A fourth quarter report on the industrial real estate market for the Interstate-78/81 corridor shows supply outpacing demand overall during 2019, according to the real estate firm CBRE.
However, for the Lehigh Valley and Berks County, the market had a solid year and supply and demand was largely in balance in 2018, said Vincent Ranalli, senior vice president of CBRE in Radnor.
In Lehigh Valley and Berks, the market saw 6.3 million square feet of new space delivered, with 5.6 million square feet absorbed.
The vacancy rate for the entire I-78 corridor, including Lehigh Valley, Central Pennsylvania and Northeastern Pennsylvania ticked up to 7.2 percent, Ranalli said.
“This was largely attributable to a large amount of speculative space delivered in Northeastern Pa., coupled with retailers like Sears who vacated three buildings in the Wilkes-Barre area,” Ranalli said. “When I look at it, I say Lehigh Valley and Berks County had a pretty good year. We need more of these buildings to be absorbed in Northeastern Pa. A lot of these developers are waiting to see whether these buildings are going to be absorbed before they decide to pull the trigger.”
According to the report, developers are reacting to a somewhat protracted demand environment and slowing the pace of new construction starts with nearly half as much supply starting construction this year compared to last.
Rents for class-A space in the Lehigh Valley rose 5 percent over last quarter and tenant activity, which includes building tours and leases signed, was up 17 percent over last quarter, he said.
Companies signed several large leases in Q4 and a few more will carry over into Q1, which should be very strong, Ranalli said.
“For Lehigh Valley and Berks County, tenant activity is strong,” Ranalli said.
This includes tenants in building sizes that range from 100,000 square feet to 1 million square feet.
“We are also seeing some restraint from developers,” Ranalli said.
As an example, for two quarters in a row, no one broke ground on a million-square-foot building, he said.
“Developers are being a little restrained,” Ranalli said. “There were a couple of deals that happened last year that were big and some happening now in the process of being signed.”
Every indicator points to a positive first quarter for the industrial market, he added.
Two areas showing strong interest from companies include the BridgePoint 78 industrial park under construction in Phillipsburg, New Jersey and two distribution properties under construction near I-78’s Exit 67 in Bethlehem.
Across all counties in the corridor, the report showed a total of 12.4 million square feet of industrial properties under construction in the fourth quarter, a decrease from Q4 2018, which had 16.8 million square feet.
The report showed average asking warehouse rents generally went unchanged during 2019, while contract rents showed the same trend. However, there were exceptions. The Lehigh Valley market showed modest rent appreciation for newer product with leases signing higher than the $6 per square foot mark in most instances.
With the purchase of the shuttered Easton Iron & Metal Co. in Easton finalized, the Easton Redevelopment Authority is focusing attention on what to do with the 15-acre property it bought on Bushkill Drive.
The first step will be establishing an environmental cleanup plan for the site, said John Kingsley, director of community and economic development for Easton. The cleanup is expected to continue through 2020 as the city works on a development strategy.
“There are several potential uses for the site, none of them have been decided upon,” Kingsley said. “We fully expect this to be an important development project for the Bushkill corridor. A number of possibilities are being discussed.”
The site is in close proximity to the Karl Stirner Arts Trail. Potential uses could include an arts park with integration to the trail and an environmental education component.
Easton Iron & Metal vacated the site in 2015 before the death of owner Jacob Stein in 2016, according to a news release. Sarah Finney-Miller of NAI Summit represented the seller, Stein Revocable Living Trust, in the sale of the property, covering more than 15 acres along Bushkill Drive.
Finney-Miller facilitated a direct sale with the Easton Redevelopment Authority to buy the three-parcel site for $700,000.
The project could help connect Easton’s West Ward and College Hill neighborhoods, particularly with the arts trail in close proximity.
Venture X, a membership-based co-working space, plans to open its first location in Pennsylvania in South Bethlehem this March.
Quadratus Construction is building out the space inside the Gateway at Greenway Park building, said Nancy Black, community director of Venture X.
Venture X is a co-working franchise that began in Naples, Florida and spread to other states, including New York, Boston, California and Texas.
Black said Venture X will occupy 13,000 square feet on the first floor and part of the second floor. She plans to have the space mostly finished by February in time for a mid-March opening. Spillman Farmer Architects of Bethlehem is the designer.
“It’s a very high-end co-working shared space,” Black said. “The building is very new and will fit the culture of Venture X. It’s also a central location in the valley.”
