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‘New Class of Office’ Under Construction at Allentown’s Waterfront

By Nicole Radzievich Mertz on June 1, 2021

Jaindl Enterprises broke ground in February 2021 on a six-story office building at the Waterfront, a mixed use development on the former Lehigh Structural Steel site. (Photo Courtesy of Jaindl Enterprises)

Jaindl Enterprises has broken ground on a $39.5 million office building, the first project in the larger Waterfront development that promises to transform an old industrial patch along Allentown’s stretch of the Lehigh River.

Casting it as “a new class of office,” Chief Operating Officer Zachary Jaindl said the six-story building will focus on “wellness” as businesses reimagine office space in the post-pandemic world.  Some of those wellness features are COVID-19 specific: an upgraded HVAC system, ultraviolet filtration in the ducts to sanitize the airflow, touchless elevator buttons, a manned wellness desk and common areas that are regularly sanitized.

Jaindl expects the 100,000 square feet of office space will be broken down into tenant footprints that are smaller than what was envisioned before the pandemic as businesses wade through the lessons learned during the remote work experiment during COVID. The space is designed to allow tenants to collaborate safely and operate efficiently as they return to the office.

“Most of the class A and B in Lehigh Valley is outside of Allentown with most space developed in the eighties and nineties,” Jaindl said. “So, there are a lot of outdated systems. Our goal is to be ahead of the curve.”

(Photo Courtesy of Jaindl Enterprises)

Even before the trickle of announcements of Lehigh Valley companies heading back to the office this spring, ground was broken in February on the western banks of the Lehigh River, just south of the Tilghman Street Bridge. The steel is expected to be topped off in August, setting the stage for a mid-2022 opening. The building will include 100,000 square feet of office space and 17,000 square feet of retail on the ground floor.

It is the largest office project, excluding owner-occupied buildings, under construction in Lehigh Valley in the first quarter, according to CoStar, a leading source of real estate data. Air Products is building a new office campus that will top 600,000 square feet in Upper Macungie Township. Together, those projects amount to more square footage than office projects under construction in larger cities including Indianapolis and Richmond, according to a recent JLL report.

Lehigh Valley has consistently made headlines over the past year for the amount of industrial inventory under construction, 8.8 million square feet last quarter, as demand for logistics space soared during a rise in e-commerce. In its recent report “10 Emerging U.S. Industrial Markets to Watch in 2021,” Colliers, a leading commercial real estate firm, ranked the Lehigh Valley the fifth hottest location in the U.S., behind only Austin, Columbus, Indianapolis, and Las Vegas.

But the office market has softened. The vacancy rate for Lehigh Valley’s 16.9 million square feet of offices, excluding owner-occupied and medical, was 12.1% in the first quarter — up by 2% percentage points year over year. Lehigh Valley’s industrial and flex space had a first quarter vacancy rate of 5.9%.

“The amount of office space under construction in the Lehigh Valley is significant because of the Waterfront and Air Products projects,” said George Lewis, Vice President of Marketing, Communications, and Research at Lehigh Valley Economic Development Corporation (LVEDC). “While the office market continues to have some uncertainty as we rebound from COVID-19 restrictions, the construction we are seeing signals a commitment to – and confidence in – the Lehigh Valley’s future as a location for companies seeking modern, professional office space.”

Jaindl said among the tools making the project possible is the Neighborhood Improvement Zone, a one-of-a-kind tax incentive district that allows debt service to be paid off by certain taxes for projects in 128 acres of downtown Allentown and the Riverfront district.

(Photo Courtesy of Jaindl Enterprises)

He said the NNN rent at the Waterfront building under construction will be $14-$16 a square foot. Base rent for offices, excluding owner-occupied and medical offices, was $16.36 for the first quarter in Lehigh Valley, according to CoStar.

The so-called NIZ has been behind some of Allentown’s biggest redevelopment projects including PPL Center, apartments, restaurants and offices in the downtown. City Center Investment Corp. has delivered about 1.5 million square feet of office in downtown Allentown, according to published reports.  Its website has a focus on health and wellness as businesses return to the office.

Among the tenants landed was ADP, which brought nearly 1,000 workers to the 13-story building at 5 City Center. During the pandemic last year, IotaComm, a fast-growing wireless communication and data analytics software company, began the consolidation and relocation of its dual headquarters in Phoenix and New Hope, Pa., last spring to Tower 6. Center City is

Two miles away from downtown Allentown, the Waterfront will be developed along 26 acres running along the western bank of Lehigh River. It had been the site of Lehigh Structural Steel, which was founded in 1919 and closed three decades ago.

The redevelopment project is nearly a decade in the making as developers cleaned up the property and made infrastructure improvements.

The Waterfront’s $184 million first phase will include another office building, an apartment building and a garage, walkway and other public amenities. The apartments could break ground as early as October.

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