lehigh valley commercial real estate report ......commercial real estate report q3 2015 3 market...

Q3 2015www.lehighvalley.org

LEHIGH VALLEY COMMERCIAL REAL ESTATE REPORT

OFFICE, INDUSTRIAL & FLEX MARKETS

ISSUE # 003

One of the core principles of the Lehigh Valley Economic Development Corporation (LVEDC) is to serve as the leading source of economic data and market intelligence on the Lehigh Valley’s economic assets and resources to serve our economic strategies, marketing efforts and the needs of our stakeholders.

To that end, LVEDC is preparing a series of quarterly reports about the real estate climate in the Lehigh Valley.

This report will focus on the region’s office, industrial, and flex space markets.

IN THIS ISSUECurrent Conditions ................................................ 2

Market Summary ................................................ 2-3

Broker Perspective (Cindy Feinberg) .................... 3

Net Absorption ................................................... 4-5

Asking Rent and Vacancy .................................. 5-6

Q3 2015 Distribution of Sales Transactions .......... 7

Range of All Sales Transactions ............................ 7

Q3 2015 Sales Top Transactions ....................... 8-9

Employment by IndustryYear-Over-Year .................................................... 10

Employment Growth by Industry ......................... 10

Unemployment Rate ............................................ 11

Workforce Employment Growth ........................... 11

2 COMMERCIAL REAL ESTATE REPORT • Q3 2015

MARKET SUMMARY (OFFICE)2015 Q3 2015 Q2 2014 Q3

A Inventory Bldgs 51 51 50

Inventory SF 5.85M 0.21M 5.64M

Deliveries SF 5.85M

Vacant SF Percent 21.03% 20.80% 18.37%

B Inventory Bldgs 579 579 575


Deliveries SF 0.00M 0.02M 0.00M


C Inventory Bldgs 764 764 764




Combined Inventory Bldgs 1,394 1,394 1,389




Source: CoStar, LVEDC Research

REAL ESTATE CLASS

CURRENT CONDITIONS

Overall, the commercial real estate market fundamentals continue to remains strong across the office, industrial and flex markets.

The national office vacancy rates, as reported the Q3 2015 NAR Commercial Real Estate Outlook report, have increased from 14.9% in Q4 2014 to 16.0% in Q3 2015. The Lehigh Valley office vacancy rate is significantly lower than the national average, and has improved from 11.79% in Q4 2014 to 10.66% in Q3 2015, with asking rental rates remaining relatively steady.

The industrial real estate market remains strong in the Lehigh Valley, with 500KSF building vacancy rates at 1.2%. Medium and smaller buildings continue to have low vacancy rates as well. This sector, in particular, is poised to gain new inventory in the next few quarters, as distribution and logistics factors favor the Lehigh Valley location.

The flex market consists of 241 buildings, and a total of 6.72M SF of space. Flex space vacancy rates remain low at 4.5%, similar to the vacancy in 2014.

3COMMERCIAL REAL ESTATE REPORT • Q3 2015

MARKET SUMMARY (INDUSTRIAL)2015 Q3 2015 Q2 2014 Q3

500K Plus (SF) Inventory Bldgs 44 44 43




100K to 499K (SF) Inventory Bldgs 183 181 177




25K to 99K (SF) Inventory Bldgs 430 430 430




Less Than 25K (SF) Inventory Bldgs 816 816 816




SF RANGE


MARKET SUMMARY (FLEX)2015 Q3 2015 Q2 2014 Q3

Combined Inventory Bldgs 241 241 241




REAL ESTATE CLASS


BROKER PERSPECTIVEThe Lehigh Valley continues to see strength in the commercial, industrial and multi-family segments of the market. We expect this to continue in 2016 due to our location and the strength our economy.

