Analysts: Coronavirus Effect on Lehigh Valley Logistics Market Limited Thus Far
By Colin McEvoy on July 13, 2020
The commercial real estate research organization CoStar published a story July 10, 2020 about the effect of the coronavirus on the Lehigh Valley economy. Below is an excerpt from that article, which was written by CoStar Market Analyst Ben Atwood. The full article story can be found on the CoStar website.
The coronavirus caused some minor disruption to Pennsylvania’s Lehigh Valley logistics market through the second quarter, but fallout from the pandemic was largely limited to investment activity.
Roughly 60 deals closed through 2020’s tumultuous first two quarters, but only a handful finalized from April through June. With one exception, these were small properties trading between local buyers.
Given the uncertainty, it’s understandable why investment remains mostly muted through the third quarter; However, a June acquisition of the five-star, 475,000-square-foot LogistiCenter 33 could indicate investor confidence slowly coming back.
The $62.5 million deal was easily the largest of the quarter and involved Black Creek Industrial. The Denver-based REIT acquired the asset for roughly $130 per square foot, comparing quite favorably to the market average near $85 per square foot.
Nearly everyone involved in the logistics industry remains bullish about its future, and it’s not hard to see why.
The pandemic has forced the nation to rapidly adapt to online shopping, and e-commerce levels surged through the second quarter. According to Adobe’s Digital Economy Index, e-commerce growth has accelerated about five years in the past three months. Total online spending for May, at $82.5 billion, is up 77% from that same time in 2019.
Lehigh Valley is uniquely situated to take advantage of this trend. The market is at the intersection of I-78 and I-476, which allows distributors direct access to all the northeast’s major cities as well as other prominent shipping nodes like Nashville and Columbus.
Consequently, more than 10 million square feet was underway at the time of the shutdown, and builders still managed to deliver roughly 1 million square feet through the second quarter. The most notable of these new properties was at 7378 Airport Road, a 450,000-square-foot distribution center near the international airport in Bath.
The airport area has seen a flurry of construction and leasing activity in recent years. Within a five-mile radius, there’s close to 2.3 million square feet of logistics space underway, and it was here that the biggest lease of the second quarter finalized, when Geodis signed for a million square feet in April.
This type of sustained demand has given owners the confidence to continue building in the midst of a world-altering pandemic, and close to 2.3 million square feet broke ground between April and June.
Visit the CoStar website to read the rest of the article. Atwood can be contacted at 301-750-4166.
For more information about the Lehigh Valley industrial market, read or download the Q1 2020 issue of the Lehigh Valley Commercial & Industrial Real Estate Report. The Q2 2020 issue of the report is expected to be released in August.
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