T
he logistics and warehousing sector remains a dominant force in the commercial real estate market of the Greater Lehigh Valley, despite a softening overall market. According to Ryan Barros, senior vice president at CBRE, logistics facilities will continue to be a staple in the region due to its strategic location, lower cost of real estate compared to nearby markets like New York and Philadelphia, and proximity to ports and consumers.

    While demand has normalized from pandemic-era highs, tenant interest remains strong. However, the market has evolved, with tenants now having more time to make decisions, leading to longer vacancy periods. This shift is partly due to the closure of some large logistics facilities, such as United Natural Foods Inc.'s Schnecksville distribution center, which eliminated over 700 jobs.

    Despite these closures, Barros notes that many of these facilities are finding new logistics tenants. The trend has been towards companies consolidating or upgrading their warehousing facilities, with a "flight to quality" in the last six months as companies opt for newer, more modern spaces. Third-party logistics (3PL) providers continue to dominate the market, offering flexibility and reduced risk for companies navigating uncertain economic conditions.

    Rents remain at record highs, increasing by 87% over the past five years from $5.09 per square foot in 2020 to an average of $9.50 today. Landlords are responding with incentives such as shorter lease terms or facility upgrades to attract new tenants. However, a lack of new buildings coming to market is also impacting the logistics market, with developers limiting construction starts due to vacancy rates and development constraints.