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Supply chain changes drive membership to Traffic Club

While it was founded in 1934 to help the Lehigh Valley’s big manufacturers, like Bethlehem Steel, get their product to market, The Traffic Club of the Lehigh Valley has evolved greatly from its early days. 

And now, as supply chain and logistics issues have become more prominent in the public eye after the massive product shortages seen during the COVID-19 pandemic, the club has become more popular than ever. 

David Higgins said more people are seeing the need to understand the supply chain and are getting involved in the club, which promotes educational and networking opportunities. 

He said people want to know more about the subject. 

“How do we get these things shipped to us in the cheapest way possible?” he said is a big question.  “Retailers are carrying more stock, worried about having the goods they need and we’re starting to see companies shifting to nearshoring, primarily over the last two years.” 

He said membership now represents all of the cogs in the supply chain wheel as well as many of the industries that support those in warehousing, trucking and logistics. 

Membership has grown to over one hundred seventy single members, he said. They represent over a hundred local companies and universities.  

Corporations and partners include manufacturers, shippers, freight forwarders, rail service providers, air organizations, ports of entry, trucking and delivery organizations, distribution and fulfillment and third-party logistics providers as well as support and suppliers to these industries. 

He said there are even janitorial supply companies represented in the club’s membership now, because the industry uses such products and vendors are more aware of the logistics players than they were in the past. 

“We’re definitely getting more diverse,” he said. 

Higgins said that while the major hiccups of the COVID-19 shutdown are now gone, the industry is still adapting to the changes brought about by those supply chain issues and still faces many challenges. 

One of the major challenges right now is the workforce, especially in trucking. 

“The number of truck drivers retiring out of the industry outpaces those entering the profession,” Higgins said. 

Especially with over-the-road trucking, where drivers earn more but are away from home for long stretches at a time, he said it is difficult to attract young people to the profession. 

“That’s not a traditional home life,” he said, and with younger people strongly interested in a work/life balance, it’s not the first choice for the younger generation. 

He said, nationally, the Department of Labor is estimating that the U.S. will be short about 50,000 to 100,000 drivers compared to what is needed and those numbers are only expected to increase. 

Some of the changes have been good for the players in the industry. 

Rick Croy, first vice president of the Traffic Club of the Lehigh Valley, owns a 3PL warehouse in Allentown, and he’s seen an increase in business. 

“A lot of companies don’t want to spend the dollars to build out for distribution either for b to b or direct to consumer,” Croy said. 

Because of that, even retailers like Walmart and Target, which were pioneers in promoting ecommerce right behind Amazon, are even looking for support from third party logistics providers. 

He said such retailers store much of their merchandise targeted for local consumers at his facilities. 

“People think it came from Target’s warehouse, but it didn’t. It came from mine,” he said. “The expectation to get their product in one to two days is becoming commonplace and support from facilities like this help make that happen.” 

As club membership grows, Higgins said the group is working to host many events to keep people interested in the logistics industry. 

The Club’s annual schedule of events includes a number of educational seminars, facility tours, various social and networking events, and they maintain a membership directory to promote collaboration amongst their members.  

The Club takes an active role with the Lehigh Valley Chamber of Commerce, co-sponsoring the yearly Transportation Week luncheon, and engages with local businesses and political figures.  

They further partner with The Traffic Club of Philadelphia, WERC, Council of Supply Chain Management Professionals (CSCMP.) 

It also provides scholarships to young people looking to study supply chain management and logistics to get more students interested in pursuing a career in what is expected to continue to be a rapidly expanding industry with a strong workforce demand. 

And now, as supply chain and logistics issues have become more prominent in the public eye after the massive product shortages seen during the COVID-19 pandemic, the club has become more popular than ever. 

David Higgins said more people are seeing the need to understand the supply chain and are getting involved in the club, which promotes educational and networking opportunities. 

He said people want to know more about the subject. 

