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NAIOP Conference Shows Lehigh Valley is Big Part of Development Future

By Colin McEvoy on June 20, 2016

This column, written by LVEDC President and CEO Don Cunningham, originally appeared in Lehigh Valley Business on June 20, 2016. (Click here to read Cunningham’s previous columns.)

Don Cunningham

Don Cunningham

Every other year, NAIOP, an international association of commercial real estate development professionals, meets in Jersey City for its Trends and Forecasts Conference, which it calls I.CON.

Last week, in the shadows of the skyscrapers of Lower Manhattan just across the Hudson River, about 600 commercial and industrial real estate brokers, investors, developers, port officials, and others in the industry gathered to mix and mingle, put together deals, and try to figure out what the future holds. They represented the biggest names in real estate in the United States and the world.

It’s clear that they believe the Lehigh Valley will be part of that development future. The group scheduled a one-day, off-site excursion to visit the Lehigh Valley, specifically the redevelopment lands of the former 1,800 acres of Bethlehem Steel Corp. in Bethlehem, anchored by the Norfolk Southern Intermodal Terminal located just off the I-78 Interchange in Bethlehem.

The only other excursion of the I.CON Summit was to the Port Authority of New York and New Jersey’s Port of Newark.

About 40 of the country’s leading real estate professionals spent a day, paying extra, to see what’s happening and available in the Lehigh Valley, one of top three industrial and logistics markets on the East Coast. During the visit sponsored and organized by the Lehigh Valley Economic Development Corporation, the group toured the 1,000 acres of Lehigh Valley Industrial Park VII, the 500 acres of Majestic Reality, the Lehigh Valley Rail Management intermodal facility, and looked at many of the old buildings and former properties of Bethlehem Steel Corp., sprinkled among the ArtsQuest Center, SteelStacks, LV-PBS, and the Sands Casino and Hotel properties.

In a keynote address, Ming Mei, CEO of Global Logistics Property (GLP) based in China, said he expects that global investment will continue in the United States, continuing a trend that has been evident in the Lehigh Valley. GLP, with $35 billion in assets, is the second largest owner of property in the world and the second largest in the U.S.

GLP has led an emergence of Asian wealth funds into U.S. development and real estate, seeking a safe place and a stable market in a volatile world for investment.

NAIOP, the Commercial Real Estate Development Association, hosted the "I.CON '16: Trends and Forecasts" conference in Jersey City. (photo courtesy NAIOP)

NAIOP, the Commercial Real Estate Development Association, hosted the “I.CON ’16: Trends and Forecasts” conference in Jersey City. (photo courtesy NAIOP)

“Our goal is to continue to be capital partners for developments,” said Mei, who was born and raised in the U.S. and is a former executive with ProLogis.  “I think that U.S. manufacturing will come back because of automation and robotics. Labor will not be a factor against it.”

Interestingly, most industry leaders and speakers said that foreign companies wanting to enter the desired U.S. market will be a greater source of investment and jobs than U.S. manufacturers returning from overseas plants.

Patrick Van Den Bossche, a partner and board member of A.T. Kearney, Americas, said, “There’s a difference between the hype and the data regarding the reshoring of American manufacturing back to the U.S. The only year we saw reshoring was 2011. Offshoring continues to outpace reshoring for American companies.  Foreign companies, however, are investing in the U.S.”

This certainly holds true for the Lehigh Valley, which has seen a surge of international companies coming into the region, anchored by Chinese manufacturer Fuling, located in Upper Macungie Township.  Last year, 42 percent of major new recruitment projects into the Lehigh Valley were international companies.

“Foreign Direct Investment is driven by companies who want to enter the U.S. market or be closer to their customers, “ Van Den Bossche said.  “Delivery time and cost is one of the factors driving companies closer to the market.”

In a good news-bad news scenario, however, nearly all speakers said that while development of technology and robotics are a plus for U.S. manufacturing it will continues to eliminate jobs while industrial output grows.

“Chasing labor supply or cheap labor is a short-lived phenomenon,” said Geoffrey Kasselman, executive managing director of Newmark Grubb Knight Frank. “If you have robotics and autonomous vehicles you don’t need to be close to a labor source.”

Kasselman said that some experts go as far as predicting that 80 million jobs across the globe will be replaced by robotics within ten years.

In the meantime, however, foreign investment and movement to the U.S. is driving job replacement. An increase from 1.2 million to 2.4 million manufacturing jobs with foreign-owned companies has kept overall U.S. manufacturing employment steady at about 12 million jobs.

LVEDC has Federal Grant Funds Available for Redevelopment Projects

The Lehigh Valley Economic Development Corporation (LVEDC) has federal grant funds available for assessment and planning for regional redevelopment projects. Those fund[...]

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