Report: Lehigh Valley Commercial Real Estate Market Shows Strength in Q1 2022
By Colin McEvoy on June 10, 2022
The Lehigh Valley’s commercial real estate market delivered encouraging signs of recovery in the first quarter of 2022 amid uncertainty caused by the pandemic and global supply chain issues, according to the latest Lehigh Valley Commercial & Industrial Real Estate Report.
The industrial market, among the nation’s busiest, expanded even as vacancy rates remained low and rents ticked upward, according to the report. Inventory grew by 1 million square feet, totaling 141.2 million square feet.
Each quarter the Lehigh Valley Economic Development Corporation (LVEDC) publishes a report that provides a detailed overview of industrial and office market activity and notable real estate transactions in the region. The newest edition covers data from the first quarter of 2022.
A digital version of the Lehigh Valley Commercial & Industrial Real Estate Report can be found here. Hard copies will also be available soon at the LVEDC office and upon request.
Another 5.4 million square feet of industrial space is under construction in the region, and nearly a fifth of it is for the nationally-recognized logistics provider Unis, according to the report. Its 953,000 square-foot lease in Allen Township is among the region’s largest since the pandemic began, with only Geodis and Nike signing for larger spaces since 2020.
Underscoring the continued strength of the industrial real estate market, global logistics operator Realterm purchased a fully-leased facility in Bethlehem for a sum that CoStar puts at $96.7 million – the largest sale of in the first quarter.
“Realterm’s new Lehigh Valley facility is advantageously located in one of the fastest growing industrial markets in the country due to the region’s transportation infrastructure, low operating costs, parcel/freight hubs, abundant labor, and unmatched regional connectivity,” Stephen Panos, Senior Vice President and Fund Manager, Realterm, said in the report. “This asset is an excellent example of our continued strategy of acquiring the most functional industrial properties across the country.”
While logistics gets much of the attention, most of the new leases were for under 100,000 square feet as the Lehigh Valley landed manufacturers that promise to bring hundreds of jobs, according to the report.
This includes Easy Signs opening its first U.S. manufacturing operation in Upper Macungie Township, Olympus subsidiary Evident opening a microscopy distribution and service center in Bethlehem, and Spot & Tango operating its first manufacturing facility in Upper Macungie Township.
The Lehigh Valley Commercial & Industrial Real Estate Report also highlighted the region’s office market, which currently includes 28 million square feet of space and a 9.1% total vacancy rate.
Philip M. Schenkel, Executive Vice President, Associate Director with Jones Lang LaSalle, one of several experts quoted in the report, said major local employers continue to encourage employees to return to the office, and many have already begun implementing their plans to do so.
“For those tenants in the market, there is a flight to quality with most now considering longer-term deals, “Schenkel said. “That is a trend we’re seeing throughout the region: as the office market normalizes, higher quality spaces are seeing more lease-up and vacancy stabilization.”
While the future of remote work and COVID-19 variants continued to cause uncertainty in the office market, two companies made significant commitments in the Lehigh Valley, according to the report.
Air Products began moving into its new 625,000-square-foot corporate headquarters in Lower and Upper Macungie townships, and FLSmidth sold its offices in Bethlehem and subleased space at Patriot American Park, the former Agere headquarters adjacent to Route 22 and Lehigh Valley International Airport.
“We’re excited to move into our new offices. They offer a much more modern space with a lower carbon footprint, which is in keeping with our sustainability ambitions,” Rafael Martinez, Vice President of Cement at FLSmidth, said in the report. “Crucially, we’re staying local to our customers, and we look forward to welcoming them into the new offices in due course.”
The economic conditions are improving as the Lehigh Valley continued to drive Pennsylvania’s jobs recovery, the report states. At the end of March, the Lehigh Valley metro region regained 99% of the jobs lost since April 2020, trending above state and U.S. levels.
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