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Lehigh Valley Must Strike While Iron is Hot and Plan Land Use Wisely

By Don Cunningham on September 28, 2015

This column, written by LVEDC President and CEO Don Cunningham, originally appeared in Lehigh Valley Business on September 21, 2015. (Click here to read Cunningham’s previous columns.)

Don Cunningham

Don Cunningham

Available land was one of the major reasons for the rebirth of the Lehigh Valley’s economy during the last 15 to 20 years.

As Bethlehem Steel closed and dozens of garment shops and other small manufacturers moved jobs overseas in pursuit of cheaper labor at the end of the last century, new office parks, production facilities, and warehouse and distribution centers sprung from the fertile ground of former farm lands.

They were in pursuit of cheaper land in the right location, surrounded by the right workers.

New companies entered our landscape or expanded their operations: Olympus, Ocean Spray, Majestic, and FreshPet, among others. They turned vacant Lehigh Valley land or buildings into facilities that create products known and sold across America. At the core of this new growth is land – some of it green and some of it vacant industrial – that lies within the epicenter of the consumer-rich Eastern United States.

With the final quarter of 2015 on the horizon, the economic landscape of the Lehigh Valley is a new one and, once again, it’s rapidly changing. Our land is no longer as abundant or as cheap.

Today, the Lehigh Valley has one of the lowest industrial vacancy rates in the United States. Our overall vacancy rate is 6.3 percent compared with a national average of 8.4 percent, but in large buildings, with more than 500,000 square feet, the region’s vacancy rate is only 2.5 percent, or, otherwise, pretty much full.

What does this mean?

It means that right now it’s difficult for the area’s developers, brokers, planners, and economic developers to keep up with the demand for companies to build or expand facilities in the Lehigh Valley. And, in the end, the best system can’t make more of what has been our most important ingredient: land.

In the short term, the news is good for those who own land and are building or leasing buildings. Sales for industrial land have gone for as high as $300,000 per acre, higher, in some cases, than New Jersey. Average rents are close to $5 per square foot for industrial space.

E-commerce has been a significant contributor to the industrial market activity, reflecting the Valley’s superior access to markets, infrastructure, and favorable business climate. The growth of online retail has generated a fast-moving back economy to produce, store, and distribute products at a quicker pace, cutting the time from an online order to the package’s arrival on a doorstep. We are at the fulcrum of that new world. More than 5,000 jobs in the Lehigh Valley have been added in this sector in just the last four years.

It also has led to bigger buildings being built, many reaching beyond 1 million square feet. This has filled up properties, both green and brown, and nudged up prices. It also has shifted a lot of development risk and activity away from smaller flex buildings in the 20,000 to 100,000 square foot range. This is the size of most of our current manufacturers and our new prospects for growth in that area of the economy.

While there are still numerous large manufacturers here like Mack Trucks, Victaulic, B. Braun, Crayola, and others, the typical sweet spot for manufacturing is smaller. The average Lehigh Valley manufacturing company employs about 25 to 100 people, working in facilities under 100,000 square feet.

The good news is that we are seeing growth and much interest in the Lehigh Valley from these new economy manufacturers. The manufacturing sector accounts for the second largest output of our $34 billion economy. The challenge today is to find the affordable properties and developers to provide the buildings.

We are in a time of opportunity. But, as we’ve seen in recent weeks, markets and the economy are fickle and susceptible to reverberations from the economies of countries across the world.  It is critical that we strike while the iron is hot – or the proverbial pocketbook is open – and plan our land use wisely, getting sites and buildings ready while there is interest and opportunity.

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Lehigh ValleyQuick Facts

By the Numbers
$40.1 Billion

Gross Domestic Product

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City Center Lehigh Valley
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11% of Labor Force
Employed in Manufacturing

By the Numbers
$3.65 Billion

Exports

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Air Products
By the Numbers
$62,489

Median Household Income

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PPL Electric Utilities
By the Numbers
26,000

New Jobs Created Over Past 5 Years

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669,899

Population

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Olympus
By the Numbers
345,260

Labor Force

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Lutron Electronics
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26.1% of Labor Force
Employed in "Eds & Meds" sectors

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5,073

Technology Patents

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Mack Trucks
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UGI
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NFI
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14% of the total community college degrees awarded in PA

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$7.4 Billion

Manufacturing Contribution to GDP

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BB&T
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69th largest metropolitan area in the U.S. by population

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Seedcopa
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10,328 degrees awarded by colleges and universities

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Fuling
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81,000 employed in "Eds & Meds" sectors

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26.97%

Population between ages 18 and 34

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