Lehigh Valley continues to see high demand for industrial space

Despite high fuel costs and supply chain issues, Newmark Real Estate said the I-81/78 industrial market remains strong. 

Demand for warehouse and distribution space shows no signs of slowing, the company said in its second quarter report that looked at Central Pennsylvania, Lehigh Valley and the Greater Philadelphia regions. 

Newmark said proximity to a strong labor pool and easy access to consumers remain the top considerations for tenants in their efforts to minimize supply chain and transportation costs.  

The Lehigh Valley submarket experienced nearly 1.0 million square feet of positive absorption bringing its year-to-date total to 2.8 million square feet, the report said.  

Construction activity is booming, with 7.1 million square feet underway, all of which is expected to deliver over the next 12 months. 

The overall vacancy rate for the Lehigh Valley submarket increased by 50 basis points quarter-over-quarter from 7.4% to 7.9% due to approximately 1.0 million square feet of new speculative construction that delivered and is available for lease, according to the report.  

This new speculative space is not expected to remain available for long, as product of this type continues to lease quickly. Asking rental rates declined slightly since last quarter by 2.8% to a current average of $5.42/SF. 

 Notable leases inked this quarter included ABB taking 340,695 square feet at the recently constructed Carson 33 warehouse and distribution facility at 1000 Carson Court in Palmer Township.  

Acadian Crossing Consumer Products also leased 214,653 square feet at 323 Logistics Drive located in the Hamburg Commerce Park in Shoemakersville.  

The building is set to deliver in the first quarter of 2023.  

Overall, demand in the central Pennsylvania region for newly constructed warehouse space remains robust, with over 30.0 million square feet of new construction underway, the report said. 

Speculative construction continues to be leased at a rapid pace, typically before the delivery of a building or shortly thereafter, causing land prices to soar, the report said. 

Strong momentum noted in the first three months of 2022 carried into the second quarter. The overall vacancy rate declined by 60 basis points quarter-over-quarter from 6.3% to 5.7% in the second quarter. 

 Overall net absorption was positive at 5.7 million square feet for the second quarter alone, bringing the year-to-date total to 12.0 million square feet.  

Average asking rents declined slightly from $5.31 per square foot in the first quarter to $5.26 per square foot in the second quarter. That is up from $5.04 per square foot a year ago. 

Currently, 30.5 million square feet is under construction. Overall vacancy declined to 5.7% in the second quarter, down from 6.3% in the previous quarter.