Focus: Commercial Real Estate – An ‘eastern inland empire’

Hinerfeld Commercial Real Estate broker/owner John Cognetti says things happening in Central America will impact northeastern Pennsylvania. He is talking about the widening of the Panama Canal and its effect on distribution and logistics in America in 2014.

What’s gradually happening is,” said Cognetti, “a lot of companies that went overseas to manufacture their products are rethinking that strategy, and some are moving back to North American shores, whether that’s the United States or Mexico.” Right now, said Cognetti, ports on the Eastern Seaboard that are ready “but not totally ready” for the widening of the Panama Canal are Miami and Norfolk, a little bit of Baltimore and, as they will raise the Pulaski Skyway, eventually Port Newark-Elizabeth. Charleston and Savannah, he said, are also both doing port work to take some of the traffic.

“So this means all the goods that are now being backed up in Long Beach, Calif. and then either shipped across country by rail or by truck, now will go around the canal and come to the Eastern Seaboard and be distributed to the maximum amount of the population in the United States,” said Cognetti. “This is, theoretically, what will happen. So that means: How are goods at the ports now distributed? If it comes in containers, in trucks, on rails, you’ll start to look at northeastern Pennsylvania in relationship to those ports.”

The I-81 Corridor, said Cognetti, which has become, in the last 10 years, a distribution corridor, will probably be impacted very definitely, as will, he said, the I-78 and the I-80 corridor coming out of New Jersey. “Very definitely. So all these dynamics come into play, and it all depends, too, on what factor in the equation rail’s going to play — who has it.”

The Lehigh Valley, Cognetti understands, has reactivated its rail line into New Jersey, which, he said, is an advantage. “We have rail service but it’s not that direct. The part of the rail service we’re trying to restore is the service to Hoboken, which is passenger rail not freight. So all these things are going to possibly be looked at differently after this canal is opened and this stuff starts moving. I think that’s a fairly significant factor or influence and we’re in a good position in this corridor port-wise.”

So, Cognetti said, the questions are: What will come to the New Jersey ports? How will it be distributed? and Is it going to stay in New Jersey and be distributed, or come over to I-81?

“It will depend on the magnitude — and you expect the magnitude to be great because this is where all the population is, in northeastern United States.”

And the other thing to keep in mind, said Cognetti, is northeastern Pennsylvania’s base industries. “Two components of our economy are still here,” he said, referring to manufacturing products, food processing. “If reshoring should take effect, even though it’s trickling now, that could be an opportunity for us.”

Cognetti believes the oppotunity exists for northeastern Pennsylvania to imitate a West Coast example. The Port of Long Beach receives international shipments, most of which go on to Ontario, Calif., which is called “The Inland Empire.” From this empire, goods are distributed across the country by rail and truck.

“Northeastern Pennsylvania could distribute goods to a large majority of the American population, and become ‘The Eastern Inland Empire.’”

Cognetti anticipates a pick-up in pace, if only because of the recent economic slowdown. “There’s no question about it,” said Cognetti. “It was full steam ahead 2006, 2007, 2008 and then, as the economy went into recession, there was no need for the distribution of goods because people weren’t buying anything, so, they weren’t distributing. So now, things are picking back up again.

“In the last couple months, Hinerfeld’s seen more calls, more warehousing, than
I’ve seen in the last five years. And that’s in large-scale warehousing, not just small but large-scale—that’s a good sign, and an indicator that things are picking up.”

CenterPoint Commerce & Trade Park, Pittston

A good location is getting even better, said William A. White, principal in Endurance Real Estate Group LLC, based in Bala Cynwyd. “CenterPoint, Pittston and NEPA are growing in importance for distribution to the northeastern United States.”

An Endurance affiliate announced the acquisition of 301-305 Oak Street in Pittston, a class A warehouse/distribution building totaling 289,277 square feet, situated on 17 acres of land. The property was acquired for $4,360,000 or $15.07 per square foot.

Put under contract while vacant, Endurance was able to land a tenant, a full-building user, RC Moore Inc., a full-service logistics company that offers freight logistics, brokerage, contract and over-the-road trucking.

Of course, Pittston’s location, said White, two hours north of Philadelphia and west of New York City, is an asset. Being at the confluence of I-81 and the Pa. Turnpike is also critical. Another bonus is quick access to I-80.

Tax breaks and immediate access to “very good” labor have also played a role in the development of the location, but one thing that makes its coordinates unique is its ability to get to Boston.

“Now the whole distribution model really depends upon where your goods are coming from, and where they’re going. So you’re basically trying to minimize the amount of miles being driven in all these directions. You’re looking at thousands and thousands of trips, adding in the cost of real estate, the cost of labor and more. Many take it for granted. We take it as a given,” said White.

Mericle started construction on CenterPoint with the goal of building the “premier business park” in northeastern Pennsylvania, and helping to create and retain thousands of jobs. Since it constructed the first building in 2006, it has developed 19 more. Now, CenterPoint boasts 5.5 million square feet. Those buildings house 30 companies which together employ approximately 3,000 workers.

Mericle just opened the newest phases of CenterPoint on which it is preparing building pads and constructing new spec buildings. The firm plans to develop approximately 10 million square feet of industrial, flex, and office space in the various phases of CenterPoint in the years ahead.

“Almost all of the companies that moved into the park since 2006 seem to be thriving,” said Jim Cummings, Mericle’s vice president of marketing. “In fact, we have helped three CenterPoint tenants expand into larger space in the park in the last few years — FedEx Ground, J.P. Boden, and Emery Building Materials.” Other well known park tenants include The Home Depot, Lowes, Men’s Wearhouse, Corning, Benco Dental and Kimberly Clark.

