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Tag: Century 21

Lehigh Valley renters becoming cost burdened

The Lehigh Valley’s median renter qualifies as cost burdened when it comes to housing these days, as affordability plummets. Households are considered cost burdened when they spend more than 30% of their income on rent, mortgage and other housing needs.

In Northampton County, the median housing cost ratio for renters was 30.1% (an estimated 32,729 occupied rental units) while it was 30.7% in Lehigh County (an estimated 48,003 occupied rental units).

Over 19 million U.S. renter households spent more than 30% of their income on housing costs in 2021, according to data from the 2017-2021 American Community Survey (ACS) 5-year estimates.

The burden was especially high in some of the nation’s largest counties where housing is pricier or in areas where incomes are low.

The ACS collects a variety of housing cost information for renters (monthly rent and utility bills) and for homeowners (mortgage principal and interest, real estate taxes, homeowner’s insurance, utilities, mobile home costs, second mortgage payments and condominium fees if applicable).

Homeowners in most of the country had a lower median cost burden than renters.

High housing costs can impact the amount of money households are able to save or use for other expenses. The ACS data show that renters were particularly vulnerable to cost burdens.

Part of the reason that rental housing cost is so high, as a percentage of income, is the lack of homes to purchase, combined with higher interest rates.

Loren Keim, president/broker of Century 21 Keim Realtors, wrote in an email: “There’s an old adage that says you are always buying a house, whether you’re buying one for yourself or you’re buying one for your landlord. And rental rates are a function of supply and demand. The current demand is very high, leading to upward pressure on rental rates. These increasing housing costs directly impact how much money households can save and how much disposable income each household has.”

Consumers have to make a decision whether to buy or rent, he said, and the lack of affordability is affecting home sales, too.

“Housing affordability in the Lehigh Valley dropped to the lowest level since I started tracking it in 2005, at only 79,” Keim said.

An index of 100 means median household income is 100% of what is necessary to qualify for a median-priced home under current interest rates. “A higher number means greater affordability. At a level of 79, that means the median household income won’t qualify with current interest rates for the median-priced home. This index has been at or above 100 since we started tracking in January of 2005, and in fact was above 200 at several points between 2011 and 2015.”

“I expect rental rates to continue to rise, although slower than the last 18 months, for several reasons,” Heim said. “In the Lehigh Valley, although there are several multifamily projects in development or under construction, there is still a low vacancy rate, leading to competition for those rental units. Additionally, developers and investment property buyers are paying more for construction and borrowing at higher interest rates to build projects, which drives their costs higher, which is passed onto the tenant.”

Rising rents can be explained by several factors, he said. The costs to maintain apartments, including lawn care, snow removal, landscaping, repairs and renovations, has also jumped. “The cost of utilities, for those landlords paying for utilities, has risen. All this leads to increased landlord cost, which is being passed along to the tenants in the form of higher rental rates.”

Anecdotally, Keim said, this has led some tenants to move farther from the Lehigh Valley into areas like Carbon and Schuylkill counties in order to find lower rents.

Paula Wolf is a freelance writer

Is the rise of coworking space good for the commercial real estate market?

Coworking office space is bringing changes to the commercial real estate landscape. PHOTO/GETTY IMAGES –

There’s no doubt the concept of coworking space is a trend in commercial real estate that is growing in popularity.

Younger professionals like the flexibility and socialization they receive in such a work atmosphere and landlords with vacant space to fill find it’s a promising alternative to the traditional long-term tenant lease.

Loren Keim, owner of Century 21 Keim Real Estate in Allentown and real estate professor at Lehigh University said coworking has become a significant disrupter in the commercial office real estate market, even though it only currently controls 4% to 8% of the office space in the major markets, where you’ll find most co-working space, and is even a smaller percent of office space in the Lehigh Valley.

It’s the way such spaces are changing the dynamic of leasing office space that he said is having such an impact.

Keim describes coworking space companies like WeWork as the AirBnB of the office market.

“These users aren’t locked into a long-term 3, 5 or 10 year lease like in the past,” he said.  “They want the perks of nice space but can’t deal with the long-term lease.  They occupy space based on their variable need for space, although the cost to them is higher.”

Coworking space, of course is nothing new, but technology is making it easier to work remotely, he said.

Social and equipment needs are keeping some from wanting to work from home. That makes coworking space an increasingly attractive venture. And coworking spaces are popping up in what had been, or could have been, traditional office space.

There are coworking spaces throughout the Lehigh Valley, mainly in urban cores such as Allentown, Bethlehem and Easton.

Keim said there’s both positives and negatives to the changing office space dynamic.

“On a landlord’s side, it’s unused space that you just created a use for and you can get more tenants in quickly,” he said. “Leasers like the flexibility. They can come and go as they will.”

However, landlords often find it’s harder to get financing for space intended for coworking as compared to a traditional office with a long-term tenant.

The landlord needs to put money into a space upfront to build it out for the tenant. So a 5-year lease is generally required to justify that expense.

With a coworking space there is generally no long-term leasing contract. So, there is more risk to the landlord.

Keim said there are different viewpoints on whether or not the proliferation of coworking space, versus traditional office space, will be successful long-term. He said much is depending on if you’re a large landlord, a tenant or a lender.

From the perspective of a landlord, if they lease a large space to one tenant and that tenant disappears, the landlord will lose the entire income from that space until it’s re-rented. There is also a cost to renovate and re-lease that could be significant.

The advantage of a coworking space is that it’s a shared risk for the space by having many small tenants.

However, in many cases, the landlords of the property do the renovation for the office space for a client that then will sublet the space to much smaller firms or individuals.

A large part of risk is on the landlord who fronts the money for the renovations and doesn’t know if the sublease to the co-working company is going to be able to generate enough revenue or tenants to make the space work.

That risk makes lenders more hesitant to finance the project.

Fiscal fears don’t seem to be slowing down the growth of the coworking space concept.

“We are seeing more of this in the Lehigh Valley.  Office Quarters and Regis are examples of shared space,” Keim said.

More landlords are seeking advice in converting portions of their space to coworking, he said, and real estate professionals, such as himself, are heading the call.

“We have some team members in our commercial real estate department that we call Flexsperts.  They work with building landlords who have interest in reconfiguring their leases to create co-working space in their buildings to generate more revenue,” he said.  “Our goal is to assist clients in using their space strategically. The concept is a strong one and will likely continue to expand over the next few years.”

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