Retail Real Estate Insights – Lehigh Valley Submarket Q2 2024

Lehigh Valley Shopping Centers are Filling Fast, Meeting Customer Demand for Convenience and Shopping Local

The post-pandemic shopper is increasingly looking to shop local, preferring the boutique, mom-and-pop businesses. At the same time, they seek the convenience and simplicity offered by large, all-in-one stores like Walmart or online giants like Amazon. This evolving customer behavior presents a unique opportunity for retail brokers and landlords to offer the best of both worlds: local charm with the convenience that shoppers have become accustomed to.

For retail brokers, this shift involves playing the role of tastemaker by curating a mix of retailers that not only complement each other but also enhance the overall shopping experience. It requires understanding market dynamics, identifying customer demand, and finding tenants who add value to the shopping center and the broader community.

Retail real estate in the Lehigh Valley is bouncing back strongly since the pandemic. After years of sitting on vacancies, smaller spaces in convenience centers are filling up fast, reflecting a renewed interest for in-person shopping and dining.

Jennifer Kennedy, an Associate Broker with NAI Summit who specializes in retail, shopping centers, restaurants, and adaptive re-use projects, has been at the forefront of this resurgence. She recently represented the owners at both the MacArthur Convenience Center and The Shops at Bethlehem, managing lease negotiations to bring both centers to nearly full capacity.

“Retail businesses are quick to pivot and meet customer demands,” said Kennedy. “This leads to improvements in customer experience and upgrades to more modern facilities and amenities.”

Retail Centers of all Sizes Experience Activity

MacArthur Convenience Center, located at 3690 Lehigh Street in Whitehall, has long been a hub for small, local businesses and restaurants, with suites averaging around 900 square feet. However, after experiencing a high turnover rate at the end of 2023, the shopping center needed a fresh approach to attract new tenants. Kennedy and her team rose to the challenge, quickly revitalizing the center by filling most of the vacant spaces in just four months. The new mix of tenants, which includes an insurance agency, a Korean chicken and mochi donuts restaurant, and a personal fitness gym, has reinvigorated the shopping experience. The center currently has one 880-square-foot space available.

Similarly, Kennedy represents a much larger shopping center, The Shops at Bethlehem (formerly known as Easton Commons) in Bethlehem Township. Anchored by Giant Food Store, the center was sitting at 40% occupancy when it was acquired by new owners in 2020, right before the beginning of the pandemic. NAI Summit’s brokerage and property management divisions worked together with the owners through the property management, remodeling, and rebranding efforts.

Since 2022, the center has seen significant activity and now receives consistent interest when new spaces become available. Several tenants have renewed their leases, while new additions include two restaurants, a pharmacy, and a 19,000-square-foot department store.

According to a CoStar retail market report from June 2024, “Lehigh Valley’s retail sector reflects its growing population. Retail demand has compressed vacancy from a peak of 5.2% in early 2021 to its current level of 4.4% as of second quarter 2024.”

Stronger retail co-tenancy is driving more foot traffic.

“If you are a restaurant, and there are other restaurants in the area but offering different types of cuisine,” Kennedy explained, “you are going to attract more people, and all of the eateries can benefit. That’s why the Reading Terminal Market and the Allentown Fairgrounds Farmers Market do so well. People come for one eatery, but they return for another.”

Consumers are ready to move on from the pandemic, Kennedy added. “They want to go to restaurants, and they want to go shopping. They are looking for more than the online shopping experience. Retailers are seeing and feeling that customer expectation.”

With the Lehigh Valley’s retail landscape undergoing a resurgence, brokers and landlords have a unique opportunity to shape vibrant, destination-worthy shopping centers. By thoughtfully curating tenant mixes and enhancing customer experiences, they can drive continued growth and make their properties a cornerstone of the community.