I-78/I-81 Industrial real estate corridor stabilizing to pre-pandemic levels

The industrial real estate market along the I-78/I-81 corridor remains strong despite a slowdown in the market in the last few quarters.

Sean Bleiler, executive vice president with commercial real estate firm, CBRE, said that the slowdown continued in the first quarter of 2024, news he called generally neutral.

The market has simply returned to the level that was normal before the COVID-19 pandemic when commercial real estate broke records as companies attempted to adjust to supply chain issues by onshoring manufacturing and beefing up their supply chain by adding logistics and distribution centers.

“Today, the demand is still there. The pre-pandemic market was still relatively healthy,” Bleiler said

Even with a slowdown in construction, inventory remains tight, averaging 6.4% across the corridor.

E-commerce and manufacturing accounted for almost all new leasing activity in the first quarter of 2024.

Some regions had tighter inventory than others.

Because of the lack of certain types of inventory there were few large leases -- and other barriers to entry, the Lehigh Valley region had a slightly higher vacancy rate of 7.2%, which Bleiler said was a health level.

Meanwhile in the Harrisburg region, inventory has dropped, and the vacancy rate is down to a tight 4.2%.

“The lack of inventory and the fact that pricing in the Lehigh Valley is getting closer to that of the New Jersey market is pushing companies west, which is driving the growth in the Harrisburg region,” Bleiler said.

Rents have remained relatively stable along the corridor, although Bleiler said he expects some rents will be increasing this year.

Currently, the Lehigh Valley market is seeing Class A industrial rents ranging from $11 to $12 per square foot.

Harrisburg is significantly less expensive with rents ranging from $8 to 9$ per square foot.

Bleiler expects the balance in the market will continue.

The construction pipeline in the last quarter was smaller than pre-pandemic averages and fewer land sales suggest it will remain constrained in the near term, which should ease any fears of over-supply.

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