TCC, Clarion Break Ground on 700 KSF Industrial Project in Lehigh Valley

Trammell Crow Co. and Clarion Partners are one big step closer to bringing 677,000 square feet of Class A industrial space to one of the top industrial markets in the country: Pennsylvania's Lehigh Valley.

Trammell_Crow-Clarion_-_Lehigh_Valley_Industrial__ProjectTrammell Crow Co. and Clarion Partners are one big step closer to bringing 677,000 square feet of Class A industrial space to one of the top industrial markets in the country: Pennsylvania’s Lehigh Valley. The partners recently broke ground on a premier speculative industrial building within the master planned Lehigh Valley Industrial Park VII in Bethlehem, Pa.

TCC and Clarion are undaunted about commencing construction without a pre-lease agreement in place for the project, which will occupy 40 acres and carry the address of 2485 Commerce Center Blvd. It’s all about location.

“Over the last 10 years, Pennsylvania has become the go-to place for big box, or buildings of 500,000 square feet and over, because the available land and cost of building is much lower,” Andrew Mele, a senior vice president with TCC’s Northeast Regional Business Unit, told Commercial Property Executive. “From a tax perspective to transportation, the entire cost structure in Pennsylvania is much lower than in [neighboring] New Jersey.”

And Lehigh Valley is particularly desirable for industrial facilities like 2485 Commerce Center. According to a recent report by commercial real estate services firm CBRE Group Inc., which has been selected to oversee the leasing of the facility, Lehigh Valley is among the top eight big box industrial markets in North America.

“Lehigh Valley is really the closest submarket to those coastal markets of Northern New Jersey, New York, going all the way up to Boston, so it’s the first market you get into geographically in Pennsylvania to put these big box distribution centers in,” Mele said. “All that drives demand for the users, and investors pay attention to where the users go and want to own in those markets.”

However, it’s not so easy for real estate developers to stake a claim in the Lehigh Valley industrial market. “There are higher barriers to entry in Lehigh Valley than in other places in Pennsylvania,” he added. “It’s harder to build, it’s more expensive to build and it takes longer to build, so it weeds out potential competitors who aren’t in it for the long haul. By virtue of that, it becomes more competitive on the acquisition side. You really have to know what you’re doing in Lehigh Valley to get your quality buildings approved.”

TCC and Clarion are not disclosing financial details of the development of 2485 Commerce Center, but the partners will benefit from a coveted economic advantage in the endeavor, given that Lehigh Valley Industrial Park VII is a designated Local Economic Revitalization Zone that provides tax breaks on new construction for a period of up to 10 years.

The construction of 2485 Commerce Center is just one of many projects that TCC and Clarion have taken on as part of a years-long national program focused on the development of new Class A industrial facilities in targeted markets across the U.S. “We are starting another project together within this same venture, South Washington Park in Piscataway, NJ,” Mele added. “It consists of two buildings totaling 540,000 square feet and we’ll be starting that in next 30 to 45 days.”

Construction of 2485 Commerce Center is on track to reach completion in spring 2014.