Q2 2022 Commercial Real Estate Market Report: Lancaster, PA
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In Q2 2022, the Lancaster, PA commercial real estate market saw steady, stable activity, with its industrial sector remaining the tightest.
Lancaster’s office space sector saw stable growth as nearly half of all new leases signed in Q2 2022 were for spaces between 1,000 and 2,000 square feet.
Its retail sector still has vacancies below 2021 levels and is simultaneously seeing lease rates increase.
General Area Overview & Demographics
Lancaster, PA is a city located in the southern part of the state of Pennsylvania, about 70 miles west of Philadelphia.
As of July 2022, the metro-area population of Lancaster was estimated to be around 500,000 people. The city is home to a diverse mix of businesses, including manufacturing, healthcare, and retail.
The median household income in Lancaster is about $57,700 and the median home value is about $127,500. The cost of living in Lancaster is relatively affordable, with a composite index of about 91 (the U.S. average is 100).
General Commercial Real Estate Performance in Lancaster, PA
Lancaster, PA commercial real estate saw steady, stable performance in Q2 2022. Demand continues to outpace supply in the industrial sector as nearly 800,000 square feet of new industrial projects are underway. Industrial vacancies are nearly below 1%.
Office vacancy in Lancaster is down to 3.41% in Q2 2022 with office-related employment growing by nearly 900,000 jobs. Average asking rents for office space in Lancaster, PA are about $13.50 per square foot.
Finally, retail vacancy in Lancaster, PA rose to 3.53% for the first time in five quarters as retail inventory remains steady and average asking rents per square foot increase.
Lancaster, PA Office Market Activity in Q2 2022
Class A and Class B office space in Lancaster, PA saw elevated asking rents but limited growth in Q2 2022.
Average asking rents for both property types are about $18.00 per square foot, but 80% of office leases in Lancaster charge anywhere fbetween $10 and $15 per square foot.
New office development projects in Lancaster are minimal, placing greater demand on existing properties within Lancaster and its submarkets of East Lancaster and Lancaster City.
With Lancaster’s unemployment below the national average of 3.6%, demand for office space may get even tighter.
Notable Office Market Sales in Lancaster, PA in Q2 2022
Some key transactions in Lancaster’s office space market in Q2 2022 include:
- Mount Joy Holding Co.’s purchase of about 13,000 square feet for $1.8 million.
- PWA Partners, LLC’s purchase of about 5,200 square feet for $800k.
- Triple J Associates, LTD’s purchase of about 4,000 square feet for $630k.
- Inline Properties, LP’s purchase of about 6,500 square feet for $425k.
These are just a few of the notable office space transactions that took place in Lancaster in Q2, 2022.
Lancaster, PA Industrial/Warehouse Market Trends
As is the case with many industrial markets across the country, demand for industrial space is outpacing supply.
Vacancy rate for industrial property in Lancaster, PA is nearly 1%, about 2 percentage points below the national average.
While about 1.4 million square feet of new industrial property has been proposed, only about half of that is currently under construction, and demand is expected to continue to outpace supply for the rest of 2022.
Average asking rents for industrial space grew by nearly $1.50 in Q2 to about $7.50 to $8.00 per square foot.
Notable Industrial Sales Activity in Lancaster, PA in Q2 2022
Alongside the office space transactions we saw in Q2 2022, Lancaster’s industrial space saw some notable acquisitions as well:
- High Properties’ purchase of 26,000 square feet for about $2.6 million.
- Lancaster County Solid Waste Management Authority’s purchase of about $1.3 million worth of space.
- Yellow Goose R/E Associates’ purchase of 2,800 square feet for $625,000.
Other notable acquisitions also took place.
Lancaster, PA Retail Sector Activity in Q2 2022
Vacancy rates for retail space in Lancaster, PA increased for the first time in five consecutive quarters. Shopping centers account for most of the vacancies with a rate of about 43%; regional mall space boasts a vacancy rate of about 25%.
Average asking rents per square foot of retail space grew by about $0.50 to about $15.50 per square foot.
Net absorption for retail space was positive in Q2 but negative for the year.
Notable Retail Lease Activity in Lancaster, PA in Q2 2022
Some new leasing activity took place in Lancaster, PA’s retail sector in Q2 2022:
- Hobby Lobby Stores, Inc. leased 52,000 square feet.
- Tobacco King leased 2,000 square feet.
- AT&T leased 1,400 square feet.
On the purchasing side of things, Weis Markets and Mavis Tire Supply also acquired new retail space in Q2 2022. Stay mindful of this market activity when trying to decide whether to buy or lease retail space.
Takeaways for Lancaster, PA Commercial Real Estate Investors
Lancaster’s commercial real estate sector saw stable performance in Q2 with an uncertain short-term forecast for the rest of the year.
The general consensus is that the continuing uncertainties plaguing the economy may expedite the moderation of Lancaster’s commercial real estate market as interest rates rise, overvalued housing cools down, and employees continue working from home.
If anything, keep an eye on Lancaster’s industrial sector and the new development projects it’s seeing this year so far.
Do your research, stay diligent, and happy investing.
Methodology
All figures presented in this article are based on MyEListing.com’s commercial real estate listing data in corroboration with other freely available data and information covering the commercial real estate industry.
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