Cindy FeinbergCo-Founder, Feinberg Real Estate Advisors


NET ABSORPTION (OFFICE)

Q1

Q2

Q3

Q4

QTD

-350K-300K-250K-200K-150K-100K-50K

0K50K

100K150K200K250K300K350K

Net

Abs

orpt

ion

(SF)

Net

Abs

orpt

ion

(SF)

Total Net Absorption (O ce)

A B CReal Estate Class

-500K

-250K

0K

250K

500K

750K

1000K

1250K

1500K

1750K

Total Net Absobtion (Industrial)

-75K

-50K

-25K

0K

25K

50K

75K

Total Net Absobtion (Flex)

1Q 2Q 3Q

4Q 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q 1Q

2Q

3Q 4Q 1Q 2Q 3Q 4Q

1Q

2Q

QTD

-500K

0K

500K

1000K

1500K

Net

Abs

orbt

ion

(SF)

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012 Q

1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015

Q1

Q2

Q3

Q4


Flex CombinedReal Estate Class

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015

Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015

NET ABSORPTION (INDUSTRIAL)

Q1

Q2

Q3

Q4

QTD

-350K-300K-250K-200K-150K-100K-50K

0K50K

100K150K200K250K300K350K

Net

Abs

orpt

ion

(SF)

Net

Abs

orpt

ion

(SF)



-500K

-250K

0K

250K

500K

750K

1000K

1250K

1500K

1750K


-75K

-50K

-25K

0K

25K

50K

75K


1Q 2Q 3Q

4Q 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q 1Q

2Q

3Q 4Q 1Q 2Q 3Q 4Q

1Q

2Q

QTD

-500K

0K

500K

1000K

1500K

Net

Abs

orbt

ion

(SF)

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012 Q

1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015

Q1

Q2

Q3

Q4



2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015

Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015




$15

$18

$20

$23

$25

Offi

ce G

ross

Ren

t Ove

rall

5%

10%

15%

20%

Vaca

nt S

F Pe

rcen

t

$14

$26

6%

21%

Asking Rent & Vacancy (O ce)

Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015

A B C CombinedReal Estate Class

Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015

Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015


$3.75

$4.00

$4.25

$4.50

$4.75

$5.00

NN

N R

ent O

vera

ll

5%

10%

15%

20%

25%30%

Vaca

nt S

F Pe

rcen

t

$3.80

$4.99

3%

27%

Asking Rent & Vacancy (Industrial)

$8.00$8.50$9.00$9.50

$10.00$10.50$11.00$11.50

NN

N R

ent O

vera

ll

3.00%

4.50%

6.00%

7.50%

9.00%

Vaca

nt S

F Pe

rcen

t

$7.95

$11.12

3.20%

9.40%

Asking Rent & Vacancy (Flex)


ASKING RENT AND VACANCY (OFFICE)

NET ABSORPTION (FLEX)

Q1

Q2

Q3

Q4

QTD

-350K-300K-250K-200K-150K-100K-50K

0K50K

100K150K200K250K300K350K

Net

Abs

orpt

ion

(SF)

Net

Abs

orpt

ion

(SF)



-500K

-250K

0K

250K

500K

750K

1000K

1250K

1500K

1750K


-75K

-50K

-25K

0K

25K

50K

75K


1Q 2Q 3Q

4Q 1Q 2Q 3Q 4Q

1Q 2Q 3Q 4Q 1Q

2Q

3Q 4Q 1Q 2Q 3Q 4Q

1Q

2Q

QTD

-500K

0K

500K

1000K

1500K

Net

Abs

orbt

ion

(SF)

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015

Q1

Q2

Q3

Q4



2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015

Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015




$15

$18

$20

$23

$25

Offi

ce G

ross

Ren

t Ove

rall

5%

10%

15%

20%

Vaca

nt S

F Pe

rcen

t

$14

$26

6%

21%


Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015


Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015

Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015


$3.75

$4.00

$4.25

$4.50

$4.75

$5.00

NN

N R

ent O

vera

ll

5%

10%

15%

20%

25%30%

Vaca

nt S

F Pe

rcen

t

$3.80

$4.99

3%

27%


$8.00$8.50$9.00$9.50

$10.00$10.50$11.00$11.50

NN

N R

ent O

vera

ll

3.00%

4.50%

6.00%

7.50%

9.00%

Vaca

nt S

F Pe

rcen

t

$7.95

$11.12

3.20%

9.40%



ASKING RENT AND VACANCY (INDUSTRIAL)


