E-commerce pushes growth in I-78, 81 corridor

Brian Pedersen//July 15, 2019

E-commerce pushes growth in I-78, 81 corridor

Brian Pedersen//July 15, 2019

During the second quarter, e-commerce continued to boost industrial properties along the Interstate 78-81 corridor.

Online shopping and delivery is driving demand for more space along the Interstate 78-81 corridor. (Stock photo) –

A second-quarter market report from real estate firm CBRE showed occupancy gains of 1.9 million square feet and $135 million in investments along the corridor, which spans Lackawanna, Luzerne, Monroe and Carbon counties in northeast Pennsylvania; Schuylkill, Northampton, Lehigh and Berks to the south; and Dauphin, Lebanon, Lancaster, Cumberland, York, Adams, and Franklin counties in Central Pennsylvania.

Brick-and-mortar retailers are closing some of their distribution centers, but e-commerce companies are quickly moving in behind them.

“Even as some of these Lehigh Valley companies are closing, there are other companies lining up to take their place,” said Vince Ranalli, senior vice president at CBRE in Wayne.

In some cases, developers are even repurposing obsolete vacant office buildings into industrial properties.

A case in point is the former Guardian Life Insurance office building in Hanover Township, Northampton County J.G. Petrucci is redeveloping the office into The Lehigh Valley Flex Center.

Meanwhile, another developer plans to repurpose the former Bon-Ton warehouse in Whitehall into an active industrial property, Ranalli added.

“There’s still some creative things happening,” Ranalli said. “Developers tear down old, inefficient buildings and build new ones. As land becomes scarce, developers are getting more creative.”

E-commerce will continue to drive development of both repurposed and new industrial properties, and there has been little slowdown for summer.

“Here we are in July, activity is really strong, there’s lots of tours, lots of new companies to the area,” Ranalli said. “Rental rates are still really strong for the Lehigh Valley so you are going to have a very good market right now.”

The report showed average asking rents decreased from $4.74 per square foot in the first quarter to $4.56 per square foot in the second quarter, largely because of an increase in Class B and C buildings on the market.

In Central Pennsylvania, average asking lease rates were at $4.69 per square foot, while Lehigh Valley showed $5.50.

Furthermore, as land gets scarcer, CBRE said it anticipates developers will push further into Central Pennsylvania and north into Northeast Pennsylvania.

Vacancy rates showed a slight increase, moving up from 6.1 percent in the first quarter to 6.2 percent. CBRE said it anticipates a slight increase in vacancy rates over the coming quarters as more buildings enter the market.

More than 2.4 million square feet of new buildings hit the market in the second quarter, with the bulk of the total in Central Pennsylvania and the Lehigh Valley, with the remainder in northeast Pennsylvania. Construction starts totaled more than 2.1 million square feet as developers broke ground on new buildings throughout the corridor.

All told, Central Pennsylvania showed nearly 6.1 million square feet of industrial properties under construction while Lehigh Valley showed nearly 6.3 million square feet.