Scranton/Wilkes-Barre, Pennsylvania is one of the nation’s top locations for growth in the logistics sector.
On its web site economicmodeling.com, labor market research firm Economic Modeling Specialists Intl (EMSI) listed the Scranton/Wilkes-Barre area 5th in the U.S. for total employment growth in the warehousing and storage sector from 2010 through 2013. Scranton/Wilkes-Barre, with 8,869 total transportation and warehousing jobs and a growth rate of 21%, finished behind Riverside/San Bernardino/Ontario, California; Columbus, Ohio; Indianapolis-Carmel, Indiana; and Memphis, Tennessee. Allentown/Bethlehem/Easton, Pennsylvania finished 6th.
American Eagle Outfitters, Amazon.com, Corning, The Home Depot, Benco Dental, Neiman Marcus and Boden USA are just some of the firms that have opened major distribution centers in Northeastern Pennsylvania in recent years.
The results of several other recent national studies bode well for future industrial growth in Northeastern Pennsylvania.
An analysis of fourth quarter 2013 data by Dr. Hany Guirguis, Manhattan College, and Dr. Joshua Harris, University of Central Florida, indicates that robust net absorption of industrial space is expected to continue through 2014 and 2015. Guirguis and Harris believe the housing recovery and employment growth are two of the main contributors to the industrial resurgence.
“We see the return of housing as a significant part of the economy driving the need for industrial space, as building products and materials need to be warehoused and shipped across the nation to meet local demand. Further, each new housing unit will need to be furnished and will create demand for other household goods, which in turn fuels even more industrial space demand. These are long-term trends and thus partially explain the forecast of strong levels of industrial space absorption,” said Harris.
The analysis was funded by the NAIOP Research Foundation. Since 1967, NAIOP, the Commercial Real Estate Development Association, has been a leading organization for developers, owners, and investors of office, industrial, retail, and mixed-use real estate.
According to Guirguis and Harris, “the major drivers for this predicted positive net absorption of industrial space, which could top 250 million square feet in 2014, are a return to more than 3 percent annualized GDP growth and a much improved U.S. employment situation.”
Locally, Mericle Commercial Real Estate Services has seen an uptick in requests for industrial space. “We are encouraged by what we are seeing,” said Mericle Vice President of Marketing Jim Cummings. “We are fielding a mix of requests for space from a variety of manufacturers and distributors.”
Cummings added that Northern New Jersey, historically one of Northeastern Pennsylvania’s top competitors, is struggling to supply large industrial sites for new construction. “We are submitting lease proposals for projects of all sizes, from 10,000 square feet to 1 million square feet, but we are hearing from our national broker contacts that large sites are becoming very scarce in New Jersey,” said Cummings. “We believe New Jersey’s loss will be our gain.”
In their analysis, Guirguis and Harris said, “New demand for industrial space most likely will come from the construction and retail trade sectors, which have been experiencing marked gains. Increases in new housing starts, up 18 percent in 2013, likely will continue as the growing population and sustained rate of new household formations suggest an undersupply of housing units for several years.”
Guirguis and Harris added, “Further, gains in employment will continue to translate into additional purchasing power, fueling gains in retail sales, which set another all-time high in December 2013. The combined forces of these two trends likely will result in continued growth in demand for warehousing and distribution facilities, specifically from the retail trade and housing construction sectors.”
Their analysis suggests that eCommerce fulfillment, a growth sector in Northeastern Pennsylvania, will likely continue to expand. “Of note is that historically, increased retail sales generated demand for retail space in shopping centers and malls,” said Guirguis and Harris. “However, as consumers purchase items online versus in person at traditional stores, demand for distribution and fulfillment centers will only increase.”
Research conducted recently by Mericle determined that 18 of the top 500 Internet retailers have distribution centers in the area. These include Mericle clients such as Amazon.com, American Eagle Outfitters, BabyAge.com, J.P. Boden, CVS Caremark, All About Dance/Discount Dance Supply, The Home Depot, Lowe’s, The Men’s Wearhouse, NBTY, The Neiman Marcus Group, Sears, and Webgistix/Rakuten.
“More than 51 million people live within 200 miles of Wilkes-Barre,” said Cummings. “Our proximity to the major east coast consumption zones combined with affordable operating costs and an ample supply of available buildings and fully prepared sites will continue to be attractive to these eCommerce companies.”
In 2013, Motorola completed a Warehouse Vision Survey, and the results support the Guirguis and Harris analysis. In its national survey, Motorola asked warehouse IT and operational personnel in the manufacturing, retail, wholesale, and third party logistics (3PL) market segments to indicate whether they expect to see growth in their U.S. distribution facilities between 2013 and 2018. Among the findings were that 35% plan to increase their number of warehouses, 38% plan to expand the size of their warehouses, and 45% plan to increase the number of their employees.
Cummings said Mericle designed its ReadyToGo!™ Program to make sure it had a wide variety of buildings and sites immediately available to accommodate inquiries from distribution, manufacturing, office, and healthcare clients. Through the program, Mericle is fully preparing 90 sites in 11 business parks throughout Northeastern Pennsylvania and is constructing buildings on speculation to keep up with market demand. So far, Mericle has completed 37 ReadyToGo!™ Sites.
Neiman Marcus, Maximus, C3i, and Greiner Packaging recently located in buildings Mericle had constructed on speculation on ReadyToGo!™ Sites. Together, the firms are creating more than 1,000 new jobs.
“We are prepared for the resurgence in industrial growth but we are ready for all types of tenants,” said Cummings. “We are very confident in Northeastern Pennsylvania’s ability to compete for new projects and new jobs.”
Mericle Commercial Real Estate Services, founded by Robert K. Mericle, is a vertically-integrated company with more than 200 in-house professionals with expertise in all aspects of commercial real estate development and construction. The Mericle team includes licensed architects, land planners, professional engineers, surveyors, licensed electricians, plumbers, carpenters, certified public accountants, in-house legal counsel, leasing and marketing professionals, licensed brokers, property managers, and more. For more information about Mericle and its ReadyToGo!™ Program, visit mericle.com.