A Radial worker scans an order in one of the company’s fulfillment centers. PHOTO/SUBMITTED –
Ecommerce solutions provider, Radial Inc., said it plans to fill more than 1,300 positions for entry-level fulfillment workers at its Lehigh Valley locations to help meet the expected demand over the holiday season.
Adecco, a provider of workforce solutions, is hosting a three-day hiring event to help fill Radial’s fulfillment center roles in the Allentown and Easton markets.
Radial has Lehigh Valley locations at 4200 East Braden Blvd. in Easton, 1611 Van Buren Rd, Easton and
at 5185 Crackersport Road in Allentown.
Radial said recent research it conducted showed that 58% of consumers said they will increase online holiday shopping compared to 2021.
Findings show that this holiday season is expected to be another high-demand period for eCommerce, and each year, Radial has successfully scaled its workforce to as much as five times its typical headcount to meet the higher demand.
“We are excited to add so many talented team members to support another busy peak season,” said Sabrina Wnorowski, senior vice president and chief human resources officer at Radial. “Each year we scale significantly and are constantly impressed with the work of our associates. It’s a busy time of year, but our teams are focused on creating an inclusive, collaborative, and fun work environment. At Radial, associates are motivated to bring their full, best selves to work every day. With the addition of new technologies and onboarding tools, we are focused on creating the best learning experience and work environments for all associates across our expanding network.”
For individuals seeking long-term employment, Radial plans to offer opportunities to convert into full-time positions this year.
Job fairs will be held Tuesday, Nov. 1 and Wednesday, Nov. 2 from 9 a.m. to 3 p.m. at the Allentown location and Thursday Nov. 3 from 9 a.m. to 3 p.m. at the Van Vuren Road, Easton location.
Consumer demand is driving the warehouse boom in Central Pennsylvania and Lehigh Valley with ecommerce companies leasing more than half of the space.
That demand is expected to grow, and local and regional companies are investing in the development, according to CBRE.
Becky Bradley, executive director, Lehigh Valley Planning Commission –
Other space is occupied by food and beverage distribution and manufacturing companies, according to Becky Bradley, executive director of Lehigh Valley Planning Commission. Small to medium-sized businesses make up the rest.
Bill Wolf, vice president of CBRE, which tracks industrial development across the country, including Central Pennsylvania, said Lehigh Valley’s industrial sector and the region are seeing substantial growth from the scaling up of local manufacturing and logistics facilities.
Pennsylvania’s 78 and Interstate 81 corridor in Central Pennsylvania and the Lehigh Valley added the most leased large industrial space in the country in 2020, with 8 industrial leases of 1 million square feet or more added last year, according to a CBRE report.
Additionally, the I-78/I-81 corridor was home to 11 of the 100 largest industrial leases, coming in at almost 13 million square feet — larger than any single MSA (Micropolitan Statistical Areas) or city-sized region in the United States, CBRE said.
The region is close to the ports of New York, New Jersey, Baltimore, and Philadelphia. It also has access to rail service through Norfolk Southern and CSX.
In addition, Lehigh Valley International Airport is ranked one of the top air cargo markets in the country and one of the fastest growing, according to the Airports Council International’s 2021 report.
“The majority of the facilities are general retail and wholesalers – consumer products,” Wolf said. The reason for the growth, he said, is simply consumer demand.
Bradley said most of the warehouses are built on spec.
“They are giant boxes with a lot of flexibility inside,” she said.
However, the majority are leased before construction is complete or around the time of completion.
“We can’t establish traffic (during the planning stages) because we don’t know who is going in until they get there,” she said.
Steven Deck, executive director, Tri-County Regional Planning Commission, which covers Dauphin, Cumberland, and Perry counties, agreed.
“There’s no single or even small group of developers that stand out in our region, more a broad range of commercial/industrial real estate developers,” he said.
In terms of who leases the space, “unless there is a single lease holder like FedEx, UPS, Walmart, Amazon, Proctor & Gamble, etc. we don’t know who leases the space,” Deck said. “Many of these warehouses have unknown users at the land development stage, with such decisions often made well after the planning process is complete.”
“Generally, we see 35%-40% leased before completion,” Wolf said. “Inventory is low, so space is absorbed before completion.”
According to the CBRE report, investing in warehouse and industrial space is more risk diverse. Investors are more local than foreign.
