After seeing availability outpace demand for space during a good portion of 2025, the Lehigh Valley’s industrial building market saw a move in a positive direction during the year’s final quarter.

Commercial real estate company CBRE said the Valley’s net absorption rate in the quarter was 564,896 square feet after seeing negative numbers in the previous quarter. The biggest contributor was Amazon leasing a 526,260-square-foot building in Bethlehem Township.

For the year, the region had more than 2 million square feet of negative absorption. A market has negative net absorption when the square footage of vacated spaces exceeds the square footage of new leases. This results in an increase in the total vacant space available.

CBRE Senior Associate Tucker McBride said the positive activity to end 2025 was coming from third-party logistics and food and beverage groups. The sluggish start to last year was partly a result of economic uncertainty and tariffs.

“I think anytime you have some uncertainty within the markets, things typically, in regards to leases and deal transactions, get delayed,” McBride said. “Deals take a little bit longer to transact and then close at the end of the year.

“You saw some of these larger Fortune 500, 3PLs, food and beverage groups start to enter the market and things started to stabilize heading into 2026.”

Commercial real estate services company Lee & Associates of Eastern Pennsylvania said conditions in the Valley have remained relatively stable compared with late 2024. It also saw improved leasing momentum in the second half of 2025 following a slower start to the year.

“The demand is there and if the measured demand currently in the market lands earlier in 2026, it will stabilize both vacancy and overall availability for the year,” said Heather Krieger, principal and regional research director for the company’s Pennsylvania office.

For the quarter that ended Dec. 31, CBRE said the Lehigh Valley had a vacancy rate of 10.8%, down slightly from 11% in the previous quarter, for industrial buildings, which include warehouses. The region has an inventory of 119.2 million square feet.

For statistical purposes, CBRE rolls the Lehigh Valley into what it calls the I-78/I-81 Corridor along with the eastern part of the state outside of the Philadelphia area. Vacancy rates in the rest of the corridor ranged from 3.7% in Lancaster to 17.4% in Hazleton, with an average of 8.6%.

The average rent per square foot in the Lehigh Valley was about $11.53, down slightly from $11.66 in the previous quarter, but still up from $11.29 at the end of 2024. That average in northern and central New Jersey at the end of the year was $19.27. However, the Valley has the highest rate in the I-78/I-81 corridor.

McBride said some companies are willing to pay higher rent as a trade off for other market factors.

“Rent is a factor, but you also have labor,” McBride said. “There’s other factors that come into play. It’s not just kind of the bottom line on the front end. It’s all case by case. Certain companies are going to be more reliant on board access and distance support, whereas others may not.”

Looking at the big picture, other areas are seeing a lot more development. While the Valley had about 938,195 square feet in the construction pipeline, places such as Hazleton had 4.3 million, the Harrisburg/York area had 2.6 million and Reading had 2.3 million.

McBride said there’s an abundance of inventory in the 200,000-to-300,000-square-foot range in contrast with larger warehouses of 1 million or more square feet in the corridor. He added that landlords are increasingly open to splitting larger buildings to house multiple tenants.

Looking further into 2026, CBRE said construction will slow amid high construction costs and continued barriers to development. Additionally, a lack of available power to meet demand remains a key obstacle for both landlords and tenants.

The Lehigh Valley Planning Commission reviewed about 3.6 million square feet of warehouse projects in 2025 out of 4.5 million square feet overall for industrial plans. A year ago the LVPC reviewed 8.9 million square feet of warehouse projects.

CBRE also looked at current office space trends in the greater Philadelphia area, which includes the Lehigh Valley. The Valley has an inventory of 9.8 million square feet with a vacancy rate of 19%.

For the upcoming year, CBRE forecasted vacancy to peak early in 2026 and then begin declining as conversions and demolitions remove older inventory. Construction remains limited, allowing owners of prime assets to increase rental rates and offer fewer concessions.

Morning Call reporter Evan Jones can be reached at ejones@mcall.com.