The recession. A longer-than-expected process to get plans approved. The Sept. 11 terrorist attacks.
Those events delayed construction and leasing activity last year for four large industrial business parks in Central Pennsylvania, said real estate developers and agents involved with the projects. While several of their warehouses were built and leased in 2001, the agents and developers acknowledged that projects progressed more slowly than they had hoped.
The owners of Crossroads Commerce Center, a 500,000-square-foot distribution center in Middlesex Township, Cumberland County, had hoped to have the building fully leased by early 2002. Now, the owners Equilibrium Equities Inc. of New York City and Conewago Enterprises Inc. of Hanover, York County - wish to have their building fully leased by late 2002.
Equilibrium Equities also plans to build a 705,000-square-foot distribution center within the existing Fairview Industrial Park in Fairview Township, northern York County. In June, that developer's president said he was in serious talks with a company that wanted to lease half of the proposed building's available space. No companies have signed leases yet, and Equilibrium
Equities doesn't expect any will until 2003.
In North Middleton Township, Cumberland County, a Reno, Nev.-based developer intends to build a 3.2-million-square-foot distribution center called Cumberland Logistics Park. The developer, DP Partners, had hoped to start on the first of four or five buildings by summer 2001. That didn't happen. Construction is now expected to begin in late spring or summer.
Finally, at Blue Mountain Logistics Park in West Hanover Township, Dauphin County, DP Partners has had trouble landing tenants for its 1.5-million-squarefoot distribution center's final two buildings. After finding companies to occupy nearly 1.1 million square feet, one of the developer's executives estimated the company would have the park fully leased by June 2001.
That didn't happen. The company hopes to lease the third building by the end of the first quarter, but it is uncertain when a fourth would be built, a real estate agent said.
The following is a more detailed look at the four industrial business park projects that stalled in 2001, with an update on who's leasing space, when prospective tenants are expected to sign leases, and why commitments have been harder to come by.
Crossroads Commerce Center
Genco Inc., a Pittsburgh-based logistics, warehousing and supply-chain management firm, is leasing 160,000 square feet in Crossroads Commerce
Center. Genco's manufacturing services division moved into the distribution center in October. The company is using its space to store products for Kraft Foods' Nabisco division.
Adam Meinstein, president of Equilibrium Equities, the co-owner of the building, said he is negotiating with three consumer product manufacturers who are interested in leasing space in the 500,000-square-foot commerce center. He declined to disclose the names of those prospective tenants, as no leases have been signed yet. Meinstein, who had originally hoped to have his building fully leased by early 2002, aims to have it fully leased by the end of 2002. The commerce center was built on speculation. "If not for Sept. 11, we'd have had more tenants by now," Meinstein said. "What happened Sept. 11 has slowed down our leasing a bit. Tenants have been slower to make commitments."
But business may be about to pick up.
Jim Adams, vice chairman of Genco, said he is negotiating with two consumer product manufacturers that want Genco to handle their returns processing, distribution, transportation management and warehousing. Those prospective tenants are interested in occupying a combined 360,000 square feet, he said. Genco hopes to hear from the interested parties by mid-January, he added.
If those companies decide to move their operations into the commerce center, Genco would lease more space, Adams said. As a third-party contract distributor, Genco structures its lease agreements to mirror the needs of its customers, he explained, requiring that the customers sign contracts stating how much space they need and how long they need it. Genco employs about a dozen workers in the commerce center, Adams said. If the two interested parties contract with Genco, 60 to 70 more jobs would be created, he said.
The economic slowdown has left Genco relatively unscathed, Adams said.
"The economy doesn't have the level of adversity on our business as it does on some other manufacturing or retail businesses," he said. "We've seen slightly lower activity with our individual customers, but because we've added new customers, our business continues to grow." Genco has 13 warehouses in Cumberland, Dauphin and Lebanon counties, Adams said.
Fairview Industrial Park distribution center
Equilibrium Equities has made lease proposals to two durable-goods manufacturers that are interested in moving into a proposed 705,000-square-foot distribution center to be built in Fairview Industrial Park. Each company is interested in leasing 300,000 square feet to 400,000 square feet, Meinstein of Equilibrium Equities said.
"I'd love to say these potential deals are newsworthy, but I could end up having the same conversation with you in six months," Meinstein said. "My expectation is that this project won't get leased until 2003, because it's such a large project."
Meinstein declined to disclose the interested companies, saying only that both companies do business in the Harrisburg metropolitan area.
Unlike Equilibrium's Crossroads Commerce Center project, the distribution center plan is being erected on a build-to-suit basis, meaning construction won't begin until leases are signed. Equilibrium's construction costs will total about $17 million, Meinstein said. Again, Meinstein said that the aftermath of the Sept. 11 terrorist attacks has slowed his project.
