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NORTHEAST SNAPSHOT, NOVEMBER 2006
Lehigh Valley, Pennsylvania Multifamily Market
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Marshall Rosen, managing director, the Solomon Organization.
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During the past several years, Lehigh Valley has seen rapid residential growth in the form of new construction and the rehabilitation/repositioning of existing rental housing product. Many of the major national builders are making their presence known within the Lehigh Valley market place. The Toll Brothers have been a major presence for quite some time in the area, and recently, national builders such as D.R. Horton and Centex Homes have been developing in the region.
The region itself has seen a substantial shift in development with the majority taking place in Bethlehem and Allentown and the suburbs surrounding those cities. Many years ago, Lehigh Valley was known for its industrial-based economy, but because of smart planning by the local government, the area has been going through a substantial shift during the last 20 to 25 years. This careful planning has brought a mix of businesses into the region, most notably the entrance of high-tech businesses. Currently, the Lehigh Valley area boasts more than 11 million square feet of warehouse and distribution space.
The network of highways that run through the region have also been an important factor in aiding development in the region. Route 78, Route 22, Route 80 and specifically the Northeast extension allow for easy access to major markets such as the northern New Jersey market, East into New York City, South into Philadelphia, North up into Wilkes-Barre and upstate New York and further West into Pennsylvania.
Another catalyst for development in the area is the demand for more affordable housing. As affordability becomes more of a factor, Lehigh Valley is experiencing a migration from New Jersey over the Delaware River and into Pennsylvania. This demand has caused a surge in single-family and multifamily home construction. Families are moving into Lehigh Valley because they can buy a single-family home for what they would pay for a townhome in urban areas. However, due to the rising interest rates, many first-time home buyers are being more cautious and continuing to rent for a few more years rather than jump right into the housing market. Thus, occupancy rates have continued to increase, and the area has seen a rise in new rental housing. Rental rates range from approximately $700 per month for a one-bedroom to $1,500 per month for a new townhome. Due to the natural migration that has been occurring, development is continuing to move further West. Western suburbs of Allentown and the Route 222 corridor are attracting a fair amount of attention in part to the development of new housing. Route 78 and Route 22 are also areas to keep an eye on for development in the future because of their easy access to bigger cities in northern New Jersey and the Newark and Parsippany, New Jersey area, all of which have become notable corporate/employment hubs. The rental market in Lehigh Valley will certainly continue to grow and become tighter. We will begin to see rent increases and occupancy rates running very high as interest rates continue to creep up.
— Marshall Rosen is the managing director of the Solomon Organization.
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