By Brian McCullough, Staff Writer

1/16/05

The boom days for commercial development in Chester County are over for now, but don’t shed too many tears.

It’s not such a bad thing to have a cool-down, even those who support business growth concede.

First the numbers for 2004, as compiled by the state Department of Community and Economic Development and PECO Energy.

The figures for new and expansion construction in the county were:

Capital investment -- $160 million;

Square footage -- 1.54 million;

New jobs created -- 937;

Jobs retained -- 2,380.

Among the biggest projects: Chester County’s prison expansion in Pocopson, at $33 million; expansion at The Hankin Group’s Eagleview Corporate Center in Upper Uwchlan, including Kensey Nash’s new offices, at $26 million; Electronics Boutique’s new distribution center in Sadsbury, at $22.5 million; J. Loew & Associates’ Lionville Professional Center offices in Exton, at $25 million; Shire Pharmaceuticals’ Tredyffrin headquarters at $10 million; and J. Loew & Associates’ retail center in Downingtown, at $10 million.

Steve McGill, research manager in PECO’s economic and business development department, said the numbers should be viewed as indicators, and not as hard-and-fast results.

Further, the numbers do not include increases in leasing activity, which would push them much higher.

"Strong, healthy economic growth," is McGill’s take on the numbers. True, there’s not a lot of activity in large companies moving into the county, but the numbers show "expansion of existing companies, which is good."

Gary W. Smith, president and CEO of the Chester County Economic Development Council, said there won’t be a lot of activity in new construction until the county’s current 15 percent to 16 percent commercial leasing vacancy rate is brought down.

This year should be another one of steady, if unspectacular, growth, but commercial real estate firms are targeting 2006 as a "very strong" year, Smith told me last week.

"What we have to look for at this point are less ‘For Lease’ signs," Smith said. "Once existing space gets filled, then (the new construction market) will pick back up."

Until the supply-and-demand equation has stabilized, the county isn’t likely to see the speculation building that took place a decade ago, when developers would put up buildings first with confidence that tenants could be lined up later.

Proof that the commercial real estate market is struggling can be found in leasing rates. Smith said space in the county that used to lease for $30 a square foot, is now going for under $20.

"I know of some at $16 a square foot -- that’s almost half," Smith noted.

Smith is troubled by two trends he sees happening in the county right now.

First, the demand for light manufacturing continues to be weak, a sign that reflects the continued decline of manufacturing in Pennsylvania and the Northeast United States.

Second, Smith is alarmed at the growing practice of using land zoned commercial/industrial for residential housing.

When the economy improves, he wonders, will there be any land left for businesses to locate?

"I just think it’s tremendously shortsighted" for municipalities to approve such rezoning, Smith said. "Cephalon is a great example. They’ve been looking for 100 acres to put their new campus and they’re still looking.

"They’re the kind of company you want to keep because those home-grown companies don’t move and they become part of the community fabric."

Unless, of course, there’s no place left on which to build.

Brian McCullough is the business editor of the Daily Local News. He can be reached at 610-430-1126 or at business@dailylocal.com.

©Daily Local News 2005

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