Morton Brown Family Wealth has been growing its client list since it first leased space in downtown Allentown’s Tower 6 in 2018.
The financial advisory firm recently decided to upgrade its office to 5,600 square feet from 3,500 square feet, and remain in the 12-story office building at 600 Hamilton St., co-founder Dennis Morton said. The company plans to double its team of nine employees.
“We have a big, audacious goal as a firm and it’s going to require us to have more people around us, so our new space is probably going to have the capacity almost double what we have now, and as we’ve thought about all of us doing our best work, we naturally think of needing more and more functional space,” said Morton, who started the company with Katie Brown.
It wasn’t long ago that a company seeking additional office space was an outlier, as many people have been mostly working from home or on hybrid schedules — a combination of working on and offsite — since the COVID pandemic started in 2020.
Have landlords turned a corner after years of mostly empty offices? City Center Investment Corp., which is downtown Allentown’s largest developer and owner of Tower 6, seems to think so.
According to spokesperson Jeff Vaughan, 13 of City Center’s office tenant companies — including Raymond James, Avantor, Moravia Health, Rettew Engineering and others — have renewed or extended their leases, covering nearly 110,000 square feet.
Additionally, 22 companies, including PPL, Valley Health Partners, ESSA, and Remington & Vernick Engineers, entered new leases for space in City Center buildings. Those cover almost 170,000 total square feet.
Jill Wheeler, vice president of sales and marketing for City Center, says 98% of the company’s more than 1.3 million square feet of office space is leased.
“People are using the office space,” Wheeler said. “People are coming into the office.”
City Center has its office utilization rate at 75%, up from 55% two years ago.
Other cities around the U.S. aren’t seeing the same sort of rebound. Kastle Systems, an office security company, surveyed 10 major metropolitan areas in the U.S. and found that the average occupancy rate was 51.4% in mid February, though it was 54.2% in January — a postpandemic high — before winter weather brought the average down.
Kastle’s latest figures have Philadelphia at 51.3% and New York at 68.1%.
There has been pressure for workers to return to the office. Philadelphia Mayor Cherelle Parker return the office five days a week, and some companies with space in Center City were expected to follow suit.
Another indicator of office usage is the demand for space-planning services. Offix Systems, a commercial furniture dealer in Allentown, has seen a significant increase in requests for design and space-planning services from its office clients in the last six months.
Juan Carlos Vidal, chief financial officer and chief of sales for Offix, said there has been an increase in business after a sluggish period post-COVID.
“Are we seeing an uptick? Yes, but it has only started, at least for us,” Vidal said. “I’ve shared this with consultants and analysts in the office world and work environment and there’s starting to be a little bit of more confidence because of the economy.”
Vidal said work-from-home was growing before COVID as technology made it more feasible. Smaller businesses also found it more economical to use co-working spaces rather than rent out an office.
He thinks that while hybrid arrangements will become more common, contact with fellow workers will persuade more people to come back to the office.
“I’m not going to say it’s a 180-degree turn, but people are starting to circle back a little bit into the workspace in my opinion,” Vidal said. “Human beings, regardless of technology, are social butterflies. Regardless of our age, younger generations, older generations or anything in between, we still need human interaction.
“So a lot of big corporations, a lot of mid-sized or smaller organizations are requiring their team members to get back to the office and to get back to that face-to-face interaction, and I believe that’s what we’re seeing.”
Crunching the numbers
Loren Keim, CEO of Century 21 Keim Realtors and a professor of real estate and the program manager for the Goodman Center for Real Estate at Lehigh University, said Lehigh Valley office space wasn’t as hit as badly as other metropolitan areas by the pandemic.
He said places such as New York are seeing higher utilization rates not because people are returning to offices, but because some former office buildings are being converted into apartments.
“I’ve got students studying Manhattan right now, and two of the bigger buildings, like Pfizer’s old headquarters and one of [real estate company] SL Green’s buildings are undergoing conversions right now to apartments, because there’s more demand for apartments than there is for office,” he said.
