INDUSTRIAL MARKET - Lehigh Valley Economic Development

ISSUE # 002
LEHIGH VALLEY
COMMERCIAL REAL ESTATE REPORT
INDUSTRIAL MARKET
One of the core principles of the Lehigh Valley
IN THIS ISSUE
Economic Development Corporation (LVEDC) is to
Market Summary ................................................... 2
serve as the leading source of economic data and
market intelligence on the Lehigh Valley’s economic
assets and resources to serve our economic
strategies, marketing efforts and the needs of our
stakeholders.
To that end, LVEDC is preparing a series of quarterly
reports about the real estate climate in the Lehigh
Valley.
Industrial Market .................................................... 2
Current Conditions ................................................ 2
Broker Perspective, Robert L. Kiel ........................ 2
Developer Perspective, Martin Till......................... 2
Net Absorption (Industrial Market) ........................ 3
Broker Perspective, Mike Adams .......................... 3
Asking Rent and Vacancy ..................................... 3
Q2 2015 Commercial / Industrial Sales
Top Transactions ................................................ 4-5
Q2 2015 Distribution of Sales Transactions .......... 6
Range of All Sales Transactions............................ 6
Employment by Industry........................................ 7
Developer Perspective, Sean Bleiler ..................... 7
Employment Growth by Industry ........................... 7
This report will focus on the region’s industrial,
Unemployment Rate .............................................. 8
Q2 2015
warehouse, and flex space markets.
Workforce Employment Growth............................. 8
www.lehighvalley.org
MARKET SUMMARY
2015 Q2
2015 Q1
2014 Q4
2014 Q3
2014 Q2
Rentable Building Area (RBA)
103.4M SF
102.6M SF
101.8M SF
101.8M SF
100.3M SF
Number of Buildings
1,698
1,695
1,694
1,693
1,691
Vacancy Percentage
6.40%
6.28%
6.66%
7.21%
7.45%
Net Absorption
397.4 SF
1,136.1 SF
539.4 SF
1,629.6K SF
1,642.2K SF
Average Asking Rent (Price/SF)
$4.82
$4.81
$4.73
$4.70
$4.67
RBA Under Construction
3,256.5K SF
3,571.2K SF
3,691.4K SF
1,205.5K SF
2,698.4K SF
RBA Delivered
776.7K SF
800.3K SF
295.3K SF
1.197.4K SF
1,959.9K SF
INDUSTRIAL MARKET
BUILDING SIZE
Number of Buildings
RBA
Vacancy Rate
0-100KSF
100,001-500KSF
500KSF +
44
1,707
33,850,743
38,111,362
32,265,550
104,229,362
6.6%
9.4%
2.5%
6.35%
1,478
185
Total
As of June 30, 2015.
CURRENT CONDITIONS
• The national industrial vacancy rate
is estimated to be 8.4 percent, with
predictions of an 8.1 percent vacancy
rate in 2016.
(Source: NAR Commercial Research)
• The Lehigh Valley is experiencing a
more favorable industrial market, with
vacancy rates averaging 6.35 percent
overall, asking rental rates increasing,
and planned new building development.
• The larger industrial space (buildings in
excess of 500,000 SF) are experiencing
the tightest market, with only 2.5 percent
vacant.
• E-commerce has been a significant
contributor to the industrial space
market activity, reflecting the Lehigh
Valley’s access to markets, superior
infrastructure, and favorable business
climate.
2
COMMERCIAL REAL ESTATE REPORT • Q2 2015
BROKER PERSPECTIVE
Over the last 28 years, we have built an industrial
portfolio of over 25 million square feet. Approximately
70 percent was done on a speculative basis.
Our portfolio is 99 percent leased and we will be
developing another 5.2 million square feet over the
next 5 years to meet the tremendous market activity.
Robert L. Kiel
Senior Vice President, City Manager
Liberty Property Trust
DEVELOPER PERSPECTIVE
The industrial market in the Lehigh Valley continues
to benefit from our geographical location. Our ability
to customize a design/build solution for our client
needs has allowed us to partner with National and
International firms looking to locate or expand within
the Lehigh Valley. We expect to see user demand in
the Lehigh Valley continue to be strong.
Martin Till
Regional President
J.G. Petrucci Co.