The office space Venture X is renting offers companies and individuals shared desks and a number of private offices, she said.
Black said she has been involved in real estate in New York City for the past six and half years and wanted to offer quality co-working office space that would include networking events.
She said she already has a few small companies and individuals interested in the space.
Terry Wallace, an executive who led a global human resources Fortune 100 company and a startup sees a strong demand for co-working space in the Lehigh Valley.
“I see an absolute need here in the Lehigh Valley,” Wallace said. “The industry is just blowing up as a service option.”
Wallace is the CEO of Alynus Inc., a company focused on business and consulting and an investor in Venture X Lehigh Valley. He’s lived in the Lehigh Valley for about 15 years and has worked in New York City all those years and felt it was time to simplify his life.
He wanted to find a solution to the challenging commutes many workers face who live in the valley but work in New York City or Philadelphia.
“The knowledge-based workforce that anchor between where you live and the impact on your work is gone,” Wallace said. “The only reason that people have to travel is because their management acumen insist they be seen. I know how difficult that type of career can be for people.”
Wallace said he knows many executives who have to travel deep into New York, New Jersey and Philadelphia for their careers because that’s how their companies work.
However, he plans to change that with Venture X.
“Where you live and where you work can be one and the same,” Wallace said. “I want us to be an offering to businesses and individuals so that no matter where you live you are about 10 minutes from one of our locations.”
He plans to invest in more potential sites in Easton and Allentown and chose Bethlehem because he views the South Side as being on a trajectory of growth.
Wallace said the leases will be quarterly and he will offer three levels of membership with different pricing. Shared desks will be $200 per month, dedicated desks will be $400 and private office suites start at $800. He will also offer community memberships, which provide access to the common space but he does not have a rental cost determined yet.
Tenants who buy co-working space will have access to other amenities on-site, including payroll services, notary services, a café, and a conference room.
The site is at 306 S. New St. and attached to a parking garage.
The site once served as a bowling alley and a car dealership in downtown Easton, now it’s being transformed into new office space.
With Hearst Magazines planning to move in this summer, officials hope the property across from the Easton Intermodal Center and City Hall on South Third Street, will be an example of what’s now known as an innovative adaptive reuse.
Hearst will bring about 180 employees to the space, many of whom are temporarily in offices in Center Valley, said Allison Keane, spokesperson for Hearst Magazines, in a statement.
Hearst is renting more than 35,000 square feet, she said.
Hearst, which bought Rodale in 2018, is a major magazine publisher headquartered in New York City.
“We chose Easton as the home for our Enthusiast Group — Runner’s World, Bicycling and Popular Mechanics — because it has a thriving, diverse downtown scene with easy and safe access to trails, paths, and outdoor adventures,” said Troy Young, president of Hearst Magazines, in a statement.
Once complete, the two-story structure, called Heritage Riverview, will offer views of the confluence of the Delaware and Lehigh rivers, in addition to a portion of the Delaware and Lehigh trail.
On a tour of the construction site Wednesday, Nikolas Naidu, owner of Mohawk Contracting & Development of Upper Macungie Township, said the building will include a below-ground parking lot, have about 22,000 square feet per floor, and offer 44,000 square feet of office space.
Workers are installing concrete slabs for the garage area and recently completed masonry on the staircase and elevator shaft.
“Right now, we are starting to prepare for steel to start going up the middle of this month,” Naidu said.
The side facing Third Street will have a multiple story glass wall, while the second story will have extensive windows to capitalize on the views and daylight, Naidu said. The firm also plans to build a courtyard between the new building and the existing Monarch Furniture retailer next door.
An older building in an urban area, the construction process for Heritage Riverview has not been without challenges.
“It’s a historic building, [there’s] tight logistics,” Naidu said. “There were quite a few stone foundations that we had to deal with, quite a bit of inadequate foundations for today’s standards. We had to keep the perimeter walls for historic requirements.”
The firm also had minimal requirements for fabricating new steel tying into the existing structure, he added.
As is often the case with historic buildings, workers come across new discoveries and encounter considerable difficulties.
“There were places where you would assume there were columns, and then there were none,” Naidu said. “We had to take off the existing roof, which was in extreme disrepair. We had to use extreme care. We had to bring in a lot of third-party safety groups.”
The other challenge will come when it’s time to erect the steel so close to the existing buildings, he added.
Still, the firm expects to finish construction by June, in time for the anchor tenant’s move.
Mohawk Contracting will also complete the interior fit-out for the project.
