As Pennsylvania's Top Industrial Markets Face Constraints, Investors Jump To 2 Overlooked Counties

Eastern Pennsylvania has long been one of the country’s top destinations for industrial real estate investors and developers, but over the last two years, the hot submarkets within that region have shifted. 

Previously, industrial investors primarily focused on the areas around Allentown, Scranton and Harrisburg. But now, development constraints in those areas have led the industry to a pair of counties that experienced less activity over the past decade: Lancaster and Berks. 

Lancaster County, located between Philadelphia and Harrisburg, experienced a record $419M of industrial investment in the 12 months ending in September, according to CoStar. Lee & Associates reported $243M in bulk industrial sales across the county in the third quarter, and neighboring Berks County had an even larger volume at $381.7M.

“I think everything is moving there,” Panattoni Development Co. partner Ian McDonald said of Berks and Lancaster counties, adding that he expects their industrial markets will continue to grow.

Panattoni has been working on big new industrial developments in the counties, and it isn’t alone.

Berks is experiencing a development boom, with five projects totaling 2.2M SF announced so far this year, up from 780K SF across two projects in 2024, according to Lee & Associates. The county also saw construction start for two projects totaling 1.2M SF in 2025, up from none last year.

Developers delivered 1.1M SF across four projects so far this year in Lancaster, where another 927,500 SF delivered across three projects in 2024.

Lee & Associates principal Heather Kreiger said Lancaster has emerged as a “standout” county in the region, and Berks has seen “a ton of development over the last couple of years.”

This activity came as typically busier industrial markets in the Lehigh Valley, northeast Pennsylvania and the Harrisburg region experienced a slow 2025, Kreiger said. 

Those markets have traditionally benefited from their highway access to major population centers, but over the last year, they have faced constraints on industrial construction. Development-ready sites have become relatively scarce following the pandemic warehouse boom, and power has become harder to obtain amid the data center gold rush. 

But Lancaster and Berks have growing populations driving demand, municipalities that are eager to play ball and a robust existing industrial stock that can draw investment. 

“We’re in a tertiary market to some degree, but we’ve got a couple things they don’t,” said NAI Keystone Managing Principal Steve Willems, who is heavily focused on Lancaster County. “They’re out of labor and out of power.” 

When Panattoni first started looking in Berks County in 2015, the I-76 corridor roughly halfway between Lancaster and Reading wasn’t seen as a prime highway for industrial development, McDonald said.

A decade later, the I-76 corridor’s appeal has grown dramatically as developable sites in heavily tapped markets have become increasingly scarce, he said.

Panattoni broke ground on the first phase of its 5M SF Gateway Commerce Center, a speculative warehouse project, last month along I-76 in New Morgan, Berks County. The first 1.2M SF across two buildings is scheduled to deliver in the fourth quarter of 2026.

This came after the company broke ground last year on a 400K SF industrial project in East Hempfield, Lancaster County. The building has since been fully leased, McDonald said.

Industrial demand has been driven in part by population growth: Reading gained about 19,000 new residents between 2019 and last year, according to census data.

“Reading was kind of an untapped labor force that was overlooked by those who were solely focused on the Lehigh Valley or solely focused on central PA,” McDonald said.

“The other part was just having a region that was more development-friendly or more welcoming to the investment we’re trying to make.”

Lancaster County is known for its highly skilled blue-collar workers and the strong pool of small businesses that employs them, Willems said.

These counties have also benefited from their access to power, which has become a contentious topic in Pennsylvania as data center projects have driven up bills for consumers. McDonald said PPL Electric, which serves Lancaster County and the section of Berks County the Gateway Commerce Center sits in, is “probably one of the best we’ve dealt with.”

High competition for Lancaster County’s existing industrial stock is creating a problem for some of the businesses that occupy it. 

“Users are struggling to pay those prices, but they’re definitely in need of buildings,” Willems said.

Institutional players accounted for more than half of Lancaster County’s $419M of investment in the 12 months ending in September, according to CoStar. Its data includes a $130M sale of two former printing presses to a joint venture including Machine Investment Group, which plans to convert them into data centers. 

“You can have a horse race when you get a property on the market, and it pushes the price up,” Willems said.

This section of Pennsylvania is also attracting smaller investors, at least one of which is local and focused on small-bay spaces.

Benchmark Real Estate is under contract to buy a 100K SF small-bay facility in a suburb of Lancaster, Managing Partner Mike Callahan said. He declined to share full details about the upcoming purchase but said it will also include by right land where the company could build another 120K SF across two buildings.

Callahan is also considering a 15-acre parcel near the Reading Regional Airport where Benchmark could build a similar facility for tenants that need 40K SF or less.

While Lancaster County is experiencing this growth, it may have a ceiling in terms of new industrial development.

Aside from NIMBY pushback to industrial projects nationwide, the area has a deep agricultural heritage. Lancaster Farmland Trust has acquired large tracts for preservation.

“There’s very few parcels available that are industrial by right,” Callahan said.

He said the Lancaster County Chamber of Commerce and EDC Lancaster County President Ezra Rothman have been working to identify parcels that could be rezoned, but Kreiger said she believes there is likely limited appetite for those kinds of changes.

She said she expects York, Cumberland and Dauphin counties will continue to capture the largest and most critical distribution hubs instead of Lancaster and Berks.

Still, there are a few pockets of the region where she said she sees potential for more development, including the northwest section of Lancaster County and the US-222 and I-78 corridors in Berks.

“Counties like Lancaster, Berks and Lebanon [will] play a supporting role with a mix of infill users, midbox tenants and select large-format projects,” she said.