Developer Planning 33-Story Building for Allentown NIZ, Tallest in Lehigh Valley

Oh hell yeah! This is why I was so obnoxiously pro-NIZ all last year. This is Allentown’s chance to finally live up to its status as PA’s 3rd largest city, with a legit skyline and enough dirt cheap Class A office space to beat back suburban sprawl office park development for the next half century. May each new building be taller than the last:

Allentown could become home to the Lehigh Valley’s tallest building. Developer Bruce Loch has proposed a 33-story tower at Ninth and Walnut streets with nearly 200,000 square feet of office, retail and residential space that would be built using funding from the one-of-a-kind Neighborhood Improvement Zone.

Loch, of Salisbury Township, said the $60 million tower would be constructed on lot owned by the Allentown Parking Authority. The authority granted preliminary approval for Loch’s plan at a meeting on Wednesday.

Plans call for retail on the ground floor, topped by 19 stories of offices. Above that would be 10 floors of residential space – of those, six would be for apartments and four for condominiums. The top three floors of the building would be a restaurant and conference center.

(via Emily Opilo)

Comments

  1. Publius says:

    This is great news, and what everyone involved in this project has been working so hard for. Once you hit critical mass, density just attract more density. It is hard to say enough good things about the people who put it on the line for this project like Sen. Browne and Palowski.

  2. marco says:

    …and like the larger cities, there will be a beautiful core with shimmering skyscrapers, surrounded by a sea of poverty. Like Philly, like Harrisburg, like most urban centers. Leave your hotel or office building or area, and take a two-block walk in any direction and see the reality that is Allentown, if you dare.

    The other cities have also transformed their centers, but unless Allentown faces the music and solves its cultural, crime, economic and educational challenges, think of the new ALlentown as an oasis in a sea of poverty.

    • Jon Geeting says:

      I think that gets the causation backwards. Poor people flock to cities because there are higher-paying opportunities at the low-skill end of the labor market than is the case in suburbs and lower density areas. Denser city cores have a greater density of service businesses, and those wages tend to be higher than similar service sector jobs in the suburbs. Public transportation connections are better, which poor people need because owning a car is expensive. The problem that cities present for poor people is usually high housing costs. But if there’s one point I am always trying to hammer on for readers of this blog, it is that high rents are a policy failure. High city rents are by no means inevitable, and actually are a direct result of bad local government land use and development policies. There’s no reason that Allentown can’t continue to provide a low cost of living for its lower-income residents as center city develops. They can provide a free trolley bus for center city and take the cost of transportation down to zero for thousands of people. And as land prices increase, they can reduce regulatory barriers to building more multifamily housing, and tax land at a higher rate to stoke more housing construction.

  3. Publius says:

    So, every single comment on the MCall page in reference to the new building is negative. What is with this place?

  4. John says:

    Bruce Loch doesn’t have near the financial or skill chops to pull this off. I’m curious who the real developer is.

    Building empty space does not = success. Pilfering tenants from Lower Mac does not = success. The only, ONLY, thing that = success here are new businesses starting up and corporate relocations from out of state that occupy all this space.

    Nothing else matters.

    The last thing you want is Dallas circa 1988 where you were able to shoot cannons through buildings without fear of hitting anyone.

    What saved Dallas? Oil.

    What will save Allentown if this doesn’t work? And if this doesn’t work, Allentown will sink the entire Lehigh Valley.

    Despite Jon’s childlike reverence for “If you build it, they will come” that only works in the movies.

    • Jon Geeting says:

      I wonder what part of the downward sloping demand curve you disagree with? If you build it, area rents will drop, and businesses will come.

      • John says:

        I wonder what part of “rent is one part of the equation” you don’t understand? Do you know how much it costs to relocate a business? Do you know what burden that puts on employees if you’re moving from out of state? Do you know what burden it puts on a business to replace the employees that don’t follow?

        Oh yeah, forgot – you have no experience in these matters and your analytical skills are so poor that you don’t ask enough questions. You just stop at rent.

        To say that’s amateur analysis would demean the word “amateur.” It’s no analysis at all.

        For someone to relocate from Lower Mac to Allentown is much easier than from NJ. But as everyone on the planet except you has acknowledged, without out/state relocations and new business startups, this will be a collossal failure.

        • Jon Geeting says:

          I’m not discounting those issues, I’m just looking at it from the public sector side. There are a limited number of things that you can do on the public sector side to attract relocations. I get that this is just one factor on the business side. But I don’t see how the public side can do much about the other costs.

          • John says:

            Good – now pursue the answer.

            Let’s say there’s a mass influx into Allentown from Lower Mac, and that empty space doesn’t get filled.

            Next step is going to be Lower Mac and Lehigh County pursuing local, county and state tax breaks for businesses to relocate – they cost the county and state money. Maybe some low or no cost loans to finance relocation and fit-out of new space – costs money. Maybe another NIZ – costs money. Hugely discounted rents required to get this space filled will result in lower property values which means lower tax revenue to the county and school district – which will cost the rest of us money to make up the shortfall.

            I could go on forever, these are just a few of the repercussions if out/state or new businesses don’t move in, all of which cost the taxpayer to get the space filled.

            And you need to account for these costs in measuring the success or failure of the NIZ.

            So in answer, there are several remaining tools in the public tool chest, unfortunately they cost money in the hopes that it all works out 15yrs from now.

            Unfortunately, usually it doesn’t work out and it just costs money. Look at Olympus as just one example – millions in giveaways and they are a complete zero in the valley. Waste of time, resources and real estate.

          • Jon Geeting says:

            So my argument would/will be that Lower Mac should not get any special tax breaks, and if they’re having trouble paying for services then it’s time to regionalize the tax base. I would be strongly against any tax breaks for exurban relocations, from any level of government.