In December, the U.S. Treasury Department and the IRS issued final regulations implementing the federal Qualified Opportunity Zones Tax Incentive. Now, many developers and investors are waiting to see how these regulations will help them with projects that will revitalize distressed areas.
Created by the Tax Cuts and Jobs Act of 2017, these zones offer capital gains tax relief for investments in economically distressed regions.
The program gives investors breaks on federal capital gains taxes in exchange for investments that support small businesses and housing projects in low-income areas. Investors can avoid federal taxable capital gains on investments in those areas if they retain ownership of a project for at least a decade.
These Opportunity Zones include areas in Allentown, Bethlehem, Easton, Reading, West Reading, Stroudsburg, Pottstown, Tamaqua, and Phillipsburg, New Jersey.
Though Gov. Wolf identified the Opportunity Zones in 2018, since that time there has not been a large-scale rush of investments to capitalize on the program. It’s questionable whether the Opportunity Zone program will actually benefit distressed areas.
“I think that the program is potentially very impactful, but I think it’s too early to tell,” said Steve Bamford, executive director of the Allentown Neighborhood Improvement Zone Development Authority. “The final regs were anticipated by investors so there’s a real good chance that a lot of capital sat on the sidelines because of the uncertainty until the final regs were issued,” he said.
The final rules should provide clarity for opportunity funds and their eligible subsidiaries in determining qualification and levels of new investment in Opportunity Zones. They also provide guidance regarding the types of gains that qualify for Opportunity Zone investments, as well as gains that investors could exclude from tax after a 10-year holding period.
To qualify for the tax incentives, investors must invest in a qualified opportunity fund, a private-sector investment vehicle that puts at least 90 percent of its capital in Opportunity Zones. The model will allow investors to pool their resources, increasing the scale of resources going to underserved areas.
Charles Jefferson, principal at Jefferson-Werner LLC, a real estate development company in Allentown, said he has not had the opportunity to review the new regulations. However, he said the Opportunity Zone program has potential to revitalize distressed communities. Jefferson, through PNC Bank, invested $4 million in Brinker Lofts in South Bethlehem, the first Opportunity Zone project in Pennsylvania.
Jefferson completed that project this year, which involved renovating a former cold storage building on Adams Street between Third and Fourth streets into a residential project with 30 market-rate apartments with a courtyard and a retail space.
He also has plans for Bethlehem’s former Boyd Theatre on Bethlehem’s north side. He plans to select an architectural firm shortly that would transform the long dormant property into a $22 million apartment project with new retail space. That project too would benefit from funding through the Opportunity Zone program.
Bamford said he believes more capital will flow into qualified Opportunity Zone funds.
Investors can capture other tax incentives, such as the City Revitalization and Improvement Zone incentive in Bethlehem and the Neighborhood Improvement Zone benefit in Allentown in addition to tax benefits from Opportunity Zones in these areas.
Allentown’s NIZ has helped rejuvenate the city by spurring more than $1 billion in new construction and renovation in downtown Allentown.
A community like Allentown has been able to demonstrate a successful track record in attracting investment and communities like that will continue to be attractive to investors, Bamford said.
“It’s possible that you could have real estate development projects that could utilize the NIZ and Opportunity Zones,” Bamford said.
The NIZ is not particularly useful for residential development projects but the Opportunity Zone program is, so the two incentives complement each other, he said.
Bamford said he has researched and read about Opportunity Zone projects in other areas of the nation and quite a few have been residential ones.
“Often, I am reading about activity in larger communities,” Bamford said. “If we do see more capital flowing into the qualified opportunity funds, you would think they would look at other markets like the Lehigh Valley.”
Benefit as an add-on
Jeff Brown, owner and operator of Bell Hall restaurant in Allentown is also founder and principal of Charles Street Capital, a real estate developer and advisory firm. He said he has looked at both the NIZ and Opportunity Zone programs and noted how the NIZ can change the fundamentals of a project.
Meanwhile, the Opportunity Zone program can make it easier to improve the return on equity, Brown said.
With an Opportunity Zone program, an investor has to have a project in mind, he added.
“I haven’t heard of any communities being benefited by it,” Brown said. “Those projects have to work on their own.”
Brown said he is not planning to invest in any Opportunity Zone projects right now. “I have looked at projects in South Bethlehem but we are not doing any right now,” Brown said.
Still, he thinks South Bethlehem could be good for Opportunity Zone investments.
