Business Community Takes Notice of Lehigh Valley Office Market
By Colin McEvoy on August 29, 2018
This article, written by LVEDC President and CEO Don Cunningham, originally appeared in the August/September edition of the Northeast Real Estate Business, which covers the multifamily, retail, office, healthcare, industrial, and hospitality sectors in the Northeast United States. Click here to visit or download and read the original issue.
From large publicly traded corporations to mid-size tech companies and small professional services firms, the business community is taking notice of the office development and vibrant live-work communities being built in Lehigh Valley.
Located one hour north of Philadelphia and 90 minutes west of New York City, Lehigh Valley is a two-county region in eastern Pennsylvania consisting of 62 municipalities and the cities of Allentown, Bethlehem and Easton. It is the 69th largest metropolitan region in the United States, with a $39.1 billion GDP larger than that of both Wyoming and Vermont.
Lehigh Valley’s total office market inventory currently stands at 26.8 million square feet.
There have been 281,250 square feet of office market deliveries in 2018 through August, and another 329,000 are currently under construction.
A total of 669,832 square feet of office space was under construction in Lehigh Valley as of the first quarter of 2018, with the majority of that development in the region’s urban centers.
Ninety-six percent of the office buildings constructed in Lehigh Valley so far this year have been built in either Allentown, Bethlehem, or Easton and all of the 329,000 square feet of office space currently under construction is in the cities.
Allentown is transforming into one of the country’s most vibrant urban communities thanks in part to the Neighborhood Improvement Zone, one of the best tax incentives on the East Coast.
The special taxing district allows nearly all generated taxes to be used toward debt service on any financed improvements.
The developer City Center Investment Corp. recently built four Class A office towers in downtown Allentown, all fully leased and anchored by large companies such as BB&T.
ADP, one of the world’s largest HR providers, has leased the majority of the developer’s fifth Class A office building, Five City Center, which is due for completion in August 2019. Just a few floors remain available in the 13-story building, which will put City Center’s total new Class A office space in downtown Allentown over 1 million square feet.
“National Fortune 500 companies can grow anywhere but they are choosing downtown Allentown, which follows a national trend of companies realizing the benefits of moving from suburban to urban locations,” said J.B. Reilly, president of City Center Investment Corp. “In the case of Allentown, companies are realizing the city offers a high quality of living at an affordable cost, close proximity to New York without having to pay New York salaries, and a qualified workforce drawn in part from Lehigh Valley’s seven impressive colleges.”
In Bethlehem, the six-story Gateway Building on Greenway Park at Third and New streets is nearing completion. St. Luke’s University Health Network and Lehigh University will be the anchor tenants at the $20 million building, which will serve as a gateway into the city from Route 378.
Office use has also been a component in several Easton projects, including the redevelopment of the former Simon Silk Mill. First built in 1883, the mill housed the manufacturing of textiles until the late 1960s, and is currently experiencing new life as a creative live-work complex with stores, restaurants, distilleries, housing and office spaces.
Overall regional vacancy rates in the office market are 8.2 percent. The Lehigh Valley office market has seen a total of 11,418 square feet in year-to-date deliveries as of the first quarter of 2018.
Lehigh Valley office rents have decreased, both over the past quarter and year over year.
Less Than 5% of Lehigh Valley Industrial Buildings Exceed 300,000 Square-Feet
While much public focus on commercial real estate development in the Lehigh Valley has been on large industrial buildings, only 4.8 percent of the region’s industrial buil[...]Continue to Next Page