Just recently, Pella Products Inc., the locally owned direct sales branch of Pella Corporation, the nation’s second-largest manufacturer of windows, patio doors and entry doors, opened a distribution center in CenterPoint Commerce & Trade Park West. Pella Products Inc. has 19 employees and serves builders, contractors, architects and homeowners in 20 Pennsylvania counties. Pella becomes the first tenant in the new 108,939-square-foot flex building Mericle recently constructed on speculation.

Just recently, the aforementioned Emery-Waterhouse expanded its distribution operation within CenterPoint Commerce & Trade Park East by more than 37,000 square feet to 173,000-plus, and announced plans to 40 to 60 new employees. Emery, based in Portland, Me., is a full-service independent hardlines distributor serving hardware dealers, lumber yards and home centers throughout the Northeast and Mid-Atlantic regions.

A Mericle tenant since June 2008, the company opted to expand in Park East to better serve its customer base in NEPA and in major markets, including the New York/New Jersey metro area and Philadelphia, saying it would be more efficient to ship from CenterPoint than from its primary warehouse in Portland.

Cummings said CenterPoint’s success is due to the fact that tenants have immediate access to overnight delivery companies. FedEx Ground is located inside CenterPoint. UPS and FedEx Express: in adjacent business parks.

The Wilkes-Barre/Scranton International Airport is just 3.5 miles away and CenterPoint is located just 10 minutes from both Scranton and Wilkes-Barre. More than 460,000 people live within 20 miles. Companies are able to maximize their labor draw from this location.

The park has natural gas, strong water pressure, abundant sewer, fiber, and strong power. Redundant power and telecom are available when needed.

Via its spec building and pad preparation program (which Mericle calls its “Ready to Go Program”), Mericle makes sure it have a wide variety of space and prepared sites available at all times so it always has a match for any company’s real estate needs.

“Because of its immediate access to I-81 and I-476 and its proximity to three overnight delivery hubs, we think Center-Point is the premier location for distribution facilities in NEPA,” said Cummings.“We also think it compares very favorably to other parks in the Eastern U.S.”

Cummings said access will soon be made even better with the construction of a widened ramp at Exit 175 of I-81 (north bound off ramp) and the construction of a secondary access road from I-81near the airport.

“We can’t predict for sure the lifespan of CenterPoint,” said Cummings, “but we plan to construct about 10 million more square feet in the park—that’s about twice the size of what’s in the park now. We think the park will be the region’s premier distribution hub for many years to come.”

“Without question, location is a, if not the, key factor in any distribution facility,” said Nick Budzyn. “You want to find a location that is a central point, or a common Length of Haul (LOH) to the primary delivery sites. The lesser length of haul obviously lowers the cost to distribute the product to the customer.”

And Budzyn knows a bit about finding things. At 23, he turned J.B. Hunt — one of the largest transportation logistics companies in North America — on its head to re-right it. He completely overhauled and re-configured the company’s routes.Hunt made him logistics coordinator and account manager for two of its most high-impact accounts, one of which was Home Depot. For the account, he relocated from NEPA to Glen Burnie, Md., and then again to Winchester, Va. Prior to Hunt, and starting in college, he worked as management at UPS-Pittston for more than four and half years. Now, come full-circle, he works at CenterPoint for a national company’s regional distribution center.

From his experience on the carrier side of the industry, Budzyn said deliveries originating in Pittston can effectively have a range to all the major East Coast cities and many other smaller cities.

Needless to say, said Budzyn, the Northeast region of the United States is the busiest and most lucrative part of the country. Capitalizing on the central location of NEPA and its ability to reach these major markets within a half day of travel is a competitive advantage. The two largest home improvement companies in the United States, said Budzyn, have both built large distribution centers in NEPA within the last four years. The Pittston hub, said Budzyn, also hasan advantage of growth.

With locale being a drawing factor, the industrial park has a lot of potential to grow and bring in other nationally recognized top companies. This, said Budzyn, will help bring even more jobs to an economically depressed area, and hopefully swing that unemployment rate from being higher than the national average. Mericle, said Budzyn, is in the process of opening a retail shopping mall accessible from CenterPoint East.

Budzyn says the hub needs to continue to bring in more business. “It seems self-explanatory, but success drives success. More businesses in the industrial part creates more jobs for the area for those specific companies, as well as creates more opportunity for additional transportation jobs.”

One potential problem on the forefront — not just in NEPA, but nationwide— is the foreseeable shortage of qualified CDL drivers, according to Budzyn. “The increase in volume shipped across the nation is averaging 4 percent a year while the number of qualified CDL drivers is increasing at a rate of about 1 percent per year,” he said.

The anticipated shortage over the next five years, said Budzyn, is 100,000 drivers. “This shortage, along with the increasing costs of fuel, is proving to be a significant constraint. These constraints are driving up transportation costs, which in turn drive up the prices on our every-day retail products.

Budzyn said CenterPoint opens a world of opportunity, providing the potential to grow and flourish economically. “It brings the ability to turn the tide on the unemployment in the area. It gives the population of NEPA the ability to find a competitive salary and earn more than the current average annual family income.

It opens the door for more business; it opens the door for additional education and skills. It provides a reason for people to move to NEPA. It provides an opportunity to enhance the area to what it once was during the mid-1900s.”