“You’ve got to have a project all put together,” he said. “The Opportunity Zone is one way you get potential equity capital that you couldn’t get otherwise. They certainly can’t hurt, but someone has to be a project champion and put that together or a municipality has to have some capital improvement project in mind.”
However, he believes that anyone with a capital gain has an interest in Opportunity Zone projects.
“It’s not going to turn a loser into a winner, it will just add a little bit of gravy,” Brown said.
Jefferson said he remembers how investors sat on the sidelines when the government introduced another tax incentive program 20 years ago, the New Markets Tax Credit Program, which also was an incentive for investment in low-income communities.
The educational process for these incentives, including the Opportunity Zone program, involves getting the attorneys, consultants and accountants up to speed, which takes time, Jefferson said.
Though the federal government introduced the Opportunity Zone program two years ago, investors did not have clarity until the release of the new regulations in December, he added.
“You can’t judge success or failure in the first two years, given that fact,” Jefferson said.
There’s no question that the business of rental real estate is in the distressed areas that the Opportunity Zones include, he added.
“Everybody sits on the sidelines waiting,” Jefferson said. “Investors are notoriously cautious. They are going to learn how to structure the deal.”
Douglas Frederick has been in the real estate business for 38 yrs. His father started the company in 1969 and he purchased it from him in 2006. His personal involvement over the last 38 years has included managing, coaching, training but he still enjoys working directly with customers.
A significant part of the business has been appraisal work. The Frederick Group has had a large appraisal department for over 30 yrs.
LVB: What attracted you to the real estate industry?
Frederick: I’ve found my experience in working with people as a natural contributor for success in real estate. In my youth I held various jobs in sales, restaurants and construction. I spent some early career days flying airplanes but everything involved working with people and serving a need so I found real estate to be a comfortable fit helping people solve their needs.
I really enjoy the feeling of accomplishment with getting all transactions to closing.
LVB: What are the particular skills a residential real estate agent needs as compared to a commercial real estate agent?
Frederick: Actually, I think the skills of a residential agent and a commercial real estate agent are very similar. The ability to work with people, problem solve, good communication and follow up apply to both focuses of the business. Prospecting, maintaining and servicing clientele and working to fulfill your clients’ needs are all closely related as well. Some of the practices of marketing, showing properties, information sharing can differ a bit, but no more than real estate practices can be different from one area to another. I find that people who enjoy and have experience working with people tend to relate to the real estate business the best in both residential and commercial focuses.
LVB: What were the highs and lows of the residential real estate market in 2019?
Frederick: The year of 2019 has primarily been a high as the last handful of years has been with few exceptions. The new construction business has gone through a tough recovery from the recession and increasing municipal controls, but has great consumer demand and is trending upward. The highest price ranges of homes have had some challenges in recovery from recession as well but have consistently been improving.
Some of the changes in the real estate business are that we’ve realized that as the largest group of buyers, Millennials are entering the marketplace in significant numbers. They tend to desire homes somewhat different then the Baby Boomer homes that are the largest group of sellers. We have many well-funded companies and venture capital sources trying to get into the real estate business with varying degrees of success but the industry tends to demand relationship based service as a cornerstone of our past present and future. Of course technology continues to develop more efficiencies of how we provide our service.
LVB: What kind of year do you think 2020 will be for residential real estate?
Frederick: It appears 2020 will be more of the same. Continued strength from the economy, availability of low cost mortgages, ever-growing demand of consumers that want to own homes and changing needs of people to find homes to best fit their lifestyles. There is no indication that it won’t continue to be a seller’s market but maybe with a slight trend toward balanced with a modest increase in pricing. We will continue to stay at the cutting edge of how we deliver our services and maintain relationships to assure we grow our market share.
Now that the owner of a major Lehigh Valley auto dealership bought a nearly two-acre site in Lower Macungie Township at a sheriff’s sale last week, he’s eyeing the land for potential expansion.
Gregg Ciocca, CEO of Ciocca Dealerships of Quakertown, said he bought the former Charcoal Drive-In and commuter parking lot for $1.16 million but is not certain what he will do with it.
“I don’t have exact plans,” Ciocca said. “I thought it was an iconic spot, it had great visibility.”
Ciocca said he was monitoring the spot and decided to buy it when the property went up for auction.
Bieber Transportation, which went out of business earlier this year, had been running buses out of the vacant drive-in property on Hamilton Boulevard near Interstate 78.
Ciocca said while he doesn’t have exact plans for it, he thought it would be a great spot for future expansion, considering its proximity to the company’s Subaru and Audi dealerships.