$15

$18

$20

$23

$25

Offi

ce G

ross

Ren

t Ove

rall

5%

10%

15%

20%

Vaca

nt S

F Pe

rcen

t

$14

$26

6%

21%


Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015


Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015

Q1

Q2

Q3

Q4

2010

Q1

Q2

Q3

Q4

2011

Q1

Q2

Q3

Q4

2012

Q1

Q2

Q3

Q4

2013

Q1

Q2

Q3

Q4

2014

Q1

Q2

Q3

2015


$3.75

$4.00

$4.25

$4.50

$4.75

$5.00

NN

N R

ent O

vera

ll

5%

10%

15%

20%

25%30%

Vaca

nt S

F Pe

rcen

t$3.80

$4.99

3%

27%


$8.00$8.50$9.00$9.50

$10.00$10.50$11.00$11.50

NN

N R

ent O

vera

ll

3.00%

4.50%

6.00%

7.50%

9.00%

Vaca

nt S

F Pe

rcen

t

$7.95

$11.12

3.20%

9.40%



ASKING RENT AND VACANCY (FLEX)



Sold Price$0.07M$5.00M

$10.00M$15.00M$17.58M

ClassificationO ceIndustrialFlex

0 1 2 3 4 5 6 7 8 9 10Transactions

Under $500K$500K but less than $1M

$1M but less than $2M$2M but less than $5M

$5M but less than $10MOver $10M 3

3

5

7

22

22

1

1

11

Range of All Q3 Sales Transactions

O ce Industrial Flex

Q3 2015 DISTRIBUTION OF SALES TRANSACTIONS

RANGE OF ALL SALES TRANSACTIONS

The Lehigh Valley’s GDP is $35.4 billion, ranking 75th out of the 381 largest U.S. MSAs. It is higher than that of the state of Vermont and 94 other countries in the world.

The finance, insurance and real estate sector is the largest contributor to the regional GDP ($5.24 billion), followed by professional and business services ($5.01 billion), and manufacturing ($4.95 billion).

Source: Lehigh and Northampton County Real Estate Tax Records, LVEDC Research



Q3 2015 COMMERCIAL/INDUSTRIAL REAL ESTATE SALES TRANSACTIONS OVER $800K

7535 Windsor Dr $17,583,000 7350 Tilghman St $12,184,000

Photo Credits: Lehigh Valley Economic Development Corporation


PROPERTY BUYER OF RECORD SELLER OF RECORD PRICE LOCATION CLASSIFICATION

7535 Windsor Dr* Brookwood Philadelphia I LLC Et AL Atlantic American Land Develop LLC $17,583,000 Upper Macungie Township Office

7350 Tilghman St* Brookwood Philadelphia I LLC Et AL IR Northlight II Associates LLC $12,184,000 Upper Macungie Township Office

7450 Tilghman St* Brookwood Philadelphia I LLC Et AL Atlantic American Land Develop LLC $10,897,000 Upper Macungie Township Office

6990 Snowdrift Dr (A&B)* Brookwood Philadelphia I LLC Et AL Atlantic American Land Develop LLC $8,568,000 Upper Macungie Township Office

6575 Snowdrift Dr* Brookwood Philadelphia I LLC Et AL Iron Run LTD Partnership V $5,547,000 Upper Macungie Township Flex

7150 Windsor Dr* Brookwood Philadelphia I LLC Et AL Iron Run Venture II LLC $5,349,000 Upper Macungie Township Office

7360 Windsor Dr* Brookwood Philadelphia I LLC Et AL Atlantic American Land Develop LLC $5,250,000 Upper Macungie Township Flex

