Q INDUSTRIAL MARKET ISSUE # 002 LEHIGH VALLEY COMMERCIAL REAL ESTATE REPORT IN THIS ISSUE. One of the core principles of the Lehigh Valley

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1 ISSUE # 002 LEHIGH VALLEY COMMERCIAL REAL ESTATE REPORT INDUSTRIAL MARKET 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 industrial, warehouse, and flex space markets. IN THIS ISSUE Market Summary... 2 Market... 2 Current Conditions... 2 Broker Perspective, Robert L. Kiel... 2 Developer Perspective, Martin Till... 2 Net Absorption ( Market)... 3 Broker Perspective, Mike Adams... 3 Asking Rent and Vacancy... 3 Q Commercial / Sales Top Transactions Q Distribution of Sales Transactions... 6 Range of All Sales Transactions... 6 Employment by Industry... 7 Developer Perspective, Sean Bleiler... 7 Employment Growth by Industry... 7 Unemployment Rate... 8 Workforce Employment Growth... 8 Q

2 MARKET SUMMARY 2015 Q Q Q Q Q2 Rentable Building Area (RBA) 103.4M SF 102.6M SF 101.8M SF 101.8M SF 100.3M SF Number of Buildings 1,698 1,695 1,694 1,693 1,691 Vacancy Percentage 6.40% 6.28% 6.66% 7.21% 7.45% Net Absorption SF 1,136.1 SF SF 1,629.6K SF 1,642.2K SF Average Asking Rent (Price/SF) $4.82 $4.81 $4.73 $4.70 $4.67 RBA Under Construction 3,256.5K SF 3,571.2K SF 3,691.4K SF 1,205.5K SF 2,698.4K SF RBA Delivered 776.7K SF 800.3K SF 295.3K SF K SF 1,959.9K SF INDUSTRIAL MARKET BUILDING SIZE 0-100KSF 100, KSF 500KSF + Total Number of Buildings 1, ,707 RBA 33,850,743 38,111,362 32,265, ,229,362 Vacancy Rate 6.6% 9.4% 2.5% 6.35% As of June 30, CURRENT CONDITIONS The national industrial vacancy rate is estimated to be 8.4 percent, with predictions of an 8.1 percent vacancy rate in (Source: NAR Commercial Research) The Lehigh Valley is experiencing a more favorable industrial market, with vacancy rates averaging 6.35 percent overall, asking rental rates increasing, and planned new building development. The larger industrial space (buildings in excess of 500,000 SF) are experiencing the tightest market, with only 2.5 percent vacant. E-commerce has been a significant contributor to the industrial space market activity, reflecting the Lehigh Valley s access to markets, superior infrastructure, and favorable business climate. BROKER PERSPECTIVE Over the last 28 years, we have built an industrial portfolio of over 25 million square feet. Approximately 70 percent was done on a speculative basis. Our portfolio is 99 percent leased and we will be developing another 5.2 million square feet over the next 5 years to meet the tremendous market activity. Robert L. Kiel Senior Vice President, City Manager Liberty Property Trust DEVELOPER PERSPECTIVE The industrial market in the Lehigh Valley continues to benefit from our geographical location. Our ability to customize a design/build solution for our client needs has allowed us to partner with National and International firms looking to locate or expand within the Lehigh Valley. We expect to see user demand in the Lehigh Valley continue to be strong. Martin Till Regional President J.G. Petrucci Co. 2 COMMERCIAL REAL ESTATE REPORT Q2 2015

3 NET ABSORPTION (INDUSTRIAL MARKET) 1500K Net Absorbtion (SF) 1000K 500K 0K -500K QTD BROKER PERSPECTIVE Our office is seeing strong interest from manufacturing companies located outside of Pennsylvania, especially from New Jersey where high taxes are making it difficult for them to conduct business. The problem now is the lack of inventory to keep up with demand. Mike Adams Senior Vice President NAI Summit ASKING RENT AND VACANCY Average Asking Rent (Price/SF) $4.85 $4.75 $4.65 $4.55 $4.45 $4.35 $4.25 Vacancy (%) Avg = $ QTD 12% 10% 8% 6% 4% 2% 0 Vacancy (%) Source: The statistical analysis in this report has been conducted using information from Costar, the largest and most comprehensive database of commercial real estate information. COMMERCIAL REAL ESTATE REPORT Q

