I-78/I-81 Corridor commercial real estate activity picking up

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While the year started off with tenant hesitancy with policy uncertainty under a new White House administration, when the threat of tariffs caused demand to plummet, the commercial real estate market along the I-78/I-81 corridor picked up in the second quarter and is looking for further growth heading into the third quarter of the year. 

A total of 5 million square feet of space was leased in the second quarter of 2025. 

According to CBRE Vice President Sean Bleiler, “leasing activity is on the rebound.” 

After several quarters of decreased activity, he said the region as a whole is seeing more interest, with the Lehigh Valley – which led the market boom following the pandemic – lagging slightly behind Central Pennsylvania and Northeastern Pennsylvania regions. 

The Lehigh Valley currently has a vacancy rate of around 9%, or 118 million square feet of available space. 

In the Harrisburg region, the vacancy rate is at 5.9% with 917,000 square feet of commercial real estate leased during the second quarter. That region saw more of the later growth as tenants were finding it more difficult to find available properties in the Lehigh Valley and sought out more options and lower rents in Central Pennsylvania. 

Northeastern Pennsylvania has the highest current vacancy rate at about 10%. 

At one point the vacancy rate hovered around 3% 

“You will see that rate fall heading into the next quarter with deals that are pending,” Bleiler said. 

He noted that, typically, a healthy vacancy rate is in the 7% to 8% range, but he said the corridor is in good shape, vacancy wise. 

“From a long-term standpoint, the market still remains healthy,” he said. “A couple of big deals will drive that vacancy rate down.” 

One factor that is keeping the vacancy rate lower is the lack of new inventory coming to market. 

After a rush to build new commercial facilities to meet the demand, a lack of available space for development and increasing construction costs have curtailed the number of new buildings coming to market. 

In the second quarter there were 18 new commercial facilities under construction in the corridor, totaling 6.7 million square feet, which Bleiler said is a fraction of the development that occurred immediately following the pandemic. 

Currently, the majority of demand in the market is for smaller regional buildings under 100,000 square feet. This counters the demand in recent years which was for larger, million-square-foot buildings. 

“A lot of smaller users are looking to expand, or companies that are new with 25 to 50 employees are looking at these spaces,” Bleiler said. 

Rents along the corridor still remain relatively high, with some properties having rate increases of up to 50% during the post-pandemic boom. However, the rent prices have been stabilizing and were just over $9 per square foot at the end of the second quarter. 

In the Lehigh Valley rents averaged $11.50 per square foot whereas the Harrisburg market had average rents of $8.16 per square foot. 

Bleiler said that while the actual rent hasn’t been coming down, landlords have been making concessions in lease agreements to lure tenants. Many have offered such things as free rent or base rent reductions. 

With the current dynamics of the market, and activity that is currently pending, Bleiler said the I-78/I-81 market should be looking towards a strong third quarter as well.