Executive Briefings

Downturn Has Positive Side for Facility Location Teams

If the slowdown in site selection in the Mid-Atlantic region is any indicator of nationwide trends, it could be another year to 18 months before things begin to return to normal across the country. So says Jason Grace, vice president of sales and leasing in the corporate brokerage services division of Landmark Commercial Realty, based in Lemoyne, Pa.

From his vantage point in the Harrisburg suburb, Grace is very much aware of the transportation arteries - Interstates 76, 78, 81 and 83 - that course through Central Pennsylvania, linking such large markets as New York City, northern New Jersey, Philadelphia, Baltimore and the District of Columbia.He feels that what's happening in that vital region is a pretty good barometer of activity - or lack of it - in most of the nation."What we're seeing with the economy going into the doldrums is, companies that haven't put off site selection for a year or two are emphasizing and refocusing on proven, core markets," Grace says. Nevertheless, there is a definite leveling off of business.

He's also aware of how much space is available because Landmark tracks existing industrial product, Grace says. He estimates there is approximately 20 million square feet of vacancy extending from the Pennsylvania-Maryland line in the south-central part of the state to the cities of Hazleton and Wilkes-Barre heading northeast. "That kind of speculative, class-A, first-generation space that's never been occupied -- that's really driving down rental rates," he says. But there's good news in that for facility location teams.  "It's driving up landlord concessions and incentives for the companies that are doing site selections."Grace had hoped to see improvement in the industry next year, but with looming refinancing and potential commercial note defaults, "I think it's 2011 before we kind of steady the ship. It will be a couple of years before we see the level of activity we had 36 to 40 months ago."

When companies are ready to scout for assembly or distribution sites, the laundry list of factors to consider include not just proximity to markets and thoroughfares but tax abatement, permitting, facility design, bid packages, construction management and other non-real-estate matters. (See the video "What Makes Industrial Site Selection a Success?".)

Landmark (http://www.landmarkcr.com) is familiar with those factors, of course. For instance, the company worked on a deal in the Hazleton area in which abatement of real estate taxes for 10 years was a nice incentive for a candy company to relocate. "That would be 50 cents to 80 cents a foot, and on a quarter-million-square-foot facility, that adds up," Grace says.

- Russell W. Goodman, Editor-in-Chief, SupplyChainBrain

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If the slowdown in site selection in the Mid-Atlantic region is any indicator of nationwide trends, it could be another year to 18 months before things begin to return to normal across the country. So says Jason Grace, vice president of sales and leasing in the corporate brokerage services division of Landmark Commercial Realty, based in Lemoyne, Pa.

From his vantage point in the Harrisburg suburb, Grace is very much aware of the transportation arteries - Interstates 76, 78, 81 and 83 - that course through Central Pennsylvania, linking such large markets as New York City, northern New Jersey, Philadelphia, Baltimore and the District of Columbia.He feels that what's happening in that vital region is a pretty good barometer of activity - or lack of it - in most of the nation."What we're seeing with the economy going into the doldrums is, companies that haven't put off site selection for a year or two are emphasizing and refocusing on proven, core markets," Grace says. Nevertheless, there is a definite leveling off of business.

He's also aware of how much space is available because Landmark tracks existing industrial product, Grace says. He estimates there is approximately 20 million square feet of vacancy extending from the Pennsylvania-Maryland line in the south-central part of the state to the cities of Hazleton and Wilkes-Barre heading northeast. "That kind of speculative, class-A, first-generation space that's never been occupied -- that's really driving down rental rates," he says. But there's good news in that for facility location teams.  "It's driving up landlord concessions and incentives for the companies that are doing site selections."Grace had hoped to see improvement in the industry next year, but with looming refinancing and potential commercial note defaults, "I think it's 2011 before we kind of steady the ship. It will be a couple of years before we see the level of activity we had 36 to 40 months ago."

When companies are ready to scout for assembly or distribution sites, the laundry list of factors to consider include not just proximity to markets and thoroughfares but tax abatement, permitting, facility design, bid packages, construction management and other non-real-estate matters. (See the video "What Makes Industrial Site Selection a Success?".)

Landmark (http://www.landmarkcr.com) is familiar with those factors, of course. For instance, the company worked on a deal in the Hazleton area in which abatement of real estate taxes for 10 years was a nice incentive for a candy company to relocate. "That would be 50 cents to 80 cents a foot, and on a quarter-million-square-foot facility, that adds up," Grace says.

- Russell W. Goodman, Editor-in-Chief, SupplyChainBrain

Comment on This Story.

Back to Think Tank Home