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BETHLEHEM, PA-Demand and activity in the Lehigh Valley industrial market are picking up, according to reports from the Philadelphia office of Trammell Crow Co. and locally based Garibaldi Group. TCC principal Paul Torosian says the vacancy rate at the end of this year’s first quarter was 12.8%, a drop of 3% from the previous quarter and a significant 27.2%-slide from first quarter 2003.

Both Torosian and Michael Bartolacci, VP of Garibaldi, expect the increased activity occurring during the first half of this year will continue in the second half. Nevertheless, rental rates are dropping, both agree. “Increased competition and options on a local and regional level will keep deal pricing in the Lehigh Valley market below the $4-per-sf, triple-net threshold for class A distribution space,” Bartolacci predicts.

TCC data shows that average rents dropped to $3.74 per sf during the first quarter of this year, 6% below fourth-quarter 2003′s average of $3.98 per sf, and 12% below first-quarter 2003 rates of $4.25 per sf. “Tenants are beginning to turn over and lock into long-term leases that solidify their existence in the market and are economically beneficial for both occupant and landlord,” Torosian says. “Overall, there is more demand in Lehigh Valley for warehouse and distribution properties,” he adds.

The opening of the Route 33 extension that connects I-78 to Route 22, “has made the Route 33 corridor a desirable location for distribution warehouses and manufacturers,” Bartolacci says. The completed extension connects I-78 all the way north to I-80. Prologis, he notes, is among the national and local developers that have taking positions along the Route 33 corridor for planned industrial parks.

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