Trends in the Valley: Commercial and Industrial Real Estate Market Update
The Real Estate market is changing, and like real estate always does, we will adapt with it. The commercial real estate market is resilient, especially in the Lehigh Valley. Our location offers many benefits others areas don’t and is made up of a large portion of industrial users who have shown to be the strongest sector 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 retail market is changing due to consumer buying habits. 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 morphing with a major focus on the e-commerce world. The events of this past year have definitely 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 pandemic 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 increasing 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.