Lehigh Valley’s Industrial Sector is Booming Today, But What’s Next?
by Josh Anderson
JERSEY CITY, NJ — Lehigh Valley is booming. Every year at CapRE’s Northeast Industrial Real Estate Summit, it’s an integral part of the conversation. So at our latest Summit, we convened a panel of regional insiders for a discussion titled Pennsylvania Development, Investment, Financing & Leasing: The Booming Lehigh Valley. That conversation kicked off with a fundamental question – Since everyone wants to be there now, what’s next for the Lehigh Valley?
First up, we heard from Kevin McGowan, President at McGowan Corporate Real Estate Advisors. “Some changes are going on as far as what Lehigh Valley needs,” he replied. “There is certainly a spread as far as the area is concerned. We’re seeing development near New Jersey but also near the I78 corridor. I kind of think that Harrisburg and Allentown essentially will connect as these towns, New Smithville, Hamburg, Bethel, all essentially merge into one market. So the geographic location is going to get bigger, and there are more buildings popping up. Inventory is growing as we see long-term demand.”
Next, Jeff Milanaik, Principal, Bridge Development Partners, LLC chimed in with some broader perspective. “I had experience at my prior shop out in the Harrisburg area, always like the Lehigh Valley. But in my mind, to break things down really simply, New Jersey’s out of land,” he asserted. “Whether we want to acknowledge it or not. And I try to re-create land when I can, legally of course. But that’s just pushing the big boxes out toward 78. And if you think about it, we’ve got one toll at the end of the river, from the port, vs. how many tolls it takes you to head down the turnpike. And the 78/81, the backbone corridor, gets you to DC and the Northeast. So it’s always been an attraction.”
However, in any case, his firm is very focused on the Eastern Lehigh Valley near Route 100 East. “Because in mind, it’s 8A,” he related. “Honestly, it tracks amazingly accurately with 8A. The rents are hitting north of $6 now. $6 to $6 and a quarter now, triple-net. The same thing is happening with 8A. Even though I think I just heard about a $695 rent deal that got done in 8A, just the other day. That’s like staggering. I’ve been doing this for 30 years, so I’m a little shocked.”
Milanaik then recalled how things have changed over the years. “The thing that happened years ago was that Lehigh Valley kind of ate our lunch in New Jersey,” he remembered. “It had labor, it had less expensive labor. It had better taxes than we do. You had the incentive programs. Well by and large those have kind of dried up by now, as far as I can see. And depending on the pocket that you’re in, like the pocket that I’m in, the Grow New Jersey program has a lot of legs for us. It’s incentivizes and it’s done some PILOTs. I’ve got a PILOT at 50% of what the Lehigh Valley is going to do right now. And I tracked that site for three years to get there. So, it’s kind of a suburb of New Jersey. I know that the Pennsylvania folks don’t like to hear that, but that’s the way that I view it.”
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