Lehigh Valley's logistics market falls further out of step with national trends

 By Brenda Nguyen CoStar Analytics

Pennsylvania's Lehigh Valley is emerging as a logistics outlier, with increasing availability and reduced tenant demand setting it apart from Philadelphia and national trends.

The logistics availability rate for the Lehigh Valley reached 18.5% in the third quarter of 2026, up more than 12 percentage points from roughly 6% in late 2022. The current rate is well above Philadelphia's 10.9% availability rate and the national average of 10.7%. Although availability remains elevated across many industrial markets following a historic development wave, the Lehigh Valley's supply-demand imbalance has widened faster than in most other U.S. markets.

The disconnect reflects a recent surge in speculative development, projects built without any preleasing, followed by a pullback in demand. Developers have added a substantial number of speculative warehouse projects based on expectations that pandemic-era gains in consumer spending, e-commerce and supply chain expansion would continue. Instead, logistics tenants have slowed expansion plans, consolidated operations or delayed leasing decisions, leaving an overhang of unfilled warehouse space.

Lehigh Valley logistics facilities larger than 200,000 square feet recorded roughly one million square feet of negative absorption over the past year, meaning tenants vacated more space than they occupied.

While the Lehigh Valley has struggled to fill recently delivered logistics facilities, Philadelphia's logistics availability has closely tracked the national average and trended lower in 2026.

By comparison, neighboring Scranton recorded approximately 2.4 million square feet of positive absorption in logistics facilities. The contrast suggests regional demand has not disappeared but has become more selective, with some occupiers likely favoring lower-cost markets.

The Lehigh Valley's long-term logistics advantages remain intact, including its 'one-day' geographical proximity to major consumer markets, robust multi-modal infrastructure and cost efficiencies relative to coastal hubs. However, the current glut of excess inventory and reduced demand are likely to keep the market trailing Philadelphia and national industrial trends over the coming year.

Even so, continued speculative development suggests logistics developers are positioning for stronger tenant demand to return in 2027 and 2028, rather than responding to current market conditions.

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