Tuesday, July 6, 2021

People First Federal Credit Union’s Planned HQ Relocation Marks Latest Win For Downtown Allentown

By Ben Atwood CoStar Analytics

People First Federal Credit Union announced late last week that it would relocate its Lehigh Valley, Pennsylvania, headquarters into downtown Allentown, a neighborhood in the midst of a renaissance thanks to a unique tax-incentive plan.

The not-for-profit credit union is set to occupy about 25,000 square feet on the third floor of Five City Center, one of the many Class A offices built in the past decade by the City Center Corp., a local developer that is almost single-handedly breathing life back into Pennsylvania’s third-largest city.

"It's so exciting seeing people come back downtown for work," said Jill Wheeler, vice president of sales and marketing at City Center. "The coronavirus didn’t disrupt our momentum at all."

In fact, it is looking as though the shutdown might have strengthened Allentown’s commercial real estate scene.

This is a city that’s one hour from Philadelphia and two from New York, and this is a year when the pandemic is redefining what office tenants are looking for and where they are looking at. Remote working has also opened the door for white-collar relocations, and life in Lehigh County is significantly cheaper than it is in the Philly and Jersey suburbs.

Downtown Allentown appears to be capitalizing on this, and much of the credit belongs to City Center. It has been utilizing a tax incentive program to build close to a dozen Class A multifamily and office properties in the heart of Pennsylvania's third-largest city. The tax plan was created specifically for Allentown and was designed to bring people and businesses back into an urban core that was pummeled by automation and outsourcing.

Loosely speaking, it allows for a large chunk of state taxes paid by tenants renting in new office or retail projects within a 126-acre Neighborhood Improvement Zone to be redirected back to the developer to pay off debt.

That mitigation of risk enabled City Center to rapidly build out several Class A offices, something that is typically tricky in Pennsylvania’s secondary markets. Its projects are almost totally occupied, and Wheeler believes it will only become more appealing in light of the coronavirus.

"Now more than ever, Class-A assets are important for employers," Wheeler said. "Employees are very concerned about workplace safety and employers need to retain their talent."

This sentiment is echoed by real estate professionals throughout the commonwealth and by office experts across the country. The People First lease totally fills Five City Center, and the 95 employees it will bring will also strengthen Allentown’s white-hot multifamily market.

CoStar data shows this submarket’s apartments are 98% occupied, a figure that would have seemed absurd in the early 2000s when residents were fleeing in droves. Even more incredible is that these rates have remained strong even with a frenzy of multifamily development.

City Center has completed seven apartment complexes containing close to 1,000 units in Downtown’s Neighborhood Improvement Zones. You must get on a waiting to list to rent from it now, and Wheeler said the developer cannot build new apartments quickly enough.

The firm has four additional properties planned for the next 18 to 24 months, which will increase the multifamily inventory within the zones by around 500 units. These residents enabled the city’s retail scene to hang on through the pandemic, and two new restaurants recently leased space within the improvement zone.

Allentown's success is also attracting outside developers. Last week, the Neighborhood Improvement Zone's oversight board approved the financing of a new multifamily complex on which The Manhattan Company, out of New Jersey, will soon begin work. It plans on rehabbing an old furniture factory along the city’s riverfront into a 25-unit modern apartment complex.

That type of development and demand wouldn’t make waves in many markets, but in a city that looked to be on the verge of defeat 20 years ago, it’s flat-out incredible. Downtown Allentown has become one of the state’s most intriguing areas to monitor for real estate development and opportunities.

People First Federal Credit Union plans to move into Five City Center in November. The credit union will retain its branch location on Downyflake Lane in Allentown and open a new branch across from Miller Symphony Hall.

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