T
he commercial real estate market along the I-78/I-81 corridor has shown significant improvement in the second quarter, with a total of 5 million square feet of space leased. According to CBRE Vice President Sean Bleiler, leasing activity is on the rebound after several quarters of decreased activity.

    While the Lehigh Valley led the market boom following the pandemic, it's now lagging behind Central Pennsylvania and Northeastern Pennsylvania regions in terms of interest. The Lehigh Valley has a vacancy rate of around 9%, with 118 million square feet of available space. In contrast, the Harrisburg region has a vacancy rate of 5.9% and saw more growth as tenants sought out lower rents.

    Northeastern Pennsylvania has the highest current vacancy rate at about 10%. However, Bleiler expects this rate to fall in the next quarter with deals that are pending. A healthy vacancy rate is typically around 7-8%, but the corridor is in good shape, he said.

    The lack of new inventory coming to market is a significant factor in keeping the vacancy rate lower. With increasing construction costs and limited available space for development, there were only 18 new commercial facilities under construction in the second quarter, totaling 6.7 million square feet.

    Currently, demand is shifting towards smaller regional buildings under 100,000 square feet, which contrasts with recent years' focus on larger, million-square-foot buildings. Rents remain relatively high, but have been stabilizing at around $9 per square foot. Landlords are making concessions in lease agreements to lure tenants, offering free rent or base rent reductions.

    With the current market dynamics and pending activity, Bleiler expects a strong third quarter for the I-78/I-81 market.