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Philadelphia, PA vs. Allentown, PA: Which Is Better for Business?

Published: 10-06-22 Category: General CRE

Specializes in providing actionable insights into the commercial real estate space for investors, brokers, lessors, and lessees. He covers quarterly market data reports, investment strategies, how-to guides, and top-down perspectives on market movements.

As a commercial business owner choosing a location for your operations, there are many factors you must consider for success. Generally, you’ll look for a secure and accessible location that will allow your business to grow.

You should also analyze how much competition is in the area. Depending on your business, this may directly affect where, when, and why you invest your commercial real estate dollars.

It’s also important to see what kind of skill base is common in the area and what employment rates look like. You should feel comfortable knowing that you can hire should you need to bring on more help.

Lastly, you should be familiar with all the expenses associated with owning and operating your business in that area.

Let’s take a look at the differences between commercial real estate in Philadelphia, PA, and Allentown, PA, to determine how your business might fare in both cities.

Population Comparisons

Philadelphia, PA vs. Allentown, PA: Which Is Better for Business

As of 2020, Philadelphia was the largest city in Pennsylvania, with a population of 1,619,355 residents. Although Allentown is the third largest city in Pennsylvania, the population is still much lower: Allentown had a population of 127,407 in 2020.

Both cities have seen growth in their population since the last census in 2020. Philadelphia’s current growth rate is 0.48% annually, while Allentown’s is 0.62% annually.

Average Population Demographics

The median age in Philadelphia is 34.6 years old; 17.9% of Philadelphia residents are between the ages of 20 and 29, with the next highest age range being 16% of residents aged 30 to 39.

As for gender demographics, 53% of Philadelphia residents are female, and 47% are male.

In Allentown, the median age is 31.2 years. The highest age range in the population is also 17% of residents aged 20 to 29. However, the next highest age ranges are younger than those in Philadelphia: 15% of residents are aged 0 to 9 years old and 10 to 19 years old.

52% of Allentown residents are female, and 48% of residents are male.

Both cities have more single residents than married residents.

Average Household Income

The average household income in Philadelphia is $68,379. In comparison, the average household income in Allentown is $56,842.

Philadelphia’s poverty rate is lower than that of Allentown: Philadelphia’s poverty rate is 23.07%, while Allentown’s poverty rate is 25.59%.

Commercial Real Estate Comparisons

Philadelphia’s economy is mostly focused on the healthcare, education, and technology sectors. The city has been bouncing back since the pandemic, and currently, there are new building developments to support the up-and-coming life sciences industry (known as “Cellicon” Valley).

Allentown has a similar focus on these industries, but the city also has many employees in the manufacturing, transportation, and warehousing industries. This is likely because of the construction of new industrial spaces in the area.

Average Commercial Rents

Philadelphia’s market for office space is back on the up since the lifting of the city’s mask mandates. It’s expected that the average asking rent will continue to rise over the course of the next year. Currently, the average asking rent for office space in Philadelphia is $30.87/SF per year with a full-service rate.

The industrial market in Philadelphia is also seeing high demand due to a rise in e-commerce sales and consumer spending.

This demand for industrial space is also causing more investor demand and, therefore, building values are climbing. Tenants aren’t focused on the cost as much as they are focused on finding the perfect space for their needs.

The asking rent for industrial spaces in Philadelphia is about $7.83/SF per year with a triple net lease.

As for Allentown, the city broke many records in terms of industrial space in 2021: The city reached a record net new occupancy of 8.9 million square feet.

The city’s office space industry is not nearly as prosperous as its industrial space. However, it’s expected to increase due to the construction of new office buildings in the city.

Currently, the average asking rent for industrial space in Allentown is $6.61/SF per year with a triple net lease. The average asking rent for office space in Allentown is $16.01/SF per year with a triple net lease.

Commercial Vacancy Rates

In both cities, there are higher office vacancies than there are industrial vacancies. Philadelphia’s office space vacancy rate is about 17.4%, compared to its 4.1% industrial vacancy rate.

Allentown’s office space vacancy rate is about 9.3%, compared to its 5.9% industrial vacancy rate. It’s important to note that many new industrial spaces have been purchased or constructed in the Allentown area since 2021.

CRE Market Outlook for 2022

Due to the construction of new buildings in both cities and the emergence of the life science industry in Philadelphia, there should be greater demand for commercial real estate in the future alongside rising rental rates and decreasing vacancies.

Commercial Activity Comparisons

Philadelphia’s stable retail activity is helping it bounce back from the pandemic, and Allentown’s new demand for industrial businesses is assisting its own recoveries.

Retail: In-Person Shopping Versus Online Shopping

The pandemic greatly impacted America’s in-person shopping experience: Online shopping saw increased activity as many retail stores closed down in the early days and months of COVID-19’s onset.

Aside from the pandemic, the sheer convenience of online shopping has led many consumers to prefer online shopping over in-person shopping. It’s likely that this trend will continue.

With both of these factors in mind, it is not surprising that Philadelphia and Allentown both have seen an increase in online shopping over in-person shopping.

However, Lehigh Valley’s WFMZ-TV news reported in November 2021 that Allentown is seeing an increase in consumers shopping in stores again.

Industrial: Warehouse Storage Activity

As previously mentioned, the growth of industrial retail in Allentown has led to the construction and leasing of industrial spaces, including warehouses.

In general, the Lehigh Valley’s economy is benefiting from the demand for their goods, meaning this industry boom is likely to stay.

Philadelphia is also seeing demand for warehouse space; however, there aren’t enough available spaces to keep up with market demand, filling Philadelphia’s industrial development pipeline with more projects expected to be delivered in coming years.

Just like Allentown, warehouse interest is projected to stay high as the economy continues to bounce back from the pandemic and businesses evaluate and re-assess their inventory and supply chain needs.

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