The dramatic growth of development in downtown Allentown is hurting the Lehigh Valley suburban office market.
The dramatic growth of development in downtown Allentown is hurting the Lehigh Valley suburban office market.
However, the suburbs also are attracting new office tenants, drawing fresh development and some construction and upgrade projects.
That is the backdrop as the office market reacts to what will be more than $1 billion in new buildings in Allentown – development, largely offices, spurred by the attractive tax incentives of the downtown’s Neighborhood Improvement Zone.
“Are we affected by the NIZ? We certainly are,” said Don Frederick, general partner of Winchester Road Limited Partnership, which owns a suburban office property in South Whitehall Township. “I can’t compete with the NIZ because they are building their buildings, theoretically, with tax money, not with cash. We are dealing with real world economics.”
Others say the NIZ is making the office market more competitive but that some users always will prefer a suburban environment and that tax incentives are not necessarily a deciding factor.
As a sign of strong interest, one real estate company is looking to build a corporate office park of multiple buildings in an untapped suburban office market off Route 33. Some corporations are consolidating offices and moving employees into single existing sites, often staying in the suburbs.
Meanwhile, the expansion of health networks, the rising population, increasing interest in the Valley from site selectors and a strengthening labor pool all play a part in painting a bright future for both the urban and suburban office market.
Although some real estate professionals are not too concerned about a flight of corporations to the cities, there is no doubt the surge of new office development in downtown Allentown is drawing tenants. Some experts say it creates an unfair competitive advantage since a large part of this growth is driven by the NIZ tax incentives, which are specific to Allentown and are used by developers to drive down rental rates.
With about one million square feet of new Class-A, top-of-the-line office space coming on the market in downtown Allentown alone, it would appear that the city could be swallowing up a significant amount of office space in a short time.
However, Allentown’s NIZ developments, as well as office projects proposed for the City Revitalization and Improvement Zone in Bethlehem, will be coming to fruition over a period of time, not all at once.
