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 pending deals. A healthy vacancy rate is typically around 7-8%, but the corridor is considered in good shape.

    The lack of new inventory coming to market is a key factor keeping the vacancy rate lower. With increasing construction costs and limited available space for development, only 18 new commercial facilities were 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 buildings. Rents remain relatively high, but have been stabilizing at around $9 per square foot. Landlords are offering concessions such as free rent or base rent reductions to lure tenants.

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