The dramatic resurgence of commercial development that
revitalized downtown Allentown the past few years has reached a pivotal point.
While restaurants and retail developments have taken off
following the opening of PPL Center two years ago, construction of office space
in the city has slowed considerably.
In its place, residential construction, namely upscale
apartments, has taken over as the dominant form of development. And that
growing desire of people to live in downtown is really what's going to drive
the next round of office development in Allentown, officials said.
Millennials and other young executives are showing an
increasing interest in living close to their workplace. Doing so allows them to
participate in nightlife after hours, walk to work, network more easily with
colleagues and shop in local stores, taking part in an authentic live-work-play
environment.
And although construction of offices has slowed in
Allentown, there is still demand, developers said. Furthermore, they are
looking to establish the live-work-play atmosphere in Allentown.
One needs to look no farther than what's happening to the
urban environment of Philadelphia to see a similar effect also taking shape in
Allentown. The scale, size and design of the office buildings going up in
Philadelphia can be seen as an influence on the projects planned for downtown
Allentown.
When this is coupled with the influx of urban millennials
seeking the live-work-play environment, a renewed vigor in office construction
projects could occur in Allentown.
But whether Allentown sees as much significant office growth
as Philadelphia, even on a smaller scale, remains to be seen.
“Employers' ability to retain and attract workers is
impacted by the environments that they are working in,” said J.B. Reilly, CEO
of City Center Investment Corp. His company is the developer behind the bulk of
new multimillion dollar projects in Allentown, including Five City Center and
Tower 6, two office buildings that are planned.
“Young people want to live in an urban environment,”
Reilly said.
Since 2014, Reilly's City Center Investment Corp. has
built and opened multiple buildings employing hundreds of office workers and
featuring many retail and restaurant establishments, as well as developed a
170-unit apartment building. Another City Center apartment building is under
construction and the city this month approved a third for construction.
“Building apartments in downtown goes hand in hand,” he
said.
There has been significant growth in the downtown's
residential developments, namely the Strata luxury apartments across from PPL Center
at Seventh and Hamilton streets and the recent construction of Strata II around
the corner on Sixth Street. Both are City Center projects.
One of the few large office projects under construction,
the expansion of the Butz Corporate Center at Ninth and Hamilton streets, built
by Alvin H. Butz Inc., marked the completion of its third phase this month. The
59,997-square-foot building offers seven floors of office space and one level
of parking.
Company officials say the goal is to attract a variety of
office tenants, including smaller ones.
The building joins a trio of projects in the works for
people looking to work in an urban environment – Landmark Tower, City Center
Five and Tower 6.
While several office development projects in Allentown
have been put on hold, the growth is not necessarily stopping. It's just taking
a little bit longer than expected.
Case in point – it's been 32 years since Bruce Loch
introduced a plan to build a 33-story tower in the city.
In 2013, Loch reintroduced the idea, which he proposed in
1984, and in 2015 earned approval from the city's planning commission.
While construction on the $70 million Allentown Landmark
Tower at the corner of Ninth and Walnut streets has not begun, Loch said he is
confident he can build and fill the tower.
It would be two floors of retail, 24 floors of offices,
seven floors of condominiums and a parking deck. He expects construction to
begin 90 to 120 days after leases are signed.
Loch said he is seeking a major tenant and is exploring
New Jersey, New York, Delaware and Maryland. Interest also is coming from
foreign companies, he added.
“We have a lot of demand; all of our prospects are coming
from the major cities and outside the Lehigh Valley,” said Loch, a Certified
Public Accountant who leads an accounting and consulting firm in South
Whitehall Township. “We've got people really beating the bushes hard. … It
requires a lot of energy and resources.”
The tower would go up across from City Center Investment
Corp.'s planned Five City Center Urban Innovation Campus, which encompasses an
entire block in the Seventh, Eighth and Hamilton street area. It includes a
17-floor tower with mainly offices and some retail on the ground floor and a
19-floor residential tower of 175 apartment units, with office and retail
included.
In downtown Allentown, office demand is still strong,
according to Reilly.
The emergence of Allentown's downtown nightlife, with new
bars and restaurants, is creating an exciting atmosphere, particularly for
young people who live and work in the downtown, Reilly said.
Loch said he remembered when activity on the sidewalks
used to end at 5 p.m., but now on any given weeknight, there are people out and
about, which will feed the growth of offices.
“There's an energy that is really building,” Loch said.
“We are just at the beginning of this. It's going to change the whole dynamic.
We are at the infancy of a major, major rebirth of the third largest city in
Pennsylvania.”
Yet some office spaces haven't filled up, even in the
newly built City Center properties.
As an example, City Center Three, which opened on the 500
block of Hamilton Street in 2015, has two floors of office space available,
Reilly said, who added he is negotiating with a potential tenant.
Banking on additional office growth, City Center recently
bought another office property, The Morning Call building, but Reilly is not
yet marketing that site.
Meanwhile, the construction of Tower 6 is right around
the corner, as demolition of existing buildings could occur in about two weeks.
The 12-story office building will go up at the corner of Hamilton and Sixth
streets and is expected to be finished by early 2018.
“Leasing activity is strong,” Reilly said. “We have
several signed leases, and we are in advanced negotiations with several
companies, as well. That building provides ownership opportunities through the
purchase of condo units.”
This Class-A building model would allow businesses to own
their office units. The classification designates buildings that are
top-of-the-line, high-quality investment properties.
Aside from Serfass Development Partners of North
Whitehall Township, which previously announced its construction firm would
build Tower 6 and could possibly move its office there, no other tenants have
been named.
Five City Center is the next building in line to go up.
“These buildings are all demand-driven; we are talking to
people about that building as well,” Reilly said. “I think we feel good about
the office market. The vacancy rate is very low in the Valley.
“Most of the growth comes from existing businesses.
There's a lot of businesses that are growing, so as a result, there's good
demand across the Valley.”
Expansion of existing office space, such as the Butz
Corporate Center, also shows that office demand has not died.
“We anticipate the end users for this building will be
office-use related but also anticipate that they will be looking for more
contemporary space requirements, meaning less individual offices and more open
space allowing for better office interaction,” said Margaret McConnell,
enterprise marketing manager for Alvin H. Butz.
Work is underway to move United Fiber and Data's sales
headquarters into the building, as well as about 2,500 square feet of “plug and
play” executive office suites. These are for tenants who would like a downtown
office or new enterprise and get their presence in Allentown started
immediately but don't need a ton of general office space, she said.
Final negotiations also are underway for several other
tenants.
Source: LVB
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