Bradley agreed, saying development is happening by companies that specialize in it. Locally, CBRE, Prologis, Lee & Associates of Eastern Pennsylvania, National Logistics and J.G. Petrucci Company Inc. are among the major players.
Space not leased by ecommerce, food and beverage or manufacturing, are leased by small or even large businesses, Bradley said.
“It could be used for storage, which there is a need for,” she said.
Many of the warehouses, Wolf said, are operated by third party operators.
“It’s always been there, but we are seeing an increase,”
He explained the third-party operators offer accounting, human resources, outsourcing and other services that help companies run more efficiently.
“We are in unprecedented times with construction delays, supply shortages and even delays in approvals,” he said. “There is more demand than supply, so costs are going up.”
Nationally, there has been a 15% increase in rents in major markets, he said. In Central Pennsylvania, rates have climbed 20%, with Lehigh Valley seeing an average of $9-$10 a square foot and Central Pennsylvania seeing $7-$7.50 per square foot.
“The further away from major transportation routes, the lower the rents will be,” Wolf said.
“All the markets are hot” and developers are stretching out to find land suitable for development,” he added.
After Lehigh Valley, developers are stretching into Berks County, Wolf said.
York County, with access to the I-83 corridor, has been strong as well. With access to Baltimore and Harrisburg, companies have pulled labor from those markets and prospered.
Lancaster and Reading, however, have suffered because of Route 222, Wolf said. “The road to nowhere does not give good access.”
While the work being done on Route 222 is ongoing, those markets are still behind in the building boom, he said.
Cold storage is an area of real growth too, he said. “These garner premium rents because they are unique buildings, especially if the leasee needs the whole building.”
Cold storage is in demand not only by food companies, but pharmaceutical and chemical companies as well, he said.
The attraction to the regional market is also due to the labor market, Wolf said.
According to the CBRE report, the regional warehouse labor force was around 190, 500 in 2020. That is expected to grow 13.4% by 2030.
While the labor market is strong, Bradley said different companies require different numbers of employees, depending on the business.
“Look at Walmart, for example,” she said. “They have two warehouses side by side. One is for small items and the other is for large ones.”
Bradley said there could be a 50% difference in the number of employees needed. The warehouse that ships small items can employ 4,000 to 5,000 people while the one that ships large items requires less hands, she said.
“These facilities are becoming more automated all the time in the efforts associated with increasing capacity without huge increases in labor costs,” Deck said.
Bradley agreed. “There is a lot more automation going on.”
Wolf said AI will play a big part in manufacturing, in warehouses and in transportation.
“These companies are more tech savvy with understanding where goods are coming from and how much they need to keep on hand,” he said. “Automation brings on more efficiency through the whole process.”
Even with inflation on the rise, Wolf said the growth of warehouse space is expected to continue because rent is a small portion of the supply chain costs when looking at the cost of transportation, goods, and payroll.
E-commerce was on the rise before the pandemic first swept across the country two years ago.
But the initial outbreak, and resulting stay-at-home orders, began a spike in online shopping that shows little sign of slowing.
That, in turn, has fueled an increased demand for, and construction of, distribution space – particularly in the Lehigh Valley.
In fact, according to a study of the top 11 regions in the country, there has been a 25% increase in growth since the global financial crises of 2007-2009.
The Lehigh Valley region, for the Transwestern study includes all areas shaded in blue. MAP/PROVIDED –
Transwestern Development Company, which does business in the Lehigh Valley and throughout the country, did a study of the 11 fastest-growing areas of the country and the Lehigh Valley, which for their report includes most of Southcentral Pennsylvania and the Lehigh Valley, showed the area was ranked first in four categories the study looked at.
The region led in investment growth, investment growth future, net absorption and rent growth, the company said.
Matt Dolly, author of the Elite 11 report, said the company wanted to track the top 11 growth areas in the country that continue to “lure global investors of industrial real estate.”
“The Lehigh Valley has grown so much, we decided to include the region in our report,” he said.
New Jersey has been so built up that demand has outpaced what it has to offer, so Lehigh Valley has benefited from that, he said.
“You would think the area would [only] support smaller spaces, but in the last year, we’ve seen large warehouses going up,” said Dolly.
In fact, in the last year, Lehigh Valley-Central PA region reported a 4.8% annual growth in occupancy gains, which equates to more than 30 million square feet for a total of 642 million square feet.