Ciocca said his company is building its 21st dealership, which is a 150,000-square-foot-dealership in Philadelphia. The company has about 1,300 employees.
He said he does not know if the former Charcoal Drive-In site will become another dealership and he has not submitted any plans to the township.
“The Charcoal-Inn just made great sense for future expansion, I just thought it was valuable,” Ciocca said. “We see the Lehigh Valley as a huge target market for us. We want to continue to expand up in that market.”
A Schuylkill County-based mattress manufacturer said it will close Feb. 3, affecting nearly 60 employees.
The closure for Corsicana Bedding in Barnesville would affect 59 employees, according to a Worker Adjustment and Retraining Notification Act, or WARN notice sent by the company’s HR director to the state Department of Labor & Industry.
In a letter dated Nov. 27, Carla Weber, human resources director of Corsicana Mattress Co., said the plant at 1214 Morea Road in Barnesville will close to restructure its business because of major changes in the industry. These changes include the growth of online bed-in-a-box retailers, the rise of imports, and the shrinking footprint of its major brick and mortar customers.
The company informed employees of the closure in a letter Dec. 3.
A call to the company’s Barnsville site requesting comment was not immediately returned.
Corsicana Bedding LLC does business as Corsicana Mattress Co., with company headquarters in Corsicana, Texas.
In a statement, Weber said the affected jobs in Barnesville are manufacturing and office jobs. In addition, the company will offer a small group of its employees other opportunities in Corsicana’s Connecticut facility. The company has 12 locations and 10 are manufacturing facilities, including the Barnesville site, which has been operating since March 2012, she said.
Darlene Robbins, executive director of the Northeast Pennsylvania Manufacturers & Employers Association in Pottsville said she had heard that the facility was closing but did not receive any information as to the reason why.
“Any time a manufacturer or employer closes its doors, it’s very disheartening,” Robbins said. “But with the number of job openings in our region, they should be able to find employment with help from CareerLink.”
Pa. CareerLink in Pottsville is offering services for the displaced workers.
It should not be difficult for the displaced workers to find employment, she added, noting that there are a lot of job openings in the county.
What book are you reading right now?: “Better Buses, Better Cities.”
If you were stranded on a desert island, what non-essential items would you want with you? : I would take my acoustic guitar. I would take The Beatles “Rubber Soul” album and I would learn it from front to back and would take “The Godfather Parts 1 and 2” and watch them.
If you could pass on one piece of advice to a younger you, what would it be?: I would say, be mindful of the fact that your perspective will change over your lifetime.
If you could bring one thing to the Lehigh Valley from anywhere in the world, what would it be? A greater desire for a lifestyle less dependent on cars.
Are you a print person or digital?: Digital for business and print for pleasure.
Something your co-workers don’t know about you?: I don’t actually enjoy wearing a suit and tie.
When you were a child, you wanted to be… In the construction trades. I always thought I’d be involved in building things.
What’s your dream vacation?: An extended stay in a European or U.K. city. For all these reasons: the built environment, the history, the architecture, the public spaces.
Who are your fantasy dinner guests?: Ben Franklin. I would love to talk to him. John Lennon and Bill Murray. Franklin and Lennon for their humble beginnings and their accomplishments and their personal foibles and then Bill Murray, basically to keep it light and get Lennon riled up. I think it would be a heck of a dinner.
When you brag about the Lehigh Valley to people outside the area, you say… That it is a great place to raise a family. I made a conscious decision to move back here for that reason. My wife and I bought a house in West Philadelphia but when the time came, this was where we wanted to raise our children. We are very active in the community.
What’s your guilty pleasure?: Baked goods, especially chocolate.
What makes for a great day?: There’s a certain look I get from my kids that makes me feel like a great father, so when that happens that’s a pretty good day.
With almost 30 years of experience in the civil engineering industry, Matthew Malozi of Bethlehem has taken on a variety of leadership roles over the years and formed a new company earlier this year.
Named Civitas Regio, the small consulting firm formed in April and occupies office space in Velocity, an incubator in downtown Allentown.
Using the words “citizenship” and “region,” in its name, the firm aims to embody the ideals of shared responsibility, common purpose and sense of community with an area distinguished by similar features, such as a neighborhood.
It’s that community and neighborhood focus, coupled with the longevity of engineering experience that Malozi and his staff share that allow the firm to tackle many local projects with a broad range of engineering, planning and environmental services.