“How do we get these things shipped to us in the cheapest way possible?” he said is a big question.  “Retailers are carrying more stock, worried about having the goods they need and we’re starting to see companies shifting to nearshoring, primarily over the last two years.” 

He said membership now represents all of the cogs in the supply chain wheel as well as many of the industries that support those in warehousing, trucking and logistics. 

Membership has grown to over one hundred seventy single members, he said. They represent over a hundred local companies and universities.  

Corporations and partners include manufacturers, shippers, freight forwarders, rail service providers, air organizations, ports of entry, trucking and delivery organizations, distribution and fulfillment and third-party logistics providers as well as support and suppliers to these industries. 

He said there are even janitorial supply companies represented in the club’s membership now, because the industry uses such products and vendors are more aware of the logistics players than they were in the past. 

“We’re definitely getting more diverse,” he said. 

Higgins said that while the major hiccups of the COVID-19 shutdown are now gone, the industry is still adapting to the changes brought about by those supply chain issues and still faces many challenges. 

One of the major challenges right now is the workforce, especially in trucking. 

“The number of truck drivers retiring out of the industry outpaces those entering the profession,” Higgins said. 

Especially with over-the-road trucking, where drivers earn more but are away from home for long stretches at a time, he said it is difficult to attract young people to the profession. 

“That’s not a traditional home life,” he said, and with younger people strongly interested in a work/life balance, it’s not the first choice for the younger generation. 

He said, nationally, the Department of Labor is estimating that the U.S. will be short about 50,000 to 100,000 drivers compared to what is needed and those numbers are only expected to increase. 

Some of the changes have been good for the players in the industry. 

Rick Croy, first vice president of the Traffic Club of the Lehigh Valley, owns a 3PL warehouse in Allentown, and he’s seen an increase in business. 

“A lot of companies don’t want to spend the dollars to build out for distribution either for b to b or direct to consumer,” Croy said. 

Because of that, even retailers like Walmart and Target, which were pioneers in promoting ecommerce right behind Amazon, are even looking for support from third party logistics providers. 

He said such retailers store much of their merchandise targeted for local consumers at his facilities. 

“People think it came from Target’s warehouse, but it didn’t. It came from mine,” he said. “The expectation to get their product in one to two days is becoming commonplace and support from facilities like this help make that happen.” 

As club membership grows, Higgins said the group is working to host many events to keep people interested in the logistics industry. 

The Club’s annual schedule of events includes a number of educational seminars, facility tours, various social and networking events, and they maintain a membership directory to promote collaboration amongst their members.  

The Club takes an active role with the Lehigh Valley Chamber of Commerce, co-sponsoring the yearly Transportation Week luncheon, and engages with local businesses and political figures.  

They further partner with The Traffic Club of Philadelphia, WERC, Council of Supply Chain Management Professionals (CSCMP.) 

It also provides scholarships to young people looking to study supply chain management and logistics to get more students interested in pursuing a career in what is expected to continue to be a rapidly expanding industry with a strong workforce demand. 

Schuylkill County logistics warehouse to close, costing 132 jobs

Ryder Integrated Logistics Inc. announced that it will close its Schuylkill County plant at 71 Mall Road, New Castle Township, terminating 132 employees.

The company, which calls itself “a leader in supply chain, dedicated transportation and fleet management solutions,” filed a Worker Adjustment Retraining and Notification Act letter with the state Department of Labor & Industry that said the closure is expected to be permanent.

In a statement provided to the media, Ryder said that in accordance with the WARN Act, “we notified the state that, due to the bankruptcy announcement of our customer Bed Bath & Beyond, the retailer’s distribution center at 71 Mall Road in Frackville … will be closing between June 25 and July 9, 2023. Based on the information currently known and available, we anticipate that 132 positions at the Ryder-managed distribution center will be eliminated within that time period.

“Ryder remains committed to continuing to serve the needs of our customers in Pennsylvania, where we continue to operate other sites. Ryder is working on redeployment efforts, as feasible, to retain as many employees as possible.”

None of the workers at the Mall Road facility, which is on the site of the former Schuylkill Mall (since razed), are unionized.