4 Q COMMERCIAL / INDUSTRIAL SALES TOP TRANSACTIONS 9677 West Hills Ct. $20,345, Mill Rd. $12,755, Tilghman St. Photo Credits: Lehigh Valley Economic Development Corporation PROPERTY BUYER OF RECORD SELLER OF RECORD 9677 West Hills Ct. Duke Realty LP WHBC Building B LP 1100 Mill Rd. IPT Iron Run, LLC Carpenter Co 6736 Tilghman St. IPT Iron Run Dc II LLC Seagis Iron Run Associates LP 3500 High Point Blvd. Steve Mohle Properties Bethlehem Lvcc 3450 & 3500 LP 146 N Commerce Way. FP Foods Realty Pa LLC Transilwrap Co Inc 1788 Vultee St. Carpenters Joint Apprenticeship and Training Fund Victaulic Company Of America 4555 Hamilton Blvd. Ciocca Properties LP Becker Robert R & Jean D 16 Centre Sq. Boutique One Properties, LLC Nk Investments LLP 2591 Mitchell Ave. JD Allentown II LLC Landmesser Robert 7248 Penn Dr. Silver Spring Properties LLC 7248 Penn Drive Associates LLC 5332 W Tilghman St. Billig Land Company James E. Blewitt & Mark D Swan 2400 Northampton St. Jerc Partners XXIX LLC Bimbo Bakeries USA Inc 30 N 4th St. 30 North Fourth LP Penn Jersey Advance Inc 682 N Brookside Rd. Sky Brookside Investment LLC Wescosville Real Estate Assocs Source: Lehigh and Northampton County Real Estate Tax Records, LVEDC Research 4 COMMERCIAL REAL ESTATE REPORT Q2 2015

5 $9,423, N Commerce Way PRICE $4,900, Vultee St. LOCATION $1,925,000 CLASSIFICATION $20,345,100 Weisenberg Township $12,755,000 Upper Macungie Township $9,423,272 Upper Macungie Township $6,350,000 Hanover Township (Northampton County) $4,900,000 Hanover Township (Northampton County) $1,925,000 Allentown $1,900,000 Lower Macungie Township $1,650,000 Easton $1,150,000 Allentown $1,101,000 Upper Macungie Township $975,000 Upper Macungie Township $950,000 Palmer Township $950,000 Easton $950,000 Lower Macungie Township COMMERCIAL REAL ESTATE REPORT Q

6 The Lehigh Valley s GDP is $34.3 billion, ranking 75th out of the 381 largest U.S. MSAs. It is higher than that of the state of Vermont and 102 other countries in the world. Q DISTRIBUTION OF SALES TRANSACTIONS Sales Price $337K $10,000K $20,000K $34,000K Type Commercial* *Commercial transactions include office, retail, and land. Source: Lehigh and Northampton County Real Estate Tax Records, LVEDC Research The finance, insurance and real estate sector is the largest contributor to the regional GDP ($4.83 billion), followed by manufacturing ($4.77 billion) and professional and business services ($4.71 billion). RANGE OF ALL SALES TRANSACTIONS Under $500K 13 $500K but less than $1M 7 $1M but less than $2M 5 $2M but less than $5M 1 $5M but less than $10M Over $10M Transactions Source: Lehigh and Northampton County Real Estate Tax Records, LVEDC Research Commercial 6 COMMERCIAL REAL ESTATE REPORT Q2 2015

7 EMPLOYMENT BY INDUSTRY The health care industry remains the Lehigh Valley s top employer, making up 18.9 percent of total employment within the region for the second quarter of % Retail Trade 15.2% Professional and Business Services 6.6% Transportation and Utilities 4.4% Wholesale 4.3% Other Services 4.2% Mining, Logging, Source: BLS Current Employment Statistics (CES) and Construction 3.9% Trade Education 4.8% Financial Activities 11.4% Manufacturing 18.9% Health 2.0% Information 11.6% Leisure and Hospitality 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 DEVELOPER PERSPECTIVE On the industrial front, the market continues to see strong fundamentals for both users and investors. Speculative construction is driving the market and many buildings are leasing prior to completion. National users, in particular e-commerce companies, are seeking locations in the Lehigh Valley to service the New York metro market with same day or next day service. Sean Bleiler Senior Vice President CBRE EMPLOYMENT GROWTH BY INDUSTRY The leisure and hospitality industry, and construction, have shown the largest percentage of growth in June 2015 compared to June 2014, increasing by 10 and 3 percent, respectively. Industry Name 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 -1% -1% -1% -2% 3% 0% 2% 0% 0% 10% 0% 5% 10% A-B-E MSA, June 2015, 12-Month % Change. Source: BLS Current Employment Statistics (CES) COMMERCIAL REAL ESTATE REPORT Q

8 UNEMPLOYMENT RATE The Lehigh Valley s unemployment rate Is 5.5 percent as of June 2015, seasonallyadjusted. That figure is down from 6.2 percent last year. The decline in the region s unemployment rate follows largely the same pattern as the national unemployment rate, which is also 5.5 percent as of June % 1.5% 1.0% 0.5% 0.0% -0.5% 10% 9% 8% 7% 6% 5% Lehigh County & Northampton County Lehigh County & Northampton County WORKFORCE EMPLOYMENT GROWTH Seasonally-adjusted figures. Source: PA Center for Workforce Information & Analysis (CWIA) United States Total Nonfarm, Seasonally Adjusted, 12-Month % Change. Source: BLS Current Employment Statistics (CES) United States 2015 Lehigh Valley Economic Development Corporation. All Rights Reserved LVEDC CRE Report designed by Michelle Chrin Avenue C, Suite 200 Bethlehem, PA Phone: Fax: Lehigh Valley Come here. Grow here. Start here.

First Quarter Industrial Market Report 2014

First Quarter Industrial Market Report 2014 Leasing Activities Highlights: Total Net Absorption 288,886 SF Total Inventory 107,654,999 SF Overall Rental Rate $4.55/SF/YR Total Vacancy Rate 6.20% Under