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Lehigh Valley Office Sector Sees No Shortage of Success Stories

By Colin McEvoy on April 27, 2016

The Allentown Neighborhood Improvement Zone (NIZ) has been a contributing factor to the growth in the Lehigh Valley's office sector.

The Allentown Neighborhood Improvement Zone (NIZ) has been a contributing factor to the growth in the Lehigh Valley’s office sector.

This article, written by the Lehigh Valley Economic Development Corporation (LVEDC), will be featured in the May issue of Northeast Real Estate Business. The magazine asks experts from various organizations to provide commentary on numerous sectors. This article is focused on the Lehigh Valley’s office sector.

The Lehigh Valley has seen no shortage of success stories in recent months when it comes to the region’s office sector.

The third-largest metropolitan area in Pennsylvania, the Lehigh Valley is located just 60 miles north of Philadelphia and 90 miles west of New York City. The region consists of 62 municipalities within Lehigh and Northampton counties, including the cities of Allentown, Bethlehem, and Easton.

Last year, Guardian Life Insurance, one of the nation’s largest mutual life providers, announced it would establish a three-story corporate office building in Hanover Township, Northampton County. That 281,680-square-foot facility is expected to be completed by late 2016 and house 1,500 employees.

That is just one of several such recent announcements to come out of the Lehigh Valley. In March, Paychex, Inc., a provider of payroll, human resources, retirement, and insurance services, announced it will undertake a $1.3 million expansion of its facility in South Whitehall Township, Lehigh County. That project will nearly double the company’s square footage, create 100 new jobs, and allow the company to retain 444 existing jobs across Pennsylvania.

Many economic factors have contributed to the growth in Lehigh Valley’s office sector. These include its central location, well-developed transportation infrastructure, availability of suitable office space, high relative broadband rank, access to markets, and strong workforce.

All these factors led the Atlanta-based Garner Economics to identify high value business services as one of the four target sectors of the Lehigh Valley after it conducted an analysis of the region. (The other target sectors, based on the region’s site-specific economic assets, were high performance manufacturing, food and beverage processing, and life sciences research and manufacturing.)

Garner Economics found the Lehigh Valley’s unique mix of economic assets align perfectly with the high value business services sector, which includes such subsectors as data processing and hosting, financial transactions, payroll services, administrative management, or consulting services.

These professional business and financing services benefit strongly from the convergence of significant economic and technological forces present in the Lehigh Valley. Companies in these fields must constantly respond to the demands of corporations seeking to adapt to rapid changes in customer expectation, while also desiring to maintain focus on their core business activities.

The Lehigh Valley’s office vacancy rate compares favorably to the rest of the country, while asking rental rates remaining relatively steady. The Lehigh Valley’s office gross rental rates were $20.07 per square foot in 2015, compared to about $23 nationally. These regional rates have remained virtually unchanged for years, hovering around $20 each year since 2011, only slightly higher than the $18.75 rates from 2010.

Another contributing factor to the growth in the Lehigh Valley’s office sector is the one-of-a-kind Neighborhood Improvement Zone tax district in Allentown. All taxes generated by the 128-acre NIZ, with the exception of school district and city taxes, can be used to pay debt service on any financed improvements within the district.

This unique tax incentive has spurred $1 billion in new or proposed development, including the PPL Center hockey arena and five office towers by developer City Center Lehigh Valley. By offsetting construction costs, developers are able to offer business owners below-market rental rates for Class A office space.

For more information about the Lehigh Valley and its office market, visit the Lehigh Valley Economic Development Corporation website at

https://lehighvalley.org

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