“The taxes are lower, there is still more land, and the population is growing,” he said. “According to the 2020 census, Lehigh Valley showed an increase in population where the rest of the state hasn’t.”
That, he said, means a larger workforce pool.
Brian Banaszynski, Northeast regional partner for Transwestern Development Logistics Group, who oversees the company’s business in the region, said e-commerce has grown 16 percent overall in the region since the pandemic began. While e-commerce was growing one to two points a year pre-pandemic, COVID-19 created a jump in that growth by five points.
“Online grocery sales have grown significantly,” he pointed out. “In 2019 there were $2 billion in online sales. When you look at 2021, you see a jump to $9 billion.,” he said. “That is huge.”
Banaszynski noted that the increase demand for product can be seen in the increase in activity at the New Jersey and New York ports.
In 2019, 600,000 cargo containers moved through the ports. In 2021, that number jumped to 800,000.
Those products must go through the logistics facilities to get to the end user.
“That’s why Lehigh Valley is so hot,” he said, pointing out the increased use of cold storage facilities.
And, Dolly said, warehouses are now beautiful properties compared to the dingy sites they used to be, so they are drawing populations in.
“The area has been hot for a while,” said Tom Palisin, executive director of the Manufacturer’s Association, York. “Our highway infrastructure offers access to most of the country, most within a one-to-two-day drive. And space is more affordable. We are not Washinton D.C., Philadelphia or Boston so it’s a smarter investment with similar access to the same markets.”
George Lewis, vice president of marketing, communications and research for Lehigh Valley Economic Development Corporation, said, “The Lehigh Valley continues to see consistent activity and interest in the manufacturing and logistics sectors. We ended 2021 with low industrial vacancy rates and average asking rents that increased by double digits over the previous year.”
“More than 5 million square feet of industrial space was under construction by the end of 2021, and vacancy rates in industrial space averaged 4.1 percent, down from an already low 4.9 percent the year before,” he said.
Banaszynski explained, “the vacancy rate dropped 42 percent even with the growth of new construction.”
In 2018, he said, the vacancy rate with 73 million square feet of space was 5.5-6 percent. In 2021, with 91 million square feet of industrial space, the vacancy rate is 3 percent.
In addition, in mid-2021, rent growth increased 13 percent, he said.
“That was the highest among the Elite 11.”
In the region, Transwestern has 10 million square feet of warehouse space, either completed, under construction, under contract or in the planning stages. Most of the activity is concentrated around Route 100 and Route 222.
“We have a 2-million-square-foot site in the Lehigh Valley right now,” he said. “I can’t disclose where because it is still under contract.”
And while the demand for larger warehouse space remains, it is slowing in the Lehigh Valley as land becomes harder to find. Banaszynski said developers are moving east into Phillipsburg as well as west into Hamburg and other sites.
“The boundaries have grown to accommodate more growth,” he said.
Palisin agreed. “Space is running out, especially along the I-81, I-78 corridors.”
Manufacturers, he said, are doing well with the high demand for products. They are still facing supply chain issues, so many have already filled orders for this year.
Even with the population growth in the region, the size of the workforce is still an issue.
“Every industry is doing well, so employees have choices,” said Palisin. “We didn’t have this before. Hiring usually runs in cycles. But when everyone is hiring at the same time, it thins the [worker] pool.”
Lewis said LVEDC is focused on marketing the region’s economic assets for such target sectors as life sciences, food and beverage processing, professional business services, and advanced manufacturing.
“We’ve seen a high demand for smaller-footprint industrial buildings in the Lehigh Valley, particularly in the 40,000 to 80,000 square-foot range,” he said. “There is a shortage of buildings in that size range in the Lehigh Valley, and LVEDC continues to communicate the need for these buildings to regional developers.”
The Bethel Industrial Center in Bethel. PHOTO/SUBMITTED –
Discount retailer Big Lots is opening a warehouse and distribution facility in the newly built Bethel Industrial Center in Bethel.
The building was constructed by J.G. Petrucci Co. Inc. in a joint venture with real estate investment management firm, DWS. The two joined to develop a 587,100-square-foot distribution facility directly off Interstate 78.
Situated on 45 Acres, the LEED Certified facility features 40-foot clear height, 108 dock doors and LED lighting.