Ryder Integrated Logistics is a subsidiary of Ryder System Inc., a $12 billion fully integrated port-to-door logistics and transportation company with operations throughout the U.S., Canada and Mexico.

Ryder System includes 48,000 employees, 45,000 customers, 260,000 vehicles under management, 11,000 professional drivers, 300 warehouses and 95 million square feet of retail space.

Paula Wolf is a freelance writer

Commercial real estate market cooling, but still strong along I-78/I-81 Corridor

4730 Hanoverville Road is one of the available commercial properties in the I-78/I-81 Corridor. PHOTO/COURTESY CBRE
4730 Hanoverville Road is one of the available commercial properties in the I-78/I-81 Corridor. PHOTO/COURTESY CBRE –

After about two years of record setting growth, commercial real estate firm, CBRE is reporting that leasing activity slowed within the PA I-78/I-81 Corridor logistics market in 2022, posting as little as half of 2020’s total.  

Still, Sean Bleiler, executive vice president out of CBRE’s Allentown office, said the market remains healthy. 

“Overall, the commercial leasing market remains very strong. There is still a lot of corporate demand for both leasing and purchasing,” he said. 

While the overall number of businesses seeking space in the market was down compared to the two prior years, he said a lack of supply added to the slowdown in activity.  

New construction is down slightly, but again, he emphasized it wasn’t due to lack of demand. 

“Interest rates are really the only thing that is slowing down development,” he said. 

Bleiler said he expects higher interest rates will impact new construction over the next several quarters. 

“It’s just put the cost level to the point where it might not make sense to put the shovel in the ground right now.” 

For the past two consecutive quarters construction starts totaled under 2 million square feet. Bleiler said that is a level not seen since the second quarter of 2018. 

The report showed 27.5 million square feet of commercial space remained under construction at the end of 2022, only 24.0% of which was already pre-leased. 

Because of the speculative construction projects being completed without tenants, the vacancy rate ticked up slightly as construction completions outpaced net absorption. 

The average vacancy rate along the corridor is currently at 4.3%, up from its most recent low of 3.5% posted in the second quarter of 2022. 

Bleiler noted that the vacancy rate remains well below the 10-year average of 7%. 

And in some ways those vacant properties are good for real estate developers. 

“Tenants like options,” he said. “They don’t want only one or two options in their price range.” 

He said any building that is up right now is seeing activity and interest and he expects in the short-term demand will still outpace future supply. 

Interest in the region is still coming largely from transportation and logistics companies, particularly third-party logistics providers, but they’re also seeing strong interest from light industrial tenants, particularly food manufacturers. 

Because of the higher vacancy rate rents have slowed from the rapid increase they’ve been seeing in recent years. 

According to the report After rising an average of 5.7% quarter-over-quarter since the fourth quarter of 2019, Class A rent increases have slowed.  

While Bleiler said year-over-year growth remains strong at 6.3%. Only the Northeast Pennsylvania region managed to avoid a regression in its Class A rents with an average of $5.04 cents per square foot. However, that region’s rents still remain far below Central Pennsylvania at $6.03 per square foot and the Lehigh Valley at $7.68 per square foot. 

Currently, he said Central Pennsylvania is leading the region in growth. Over the past six months the market has grown at a much faster pace than the Lehigh Valley, which has less available space and higher rents. 

Overall, the report shows that demand is expected to persist in the short term, driving continued positive absorption while some vacancy growth in the form of new construction may provide some needed supply reserves to the market. 

Aging Industrial properties help to drive new construction demand

A new 953,000-square-foot distribution facility in the JW Industrial Park in Northampton. PHOTO/CBRE –

The region’s industrial real estate market is starting to show its age, and that means developers may be looking to replace some of the older structures along the I-78/I-81 corridor with newer, more modern and efficient ones. 

According to a report by CBRE, the average age of an industrial building in Lehigh and Northampton counties is 32 years old. The average age in Central Pennsylvania is slightly older at an average of 36 years.  

