E-Commerce Hubs Shift Ground — WSJ

Lehigh Valley in Pennsylvania offers retailers proximity to major markets

By Robbie Whelan 
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The rise of online shopping is forcing warehouse builders to redraw the map of logistics hubs on the East Coast.

During the weekend, FedEx Ground, one of the largest transporters of parcels and other shipments, broke ground for its largest facility in the country, an 800,000-square-foot automated distribution center in Allen Township, Pa., adding a large chunk of space to the cluster of logistics real estate in the state’s Lehigh Valley area.

“E-commerce is really changing the shape of the market,” said Perry Colosimo, a FedEx spokesman, in a written statement. “We conducted an exhaustive search across three states for the right location that would best enable us to meet this growing demand for our services … The Northeast region is a busy transportation corridor because of its population density and high concentration of businesses, and that trend is projected to continue.”

Historically, the area around the central Pennsylvania towns of Harrisburg and York has hosted large clusters of warehouse space because of light zoning restrictions, access to several large city population centers and ample cheap land to build on. But in the last five years, as online retailers have begun to focus more on two-day and same-day package delivery, warehouse development in the Lehigh Valley, which is to the north and closer to New York City, has surged, according to brokerage CBRE Inc.

Since the end of the Great Recession in the second quarter of 2010, no U.S. industrial market has grown as fast as the Interstate-78/Interstate-81 corridor, which includes the Lehigh Valley and parts of Central Pennsylvania, but excludes the Philadelphia market. Developers have added 56 million square feet of space, increasing the size of the market by 25% over that period, exceeding double-digit percentage growth in Houston; Columbus, Ohio; and the Inland Empire area east of Los Angeles.

Tenants including Wal-Mart Stores Inc., Dollar General Corp., Uline Inc., Ocean Spray and PetSmart Inc. have added nearly 7 million square feet of distribution space in the last three years. This year alone, Samsung Electronics Co., Stitch Fix and Isuzu Motors Ltd. have signed large warehouse leases in the area.

“As supply chains have become much more heavily focused on getting access to highest number of people in the shortest period of time, there’s been a big push to try and create an equivalent of the Inland Empire on the East Coast,” said David Egan, CBRE’s head of industrial and logistics research for the Americas. “The Lehigh Valley is really where it’s all sprung up.”

Satish Jindel, a shipping consultant based in Pittsburgh who helped build FedEx’s ground network, said the new distribution center in Allen Township is in an appealing location because of its proximity to the large population centers of New York and northern New Jersey, but also has access to airfreight facilities at Lehigh Valley International Airport and logistics companies that have set up shop all over the area.

“It’s a recognition of the way e-commerce is playing a role. It’s going to make it easy for a lot of big shippers to bring big volume to them at that hub, so they can support next-day and two-day delivery as well,” Mr. Jindel said. “If they don’t expand their networks, they’ll lose out on the growth of e-commerce.”

Write to Robbie Whelan at robbie.whelan[a]wsj.com

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