The coronavirus pandemic changed the way a lot of people shop. When the health crisis first exploded, many people intentionally stayed away from physical stores and malls and instead opted to purchase items online. That habit expanded to grocery store purchases, too.
But even though things have recently improved on the pandemic front, consumers aren't exactly rushing back to stores. Why would they, when ordering goods online is so much more convenient?
As such, the demand for warehouse space had soared. And in Pennsylvania's Lehigh Valley, warehouses are popping up like lightning. But while that may be a good thing for real estate investors, some locals aren't happy about it.
Why Pennsylvania has become a new warehouse hub
Warehouse construction has exploded in full force in Pennsylvania's Lehigh Valley -- an area known for its manufacturing jobs. The reason? Proximity to New York City.
Finding warehouse space in and around the city itself is no easy feat, and developers have long been forced to look outside the city for affordable space. Pennsylvania's Lehigh Valley fits that bill. But warehouse construction has taken off at such a rapid pace that some residents are worried about the impact it'll have on the local economy.
While a surge in e-commerce has created a huge level of demand for warehouse space and jobs, the work itself is not only potentially dangerous but doesn't tend to pay nearly as well as manufacturing. Manufacturing jobs in the Lehigh Valley pay, on average, $71,400 a year, compared to $46,700 for working in a warehouse or driving a truck. There's also the fear that automation will, in time, make warehouse jobs more obsolete.
Of course, warehouse developers are extremely confident in the sector's growth potential, and understandably so. Major warehousing companies are already investing billions of dollars in local properties, and distribution centers are being built even before tenants sign up to use that space. That alone should give real estate investors with industrial REITs (real estate investment trusts) in their portfolios peace of mind. But local pushback could, at some point, thwart developers' efforts to build out more New York City-adjacent space.
Right now, there are almost as many warehouse and transportation jobs in the Lehigh Valley as there are manufacturing jobs. And that's a shift many aren't comfortable with.
But still, some locals aren't unhappy with the pace at which warehouses have been popping up. While warehouse jobs may not pay as well as manufacturing roles, they still tend to pay well above the federal minimum wage. And that gives workers with limited skills the option to earn a livable salary in an area where earnings growth tends to be limited.
The Millionacres bottom line
As consumers continue to shop online and more retailers shift their focus from opening stores to opening massive distribution centers, the need for warehousing space is only likely to increase. The fact that Pennsylvania's Lehigh Valley had become a warehouse hub may be a mixed bag for locals, but for real estate investors, it spells opportunity.