The facility will help Big Lots accommodate its growing demand in the eCommerce space.
In need of more space, Big Lots looked to Eastern Pennsylvania for a large industrial solution.
After issuing a proposal on behalf of the tenant, JLL brokers, Mike McCreary, Larry Maister, Ryan Barros and Matt Powers worked with J.G. Petrucci and JLL Broker Jeff Lockard to locate the appropriate site for Big Lots next home and selected this facility to lease.
JW Industrial Park at Route 329 in Northampton is one of the many light industrial projects currently under construction. PHOTO/CBRE –
The overwhelming demand for light industrial and warehousing space along the I-78/I-81 corridor should last through the end of the year and likely beyond, said Vince Ranalli, executive vice president for CBRE.
The company has released its latest report on development in the corridor, which shows available space running out, new development on the upswing and an overall hike in leasing costs.
“We’re ahead of where we expected,” Ranalli said. “I don’t think anyone could have imaged since the pandemic how much space we would absorb.”
The corridor had a record-setting 7.9 million square feet of absorption in the second quarter of 2021 alone.
“That’s nearly 8 million square feet of space in one quarter. I remember when 8 million square feet was a good year,” he said. “It’s unprecedented and we see no signs of a slowdown.”
Overall vacancy fell to 5.8%, further underscoring the record demand for space.
To meet the demand, developers are building new facilities as fast as they can.
In 2020 5 million square feet of new construction was completed. About 9 million square feet of new light industrial construction is in the pipeline.
The Northeast Pennsylvania and Lehigh Valley markets posted the highest occupancy gains in the second quarter, accounting for most of the net absorption.
In the Lehigh Valley, much of the occupancy growth was from the 3.6 million square feet of construction deliveries as very little existing Class A space is available within that market.
While the bulk of the construction remains in the Central Pennsylvania and Lehigh Valley markets, because of the lack of available properties in the Lehigh Valley and Central Pennsylvania area, the report shows gains in the Northeastern Pennsylvania region.
Northeastern Pennsylvania now represents 16.1% of the overall development in the corridor with 3.1 million square feet under construction.
Sticker Shock
Available land is the one thing slowing down development.
For those who do want the access in the Lehigh Valley, Ranalli said, they have to get creative.
Companies looking to build out their network of warehouse and logistics space are turning to brownfields sites, where they are knocking down old buildings and constructing new facilities.
Ranalli gave Bridge Point 78 in Phillipsburg, New Jersey as an example. The 3.85-million-square-foot industrial complex was created on the site of the former Ingersoll Rand.
In other cases, developers are knocking down old office buildings or shopping centers to build logistics facilities because of the changing market due to the shifting consumer preference towards ecommerce.
The demand for space, coupled with drastically rising construction costs has led rents to record highs, Ranalli said.
“Some tenants are really getting sticker shock,” he said.
According to the report, Northampton County has the highest average rent for industrial space at an average of $6.72 per square foot. Lehigh County is next with average leasing rates of $6.21.
By comparison the other regions are less expensive. The average rent for industrial space in York County was $5.21 and Dauphin County had an average lease rate of $5.46.
“In some cases we’re seeing Class A space at above $7 per square foot. It’s really unprecedented,” Ranalli said.
The corridor is still a bargain, rent wise for companies looking for light industrial properties in the Northeast when compared to North and Central New Jersey, so Ranalli said he expects rents to remain high for the foreseeable future
The ecommerce industry is continuing to grow in the Lehigh Valley.
Radial, an omnichannel commerce technology and operations company, is expanding in Easton with the opening of a second facility.
The company will be bringing fulfillment operations to a 629,800-square-foot operation at 1611 Van Buren Road, which is currently the site of fulfillment operations for a clothing and apparel brand.
Radial said in a press release that it will be employing 700, with jobs including outbound fulfillment associates, operations supervisors and managers.
As Radial takes over operations at the site it will be offering positions to the existing workforce there.
“We are excited to be expanding our presence in the Easton area less than two years after opening our first facility in the area,” said Esteban Gutierrez, vice president of fulfillment operations at Radial. “We realize this comes at a critical time for many local residents as employment statuses can change quickly. If you are looking for a great opportunity in a growing industry and desire a fun and collaborative culture, we welcome you to join our team.”
Gutierrez noted that ecommerce demand has increased dramatically since the start of the COVID-19 pandemic and that has driven the need for more workers in fulfillment services.