Malozi previously worked at RETTEW Associates Inc. for seven years, and Traffic Planning & Design Inc. for nearly 20 before deciding to start a new company.
As co-founder and president of Civitas Regio, Malozi helps both private and public sector clients with civil engineering and related services.
He also volunteers and offers professional leadership in a number of capacities in the community, including serving on the city of Bethlehem Planning Commission, the Bethlehem Area School District, and the American Council of Engineering Companies Eastern Pa. Chapter.
He recently sat down with Lehigh Valley Business to share details about himself and his approach to doing business in the Lehigh Valley.
LVB: What got you interested in the engineering field?
Looking back at my age now, I enjoy the built environment. If I had not gone to college, I would probably be in the building trades now. Upon graduation from college, my first job was with a transportation-engineering firm. I enjoyed the subject matter very much but I enjoyed taking a step back and being able to see the big picture of the operation of an engineering firm and preferably, a very employee-focused operation.
My second job with RETTEW was a much larger organization when I joined, about 500 people when I started there. Upon reflecting, in starting this organization, I found I was energized by a smaller growth-oriented and agile company. Here, we talk about something and make a decision and we do it. I want to see where we can take it, how much it will grow.
LVB: What challenges do you see facing the engineering industry?
Staffing. If national unemployment is at 3.5 percent, in engineering, it’s 0 unemployment or pretty darn close to it. Everybody is working. Everybody is waiting for the fresh grads to come out of college. The talent supply is low right now. Business is good. The Lehigh Valley is diverse and growing at a constant and moderate pace, which is healthy. There’s opportunity here for a lot of different reasons. It’s a good time for engineering right now. I think civil engineering is an underrated profession.
LVB: What have been some of your favorite projects?
Urban infill and redevelopment projects have been my favorites. Taking underused parcels and putting them into productive use, particularly in the cities in the underutilized areas.
You can talk about sustainability but when you concentrate populations in areas that already have infrastructure in place you are not running power three miles out in a cornfield. There’s an overabundance of automobiles. We’re still terrible when it comes to transportation. Electric cars are not even going to solve it. Thirty percent of the mass of available land area in a city could be set aside for vehicle storage. More parking means less city for real estate.
The Seville in Easton, that’s the development of a surface parking lot in downtown Easton into a mixed-use retail-residential building. It’s fully approved so I would assume construction would begin next year. In terms of sustainability, it’s taking a low functioning piece of real estate in an urban core and putting it into productive use and eventually more residents in the downtown which is important to the economy and local community. The residential component in downtowns is so key. There haven’t been much market rate apartments in the downtown. It is adding to the diversity of housing options in the downtown.
LVB: How did you form your company?
The formation of the company was something that’s been in my mind for several years but what made it a go was meeting up with the right people to get it started. This was the right time. It was an opportune time with the economy here in the Lehigh Valley. We do a lot of due diligence for St. Luke’s real estate transactions and those involve surveys and environmental site assessments. [Other clients include] Liberty Property Trust, Peron Development, and Serfass Construction.
LVB: Where do you see the local economy heading?
I think it’s unlikely we’ll have a recession unless some disrupter occurs. The diversity of the Lehigh Valley economy across different sectors and our geographical position across the Northeast…will enable the constant and moderate growth to continue. The fact that we are in a decade of expansion is because it’s been so constant. I’m bullish for 2020 again with the dearth of available talent being a concern.
Health care, we expect that to be a very good field, warehousing and logistics, multifamily probably still has some life left in it but the demand seems to be there and particularly, urban development. I think the demand for urban living will remain strong. [And also] urban style living in a more suburban setting with open space contiguous to it. There’s density to it but it’s out in a township. Those sectors will continue to expand.
LVB: What person influenced you the most and why?
Malozi: My response would be, who hasn’t influenced me? There are teachers, professors. If I had to choose one, I would choose Ben Franklin because I went to the University of Pennsylvania and Franklin started that. Those years that I spent there were so formative to me as a person. I study him and the school he founded was a major influence. Those years and the time I spent there were hugely transformative for me. Franklin I would say is more of a role model.
What book are you reading right now? : “Fantastic Beasts” by J.K. Rowling, and I’m reading an Italian book about the fascist rise in Europe — “Christ Stopped at Eboli,” and “Engineering the City.” I’m learning about urban infrastructure, how you distribute power on the grid. The book is about how it’s done.
If you were stranded on a desert island, what three non-necessity items would you want with you? : An iPod to listen to music, a Polaroid camera, a watch.
