Analysts: Lehigh Valley Industrial Market Well-Positioned to Weather Pandemic

By Colin McEvoy on April 28, 2020

CoStar Market Analyst Ben Atwood (pictured) and other analysts hosted a webinar to discuss the impact of the coronavirus pandemic on the Lehigh Valley industrial market during. (image courtesy CoStar)

The Lehigh Valley industrial real estate market is well-positioned to weather the economic downturn expected to result from the coronavirus pandemic, according to analysts from the commercial real estate research organization CoStar.

Lehigh Valley’s industrial market was strong before the disruption caused by COVID-19, and the region’s economic fundamentals – such as its central location and access to markets – will not have not changed, and will in fact be more important than ever, analysts said.

“The coronavirus is so big, and we’ll be talking about it for the rest of our lives, but it’s hard to imagine the type of disruption it would take to upend the market of Lehigh Valley, and I’m pretty optimistic of its future,” said Ben Atwood, CoStar market analyst.

CoStar hosted a webinar about the Lehigh Valley industrial market earlier this month, which was attended by about 100 people, including representatives from the Lehigh Valley Economic Development Corporation (LVEDC).

Distribution, shipping, and logistics are among the strengths of Lehigh Valley’s industrial real estate market, Atwood said, and those sectors are expected to do particularly well when the national economy reopens.

Lehigh Valley has long been recognized as one of the fastest-growing e-commerce hubs in the United States, with major distribution facilities having opened in the region in recent years, such as Amazon, FedEx Ground, Lulus, and Zulily.

The national growth of e-commerce will only accelerate due to the coronavirus pandemic as more people become accustomed to shopping online, not only traditional goods but also for groceries and day-to-day essentials, according to CoStar Director of Analytics Brandon Svec.

“We are very much expecting the consumer to adopt online shopping across the board,” he said. “People are adopting a new way of living, and that new way is very bullish to industrial.”

Svec believes the coronavirus will accelerate what would have been 5 to 7 years of e-commerce adoption and industrial changes into a 12-month period.

The greater use of online grocery services will also lead to a higher demand for cold storage facilities, another trend Lehigh Valley would be well-positioned to benefit from, Svec said.

As companies reorganize supply chains to shift away from Asian markets, more manufacturing may return to the United States. Atwood said Lehigh Valley has the capacity to benefit from this re-shoring, particularly in the medical equipment and supplies sector.

Atwood noted that Lehigh Valley attracts “the heavy hitters” in industrial real estate development. Speculative construction fills as soon as it comes on the market, he said, adn even aging space draws good prices.

New space may not fill as quickly in the short term due to the coronavirus pandemic, but Atwood said it is difficult to imagine any scenario in which the Lehigh Valley industrial real estate market does not remain strong.

Economic development activity has continued in Lehigh Valley despite the ongoing COVID-19 crisis. LVEDC has continued to work in recent weeks on projects and expansions that had been in the pipeline, as well as fielding inquiries about potential projects after the pandemic ends.

Some companies have announced new construction projects or expansions to existing facilities in recent weeks, such as the medical supply distributor TwinMed, and the aquarium equipment manufacturer EcoTech Marine.

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