Colin McEvoy, Lehigh Valley Economic Development Corporation.
The Lehigh Valley has seen no shortage of success stories in recent months when it comes to the region’s office sector.
The third-largest metropolitan area in Pennsylvania, the Lehigh Valley is located 60 miles north of Philadelphia and 90 miles west of New York City. The region consists of 62 municipalities within Lehigh and Northampton counties, including the cities of Allentown, Bethlehem, and Easton.
Last year, Guardian Life Insurance, one of the nation’s largest mutual life providers, announced it would establish a three-story corporate office building in Hanover Township, Northampton County. That 281,680-square-foot facility is expected to be completed by late 2016 and will house 1,500 employees.
In March, Paychex Inc., a provider of payroll, human resources, retirement, and insurance services, announced it will undertake a $1.3 million expansion of its facility in South Whitehall Township, Lehigh County. That project will nearly double the company’s square footage and will create 100 new jobs.
Many economic factors have contributed to the growth in Lehigh Valley’s office sector. These include its central location, well-developed transportation infrastructure, availability of suitable office space, high relative broadband rank, access to markets, and strong workforce.
All these factors led Atlanta-based Garner Economics to identify high-value business services as one of the four target sectors of the Lehigh Valley after it conducted an analysis of the region. The other target sectors, based on the region’s site-specific economic assets, were high-performance manufacturing, food and beverage processing, and life sciences research and manufacturing.
Garner Economics found the Lehigh Valley’s mix of economic assets align with the high-value business services sector, which includes subsectors such as data processing and hosting, financial transactions, payroll services, administrative management, and consulting services.
These professional business and financial services benefit from the convergence of significant economic and technological forces present in the Lehigh Valley. Companies in these fields must constantly respond to the demands of corporations seeking to adapt to rapid changes in customer expectation, while also desiring to maintain focus on their core business activities.
The Lehigh Valley’s office vacancy rate compares favorably to the rest of the country, while asking rental rates remaining relatively steady. The Lehigh Valley’s office gross rental rate averaged $20.07 per square foot in 2015, compared to about $23 nationally. The average regional rate has remained virtually unchanged for years, hovering around $20 each year since 2011, only slightly higher than the $18.75 rates from 2010.
Another contributing factor to the growth in the Lehigh Valley’s office sector is the Neighborhood Improvement Zone tax district in Allentown. All taxes generated by the 128-acre NIZ, with the exception of school district and city taxes, can be used to pay debt service on any financed improvements within the district. This unique tax incentive has spurred $1 billion in new or proposed development, including the PPL Center hockey arena and five office towers by developer City Center Lehigh Valley. By offsetting construction costs, developers are able to offer business owners below-market rental rates for Class A office space.
— By Colin McEvoy, Communications Director, Lehigh Valley Economic Development Corporation. This article originally appeared in the May 2016 issue of Northeast Real Estate Business magazine.