What person in your life influenced you the most and why? : My maternal grandfather. He was a farmer and I witnessed the old way of being a farmer in Europe. My grandfather was very respectful of the land. He was respectful of the season cycles and that’s something I always think about to keep me in perspective.
If you could pass on one piece of advice to a younger you, what would it be? : To be more patient. I still have a tendency to be impatient.
If you could bring one thing to the Lehigh Valley from anywhere in the world, what would it be? : A train. Also, I would go and reserve a zip car. I miss that.
Are you a print person or digital? : I am in between. I need to print plans so I can review them. I like to have a book in my hands. But I like to read newspaper articles online.
Something your co-workers don’t know about you? : I actually enjoy reading period books, romantic books like Jane Austen.
When you were a child, you wanted to be…: An astronaut. It’s the period of Star Trek. I wanted badly to do that. I wanted to be Han Solo [from Star Wars] and be on the Millennium Falcon. I also find it fascinating how the architecture is expressed in these futuristic movies.
What’s your dream vacation? : I want to cross Canada from east to west and go in the open spaces. And I want to do it in all four seasons. We cannot experience big spaces like that in Europe.
Who are your fantasy dinner guests? : Darth Vader. I want to really find out why he’s so dark. Han Solo. He needs to teach me how to fly the Millennium Falcon. And Indiana Jones.
When you brag about the Lehigh Valley to people outside the area, you say…: That it’s a wonderful place to be because there’s a real sense of community. There’s a feeling when I go to the Chamber of Commerce events or LVEDC events, you feel there’s a lot of strength among the people there. Businesspeople help each other too.
Guilty pleasure: Dark chocolate.
These days, sustainability is a big buzzword in architecture, engineering and construction. But for Artefact, an architecture firm in Bethlehem, it’s been central to the core of their mission since their inception in 1986.
The small firm specializes in adaptive reuse, effectively saving old historic buildings from the wrecking ball and, when possible, putting them back to work. This respect for history, coupled with a focus on the potential for renewal is reflected in the work and vision of Lucienne Di Biase Dooley. She’s been a principal of the firm for many years and is directly involved with several projects the firm has taken on in the Lehigh Valley.
She recently sat down with Lehigh Valley Business for this Interview Issue to share more details about her career.
LVB: Why is sustainable development so important to you? :
It’s important to us because it has an impact on the building. We have to be mindful of the construction that is proposed. If you notice, too, we do a lot of existing buildings and adaptive reuse. It doesn’t always make sense. Coming from a different background in Europe it’s very expensive to build [and pay for] land and resources.
LVB: What have been some of your favorite projects and why? :
My favorite project is in Africa, Sierra Leone. I was asked to design a recovery center. I was contacted by the Swiss branch of the organization [Mercy Ships, an international charity]. I designed a 33,000-square-foot-hospital that was organized around two courtyards. It’s very humid. The center had a prosthetic center where they made prosthetics. They had a research center with a computer lab for the local team. At the back of the building, we had a farm prototype. They needed everything re-built. To this day, the reason why it is my favorite project is it has taught me humility and how to do a project with minimal resources. All the domestic animals were killed. All the infrastructure was demolished. This was a very special project to the point that that my husband and I are still involved.
LVB: What do you enjoy about architecture?
Just the fact that I can make a project immediate, but also it’s constant. The research for how you do it and you never know where it will end up. You are constantly in a learning process.
LVB: What are some of the challenges that you face?
You have to educate your clients about the limitations of things they want to do. Managing clients’ expectations I think, in general is the biggest challenge. Everything takes time. You are constantly mitigating time challenges.
LVB: What trends do you see happening in the industry?
We see more contemporary designs for residential units. Streamlined cabinets for kitchens, streamlined trim work, minimal lines. I think the project of ArtsQuest [an arts center designed by Spillman Farmer Architects in 2010] is a good indicator that the Lehigh Valley was shifting toward more contemporary design. We did the Lehigh Valley Charter High School of the Arts that also shows a more contemporary design.
LVB: What got you interested in architecture?
I’m Italian. One of the things you are constantly exposed to [in Italy] is art and architecture. I remember the day I decided to be an architect. I was 14 and one of my summer retreats was to visit this archaeological site. [I thought] I want to be able to design and build and be an architect. This was in Paestum, south of Naples. I visited with my family and saw a Greek archeological site that had been standing for 3,000 years.
LVB: If you could change something about your industry, what would it be?