He said the opening of this site will hopefully enable residents who may have been displaced from other work to build careers in ecommerce fulfillment.
Despite the COVID-19 pandemic hitting pause on its retail operations as well as shutting down many of its largest customers, the Pennsylvania Liquor Control Board is reporting that it had a fairly good fiscal year.
“We were actually on the path to set a new record for the fiscal year. We even had a bonus sales day on Leap Day in February, but then COVID hit and required us to pause our operations,” said Shawn Kelly, PLCB spokesman.
Sales were down slightly in Fiscal 2019-2020 from the previous fiscal year, but income was actually up because of the implementation of operating efficiencies and retirement and post-employment costs, according to Kelly.
Net sales for the fiscal year were $2.39 billion as compared to $2.127 billion in fiscal 2018-2019.
Net income, however was $208.71 million for 2019-2020, up from $191.04 million in 2018-2019.
Of course the shutdown during the pandemic did significantly impact operations as well as how and what they were selling.
The biggest factor was the quick shift to an e-commerce platform when COVID-19 led the PLCB to stop in-store sales.
“We had to significantly boost our ecommerce capabilities in a short time,” he said.
That meant creating 120 e-commerce fulfilment centers across the state, many in converted retail stores.
“We really needed a big IT lift. There’s a lot involved in turning a retail store into an e-commerce center,” he said.
Not only did the technology need to be created, quickly, logistics issues such as which stores had which products became a pressing issue as well as the need for different equipment and packaging stock.
While the PLCB’s website started off with limited accessibility with the initial demand greatly outpacing the agency’s ability to convert its systems, Kelly said once the kinks were worked out, e-commerce became a dramatically larger portion of sales.
“Before COVID people mostly used the site to get specialty and harder to find items,” Kelley said.
With the e-commerce demand switched to daily needs, he said those sales jumped from $5 million in 2018-2019 to $27 million for the 2019-2020 fiscal year, with much of that at the peak of the shutdown in the spring.
It also changed what type of alcohol people were buying online from high-end whiskey to more common products, like vodka.
Overall spirits sales to PLCB licensees were hurt by the temporary shutdown of the state’s bars and restaurants, and continued limited capacity.
Wine, however, was stronger because outlets such as grocery stores, which remained open during state’s retail shut down, were still able to keep wine sales going.
Kelly said the PLCB was able to meet its $185.1 million obligation to the state’s general fund.
In all, it provided $894.8 million in funds to state and local government.
Kerry A. Wrobel is the president and chief executive officer of Lehigh Valley Industrial Park Inc. He has served in this capacity for 19 years. Wrobel is responsible for LVIP’s seven industrial parks and his work includes the development of Lehigh Valley Industrial Park VII at the Bethlehem Commerce Center, the former site of Bethlehem Steel.
LVIP VII is a 1,000-acre industrial park that has created 4,000 jobs and $500 million in private investment in the city of Bethlehem.
Lehigh Valley Industrial Park, Inc., is a private, non-profit economic development corporation with seven industrial parks in Lehigh and Northampton Counties. LVIP’s seven parks have diversified the regional economy with nearly 500 businesses, created 24,000 jobs, and attracted more than $1 billion in new investment. LVIP has operated continuously since 1959.
LVB: How are the Lehigh Valley Industrial Parks as far as capacity? Do you have room to grow?
Wrobel: LVIP has sold every parcel in its first six industrial parks. LVIP has approximately 85 acres remaining in its 1,000-acre LVIP VII in Bethlehem. Occupancy rates of buildings throughout LVIP’s system remain at near full capacity. Future growth will require the acquisition of additional land at other locations in the Lehigh Valley.
LVB: I hear a lot of buzz about demand for distribution centers, cold storage and sites that can support ecommerce. Where is the demand coming from for space in LVIP?
Wrobel: Our last large tract of land in LVIP VII was acquired by Trammell Crow in 2019. This 50-acre parcel situated at the Bethlehem/Hellertown interchange of I-78 is now seeing the development of two industrial buildings totaling 500,000 square feet. Both buildings are being marketed as logistics and ecommerce centers. TwinMed is operating in Trammell’s first building, a 190,000-square-foot industrial facility. TwinMed is playing a key role in the regional distribution of PPE.
