A Growing Region

The Lehigh Valley has been adding more than 4,000 new residents a year for seven decades. All those people need more places to live, work, shop and recreate. Here’s a look at how investors and developers have been building to handle all that new demand.

Residential Trends – More Apartments and
More Housing Diversity

Since the Great Recession that ended shortly after 2010, the Lehigh Valley housing market has become more diverse. No longer dominated by the single-family detached home, housing over the past decade has included a growing number of townhouses and apartments.

In 2021, developers and investors appeared to be working to address the region’s housing shortage, with more than 2,200 new residential units approved -- the most since 2007.

Since then, the interest of developers to build apartments has strengthened. Apartments represented more than half the total units approved in 2021, while also being the highest number approved in 20 years.

This trend is likely to continue as the amount of developable land becomes more limited and demand for homes to purchase outpaces unit construction. The density of apartments rose from about 12 units per acre in 2020 to about 22 units per acre in 2021, while the density of single-family detached units remained relatively the same.

Single-family detached homes remain a staple in the Lehigh Valley market, but they no longer dominate housing proposals. Other housing types, including twins, townhouses and condos saw a dip since 2020, resulting in a decrease in the variety of purchase options.

Since the Pandemic began in 2020, the demand for housing has grown significantly in the Lehigh Valley, as well as many communities across the country. The number of housing units approved is not likely to slow because the number reviewed in 2021, at 5,746, was the most since 2007, with many of them expected to be approved and built in the coming months and years.

Non-Residential Trends – Industrial Development Continues Its Impact

The Lehigh Valley’s place in the evolving global economy continued to grow in 2021 as nearly 6 million square feet of non-residential development was approved – more than 85% of which was for new industrial facilities.  It included approved square footage of 378,847 of commercial, 183,326 of office, 115,623 of transportation 70,022 of quasi-public, 40,502 of recreation, 57,031 of retail and 20,160 of agricultural space, but the year was again dominated by a steady stream of industrial development.

The nearly decade-long warehouse boom continued with 3.5 million square feet approved, making up the majority of the 5.1 million of industrial development for the year.

It shows that as online shopping grows, the region’s place within a single trucker’s shift of 100 million consumers maintains the Lehigh Valley as one of the nation’s hottest markets for warehouse and logistics center building.

There’s no indication that will slow anytime soon. Even as available land close to major arteries dwindles, developers compete for land in outlying areas, often straining local roads and infrastructure not built for such intense use.

That makes it important for municipal leaders to update zoning and official maps and consider coordinating with neighboring communities to use every tool available to control development.

Pandemic Accelerates Warehouse Evolution

The Pandemic has accelerated the move to an online and on-demand economy, and the industrial sector continues to respond.

Over the past six years, 27.9 million square feet of new warehouse space has been approved by local governments in the region and another 16.5 million square feet remains in the approval pipeline. Fueled by location within a single truck driver shift of 100 million potential consumers, the Lehigh Valley is on pace to see a nearly 50% increase in total warehouse square footage, just since 2015, and there’s no indication the trend will end anytime soon. In fact, industrial developers are finding new ways to move goods into and out of the region more quickly.

Automated and taller, or High Cube, warehouses have emerged as a new land use as more goods are ordered directly, skipping the stop at a physical store location. These ‘robotic’ and high-volume warehouses could change the face of freight in our region.

Data from commercial real estate firm CBRE Group shows that lease rates are relatively low compared to the Lehigh Valley’s peers along the Eastern Seaboard, an indication that development pressure will continue.

Closer to home, the region’s interstate access and proximity to major metropolitan areas mean the aggregated lease rate of nearly $7 per square foot is higher than Central and Northeastern Pennsylvania.

Evidence of this is a developing industrial area in Upper Mount Bethel Township being marketed by CBRE as ‘the largest industrial development on the East Coast’. At the same time, lease lengths now at eight years on average are shorter than they previously were, meaning less guarantee over the long-term that industrial spaces will operate in the same manner as now.

Traffic volumes, number of employees, need for transit, emergency management services needs and even tax revenues could change in under a decade. Changes are not isolated to one or two areas, but instead spread across the seven existing and three emerging industrial districts spread across the Lehigh Valley.

Communities will need to keep an eye on the future when considering industrial proposals for these large structures and how they might be used over the next couple of decades.