Tenants emerge as top buyers of Lehigh Valley industrial warehouse properties

 By Brenda Nguyen CoStar Analytics

There's been a significant shift in the Lehigh Valley industrial market as large industrial space users and tenants increasingly opt to buy their formerly leased warehouse and distribution properties.

Recent transaction data from the first quarter reveals that building acquisitions by local users have gained substantial market share during the latest real estate down cycle, especially as institutional investors and REITs have pulled back.

This trend is a notable reversal from previous years when institutional capital dominated the industrial property acquisition market. While REITs, public companies and institutional investors moved to the sidelines amid a higher-risk environment, end-users now have less competition in pursuing property ownership.

Owner-occupant transactions have buoyed recent sales volumes by dollar, accounting for over 40% of the total industrial property sales volume, a notable surge from the 6% to 7% share of the total sales volume in 2022 and 2023.

Current market conditions have created a unique window of opportunity for tenants to become owners. Smaller companies that previously couldn't compete with deep-pocketed institutions are now finding themselves at the negotiating table with a chance to acquire their operational facilities. These owner-user sales could stay elevated as long as investors have difficulty underwriting and financing property purchases.

Long-term occupancy cost control is a primary motivation for businesses to acquire their distribution facilities. With industrial rents having increased by over 40% in the past five years, ownership provides predictable real estate expenses rather than potential double-digit rental increases upon lease renewal.

Tax benefits further motivate these purchases, with advantages including depreciation deductions and potential capital gains treatment upon eventual sale.

In January 2025, national freight shipper J.B. Hunt Transport acquired the warehouse it partially leased at 1235 Easton Road for $30 million. This 44,500-square-foot warehouse, built in 2008, marked the highest-valued building sale since late 2023.

Similarly, in December 2024, XPO purchased the truck terminal in Allentown for $20 million, achieving a near-record price of over $750 per square foot despite the 1960s-era construction.

Both trades were the highest valued transactions in the past 12 months.

As Lehigh Valley reinforces its position as Pennsylvania's second-most active industrial market, this shift toward user ownership indicates an in-demand market where companies increasingly view property as a business asset rather than only a leased necessity.

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