NET ABSORPTION (INDUSTRIAL MARKET)
1000K
500K
2012
2013
2014
2Q
1Q
4Q
3Q
2Q
1Q
4Q
3Q
2Q
1Q
4Q
3Q
2Q
1Q
4Q
3Q
2Q
2011
2015
QTD
2010
1Q
4Q
3Q
-500K
2Q
0K
1Q
Net Absorbtion (SF)
1500K
BROKER PERSPECTIVE
Our office is seeing strong interest from manufacturing companies located outside of Pennsylvania,
especially from New Jersey where high taxes are making it difficult for them to conduct business.
The problem now is the lack of inventory to keep up with demand.
Mike Adams
Senior Vice President
NAI Summit
$4.85
$4.75
10%
Vacancy (%)
$4.65
8%
$4.55
6%
Avg = $4.48
$4.45
4%
$4.35
2%
2012
Average Asking Rent (Price/SF)
2013
2014
2Q
1Q
4Q
3Q
2Q
1Q
4Q
3Q
2Q
1Q
4Q
3Q
2Q
1Q
4Q
3Q
2Q
4Q
1Q
2011
2015
QTD
2010
3Q
2Q
$4.25
Vacancy (%)
12%
1Q
Average Asking Rent (Price/SF)
ASKING RENT AND VACANCY
0
Vacancy Percentage
Source: The statistical analysis in this report has been conducted using information from Costar, the largest and most comprehensive
database of commercial real estate information.
COMMERCIAL REAL ESTATE REPORT • Q2 2015
3
Q2 2015 COMMERCIAL / INDUSTRIAL SALES TOP TRANSACTIONS
9677 West Hills Ct.
$20,345,100
1100 Mill Rd.
$12,755,000
6736 Tilghman St.
Photo Credits: Lehigh Valley Economic Development Corporation
PROPERTY
BUYER OF RECORD
SELLER OF RECORD
9677 West Hills Ct.
Duke Realty LP
WHBC Building B LP
1100 Mill Rd.
IPT Iron Run, LLC
Carpenter Co
6736 Tilghman St.
IPT Iron Run Dc II LLC
Seagis Iron Run Associates LP
3500 High Point Blvd.
Steve Mohle Properties
Bethlehem Lvcc 3450 & 3500 LP
146 N Commerce Way.
FP Foods Realty Pa LLC
Transilwrap Co Inc
1788 Vultee St.
Carpenters Joint Apprenticeship and Training Fund
Victaulic Company Of America
4555 Hamilton Blvd.
Ciocca Properties LP
Becker Robert R & Jean D
16 Centre Sq.
Boutique One Properties, LLC
Nk Investments LLP
2591 Mitchell Ave.
JD Allentown II LLC
Landmesser Robert
7248 Penn Dr.
Silver Spring Properties LLC
7248 Penn Drive Associates LLC
5332 W Tilghman St.
Billig Land Company
James E. Blewitt & Mark D Swan
2400 Northampton St.
Jerc Partners XXIX LLC
Bimbo Bakeries USA Inc
30 N 4th St.
30 North Fourth LP
Penn Jersey Advance Inc
682 N Brookside Rd.
Sky Brookside Investment LLC
Wescosville Real Estate Assocs
Source: Lehigh and Northampton County Real Estate Tax Records, LVEDC Research
4
COMMERCIAL REAL ESTATE REPORT • Q2 2015
$9,423,272
146 N Commerce Way
PRICE
$4,900,000
1788 Vultee St.
LOCATION
$1,925,000
CLASSIFICATION
$20,345,100
Weisenberg Township
Industrial
$12,755,000
Upper Macungie Township
Industrial
$9,423,272
Upper Macungie Township
Industrial
$6,350,000
Hanover Township (Northampton County)
Office
$4,900,000
Hanover Township (Northampton County)
Industrial
$1,925,000
Allentown
Industrial
$1,900,000
Lower Macungie Township
Office
$1,650,000
Easton
Office
$1,150,000
Allentown
Industrial
$1,101,000
Upper Macungie Township
Industrial
$975,000
Upper Macungie Township
Industrial
$950,000
Palmer Township
Industrial
$950,000
Easton
Office
$950,000
Lower Macungie Township
Office
COMMERCIAL REAL ESTATE REPORT • Q2 2015
5
The Lehigh Valley’s GDP is $34.3 billion, ranking 75th out of the 381 largest U.S. MSAs.
