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Need Grows for Warehouse and Distribution Space in NEPA


The COVID-19 pandemic has left some office buildings deserted, but commercial real estate has a bright future.


People stuck at home during the pandemic lockdown spent more time online ordering products, sparking a need for warehouses and distribution centers.


According to Business Insider, a surge in e-commerce is fueling demand for warehouse and cold storage space.


In Northeastern Pennsylvania, the demand is becoming so great, the region is struggling to keep up with companies’ needs for space, said Bruce Reddock, economic development specialist with the Greater Scranton Chamber of Commerce.


“Given the circumstance surrounding CVOID-19, office space is taking a significant hit,” Reddock said. “There is plenty of office space on the market right now.”


He said the region, though will soon lack sufficient warehouse space, putting economic development leaders in a position of seeking new opportunities. Those opportunities include either new construction or the repurposing of existing structures.


“E-commerce and distribution centers are just as busy during the pandemic,” said John Augustine III, president and chief executive officer of Penn’s Northeast, a regional economic development organization based in Pittston Township. “They’re busy to service people working from home.”


Augustine said that before the pandemic, the region also started to see a dramatic increase in manufacturing, including domestic and international interest.


Empty offices, empty shelves

Augustine said more retail space, like offices, is empty, such as in the Wyoming Valley Mall.


“They will have no choice but to turn it into a distribution center,” he said.


He also could see it as a senior living center.


“Put in a pool, put in a putting green, they could take a shuttle to Mohegan Sun.”


Walk-in clinics, urgent care facilities are other possibilities, he said.


“Even stores that have done well during the pandemic have a lot of empty shelves,” Augustine said. “There are not enough people in the stores.”


He doesn’t see office work or retail coming back to the way it was. A new generation has learned to shop online with no choice but to buy online.


“There’s still that fear of being in large groups,” Augustine said. “With office space, we went from where everybody had to be in the office every single day to a complete opposite where no one is allowed in the office. This was a complete shift and it showed this could work.”


He said there may be hybrid schedules, with some days in the office and some working from home, much like the school hybrid schedules. Companies may downsize their space, for example, from 20,000 square feet to 10,000 square feet.


Companies that lease office buildings in cities such as New York cannot easily move to smaller regions, such as Northeastern Pennsylvania, because they are tied into costly leases, Augustine and Reddock said. But more of their workers could work remotely while living here, and the companies could look at leasing a smaller portion of the building.


Reddock believes much of office work in the future will be done remotely.


“Companies are realizing they don’t have to have as much office presence,” Reddock said. “Companies are realizing they can manage employees working remotely.”


He said they might only have information technology (IT) employees in the office, though he said more companies might even outsource IT.


He added upper management might miss that face-to-face interaction and will need to be in an office setting two or three days a week.


Downtown takes a hit

Empty offices also have had a domino effect on downtown businesses, said Larry Newman, executive director of Wilkes-Barre’s Diamond City Partnership, a nonprofit downtown revitalization group.


“We’re still too close to the situation to know where the pendulum is going to rest,” Newman said. “There will undoubtedly be an impact on commercial office usage. Downtown is missing about 6,000 office workers and has been for more than a year in the region’s largest concentrated employment center. When that went away, it had a very significant impact on the ground floor economy, on restaurants and retail.”


He said six retail businesses closed last year.


Downtown anchors such as the F.M. Kirby Center for the Performing Arts Wilkes-Barre Movies 14 usually draw people to the downtown, including restaurants. Their shutdowns during the pandemic also kept people away from the downtown.


Downtown Wilkes-Barre also took a hit from the lack of 7,500 Wilkes University and King’s College students and the schools’ employees, Newman said.


One bright spot is the growing downtown residential sector, which has grown to 250 units in the past 10 years, though, Newman concedes, that doesn’t make up for the missing 6,000 office workers.


Newman also said a major downtown office building, at 15 Public Square, sold toward the end of last year. Humford Equities, which constructed the building in the mid-1970s, sold the building to a New York City investment company formed to purchase the property.


Newman said the ground floor tenants all have leases and the building will continue to be an office building.

“It just shows there is ongoing demand for those investment grade assets,” he said.


He is cautiously optimistic.


“I’m starting to hear office employers talk about timelines for bringing employees back,” Newman said.


Donna Cain, a Realtor with the Century 21 Smith Hourigan Group, Kingston, said commercial properties are available.


“There definitely is more starting to sell, as opposed to before,” she said.


She said the commercial listings are more retail and investment properties that are labeled as commercial, such as three apartments above a store, a small medical center that sold.


She didn’t know if companies would continue to have employees working from home.


“I don’t know if that’s going be sustainable for a lot of companies,” Cain said. “With vaccines and a decrease in virus cases, they may go back to office.”

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