7248 Tilghman St* Brookwood Philadelphia I LLC Et AL Iron Run LTD Partnership $4,755,000 Upper Macungie Township Flex

7310 Tilghman St* Brookwood Philadelphia I LLC Et AL G & I VI 7310 Tilghman FE LLC $4,359,000 Upper Macungie Township Office

7010 Snowdrift Dr* Brookwood Philadelphia I LLC Et AL Atlantic American Land Develop LLC $3,863,000 Upper Macungie Township Office

1611 Pond Rd** P4-DTS LLC & P4 DSS LLC Paragon Partners LP $2,950,000 South Whitehall Township Office

33 E Minor St / 151 E Minor St Borough of Emmaus Rodale Inc $2,950,000 Emmaus Borough Office

1611 Pond Rd** P4-DTS LLC Tallman Hudders & Sorrentino Real Estate Partnership $2,216,000 South Whitehall Township Office

3100 Charlotte Ave Bermuda Ridge LLC Exelis Inc $2,000,000 Palmer Township Industrial

1611 Pond Rd** P4-DTS LLC Paragon Partners LP $1,744,000 South Whitehall Township Office

826 Delaware Ave Jane Street LLC AG Real Estate Investments LLC $935,000 Fountain Hill Office

740 N Fenwick St AC Drive-In Holdings LLC Allentown Classic Motor Car $934,100 City of Allentown Industrial

3971 Independence Dr Westeros LLC BR Holding Co Inc $905,000 North Whitehall Township Industrial

3320 Hamilton Blvd Bottom-Down Leasing LLC Wood Family Real Estate LLC $860,000 South Whitehall Township Industrial

* These properties are part of a portfolio sale** Three separate office condominiums were sold from within the same property


Q3 2015 COMMERCIAL/INDUSTRIAL REAL ESTATE SALES TRANSACTIONS OVER $800K


PROPERTY BUYER OF RECORD SELLER OF RECORD PRICE LOCATION CLASSIFICATION

7535 Windsor Dr* Brookwood Philadelphia I LLC Et AL Atlantic American Land Develop LLC $17,583,000 Upper Macungie Township Office

7350 Tilghman St* Brookwood Philadelphia I LLC Et AL IR Northlight II Associates LLC $12,184,000 Upper Macungie Township Office

7450 Tilghman St* Brookwood Philadelphia I LLC Et AL Atlantic American Land Develop LLC $10,897,000 Upper Macungie Township Office

6990 Snowdrift Dr (A&B)* Brookwood Philadelphia I LLC Et AL Atlantic American Land Develop LLC $8,568,000 Upper Macungie Township Office

6575 Snowdrift Dr* Brookwood Philadelphia I LLC Et AL Iron Run LTD Partnership V $5,547,000 Upper Macungie Township Flex

7150 Windsor Dr* Brookwood Philadelphia I LLC Et AL Iron Run Venture II LLC $5,349,000 Upper Macungie Township Office

7360 Windsor Dr* Brookwood Philadelphia I LLC Et AL Atlantic American Land Develop LLC $5,250,000 Upper Macungie Township Flex

7248 Tilghman St* Brookwood Philadelphia I LLC Et AL Iron Run LTD Partnership $4,755,000 Upper Macungie Township Flex

7310 Tilghman St* Brookwood Philadelphia I LLC Et AL G & I VI 7310 Tilghman FE LLC $4,359,000 Upper Macungie Township Office

7010 Snowdrift Dr* Brookwood Philadelphia I LLC Et AL Atlantic American Land Develop LLC $3,863,000 Upper Macungie Township Office

1611 Pond Rd** P4-DTS LLC & P4 DSS LLC Paragon Partners LP $2,950,000 South Whitehall Township Office

33 E Minor St / 151 E Minor St Borough of Emmaus Rodale Inc $2,950,000 Emmaus Borough Office

1611 Pond Rd** P4-DTS LLC Tallman Hudders & Sorrentino Real Estate Partnership $2,216,000 South Whitehall Township Office