          • John says:

            Ok – now follow through to the next question. Remember, keep asking questions.

            You now have 100 acres in Allentown occupied and vast stretches of office buildings in the suburbs vacant because no tenants relocated here and no new businesses opened.

            In your view, the valley is better off. But is it?

            In this scenario, suburban real estate values will drop and resulting local and county tax revenues from that real estate will drop as well due to assessment challenges. State tax revenues drop as well because taxes that were flowing there are now flowing to developers and banks.

            All this means everyone else’s taxes go up to cover the local, county and state shortfalls created by the NIZ.

            It’s clear and incontrovertible – this happens if new businesses don’t open and businesses from out of state locate here. Neither is a slam dunk, this thing is fraught with risk.

            By the way, Lower Mac has no real estate tax, the services it provides are fine. What gets hit here is your regional base, the county, and the state.

            So what happens? Those tax strategies you don’t want approved for Lower Mac will get approved anyway because they have to be approved. No way do the county and state allow themselves to take it in the nuts here. They need the revenue like an addict needs crack, and they’ll do whatever they have to for the hit.

          • Jon Geeting says:

            You’re talking about a revenue shift, not a net loss in revenue. With a regional tax base, revenue shifts within the region don’t matter. Some areas lose value but others gain. The region as a whole is not worse off. The idea that no businesses move into any of the suburban commercial buildings is obviously not plausible. Nobody’s going to hold out for 2013 rents forever, they’ll slash prices at some point and clear the market.

  5. GDub says:

    Jon,

    I think it is good when people want to build in Allentown. Sure, some people will always complain about something new, but its nice to see some creative thinking.

    That said, the project is “in its early stages” (likely meaning that it is one drawing deep), and it might be a little odd to see that a residential builder thinks he can build a fairly complicated office design in a relatively high-cost labor environment in a sinkhole zone for $60 million dollars. Sounds like he might want to call an engineer or two before having his next press conference.

    I’m not sure what to make of the idea that he thinks he can pay half the mortgage with NIZ subsidies. Sounds like a great recipe for a builder to at least break even on a half empty building. Good or bad, not sure.

    There’s something missing in your events chain that you draw out from your “low rent” thesis. Lower rents as a sign of building out urban cores might be “better”– but the idea that a low rents aren’t a feature of low-demand markets is laughable. As an illustration–look at the commercial rent level of (for example) Detroit, Dayton, Springfield MA, Hartford, and Harrisburg. All cities with similar historical profiles to Allentown and proximity to prosperous urban areas. Some even have tall buildings. None are doing “well.”

    The problem with the NIZ is that it is impossible to evaluate as a public policy program. One would think that a prosperous Allentown would be the goal–something that can be evaluated. However, here I see a lot of “looking good” or “looking like a city.” Sounds like something out of Moneyball.

    • Jon Geeting says:

      I expect that as more of the downtown gets built up, land prices will rise, putting upward pressure on rents. My daily sermons on the virtues of low rents are an attempt to get out in front of this and persuade Allentown’s policymakers that new construction should keep pace with the rise in land prices, and that taxing land value is preferable to taxing new construction.

    • Jon Geeting says:

      The difference between Allentown and those other cities is that there actually is demand for office space in the Lehigh Valley. Don’t take it from me – the LV keeps showing up in trade publications as a desirable in-demand business location. You can take issue with that, or the projections of continued population inflows from NYC and NJ. I have yet to hear a persuasive case that either will change, but am of course open to the idea that the projections could be wrong. But insofar as they are correct, businesses and population will continue to flow into the region, and my argument is simply that tax and land use policies should deliberately channel as much of that growth into Allentown and the other core downtowns as possible. Most of the new housing and office space yet to be built should be infill, not new greenfield development.

  6. GDub says:

    I agree that rents have gone up on recent news of development and “buzz,” although whether that is because of genuine business interest (I hope) or speculation remains to be seen.

    I agree with you that a better taxation scheme is part of the policy mix to getting Allentown on the right track. However, if that were true I don’t understand why putting the state on the hook for half the mortgage cost of a new building is a better business development program than just giving straight relocation and annual subsidy grants directly to out of state firms contingent on the firm locating a certain percentage or number of jobs in certain zip codes (also, historically, a problematic program). At least the second can be terminated.

    The NIZ has that problem–its based on “changing the narrative,” “buzz,” and “look” and not on metrics or a measurable goal, which almost always leads to a failed public policy program.

    • Jon Geeting says:

      I don’t see any reason for you to discount the role of expectations as somehow illegitimate. Coordinating expectations around more rapid growth is extremely important, and it appears to be working quite well so far.

  7. GDub says:

    The other challenge is determining what people are moving to the Valley for–while many assume that this pattern will continue, I don’t think any of those regional studies have assumed that the state or the region will succeed at shutting off suburban development significantly.

    If they are leaving suburban NJ for bigger homes or spacious lots at cheaper prices, it may be that a major change in land usage will lead to a change in movement patterns (why move 2 hours farther from NY for a slightly larger apartment?). There has been substantial outmigration–and in many cases this outmigration has demanded more greenfield development, not less.

    • Jon Geeting says:

      I think the biggest issue is that people are moving out of NYC and NJ because the housing costs are too high. Philly is benefitting from that right now, and the Lehigh Valley can too. People still want the city amenities, but they want to pay less for housing. That doesn’t mean Allentown needs to be all high-rises, but I think there is definitely an opportunity to densify the downtown area with 5-6 story modern mixed-use buildings in addition to some more skyscrapers, and attract more young professionals and families by offering an affordable urban lifestyle.

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