That’s still better than some regional markets according to Vince Ranalli, executive vice president at CBRE. 

He noted that the average industrial building in the Philadelphia metro region was 49 years old and the average industrial building in the New York/Northern New Jersey market is 60 years old. 

The national average is 43 years and 28% of the country’s industrial buildings are over 50 and at risk of becoming functionally obsolete. 

While better off than some markets, Ranalli aid the aging stock is contributing to the new industrial construction in the region. 

“The old buildings just aren’t as efficient. They have lower ceilings, less dock doors, less parking and they’re just not as desirable,” Ranalli said. 

He gave the Kraft Heinz building in the Lehigh Valley as an example. That facility was built in the early 1970s. 

“When a developer looked at a building like this they’d say, ‘this would limit the number of tenants that would be able to use this,’” he said. 

So, instead of trying to market the property, it was knocked down and two new state-of-the-art buildings were constructed in its place. 

You are going to see more of that, Ranalli said. Especially with the diminishing availability of land, reusing, renovating or rebuilding old sites is becoming increasingly common. 

And while, yes, construction costs remain high and interest rates are rising, the rent is also increasing on the more modern buildings, which make up for the construction investment, he said. 

He said that tenants, especially in the ecommerce and logistics industries, are asking for properties that have such things as higher ceiling heights and are more energy efficient to help them operate better. 

He said developers are delivering. There are currently 36.7 million square feet of new industrial buildings under development along the I-78/I-81 corridor. Comparatively, there is currently a record 627 million square feet of new industrial construction going on nationally. 

And the demand is there. Ranalli said newer buildings perform better on the real estate market.  Of the distribution facilities built in the past 10 years, there is a minuscule 2% vacancy rate. 

 

Logistics company hiring 200+ seasonal workers in the Lehigh Valley

PHOTO/SUBMITTED –

Global transport and logistics provider GEODIS said it plans to hire approximately 215 seasonal workers in the Allentown area in preparation for peak season.  

The company is increasing its workforce to strengthen its warehousing and distribution center capabilities to prepare for the holiday season. 

GEODIS said that according to Insider Intelligence, the 2022 peak season is expected to see healthy consumer spending patterns continue after record 2021 holiday sales as global supply chains continue to stabilize.  

To anticipate demand, GEODIS plans to hire seasonal employees to join its existing workforce of more than 13,000 employees across the U.S. and Canada. 

“With the economic conditions consumers and our clients are facing, it is now more critical than ever that businesses have a trusted third-party logistics partner with the expertise and team to navigate the unexpected,” said Anthony Jordan, GEODIS in Americas executive vice president and chief operating officer.  

GEODIS is hiring material handlers and equipment operators this peak season across 20 of its campuses in the U.S. and Canada. GEODIS offers competitive pay along with referral bonuses. Additionally, the company said it offers flexible schedules where feasible, the opportunity to choose between part-time or full-time seasonal work. 

Along with prioritizing an employee-first work environment, GEODIS offers COVID-safe warehouses featuring socially distant workstations, frequent surface cleaning and extensive use of technology to help deliver ongoing reports within the warehouse to mitigate potential COVID-19 outbreaks.  

Number of 1 million-square-foot warehouses at record level

The Lehigh Valley isn’t just getting more warehouses. The warehouses are also getting bigger. 

CBRE just released its latest 100 largest industrial & logistics leases report. This year there were 37 leases of properties over 1 million square feet, up from 24 in 2021. 

 Four of those properties were in the Lehigh Valley. 

“Our region, the I-78/I-81 corridor, is in the top 10 for the largest leases across the country, and this is the seventh year in a row,” said Vince Ranalli, executive  vice president of CBRE. “It’s a great run that we’ve had.” 

He said the boom in the construction of large warehousing space is significant and ongoing. 

He noted that the number of warehouses larger than 1 million square feet grew by 35% over 2021, and that was a record year. 

“We’re on pace for another really strong year next year,” he added. 

