14C — May 30 - June 12, 2014 — Industrial / Distribution Centers — M id A tlantic
Real Estate Journal
NAI S ummit
By Mike Adams, NAI Summit Industrial shortage in the Lehigh Valley
he vacancy rate for in- dustrial buildings in the Lehigh Valley is rang-
deals happen. Flex building construction has basically been nonexistent since 2006. Big box warehouse development 500,000 s/f or more has taken over themarket creating a void in construction of multi-tenant, light industrial buildings. Developers have been reluctant to build speculative buildings and banks havemade it difficult to borrow money for these types of projects. Typi- cally, a bank is looking for the developer to have a tenant that will occupy at a large percent- age of a building before theywill lend money. Since the recession, there has
been a large absorption of much of the flex building inventory in the area. These buildings were constructed in the 1980s and 1990s. Lease rates in these buildings would range typically in the low $4.00 - $9.00 per s/f range. Buildings constructed in 2000 – 2006 leased at a rate of $6.50 -12.50 per s/f depending on building improvements. With much of the class “B” and newer flex buildings leased there has now become a serious void in the market. Tenants looking for the $4.00-$5.00 space and are finding out that there is little thatmatches their requirement. Space is available,
but it is spotty. Recently, I was with a company looking for 10,000 s/f in Bethlehem over towards the NJ/PA border and there was basically nothing to show them. Many tenants don’t plan far enough in advance to start their search and begin looking to occupy a building within six months. Unfortu- nately, what this means is as a tenant’s search comes up with an inadequate amount of op- tions, they will then begin to look outside the Lehigh Valley. Brokers and the Lehigh Valley all lose out in this situation. Hopefully, developers and lending institutions will feel
enough confidence to consider construction onnewspeculative projects. The other alternative is to retrofit older user oriented buildings tomulti -tenant prop- erties. IF this does not take place opportunities will be lost. I have been in the real estate for 27 years and have seen many changes in industrial real estate market. When I began my career in 1987 there was an abundant supply of industrial flex space in the Lehigh Val- ley. Developers such as Rouse & Associates (Liberty Prop- erty Trust) were well known for their flex space. Industrial flex space by NAIOP definition means an “industrial building designed to allow its occupants flexibility of alternative uses of the space which included uses of such as service center/ showroom, Research and De- velopment, Office, High-Tech, data call centers etc. These buildings were very prevalent in the 1980’s-1990. Due to Lehigh Valley becom- ing a prime location for distribu- tion, increase land prices and general business climate de- velopers have shied away from flex construction. In fact the last new construction for flex space in the Lehigh Valley dates back to 2006. What has happened now is a void in available space for small business. This void in available flex space along with rising operat- ing expenses and lease rates has made the job as a real es- tate broker extremely difficult. Tenants that are searching for space are looking to brokers to locate a space that needs their needs. An example would 6,000 s/f of warehouse and office. If you search the market today three buildings would be in- cluded in the search. Tenants are then hovering in themarket for longer periods looking for space that doesn’t exist. So whats next? Will devel- opers consider going back to developing smaller buildings? With higher land prices and constructiopns costs brokers will need to concinvce develpo- ers that the market exists. Also tenants will need to step up and realize that this void will create a lease rate hike. Can the two be matched will take tome to tell. Commonly banks these days will not lend money for construction unless a tenant is sewcured for a large portion of the building. Therefore the void will continue and small business n
ing between 4%-5%. There is a shortage of all types of industrial buildings es- pecially flex space, which typically ca- ters to small
businesses. I would classify these as buildings that can accommodate light industrial tenants from2,000 s/f to 30,000 s/f. This shortage is making it difficult for brokers to make
Available Industrial Space
6475 Ruch Road, Bethlehem 181 Mikron Road, Bethlehem Riverside Business Ctr, Whitehall
FOR SALE! 28,000 sf available June 2014, sits on 2.61 acres, Light Industrial Business Park zoning, 24’ clear ceilings, metal siding, 4 drive in doors, dock door, 5 ton crane and easy access to Rte 22 and LV Int’l Airport
FOR LEASE! 25,250 sf warehouse/industrial facility, outside storage, truck parking, 16’6” ceiling height, 3 tailgate doors, 2 oversized drive in doors, Industrial zoning, Lease rate: $4.60/sf NNN
FOR LEASE! 27,532 sf office/showroom/ware- house, 2,000-30,000 sf subdividable flex/office, 17,000 sf industrial space, all spaces include a dock door and/or drive in, easy access to Rts 22, 33, 78, 476 & LV Int’l Airport, BelowMarket Rates!
BROKER INCENTIVE! $5,000 to a cooperating broker who consummates a 5 year lease!
FIRST YEAR LEASE INCENTIVE!
191IndustrialParkWay, MountPocono 2045 Harvest Way, Allentown
2451 Baglyos Circle, LVIP VI FOR LEASE! 4,680 sf warehouse with dock door and built to suit office space, 4,680 sf finished office corner unit, great visibility, 100% wet sprinkler system, located off Rt. 33 with easy access to Rts. 22, 33 and 78
FOR LEASE! 103,905 sf industrial space available (2,442 sf office area), 24’ clear ceiling height, 15 tailgate docks with levelers, drive in door, conveniently located right off 611, Lease rate: $2.75/sf NNN FOR THE FIRST YEAR!
FOR SALE! 17,746 sf Class A industrial building in excellent condition,15,746 sf one story industrial space, 4,000 sf two story office space, set on 2.12 acres, 5 tailgate doors, 1 drive in door, minutes to Rts. 22, 78 & 222
EXPANSION OPTIONS AVAILABLE!
270 E Hamilton Street, Allentown 7448 Industrial ParkWay,Macungie Winside Industrial Park, Bethlehem
FOR SALE OR LEASE! 22,000 sf warehouse space & 3,000 sf two story office area set on .63 acres, 5 ton crane, 2 16’ high drive in doors, 240 Volt 400 Amp 3 Phase electric, flexible zoning, secured fenced in parking
FOR SALE OR LEASE! 16,790 sf single story office/flex building set on 2.31 acres, built in 2007, renovated in 2013, fully air-conditioned, located directly off Rt. 100, convenient access to 78, 80, 81 and the PA Turnpike 476
FOR LEASE! 4,000 sf with dock door & 3,470 sf with drive in door, 14’ clear ceiling height, Three Phase Power, convenient location off Airport Road with easy access to Rts. 22 & 512, minutes to Lehigh Valley Int’l Airport
CONTACT NAI SUMMIT | 610.264.0200 | 3435 WINCHESTER RD., SUITE 300, ALLENTOWN, PA 18104 | WWW.NAISUMMIT.COM RETAIL • OFFICE • MEDICAL • INDUSTRIAL • MIXED USE • LAND • INVESTMENT
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