I think it would be very good if there were more collaborative efforts. In Europe, I could call other architects and work on projects. I was the director of an architectural gallery and I would discuss urban issues, architectural issues and urban issues related to architectural design. I prepared and organized lectures and exhibitions. Here it is more of a competitive feeling. It would be beneficial to the industry to have more of a collaborative approach.
LVB: When designing a building, what’s the most important step?
If it is a new building, it’s really how the building is sited and also how the orientation of the building can maximize solar gains or light views. Pretty much the creation of a facility that responds to the conditions of the site. Generally, all of our clients that come to us, they come with a program for the building. Generally, they already know what they want.
For existing buildings, it’s about respecting the history and what is there. I’m not going to change the structure to make it work. You use the constraints of the building. It is a good challenge but the results are unique. It is cheaper to take an old building with the existing infrastructure and go from there.
LVB: What projects are you working on now?
We are doing 601 E. Broad St. [in Bethlehem]. A third-floor conversion of a building that’s going to be 57 apartments. We did the Quakertown Trolley Barn for the public market.
We are the architects of The Commodore [a mixed-use project in Easton.] We are adding a new piece around the Kaplan Building.
The former Turn & Grind building [an ArtsQuest project in Bethlehem]. That’s another one that’s adaptive reuse. The challenge is with very tall buildings; the heat rises. The good thing is that with old buildings, the energy code has some latitude. Generally, we restore the windows.
We started a program, we are buying buildings where we are in the process of creating in Allentown urban healing hubs. With those projects we are experimenting with green technologies and implementing construction methods that are less wasteful.
We are recovering five existing buildings and we are looking at prefabricated systems to reduce cost, waste, and construction time.
The Commodore project is looking at the bigger scale of how to do that.
With the growth of online grocery sales, investors are starting to show more interest in the cold storage sector.
A report from real estate firm CBRE shows that nationally, capitalization rates for Class-A temperature-controlled facilities are now closer to those of the traditional high-quality warehouses. These rates measure a property’s annual income as a percentage of its price. A lower cap indicates a higher price, according to the report.
“As the need for cold storage increases, many investors in the Lehigh Valley are becoming more comfortable with the specialized use,” said William Wolf, executive vice president of CBRE in Upper Macungie Township. “There is even discussion about speculative construction of cold storage which was never contemplated a few years ago. The main investors, they are in the Lehigh Valley.”
These sites in the Lehigh Valley include U.S. Cold Storage and Americold Logistics, he added.
“A lot of these are run by third party logistics companies,” Wolf said.
CBRE’s report, the third and final installment in its Food on Demand series about cold storage outlines how trends such as the anticipated growth of online grocery sales have narrowed the gap in cap rates between cold storage warehouses and dry storage warehouses to 75 basis points from 200 basis points in the past three years.
“They demand much higher rent,” Wolf said. “As cap rates do come down it becomes a much more viable development.”
In the Lehigh Valley, warehouses sell for $100 to $120 per square foot, while cold storage sites sell for $150 to $200 per square foot, he said.
Interest in these facilities is growing, as investors see the need to meet the demand from consumers. Much like the rise of e-commerce over the years, the need for facilities that can store food and pharmaceuticals is growing.
“It’s definitely growing and getting noticed,” Wolf said.
However, the construction of these specialized facilities is not without its challenges.
Land of course, is in short supply and every developer wants to build these sites close to major highways and not far from where consumers live.
For investors looking to enter the cold storage market, there are several factors to consider.
“It has barriers of entry because of supply infrastructure,” Wolf said.
For facilities that need products to stay at specified temperature range, a power outage could be costly. While a warehouse with regular storage could simply shut down, a cold storage facility could have all its products destroyed, Wolf said.
Aside from high operating costs, the construction of these sites often requires insulated metal panels, different types of floors, tightly sealed doors or quick freezer sections, which places increased demand on electricity, he added.
He views grocery delivery to be a major growth area and one that companies won’t be able to run out of supermarkets any longer.
How that plays out in the industrial market is unknown but the report offers several potential solutions.
Favorable investment methods include build-to-suit developments or partnerships with cold storage operators, in addition to sale/leaseback arrangements, conversions of older buildings and renovation projects.
Furthermore, as the demand for direct-to-consumer services increases, these cold storage sites will become more valuable, offering opportunities for multi-tenant urban infill development, the report said.
CBRE research nationally forecasts an up to 13 percent rise in online grocery sales by 2022. That would bring more demand for infill cold storage space as grocers and logistics operators strive to serve their customers in urban areas.
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