It is higher than that of the state of Vermont and 102 other countries in the world.
Q2 2015 DISTRIBUTION OF SALES TRANSACTIONS
Sales Price
$337K
$10,000K
$20,000K
$34,000K
Type
Commercial*
Industrial
Source:
Lehigh and Northampton
County Real Estate Tax
Records, LVEDC Research
*Commercial transactions include office, retail, and land.
The finance, insurance and real estate sector is the largest contributor to the regional GDP ($4.83 billion),
followed by manufacturing ($4.77 billion) and professional and business services ($4.71 billion).
RANGE OF ALL SALES TRANSACTIONS
13
Under $500K
7
$500K but less than $1M
5
$1M but less than $2M
1
$2M but less than $5M
$5M but less than $10M
2
Over $10M
2
0
1
2
3
Transactions
4
5
Source:
Lehigh and Northampton County Real Estate Tax Records, LVEDC Research
6
COMMERCIAL REAL ESTATE REPORT • Q2 2015
6
7
8
9
10
Commercial
11
12
13
Industrial
EMPLOYMENT BY INDUSTRY
The health care
industry remains the
Lehigh Valley’s top
employer, making up
18.9 percent of total
employment within the
region for the second
quarter of 2015.
6.6%
Transportation
and Utilities
4.4%
Wholesale
Trade
3.9%
Education
Industry Name
Education
4.8%
Financial Activities
Financial Activities
Health
12.8%
Retail Trade
18.9%
Health
Information
Leisure and Hospitality
Manufacturing
Mining, Logging, and Construction
15.2%
Professional
and Business
Services
4.3%
Other Services
Source: BLS Current Employment Statistics (CES)
Other Services
2.0%
Information
4.2%
Mining, Logging,
and Construction
Professional and Business Services
Retail Trade
11.6%
Leisure
and Hospitality
Transportation and Utilities
Wholesale Trade
11.4%
Manufacturing
DEVELOPER PERSPECTIVE
On the industrial front, the market continues to see strong fundamentals for both users and investors.
Speculative construction is driving the market and many buildings are leasing prior to completion.
National users, in particular e-commerce companies, are seeking locations in the Lehigh Valley to
service the New York metro market with same day or next day service.
Sean Bleiler
Senior Vice President
CBRE
EMPLOYMENT GROWTH BY INDUSTRY
The leisure and
hospitality industry,
and construction,
have shown the
largest percentage
of growth in June
2015 compared to
June 2014, increasing
by 10 and 3 percent,
respectively.
Industry Name
Mining, Logging, and Construction
3%
Manufacturing
0%
Trade, Transportation, and Utilities
2%
Information
Financial Activities
0%
-1%
Professional and Business Services
0%
-1%
Education and Health Services
10%
Leisure and Hospitality
Other Services
Government
-1%
-2%
0%
5%
10%
A-B-E MSA, June 2015, 12-Month % Change. Source: BLS Current Employment Statistics (CES)
COMMERCIAL REAL ESTATE REPORT • Q2 2015
7
The Lehigh Valley’s
unemployment rate
Is 5.5 percent as of
June 2015, seasonallyadjusted. That figure is
down from 6.2 percent
last year.
The decline in the
region’s unemployment
rate follows largely the
same pattern as the
national unemployment
rate, which is also 5.5
percent as of June 2015.
10%
9%
8%
7%
6%
5%
2009
2010
2011
2012
2013
Lehigh County & Northampton County
2014
2015
United States
Seasonally-adjusted figures.
Source: PA Center for Workforce Information & Analysis (CWIA)
WORKFORCE EMPLOYMENT GROWTH
2.0%
1.5%
1.0%
0.5%
0.0%
-0.5%
2010
2011
2012
Lehigh County & Northampton County
2013
2014
2015
United States
Total Nonfarm, Seasonally Adjusted, 12-Month % Change. Source: BLS Current Employment Statistics (CES)
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Phone: 610-266-6775 • Fax: 610-266-7623
www.lehighvalley.org
Lehigh Valley
Come here. Grow here. Start here.
©2015 Lehigh Valley Economic Development Corporation. All Rights Reserved. 08.15. LVEDC CRE Report designed by Michelle Chrin.
UNEMPLOYMENT RATE