Scott July 20, 2017 No Comments

In my consulting business, a cover the counties that make up Southcentral Pennsylvania, from Lancaster to the east to Franklin County to the west.

I utilized the Costar service to identify recent sales trends for office, retail, industrial and multifamily properties in these counties.

Southcentral PA Office Sales Trends

In the second quarter, there were 53 sales totaling just over 470,000 square feet with an average sale price of $136 per square foot.  The average cap rate was 8.4%.

The largest transaction involved 100 Corporate Center Drive in Camp Hill, which sold for $6,820,000 in June.

In the first quarter, there were 50 sales altogether with an average price of $88 per square foot and an average cap rate of 9.8%.

In the year ago period, there were 58 sales with an average price of $92 per square foot and an average cap rate of 7.4%.

Over the last five years, the average sale price has been $80 per square foot with an average cap rate of 8.0%.

SCPA5yearofficeavgsaleprice

As indicated by the data this graph, there has been no real clear trend in the average sale price over the last five years.  We’ll see if the recent up swing in prices leads to a more permanent trend.

Southcentral PA Office Market

In general, the average cap rate has been relatively stable over the last four years, but appears to be trending modestly upward since the low was set in mid-2014.

Southcentral PA Retail Property Sales Trends

In the retail sector, there were 87 sales totaling just under 700,000 square feet in the second quarter with an average price of $142 per square foot.  The average cap rate was 6.5% with a range from 5.6% to 7.6%.

In the first quarter there were 74 sales totaling 650,000 square feet with an average price of $96 per square foot with an average cap rate of 7.4%.

In the year ago period there were 92 sales with an average price of $72 per sqaure foot and an average cap rate of 6.9%.

over the last five years, the average sale price has been $93 per square foot with an average cap rate of 7.5%.

Southcentral PA retail market

While the last quarter saw a spike in the price per square foot, over the last five years, the average price has been generally range bound between $60 and $110 per square foot.  That’s a pretty wide range nonetheless, as sales typically involve lower quality buildings.

SCPA5yearretailavgcaprateQ22017

After peaking in 2015, cap rates for retail properties appear to be trending lower,  and the latest quarter has seen the lowest average yet.

Southcentral PA Industrial Market

In the second quarter, there were 45 sales totaling 3.64 million square feet.  The average sale price was $66 per square foot.  The average cap rate was 5.4% with a range of 5% to 6%.

The most significant transaction was the Logistics Center at Carlisle facility containing 595,000 square feet which sold in May for $55 million to UPS.

In the first quarter, there were 49 sales totaling 3.877 milion square feet with an average sale price of $40 per square foot and an average cap rate of 6.8%.

In the year ago period, the average sale price was $53 per square foot with an average cap rate of 6.9%.

Over the last five years, the average sale price has been $46 per square foot with an average cap rate of 6.5%.

SCPA5yearindavgsalepriceQ22017

The average price in the recent quarter was clearly impacted by the UPS transaction, which was priced at over $92 per square foot.  Otherwise, the average price per square foot has been pretty consistent  over the last couple of years.

Southcentral PA Industrial Real Estate

Cap rates for industrial space in Southcentral PA have consistently stayed within a range of 6% to 9% for several years.  However, the more recent trend is lower as some high quality properties have transferred.

Southcentral PA Multifamily Sales Trends

In the second quarter, there were 18 sales with an average price of $89,706 per unit.  The average cap rate was 7.5% with a range from 6% to 8.5%.

The most significant transaction involved a property located at 99 Dickens Drive in Lancaster, which sold for $17.2 million.

In the first quarter, there were only 11 sales with an average price of $65,323 per unit and an average cap rate of 6.6%.

In the year ago period, there were 35 sales with an average price of $58,498 per unit with an average cap rate of 10.6%.

Over the last five years the average sale price has been $53,924 per unit with an average cap rate of 8.6%.

It should be noted that Costart typically doesn’t keep up with the smaller transactions that occur in the marketplace within the multifamily sector.  Most of the sales found in the service involve properties selling for $500,000 or more, with a few exceptions.

Southcentral PA Apartment market

Judging from this graph, it appears that the multifamily market has broken through a significant level above $75,000 per unit.  The sector has now experienced three consecutive quarters with increases in the average price per unit.  it will be interesting to see if this trend continues.

SCPA5yearlmultifamilycapratesQ22017

As one would expect, with the higher average price per unit, cap rates are hovering at historically low levels for this market.

Final Thoughts

Overall, the commercial real estate markets in Southcentral PA enjoyed a very strong quarter in terms of higher prices.  If the economy continues its steady pace, expect these markets to continue to perform reasonable well into the foreseeable future.