Scott Kraus’s story about app-developer Trifecta moving into the NIZ is exactly why I supported the idea. Trifecta is moving 60 jobs from Lower Macungie to downtown Allentown, and using the NIZ to bargain down rents.
Trifecta is the latest in a series of companies relocating to the NIZ to take advantage of its tax benefits and location in a suddenly booming downtown.
Developers who build or redevelop within the boundaries of the 127-acre zone can use new tenants’ state and city taxes, excluding property taxes, to repay their construction loans, allowing them to offer below-market rents.
While the incentive is remaking downtown Allentown, it’s causing heartburn for commercial property owners like Michael Ervin, Trifecta’s current landlord on Medical Center Drive in Lower Macungie.
Ervin, who must now find a replacement tenant for the 15,000 square-foot space, said it’s difficult for a commercial landlord with holdings outside the NIZ to compete with the incentives it offers.
“I guess I have my issues with the NIZ down there too, with the tax situation,” Ervin said Thursday. “I think they are taking away from the surrounding area, by making it so attractive to relocate. It is only because they are getting a break to do it. I think what it is doing is impacting the owners in the surrounding areas that have commercial space available.”
Pelletier said Trifecta approached Ervin about buying its Lower Macungie offices in order to expand them, but couldn’t reach a deal. Ervin said Trifecta’s offer was below the building’s appraised value.
Every part of this story is great. A tech business is moving from the periphery to the core, adding 60 workers to the downtown, enlarging the market for service business like restaurants and retail businesses. 60′s not a huge number, but replay this a dozen more times and it starts adding up to a good-sized customer base for the service sector.
The rent bargaining part of the story is also good, although incumbent commercial property owners might not think so. What’s good for the region is for businesses, and especially small new companies, to have the edge in bargaining power over land and commercial property owners. Michael Ervin won’t like it, but the wave of commercial property owners forced to cut their asking rents to compete for new business tenants businesses is going to make all the Lehigh Valley a more attractive destination for businesses. Everybody’s going to need to level down their expectations for asking rents, which is good for companies, and good for wage-earners, since the competition will limit how much of their output landowners can capture via rent.
Did you read the whole article?
As was cited by everyone, including the NIZ’s phantom author Pat “Fuck you I”m $300k/year richer” Browne, it won’t have worked until new businesses start and relocations from out of state come into PA.
Until that happens, this is an economic drain on the Lehigh Valley and the state.
Your headline is wrong, please retract.
That’s why I said “starting to” work. There’s no contradiction between what Pat Browne’s saying and what I’m saying. A big levelling down for commercial rents is the process by which new businesses will be attracted to the Lehigh Valley.
Again – it’s not starting to work until new businesses and relocations start.
Your view is akin “My bong has pot in it so therefore I am high.” You’re not high until you light it and inhale.
John we disagree about nearly everything. But that is an awesome analogy.
Thanks – it just fit for some reason!
The bong is getting lit. The process that will draw new businesses – rounds of competitive rent cuts – is starting to kick in.
Nope – all it’s done has been stuffed, with questionable grade no less.
Lit = new businesses.
Inhale=relocations from out of state.
Until those two happen there is no benefit to the region or the state. None. Zero. Zilch. Nada. And in fact it’s a net loss for the benefit of rich white guys at the expense of women, children and minorities.
It’s ok to be a mindless zombie cheerleader Jon, just accept that is your role and not the role of people who actually think about this stuff.
First you get the successive rounds of rent cuts, Valley-wide.
Next you get relocations into Allentown from elsewhere in the Valley and from out of state, and relocations into marked-down suburban commercial properties from elsewhere in the Valley and out of state. I don’t know why you would think that first Valley businesses would move, and then out-of-state businesses, in staggered fashion like that?
It’s also impossible to project how many, but a lower rent level will also help new businesses afford office space sooner.
I don’t see any reason to view it as a closed system like this, but even if all this did was take all the existing LV businesses and cluster them closer together, you’d get a higher regional growth rate from agglomeration.
Jon you’re missing a huge part of this – you don’t get rent cuts unless you have tenants at the lower rate. Without those tenants you get rent transfer/elimination.
The next fact you’re missing – all we’ve had are tenants transferring into Allentown from the suburbs. This does not make the area stronger. We need tenants for the vacated space first.
Finally, your childlike belief that “if you build it they will come” simply does not work in the real world. You won’t get any growth simply because you moved businesses to Allentown from Macungie.
Bottom line – until new businesses start and out of state businesses relocate, this is not a success. You believe it will happen and therefore claim success with no benefit having been achieved. I hope it will happen and will wait on claims of success until there’s actual success happening.
So in other words, you’re a zombie cheerleader. And again that’s ok. Just know what you are.
Prices are sticky, and it may take a while before people are willing to cut their asking rents. But this is the process that will improve the business climate. There’s nothing childlike about believing that prices impact behavior. Businesses are as close to rational actors are it comes. On the margin, they’ll seek out locations where overhead is lower.
Another fact you constantly miss – there are no guarantees in this. When you use terms like “”will improve” you look like a maroon. There are thousands of things that could go wrong here.
Fact is, you’re being just like George Bush with that “mission accomplished” banner. Might want to wait on claims of success until there is success, lest you look like a bumbling idiot even more than you usually do.
Always a possibility something could go wrong, but so far everything’s been shaping up more or less as I was saying they would last year. I haven’t seen any data points yet that would cause me to revise my expectations. Not taking a victory lap, just putting a point on the board.
It’s been shaping up like I thought as well – insanely low rents (Trifecta got under $5/foot), the only people relocating are ones that Reilly, Pawlowski or Topper have a hammer over, and alot of angst over whether the successful part will ever happen.
You actually have seen the most important data point – no new businesses or out of state relocations. You just choose to ignore it.
Just because it’s not happening all at once, doesn’t mean it won’t happen. This deal’s going to be around for 30 years.