaging 790,000 square feet in size, Colliers says in its report. Construction commenced on four facilities, all larger than half a million square feet, bringing to ten the number of buildings under construction. About 2.4 million square feet of new speculative product delivered this quarter, including two facilities greater than 800,000 square feet in Berks County.

The two largest deals in the Central Pennsylvania/I-81/I-83 market were build-to-suit projects: Bayer Pharmaceutical's 681,700 square-foot lease with DHL in Manchester, along the I-83 corridor, and Riviana Foods' 714,598 square-foot lease with NorthPoint Development in Greencastle, along the southernmost stretch of PA's I-81 corridor. Both facilities will include additional square footage on a speculative basis, for a total rentable building area greater than one million square feet.

In Northeastern PA, Exeter's 1.1 million square-foot build-to-suit facility for American Tire Distributors in Blakeslee helped year-to-date absorption reach 1.3 million square feet. Mericle's one million square-foot Pittston development is the only spec project currently underway, but Colliers says more speculative development will begin before the year is over. Of the 3.5 million square feet of existing or under construction availabilities, 2.4 million is new speculative product.

Instant Insights /

Colliers Research: Eastern PA Industrial Markets Growing with Positive Absorption

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