"Things were modestly slower before Sept. 11, and the events of that day affected people's decision-making abilities," Meinstein said. "The challenge in our market has not been developers competing against developers; it's been corporate contractions."
Cumberland Logistics Park
In September, developer DP Partners received approvals from North Middleton Township to build a 3.2-million-square-foot distribution center. That approval process, which began in November 2000, took longer than the developer expected, said Michael Alderman, a partner with the Industrial Properties Group at NAI/Commercial-Industrial Realty Co. His Wormleysburg-based real estate firm is marketing the property for the developer. Although the developer has the township's permission to start, DP Partners might not break ground until the Pennsylvania Department of Transportation OKs the project.
Deborah Steffee, manager of North Middleton Township, said she hopes the developer will receive its two approvals from PENNDOT by the end of the first quarter. The developer needs PENNDOT to approve its highway occupancy permit application and its traffic impact study, she said. In essence, PENNDOT needs to see how the developer's project would affect state highways and intersections, and what roadway improvements the developer would need to make, if any, to reduce congestion.
Glenn Rowe, district traffic engineer for PENNDOT, was unsure when the developer would receive those approvals.
DP Partners hopes to begin construction on the first of four or five buildings planned for the industrial park in late spring or early summer, Alderman said. That building would be 805,000 square feet. The other buildings would range between 473,000 square feet and 1.4 million square feet, Alderman said.
DP Partners had intended to begin construction in summer 2001. The Industrial Properties Group hopes to have a tenant signed by mid-2003, he said.
The slower-than-anticipated approval process isn't the only reason the project has been delayed, Alderman said.
"This year has been marked by a recession, which may have had some effect on our leasing activity," he said.
Blue Mountain Logistics Park
Several companies want to lease Blue Mountain's third building, a 252,000square-foot structure that DP Partners completed the week of Dec. 10, said Alderman, who is in charge of leasing this project, as well. But no one has signed on the dotted line. He declined to identify the prospective tenants.
In an interview earlier this year, Aaron Paris, vice president and chief operating officer of DP Partners, said he expected the company would have the 1.5-millionsquare-foot industrial park fully leased by June 2001. Tenants have not yet been identified for the third building and a planned 137,000-square-foot warehouse, the park's final building. The first three buildings were speculative; the final building will be constructed on a build-to-suit basis, Alderman said. That decision was made recently, after the developer decided it was too risky to build another warehouse on a speculative basis, he said, It hasn't been determined when construction would begin on the final building, he said.
In early 2001, two companies began leasing space in Blue Mountain. One company is The Order People Co., a subsidiary of United Stationers in Des Plaines, Ill., an office equipment supplier. The other is OneSource Logistics, a division of C&S Wholesale Grocers of Brattleboro, Vt., a wholesale food distributor. Those companies share a 770,000-square-foot distribution center.
In April, UPS e-Logistics Inc., a division of Atlanta-based United Parcel Service, agreed to lease a 324,000-square-foot warehouse. Since then, no agreements have been signed.
INDUSTRIAL, PARKS IN THE MAKING
Blue Mountain Logistics Park: Construction is nearly finished on the 1.5-millionsquare-foot distribution center on 95 acres in West Hanover Township, Dauphin County. DP Partners of Reno, Nev., is developing the project. Three of the four buildings are completed. So far, there are three tenants:
* The Order People Co., a subsidiary of United Stationers in Des Plaines, Ill., an office equipment supplier;
* OneSource Logistics, a division of C&S Wholesale Grocers Inc. of Brattleboro, Vt., a wholesale food distributor; and
* UPS e-Logistics Inc., a division of Atlanta-based United Parcel Service.
Crossroads Commerce Center: A 500,000-square-foot distribution center that was completed this past summer in Middlesex Township, Cumberland County. The owners are Equilibrium Equities Inc. of New York City and Conewago Enterprises Inc. of Hanover, York County. Construction costs were about $12 million, said Adam Meinstein, Equilibrium's president. The center is south of where Interstate 81 crosses the Pennsylvania Turnpike. Genco Inc., a Pittsburghbased logistics, warehousing and supply-chain management firm, leases 160,000 square feet in the center.
Cumberland Logistics Park: A 3.2-million-square-foot distribution center that is planned for 222 acres in North Middleton Township, Cumberland County. DP Partners a Reno, Nev.-based industrial/commercial developer, hopes to begin construction in late spring or early summer on the first of four or five buildings. That first building will have 805,000 square feet. No tenants have signed leases yet.
Fairview Industrial Park distribution center: A 705,000-square-foot distribution center to be built in Farview Industrial Park, Fairview Township, northern York County. Equilibrium Equities plans to begin constructing the distribution center by late 2002. Meinstein estimates construction costs will be about $17 million. No tenants have signed leases yet.
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