18B — December 18 - January 14, 2020 — Pennsylvania — M id A tlantic Real Estate Journal
www.marej.com
P ennsylvania
By Jennifer Kennedy, NAI Summit Trends in the Valley: Commercial and Industrial Real Estate Market Update
T
he Real Estate mar- ket is changing, and like real estate always
shown to be the strongest sec- tor this past year, presently, and in the year to come. As a whole, our region remains stable, already showing signs of recovery, despite the many challenges we faced this year. It is evident that the re- tail market is changing due to consumer buying hab- its. We are seeing vacancies in most retail centers and larger box spaces being used for nontraditional uses. Big boxes are being looked at as possible industrial space, e-commerce, entertainment
locations, or healthcare. We are also seeing department stores re-purposed for larger grocery stores. Even prior to Covid-19, retail was morph- ing with a major focus on the e-commerce world. The events of this past year have defi- nitely accelerated this trend, forcing many retailers to look at adding alternative revenue generators outside of their brick and mortar locations or upgrading their current e- commerce platforms in place. Unsurprisingly, the pan- demic has slowed office real
estate activity but things still remain steady in the Lehigh Valley. As of now, office space is in a holding pattern as users are pushing pause on expansions as they consider what is to come in the next few months. According to the Lehigh Valley Economic Development Corporation, 47% of surveyed companies plan to use the same amount of office space post Covid. Of those surveyed, 11% of those say that they will be increas- ing their footprint of their offices when they return to
the office. Shorter leases are becoming a reality and are probably here to stay for a while. The days of seeing 10–15-year leases are in the past at least for now. More realistically, companies will be looking for 3-6 year leases. Landlords are also looking at current and new tenant lease incentives as they handle lease negotiations. The one clear winner in the office space sector is health- care, medical office space, and biotech facilities. This sector is expected to grow 10- 16% annually over the next decade. With that type of growth, there will be a need for more space. Many of the retail centers and restaurants that are vacating now have become an option for these types of facilities. Creative brokers are look- ing to municipalities and smart investors to come up with new and innovative ways to utilize spaces that are vacant or may become vacant in the coming months. Mu- nicipalities that are forward thinking will have the ability to take these spaces that are vacant or underused and re- zone those areas for mixed or alternate use. Those mu- nicipalities that are willing to work with developers and investors could see tremen- dous future growth. In the Lehigh Valley, we are seeing an influx of inves- tors and businesses coming in from the major cities. The infrastructure surrounding the Lehigh Valley makes it a logical location for industrial as well as office users trying to relocate from the larger cities. LVEDC reports the average rent for office space in Lehigh Valley is significantly lower than other major metropoli- tan areas in the Northeast. On top of being more afford- able than other major cities, the Lehigh Valley offers short drives to three international airports, rail service, quick access to water ports, and includes three major inter- states which provide short commutes to Philadelphia, NJ, and NY. 2021 may look different, but what our area offers companies will not. Cheers to a prosperous New Year for all! Jenni f er Kennedy is an associate at NAI Summit. MAREJ
d o e s , w e wi l l adapt with it. The commercial real estate ma r k e t i s resilient, es- pecial ly in the Lehigh Valley. Our
Jennifer Kennedy
location offers many benefits others areas don’t and is made up of a large portion of industrial users who have
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