3100 Charlotte Ave Bermuda Ridge LLC Exelis Inc $2,000,000 Palmer Township Industrial

1611 Pond Rd** P4-DTS LLC Paragon Partners LP $1,744,000 South Whitehall Township Office

826 Delaware Ave Jane Street LLC AG Real Estate Investments LLC $935,000 Fountain Hill Office

740 N Fenwick St AC Drive-In Holdings LLC Allentown Classic Motor Car $934,100 City of Allentown Industrial

3971 Independence Dr Westeros LLC BR Holding Co Inc $905,000 North Whitehall Township Industrial

3320 Hamilton Blvd Bottom-Down Leasing LLC Wood Family Real Estate LLC $860,000 South Whitehall Township Industrial

1611 Pond Rd $2,216,000 3100 Charlotte Ave $2,000,000


EMPLOYMENT BY INDUSTRY

3.7%Education

2.0%Information

4.3%Mining, Logging, and Construction

4.2%Other Services

15.3%Professional

and Business Services

4.4%Wholesale

Trade 4.7%Financial Activities

18.8%Health

12.1%Leisure

and Hospitality

11.3%Manufacturing

12.7%Retail Trade

6.7%Transportation

and Utilities

Industry Name

Education

Financial Activities

Health

Information

Leisure and Hospitality

Manufacturing

Mining, Logging, and Construction

Other Services

Professional and Business Services

Retail Trade

Transportation and Utilities

Wholesale Trade

The health care industry remains the Lehigh Valley’s top employer, making up 18.8 percent of total employment within the region for the second quarter of 2015.

YEAR-OVER-YEAR EMPLOYMENT GROWTH BY INDUSTRY

-10% -5% 0% 5% 10% 15%12-Month % Change

Total Nonfarm*

Mining, Logging, and Construction

Manufacturing

Trade, Transportation, and Utilities

Information

Financial Activities

Professional and Business Services

Education and Health Services

Leisure and Hospitality

Other Services

Government

0.3% 1,200 Jobs

2.2% 300 Jobs

0.0% 0 Jobs

0.1% 100 Jobs

0.0% 0 Jobs

1.3% 200 Jobs

-0.6% -300 Jobs

-0.7% -500 Jobs

10.6% 3,800 Jobs

-1.5% -200 Jobs

-5.6% -2,200 Jobs

Industry Name

Source: Lehigh Valley MSA, Sept 2015, 12-Month % Change (Preliminary) Source: U.S. Bureau of Labor Statistics* 355.9K Jobs

The leisure and hospitality industry has grown 10.6 percent year-over-year from the third quarter of 2015 to the third quarter of 2014. The mining, logging, and construction industry has grown 2.2 percent in that time period.

Lehigh Valley MSA Source: U.S. Bureau of Labor Statistics


Lehigh Valley MSA United States

2010 2011 2012 2013 2014 2015

-0.5%0.0%0.5%1.0%1.5%2.0%

UNEMPLOYMENT RATE

2009 2010 2011 2012 2013 2014 2015 2016

5%

6%

7%

8%

9%

10%

Lehigh County & Northampton County United States

WORKFORCE EMPLOYMENT GROWTH

The Lehigh Valley’s unemployment rate was 4.9 percent at the end of third quarter of 2015, seasonally-adjusted. That figure is down 0.6 percent from this time last year.”

The 4.9 percent regional unemployment rate is slightly better than the national unemployment rate, which was 5.1 percent as of the end of the third quarter of 2015.

Seasonally-adjusted figures.Source: PA Center for Workforce Information & Analysis (CWIA)

Total Nonfarm, Seasonally Adjusted, 12-Month% Change. Source: U.S. Bureau of Labor Statistics

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lehigh valley commercial real estate report ......commercial real estate report q3 2015 3 market...

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