Investors Making Plays Across North Atlantic Trade Corridor, Particularly in Pennsylvania's Lehigh Valley

 By Ben Atwood CoStar Analytics

The second quarter of 2021 saw some of the highest levels of industrial investment ever recorded in the North Atlantic trade corridor, according to CoStar data.

Investors spent over half a billion dollars acquiring warehouses and distribution centers across the seven markets that orbit Philadelphia. This figure compares favorably to what these same markets saw in the first quarter, when roughly $250 million was spent. It also compares well to the 10-year quarterly average, which is closer to $400 million.

Unsurprisingly, much of the second quarter transaction volume came from the Lehigh Valley industrial market. Lehigh remains Pennsylvania’s premiere shipping node and investors have been buying assets here for some time. What is interesting is just how much these assets are selling for now.

The sale at 951 Willowbrook Road in Northampton appears to be the most expensive acquisition in Lehigh history. This 1 million-square-foot distribution center sold for an eye-popping $195 per square foot in late April, closing at just over $200 million.

There are no recent non-portfolio transactions that come close to that sales price locally. It also compares favorably to a similarly sized property which sold in mid-2020, when a 975,000-square-foot warehouse in Lopatcong, New Jersey, sold for $135 per square foot.

While some of this price discrepancy can be explained by a difference in occupancy and location, what is also interesting about Lehigh is how much its Class B assets sold for last quarter. For instance, 6355 Farm Bureau Road sold in May for over $90 per square foot. This 40-year-old, 100,000-square-foot property was acquired by Indus Realty Trust of New York, which stated it was attracted to the property's location and the ability to develop the land it sits on in the future.

That property is about one mile from the Interstate 78/I-476 interchange that makes Lehigh so popular. While prices can spike in this area, assets similar to 6355 Farm Bureau Road were typically trading for closer to $60 per square foot prior to the pandemic.

Given that demand for industrial space continues to climb and Lehigh has a prominent position on the Northeast supply chain, it seems likely that this will remain a hot investment market in the coming quarters.

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