More than 500 people attended a virtual seminar hosted by City Center Investment Corp. on Sept. 24.

The coronavirus crisis could be an opportunity for smaller cities like those in the Lehigh Valley to attract office and residential tenants who may be seeking satellite locations or an alternative to large, densely-populated urban areas.

That was one of the key takeaways from a virtual event hosted on Sept. 24 by City Center Investment Corp. More than 500 people attended the webinar, entitled “Opportunities in the Coronavirus Crisis: Exploring How the Pandemic has Companies Looking at Smaller Cities.”

Lauren Gilchrist, Senior Vice President & Senior Director of Research at JLL, discussed the increasing popularity of the “hub-and-spoke” real-estate model, which includes a large anchor establishment (“hub”) complemented by several smaller, secondary establishments (“spokes”) in different locations.

As opposed to one centralized office location, this model provides companies more distribution, flexibility and resiliency, as well as a wider pool of local workforces to draw from. With its central Northeast location and strong economic assets, the Lehigh Valley and its cities like Allentown, Bethlehem and Easton are well-positioned to benefit from this trend.

“Companies might be looking to move away from their centralized headquarters to favor multiple and smaller satellite offices that are strategically located in new and emerging markets,” said Dana Nalbantian, Studio Director & Principal with Gensler. “Allentown as a small city is really a prime candidate for this model.”

City Center President J.B. Reilly said the ability to attract high-quality talent will be a major factor for companies in choosing satellite locations in this new model. The fact that downtown Allentown has already attracted Fortune 500 companies like ADP, Morgan Stanley, and Merrill Lynch in recent years indicate that Lehigh Valley offers that talent, Reilly said.

Attracting and retaining workforce and developing a strong talent pipeline in the region has been a priority in recent years for the Lehigh Valley Economic Development Corporation (LVEDC) and the Made Possible in Lehigh Valley initiative. 

“We think the Lehigh Valley is positioned to capture some migration away from some of these dense urban areas like New York,” Reilly said.

City Center has invested $1 billion in downtown Allentown and developed 1.8 million square feet to date, drawing more than 6,000 new employees. This development includes Class A office towers like Five City Center, Tower 6, and Two City Center, as well as residential complexes like Center Square Lofts, Cityplace, and 520 Lofts.

Nalbantian said City Center’s investments in recent years have created the amenities major companies will seek from satellite locations in the hub-and-spoke model. In particular, the new residential space will provide employees with shorter commutes and improved quality of life, which improves productivity.

The hub-and-spoke model had already started to gain significant traction even before COVID-19, Gilchrist said, with major companies like Amazon, Apple, Facebook, Microsoft, and Uber already implementing and utilizing it.

“The pandemic hasn’t really created anything new,” Gilchrist said. “Crisis in the economy and crisis in the market tend to accelerate things that were already existing. … When we look at the office market, and look at what was happening on the West Coast, in many ways this hub-and-spoke model is nothing new.”

Regarding the future of office space, Gilchrist said remote work and telecommuting will likely expand after the pandemic, data gathered by JLL suggest traditional office will not be completely decimated.

Gilchrist said 47% of surveyed companies plan to use the same amount of office space post-COVID, while only 23% expect to significantly reduce their office portfolio, and 11% expect to expand their office footprint to accommodate growth and provide greater distancing.