While we continue to receive calls for warehouse and ecommerce development, LVIP lacks the large land parcels in LVIP VII needed to accommodate these end users. Consequently, our most recent demand has been focused on manufacturing and office users locating on smaller parcels, which has been LVIP’s focus for 60 years.
LVB: How important is the Lehigh Valley’s transportation and logistics to the success of your parks?
Wrobel: LVIP’s success was built on its proximity to the Lehigh Valley’s key highways – Route 22 and I-78. LVIP’s first six parks were built immediately adjacent to Route 22 and LVIP VII’s southern border is at the intersection of I-78 and S.R. 412. This major infrastructure has provided LVIP’s businesses ease of access to key roads for their transportation needs. And our tenants’ employees can travel to work without significantly impacting local neighborhoods as well.
LVB: What do you see next for LVIP?
Wrobel: LVIP is starting development of its commercial properties in LVIP VII, along the 412 corridor in south Bethlehem. We’ll continue to look for opportunities in the future for new land development in the Lehigh Valley.
The coronavirus pandemic is expected to drive a demand for storage and packaging firms, as local businesses seek to bring their supply chains closer to home. PHOTO/GETTY IMAGES –
The greater Lehigh Valley region is well positioned for the future of commercial real estate according to a report by CBRE looking at the Northeast U.S. market.
Vince Ranalli, executive vice president for CBRE said in the wake of the COVID-19 and the supply chain problems that plagued many industries, companies are looking to onshore their goods so that they are closer to the consumer.
“They want to be prepared. They can’t get caught off guard again,” Ranalli said.
He said the unavailability of items ranging from toilet paper to hand sanitizer and even personal protection equipment for health care workers showed flaws in the supply chain. The situation has created a demand in the light industrial sector along the I-78/1-81 corridor.
“This supply chain wasn’t meant for everyone to be in their home,” Ranalli said. “Going forward, no one is going to be caught with their pants down again. They’ll have toilet paper and paper towels and hand sanitizer.”
According to the report, so far this year, third party logistic centers comprised approximately 46% of leasing activity in the corridor, while e-commerce accounted for 27%.
Ranalli said companies are looking to quickly ramp up their e-commerce and distribution capabilities in the region with the Greater Lehigh Valley developing as a significant inland hub.
“We’re one of the first stops for onshoring,” he said.
In metro areas and port cities, like Philadelphia, there is virtually no space available and that is bringing attention to the region.
“Landlords who have existing buildings or who are delivering soon have the best opportunity to land these tenants,” he said.
Joe Gibson, CBRE’s assistant director of research for Pennsylvania, said that while bricks and mortar retail and restaurants will definitely be negatively impacted in the coming months, any company that can capitalize on e-commerce may be shifting from storefronts to light industrial settings where they can better deliver goods direct to consumer.
Industries that serve those transitioning to an emphasis on e-commerce are also looking for space along the corridor. Businesses are using substantially more corrugated boxes to deliver goods, box manufacturers are looking for new locations.
CRBE is also seeing activity form food packaging companies, bottle makers, pet food suppliers, and anything in the pharmaceutical packaging industry. Even grocery stores are looking for more regional distribution sites and cold storage facilities are in great demand right now.
“People are becoming more comfortable buying their food over a computer,” Gibson said. “In e-commerce, grocery stores were really the last to fall into the fold.”
Gibson said the consumer demand for grocery delivery because of safety concerns during the pandemic has dramatically sped up what was already expected to be a growing segment of the grocery industry.
CRBE recently spoke to the CEO of a major regional grocery chain who said that the COVID-19 pandemic has sped up the company’s grocery delivery business plans by about five years, Ranalli said.
With the transportation infrastructure in place for a growing e-commerce industry, Ranalli said the region is ready for the growth. He pointed to the Fed-Ex ground hub near the Lehigh Valley International Airport and the UPS center off of Route 33 as examples of major companies investing in the transportation and logistics capabilities of the area.
“These parcel companies have spent tons of money setting up in the area,” he said.
Overall the report concluded that a strong infrastructure means a bright future for commercial real estate in the region.
“Looking forward, e-commerce will continue to be the biggest catalyst for both demand and innovation in industrial real estate over the next cycle. Increasing demand for goods bought online, especially food, will fuel the need for modern distribution facilities at a pace much higher than the previous cycle.”
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.
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