The apartment market in Pennsylvania's Lehigh Valley is strengthening during the pandemic.
Multifamily vacancies are at record lows, and close to 97% of the Lehigh’s inventory is leased. This is good news for a small market with modest population growth that saw over 1,000 apartment units deliver since 2018. The recent supply is over 90% occupied, and few of these projects are advertising concessions.
The market’s workforce housing, or housing geared toward middle-income households, is also faring well. Lehigh's mid-tier two- and three-star properties are faring even better. They post average vacancies of just 2%, and occupancies have climbed over the past 12 months.
Even more interesting is the rent growth.
At a time of great uncertainty for the apartment market, Lehigh's apartment landlords are doing quite well. Year-over-year gains are over 3%, which makes the area one of the nation’s top performers. Gains here are surpassing those seen in nearby cities such as Philadelphia and New York, which are struggling with some outmigration issues caused by the coronavirus.
It is possible that Lehigh is benefiting from this. The market offers relatively quick access into both cities, particularly Philadelphia. The restructuring of office and the likelihood of companies adapting hybrid remote/office employment in the coming years could be a great benefit to a market like Lehigh Valley.
The region’s location could also make it a prime destination for workforce housing. Lehigh is ideally situated at the crossroads of Interstates 78 and 476 and has become a shipping node. Developers have been extraordinarily busy in the past 10 years, adding millions of square feet of logistics space. These warehouses are creating thousands of jobs, which could pull in even more blue-collar workers now that retail has been so thoroughly disrupted.
While sales have slowed because of the pandemic, third quarter figures have already surpassed what the market saw in the second quarter. Though only a handful of properties have traded in the past three months, there were a pair of notable deals that did close in July. Laub Realty had one of the larger deals: The New York firm spent $6.25 million on the three-star, 30-unit Taylor Apartments.
Out-of-state money, tightening vacancies and stronger than average rent growth all are good signs for the local apartment market and Lehigh at large.
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