Development Interest in Lehigh Valley Remains at a High Level
By George Lewis on May 7, 2021
The effects of COVID-19 on the Lehigh Valley economy have been profound and will be analyzed for years to come. Much of the immediate attention focused on jobs: who worked, how they worked, and where they worked. In the overall assessment of economic impacts, however, an important longer-term trend has been somewhat overlooked. The Lehigh Valley remains one of the most attractive markets for industrial development in the United States.
Leading up to 2020, the Lehigh Valley consistently ranked among the top markets of its size – population between 200,000 and 1 million – in the country by Site Selection magazine for the number of job-creating economic development projects announced, under construction, or completed.
The pandemic did not change the Lehigh Valley’s status. In 2020, the region again made the top 10 for development projects among markets of our size. In the Northeast, the Lehigh Valley ranked behind only New York, Philadelphia, Boston, and Pittsburgh for development projects in 2020, beating out several Northeast cities and regions with much larger populations.
LVEDC tracked 41 development projects in 2020. They included new and growing manufacturers such as AP Deauville, Follett, and Suncup Juice; distribution and logistics firms such as Geodis and Forward Air, which were attracted by the Lehigh Valley’s strategic location; and diverse professional services firms such as health care giant Capital BlueCross and technology startup IotaComm.
The momentum of the economic renaissance that has been going on for the last 25 years in the Lehigh Valley has carried right into 2021. As of April 1, there are 35 economic development projects in the Lehigh Valley for which a site had been chosen or announced, or construction was under way.
In its recent report “10 Emerging U.S. Industrial Markets to Watch in 2021,” Colliers, a leading commercial real estate firm, ranked the Lehigh Valley the fifth hottest location in the U.S., behind only Austin, Columbus, Indianapolis, and Las Vegas.
“The occupier pipeline is strong, and the market continues to be a preferred location for national and regional developers,” Colliers Senior Managing Director and Principal Michael Zerbe said in the report. “2021 is likely to have high levels of new development, absorption, and rent growth.”
In addition to those projects already announced or under construction, LVEDC was working with 52 development prospects at the end of the first quarter. Three new prospects were added in March. LVEDC defines a development prospect as a company that doing its homework on the region, evaluating talent, real estate, infrastructure, and other factors as part of its decision-making process on where to locate or expand a facility.
More than half the prospects in the LVEDC pipeline are manufacturers. While not all prospects will end up choosing the Lehigh Valley, the projects they are considering represent more than 5,000 new jobs and potential capital investment of $1.7 billion.
Continued strong interest in the Lehigh Valley has fueled construction of industrial buildings. Despite the pandemic, in 2020 the Lehigh Valley added 13 industrial buildings totaling 3.3 million square feet. At the end of 2020, more than 8.7 million square feet of industrial space was under construction in Lehigh or Northampton counties, according to the commercial real estate information firm CoStar.
In fact, CoStar recognized the Lehigh Valley as one of the top three industrial real estate construction markets in the country. In CoStar’s analysis, only Nashville and Austin – two regions that have received considerable recognition for their economic growth – have more industrial space under construction as a percentage of existing industrial space in the market.
Among the prospects in LVEDC’s pipeline, more than half of them have indicated their building space needs. Those needs total more than 5 million square feet. The vast majority of prospects working with LVEDC right now are looking for less than 200,000 square feet of space.
Building size requirements represent a potential issue for the Lehigh Valley. Of the 20 buildings CoStar has identified that are currently under construction in the Lehigh Valley, only eight match the size requirements that most prospects are seeking.
With limited options and high demand for smaller-footprint industrial buildings, space available to lease or buy in buildings smaller than 200,000 square feet was 6.6% of the total inventory at the end of 2020, compared with 9.6% for all industrial buildings, according to CoStar data.
The Lehigh Valley’s current success is based on the partnerships we have established over the past quarter century that enables us to compete for – and win – projects going up against regions with larger population and more resources. The power and expansion of these partnerships is one of the factors that has enabled LVEDC to be ranked among the 20 best economic development organizations in the country by Site Selection magazine in each of the last two years.
The coalition for economic development in the Lehigh Valley, led by LVEDC and driven by the support of investors, is hastening the economic rebound from pandemic by building on the sturdy economic foundation that the region has worked so hard to establish.
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