The number of large warehouses isn’t just increasing, the overall size of the buildings is also on the rise. 

Building size is up 14% over 2021. 

“The buildings just keep getting larger,” Ranalli said. 

The larger buildings are being leased mostly by the retail, food and beverage and third-party logistics industries. 

“They’re telling us that they’re extremely focused on having adequate inventory on hand,” he said. “We call it ‘just in case’ or ‘safety stock.’ They’re trying to prevent the supply chain issues [of the recent past.] Their warehouses are full to hold all this inventory.” 

He said the demand to keep inventory in stock close to major population centers is going to continue to drive the market for large warehousing space in the Lehigh Valley. 

And while there has been talk about a small recession looming on the horizon with higher interest rates and a tight labor market, Ranalli said he doesn’t expect that to kill the momentum of construction in the warehousing and logistics space as these companies continue to seek to update and modernize their supply chain. 

“The industrial & logistics market preformed solidly in the first half of the year despite headwinds challenging the broader economy,” said John Morris, CBRE’s president of Industrial & Logistics in the Americas. “We have seen a falloff in leasing by smaller users – those in 25,000 square feet or less – likely due to the economic environment. But the largest users are forging ahead, picking up most of the slack.” 

Maryland logistics firm acquires Bethlehem property

Annapolis, Maryland-based Realterm, a global operator of logistics real estate for the transportation industry, said it has acquired a fully leased, 44.98-acre secured parking and maintenance facility located at 1245 Easton Road in Bethlehem.  

The property also offers a freight yard with direct rail service provided by Lehigh Valley Rail Management.

 “The Lehigh Valley is a premier regional distribution location that enables users to service the northeast United States,” said Ben Andreycak, vice president, east region acquisitions at Realterm. “There are limited opportunities to acquire high-flow-through assets in the region, making this property a strong addition to our portfolio.”
 
He noted that 1245 Easton Road is located in the heart of Lehigh Valley.  

It is less than one mile from I-78 and is 15 minutes from Route 22 offering immediate access to the region’s key highway network. The property is a two-hour drive from major cities, including Baltimore, Washington D.C., Philadelphia and New York City and is within five hours of Pittsburgh and Boston.

 “The facility is advantageously located in one of the fastest growing industrial markets in the country due to the region’s transportation infrastructure, low operating costs, parcel/freight hubs, abundant labor, and unmatched regional connectivity,” said Stephen Panos, senior vice president and fund manager at Realterm. “This asset is an excellent example of our continued strategy of acquiring the most functional industrial properties across the country.” 

Terms of the deal were not disclosed.

 

California developer buys Schuylkill logistic center for $25.7M

The 2.4-million-square-foot Rausch Creek Logistics Center in Valley View has sold for $25.7 million. RENDERING/SUBMITTED –

A Schuylkill County logistics center has just been sold for $25.7 million.

CBRE reports that it arranged the sale of the nearly 2.4 million-square-foot Rausch Creek Logistics Center in Valley View to California-based Panattoni Development Co.

CBRE represented the seller, Tremont FT LLC, which is an affiliate of Viridian Partners.

“Located in the heart of Pennsylvania’s I-78/I-81 Industrial Corridor, Rausch Creek Logistics Center will offer tenants superb access to major industrial markets in the Northeast,” said Michael Hess, an agent with CBRE involved in the sale. “Panattoni Development specializes in build-to-suit and speculative industrial development. With limited inventory in Central Pennsylvania and the Lehigh Valley, and with a 75% LERTA tax abatement available, this state-of-the-art industrial park will attract an array of prominent industrial users.”

The logistics center sits immediately off of Exit 107 of I-81, and just 18 miles from I-78.

It will consist of Building 1, which will be 1,346,755 square feet.

Speculative construction is expected to begin soon with delivery in the third quarter of 2022.

Building 2, which is 1,040,540 square feet, will be pad ready to begin speculative construction in early 2022.

 

Construction boom continues for Light Industrial properties along I-78/I-81 corridor

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

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