Warehouse demand, locally and beyond, outpacing last year
When warehouse space becomes available in the Lehigh Valley, it doesn’t stay that way for long. Even the aging, second-generation industrial buildings have a market.
Case in point: The former True Value distribution centers in Upper Macungie Township, about 690,000 square feet of 45-yearold industrial space the hardware wholesaler vacated this year, already have new tenants, according to a third-quarter industrial market report from commercial real estate services firm CBRE.
While third-party logistics provider Allen Distribution leased the 540,000-square-foot building at 7058 Snowdrift Road, e-commerce fulfillment services provider ShipHero took the roughly 150,000-square-foot structure at 6736 W. Tilghman St.
Demand for industrial buildings through the Interstate 78-Interstate 81 corridor is outpacing last year, even amid a pandemic that has stalled momentum in almost every other commercial real estate sector. And the high industrial demand is mostly coming from third-party logistics providers and e-commerce fulfillment operations, racing to secure more space to keep up with a surge in online shopping.
In the corridor, which includes the Lehigh Valley, central and northeastern Pennsylvania, net absorption — essentially the net change in occupancy — has reached more than 10.3 million square feet so far this year, easily on pace to eclipse last year’s positive absorption of nearly 11 million square feet, according to CBRE. The Lehigh Valley, which CBRE defines as Lehigh, Northampton and Berks counties, was responsible for 3.6 million of that total.
“In the Valley, we didn’t see any projects get sidelined because of C OVID ,” said Sean Bleil er, a CB RE senior vice president and member of the firm’s Lehigh Valley industrial team. “They were shutdown from the state mandate, but in
terms of projects not restarting or saying we’re going to hold off, we didn’t see any of that take place in the Lehigh Valley.”
What is taking place, however, is that available and properly zoned land is getting harder to find for developers, who have added more than 30 million square feet of industrial space to Le high and Northampton counties over the last decade.
“The Valley has a lack of big inventory ,” said Bleiler, noting the development of large warehouse so fat least 750,000 square feet is pushing north or into surrounding areas such as Warren County, New Jersey.
That lack of big space is one reason why True Value packed its bags and left for Luzerne County, where it is leasing a new 1 million-square-foot building.
Many communities surrounding the Lehigh Valley are seeing this scenario play out. That includes Warren County, home to the in- progress Bridge Point 78, which will offer 4 million square feet of industrial space in Phillips burg and Lo pat cong Township. In nearby White Township, residents continue to fight an industrial proposal from Jaindl Land Co. that, they argue, would overwhelm Route 519 with trucks and forever change the area’s rural character.
While the rate of mega-warehouse development in the Lehigh Valley is slowing, the area is still seeing plenty of activity.
According to Lehigh Valley Economic Development Corp., 12 industrial projects representing 2.5 million square feet were added to the market this year. In addition, 17 industrial buildings are under construction in Lehigh and Northampton counties, totaling 7.9 million square feet of space.
Many of those buildings, LVEDC said, will end up being used for more than just warehousing.
“This misnomer that every rectangular box building is a warehouse is not good,” LVEDC President and CEO Don Cunningham said. “It implies in people’s minds that it’s a nuisance that doesn’t create economic output, which is not the truth.”
Of the 35 projects LVE DC is tracking ,23 are manufacturers ,10 involve distribution and two are office prospects. Not all 35 will come to fruition, as that number includes everything from companies that have expressed interest in the Le high Valley to those that have chosen sites.
Food-and-beverage manufacturing has been a big growth segment for the Le high Valley in the industrial sector.
For example, Keurig Dr. Pepper in the third quarter moved into its 810,000- square-foot manufacturing plant in Upper Macungie Township, according to a report from commercial real estate services firm Lee & Associates. The plant is next toa730,000-square-foot-warehouse that K eu rig Dr. Pepper also leases, an operation connected by a tramway.
Some companies also decided to leave aging locations to build new operations in the area’ s rural reaches.
ASGCO Manufacturing Inc., which makes conveyor and screening equipment, announced plans in June to move from its longtime Allentown home to 730 Bangor Roadin Plainfield Township, where it is building a 194,000-square-foot facility that should be complete next summer.
Some existing industrial space also became available in the third quarter when lighting company Ledvance LLC decided to consolidate its distribution network and vacated its 526,260-square-foot facility at 2460 B rod head Road in Bethlehem Township. The Pro log is-owned building is now being marketed for lease.
It likely won’t stay empty for long.