There is some of that movement in Allentown, too, as the former PPL building at Ninth and Hamilton will be converted from offices into apartments by owner D&D Realty Group, which bought the iconic skyscraper last year for $9 million. The same thing is happening next door at Grand Plaza — formerly PPL Plaza — where owner DLP Capital is offering 118 housing units in what used to be exclusively an office building.
Keim said the vacancy rate remains high despite employees trickling back to the workplace. While studying New York, his class found that despite having the best numbers since 2019, the vacancy rate was still 16.5% in the fourth quarter of 2024.
He added that statistics can vary, depending on the company. Not every developer shares numbers with real estate data companies such as CoStar.
The vacancy rate for the Valley is about 7.4%, according to CoStar. According to the Lehigh Valley Economic Development Corp., there is 29.7 million square feet of office space in the Valley. About 35,575 square feet is under construction.
Older office buildings in places such as Lehigh Valley Industrial Park IV in Hanover Township, Northampton County, are having trouble keeping tenants and have vacancy rates of at least 17%, Keim said. Those seeking space are looking for newer structures and more amenities, such as those along Hamilton Street in Allentown.
“There’s that flight to quality, and there’s a difference between the stuff that’s along Hamilton and stuff that’s everywhere else,” Keim said. “Because along Hamilton, you’ve got the [Neighborhood Improvement Zone] benefits and you’ve also got new buildings. So when you’re looking at general office space in the Lehigh Valley, and you look at a lot of these buildings that were built in the ’80s and ’90s, a lot of them still have pretty significant vacancy, even though the average right now is at 7.4%.”
In downtown Allentown, there’s about 1.6 million square feet in the city’s unique NIZ tax zone, with the majority of it owned by City Center. About 400,000 square feet is made up of the Butz Corporate Center, Trifecta Building, St. Luke’s Hospital-Sacred Heart and 615 Waterfront Drive.
Loopnet, a website that specializes in listing such properties, says there is 113,287 square feet available in Allentown’s central core along Hamilton Street. An additional 600,000 square feet could come in the future if projects such as the 21-story Ideal Tower proposed for Eighth and Hamilton along with other City Center projects are built.
Keim said he’s mostly seeing anecdotal evidence of a rise in leases, including some with his own agency.
“We’re getting a lot more calls for leases over the last maybe three or four months than we have in a while, and we’ve leased some pretty decent spaces,’ Keim said. “But I don’t see a significant bump one way or the other. And I think where [City Center President] J.B. Reilley has a benefit because they’ve got relatively new space in an area where they can do some pretty interesting things with discounts, because of the NIZ zone. That’s probably why he’s seeing the improvements. I don’t think that’s universal.”
The quest for more space
Morton said a reason for obtaining the bigger space a couple of floors up from the company’s current workplace is to improve the experiences of both employees and clients. Instead of desks and cubicles, the office will feature more of a homey feel to make it more welcoming for clients.
“There’s the space and the capacity for more people over time, but there’s also the way that we’ve designed that space,” Morton said. “For example, one of us was at the doctor’s office yesterday, and doctor’s offices are great, but there’s a certain amount of anxiety that comes from walking into a place where there’s all the gadgets and gizmos.
“We’ve tried to defuse that, because many people have the same reaction going to see their financial adviser, that it can be a little bit of a harrowing experience,” he said. “So our main conference room is a living room. There’s a couch, two comfortable chairs and a coffee table. There’s no big boardroom table that feels intimidating.”
It’s also a way to make working at the office more appealing to those who have grown used to working from home. It can help reinvigorate a culture where employees work together toward bigger goals, City Center’s Wheeler said.
“So it’s really that flight to quality, and then within there, it’s providing a variety of work settings for people,” Wheeler said. “When they can come and they can work in person with others, they can sit in that soft seating, but then they also have the break area.”
Morning 첥Ƶ reporter Evan Jones can be reached at ejones@mcall.com.
