Chesapeake Real Estate Group LLC and financial partner USAA Real Estate Co. announced the purchase of nearly 50 acres of land and broke ground on a 571,000-square-foot warehouse distribution facility in Harford County without a tenant lined up.
Building on speculation is a sign of confidence in the market’s ability to attract businesses, and that confidence is being spurred by an increasingly hot industrial market in the Baltimore metro market’s portion of the Interstate 95 corridor — particularly in Harford County. The surge in the market is being driven in large part by “e-commerce” and the need for distribution centers in the area.
“Strong and sustained market fundamentals, led in particular by the enormous appetite in the e-commerce sector for large-scale distribution and warehouse projects, have given us extreme confidence to move forward with this strategically-located speculative project,” Jim Lighthizer, founder and owner of Chesapeake Real Estate Group, said in a news release.
Harford County has particularly benefited from the industrial sector boom along Interstate 95 corridor. In the last year Sephora (655,000 square feet), Clorox Distribution (945,292 square feet) and IKEA (184,0000 square feet) all leased space in the submarket.
Third quarter reports offer reasons to believe the submarket will continue to perform well. According to a report from Cushman & Wakefield released Tuesday, year-to-date overall net absorption for flex properties in that county is 126,534 square fee of flex space and 1.15 million square feet of warehouse and distribution space. The county has the second-highest direct weighted average net rental rate of $10.08 per foot for flex space, just behind Baltimore.
MacKenzie Commercial Real Estate’s third quarter report noted the region absorbed 1.7 million square feet of industrial space in the last quarter alone, while the combined Harford and Cecil counties submarket absorbed 863,931 square feet in the past three months.
Jim Richardson, director of the Harford County Office of Economic Development, agreed that much of the demand for industrial space in the market is being driven by “e-commerce.” But he said another major factor is location. He said the area is about midway on the Boston to Richmond, Virginia, corridor, which is shorter and more densely populated than the area between San Francisco and Los Angeles.
“We’ve got an ecosystem, if you will, that makes distribution pretty easy for Harford County,” Richardson said.
But the boom could also be undermined by the fact the county is running out of places to build new industrial space. Richardson said Perryman peninsula, which was designed as a warehouse distribution center, is nearly completely built out. The only way to develop more space may be to rezone some areas, but that might not entirely fix the problem.
Although there may be the political will to do the necessary rezoning, the county’s landscape could be another hurdle. There’s limited large parcels of land in the I-95 corridor that could be developed into a 500,000 or 1 million-square-foot warehouse, and the price of land increases the closer a development is to an existing community.
“There’s not a lot of farms left in the I-95 corridor that would be appropriate because most of them are more toward Havre de Grace or Aberdeen, and they’ll probably go for a little higher value per acre for either office or housing,” Richardson said.