The 2022 economy was a wild ride in the Lehigh Valley. Still recovering from the COVID-19 pandemic, the region saw economic highs and lows in a year that was anything but typical.
Overall, however, economic development officials in the Lehigh Valley said the 2022 economy is strong and has evolved greatly over the past 12 months.
“It has been a tumultuous year,” said Rich Hobbs, president and CEO of the Manufacturers Resource Center of the Lehigh Valley. “There have been transformational changes.”
The year began, he said, with a great number of challenges including supply chain issues, logistical and transportation problems and a significant workforce shortage.
“At the beginning of the year there was a craze trying to hire workers which drove up wages,” he said.
While there is still a hiring press, he said it’s not as crazed at the end of 2022 as it was in the beginning of the year and wages are starting to normalize to more stable levels.
Don Cunningham, president and CEO of the Lehigh Valley Economic Deveopment Corp., said overall the economy was stronger in the Lehigh Valley in 2022 than in other parts of country.
He noted that Site Selection Magazine, which tracks 350 metro regions, has named the Lehigh Valley as one of the top economic development markets for the last several years in both the Northeastern U.S and nationally among markets of its size.
The region made the list because of the large number of new commercial developments each year, and 2022 was no exception.
“We’re going full speed ahead in economic growth,” Cunningham said.
He pointed to such projects as pet food manufacturer Spot & Tango moving to the Lehigh Valley as well as major expansion projects including the $200 million expansion at B Braun, a medical device manufacturer.
According to the LVEDC, the region had a record low vacancy rate of 3.7%, and the Lehigh Valley’s real estate market grew to 145 million square feet, indicating a robust demand for space.
“One of the biggest challenges is finding locations to open,” he said.
Because of the low inventory and high demand, rent rose to $8.70 per square foot. The Lehigh Valley is still a bargain, however. The price is nearly half the rate of properties in nearby northern and central New Jersey.
All totaled, 658,000 square feet of new industrial and flex space added to the market.
For those manufacturers already doing business in the Lehigh Valley, supply chain and material costs have remained an issue, said Hobbs.
“There’s still a lot of juggling with the supply chain,” said Hobbs.
One bit of good news is that many companies, having learned from severe material shortages during the 2020 COVID-19 shutdown, are keeping more stock close at hand.
“Many companies have stocked up,” he said.
One continued weak spot in the local economy has been the professional office space sector, said Cunningham.
He said that while elsewhere in the economy it’s been “pedal to the metal with nothing slowing down,” there is still a significant amount of vacancy in office space as many companies have allowed staffers to work from home.
“Companies are not opening new office space right now,” he said.
That has been a boost for the hospitality industry, however, as more companies are using hotel conference and meeting spaces as a substitute for offices when they plan meetings and conferences.
According to Discover Lehigh Valley, which promotes tourism in Lehigh and Northampton counties, the region was top in hotel occupancy rates among communities of similar size in Pennsylvania.
Alex Michaels, president and CEO of the authority sited a 2021-2022 report from Smith Travel Research, which showed overnight visitor stays reached 16.1 million in the Lehigh Valley for the fiscal year, that’s up 28.6% from 2020.
The bottom line is that most economic development officials see things returning to “normal.”
“We are continuing to measure things from a pre-pandemic perspective,” said Aaron Gantz, senior director of economic development for the Greater Reading Chamber Alliance.
She said with a lower number of participants in the workforce, finding quality workers continues to be a struggle for employers and likely will for some time. But, like Hobbs said, it’s not at the level it was in the beginning of the year.
One advantage the Berks region has is its relative affordability compared to some surrounding regions. The Lower cost of living makes it more attractive for people to move to and find jobs in the area, which should help with the employment situation.
And affordability was a big challenge across the Lehigh Valley as a whole. While, yes, housing and apartments are less expensive than nearby major metropolitan areas like New York City and Philadelphia, housing affordability is a concern.
According to Rent Café, the average rent for an apartment in Lehigh Valley is $1,585. That varies greatly based on location, size and quality.
And in single family homes there has also been a struggle. By year’s end the average home price in Pennsylvania was about 9.5% higher than a year prior, but the average home price was still lower than the record high of $219,154, which was set in July.
Pennsylvania Association of Realtors President Christopher Beadling said affordability has become an issue for many potential homebuyers.
“The number of sales has leveled out with the higher interest rates. These higher rates are primarily affecting first-time buyers who need a mortgage,” he said.
While growth may have slowed in home sales and new commercial construction, the economy is still strong, just stabilizing in the Lehigh Valley, said Mark Chubb, senior managing director for Colliers commercial real estate.
“There’s no reason to panic,” he said. “There’s still plenty of growth.”
He said the Lehigh Valley remains a strong target for economic development.
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