Pennsylvania’s Lehigh Valley Big-Box Warehouse Growth Among Fastest in US
The appetite for large warehouses continues to grow in Pennsylvania's Lehigh Valley, as retailers adjust their distribution networks for online sales, according to a new report.
And demand from logistics and e-commerce users propelled the Valley, as well as the eastern Pennsylvania/New Jersey region to emerge as one of the most robust in the country, commercial real estate services company Colliers International Group Inc. said in its recently released 2016 Mid-Year Industrial Logistics & Transportation report.
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Colliers says the Lehigh Valley's Interstate 78 "submarket" has seen growth in new construction top 8 percent since Jan. 1. The company says that level of growth would rank the region as one of the most rapidly growing markets in the United States.
The e-commerce industry has brought in thousands of jobs and generally has been a boon to the Lehigh Valley in recent years. The Colliers report notes logistics company California Cartage Co. signed a lease for a 538,650-square-foot warehouse and online retail heavyweight Amazon.com announcing in July it will open a 1.1-million-square-foot warehouse — its second fulfillment center in the Lehigh Valley.
"Some of these, like Amazon, they can employ 2,000 or 3,000 people," said Mark Chubb a senior managing director with Colliers. "These are very labor-intensive operations."
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Colliers says the so-called "big-box" warehouse leasing activity has more than doubled between the second quarter of 2015 and the same period this year. And during the first half of 2016, 18.4 million square feet of space was leased, the most of any North American market.
In the Lehigh Valley, the report shows feasible market rents now top $5 per square foot. With lower vacancies, higher effective rates and strong absorption, the demand for industrial space will continue to outpace supply in the Valley.
Space is being leased within about three months of the completion of such buildings, said Michael Zerbe, another senior managing director with Colliers.
"That's a pretty phenomenal number," said Zerbe. "It almost never occurs."
The Colliers report bolsters a commercial real estate report released during the summer by the Lehigh Valley Economic Development Corp. That report noted the combined vacancy rate for industrial space in the area was 7.2%. In addition, there is more than 5 million square feet of industrial space under construction in the area.
Since 2014, about 10 million square feet of industrial space — much of it built on speculation — has been delivered in the region, the report states.
"We're a bull's-eye right now on the East Coast market," said Don Cunningham LVEDC president and CEO.
Cunningham also said more manufacturers want to have a presence in the Valley to be able to deliver hard goods and consumables within a day's drive. It's a reason companies such as Boston Beer, Ocean Spray and Curtiss Wright have set up production sites in big-box facilities.
"We sell them on it's a great location to make product and then move it on," he said.
While e-commerce, manufacturers and other companies have found the Valley attractive because of its proximity to major highways and population centers, area residents see the growth playing out with more trucks traveling on already congested roads.
Freight volume in the Lehigh Valley is expected to grow by 96% to 80.2 million tons by 2040, according to the Lehigh Valley Planning Commission.
