Friday, January 15, 2021

Lehigh Valley Industrial Market Well Positioned for 2021

By Ben Atwood CoStar Analytics

The Lehigh Valley, Pennsylvania, industrial market took everything COVID-19 dished out without missing a beat. And it appears ready for whatever 2021 may throw its way.

Lehigh Valley's unique location and proximity to every major city along the northeastern shore meant at the start of the shutdown, it had a deep base of strong tenants relatively unexposed to risk. This helped keep the market stable through a few turbulent months in the second quarter when leasing activity dried up across the county.

Because COVID-19 has accelerated the growth of e-commerce, demand quickly resumed. Last year ended with nearly 2.5 million square feet of net absorption — the difference between move-ins and move-outs — which kept vacancies stable even as millions of square feet of industrial space came online in the midst of a global pandemic. The market posted year-over-year rent growth of nearly 5.5%, which is incredible considering the chaos surrounding the initial shutdown.

Demand was heaviest in the Fogelsville corridor, where Interstates 78 and 476 intersect. This is one of the state's best locations for distributors, and 14 of the year's 52 leases over 10,000 square feet were signed here. There was also an interesting flurry of activity near Easton and close to the airport, where Geodis and Natural Foods each signed for over 1 million square feet in 2020.

This level of activity likely helped give developers the confidence to resume building, breaking ground on more than 7 million square feet last year. Many of these projects are northeast of Fogelsville and hug I-22. There's several major projects underway around Easton, which offers the most direct access into New York City but also substantial work being done near the Airport.

Given the market’s location and the growth of e-commerce, it is not too surprising that investment exploded in the Valley. Total industrial sales volume was over $730 million, one of the highest levels in market history and the third consecutive year of sales growth. Big buyers on the year included Prudential, Uline, Prologis, and the BlackStone Group.

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