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RUST TO RETAIL

As former Pennsylvania steel towns grow once more, so does their need for stores, restaurants

BY IAN RITTER

Photo: Ian Ritter

BETHLEHEM, Pa. — The blast furnaces pretty much tell Lehigh Valley’s story of the past few decades. Rusted and abandoned, they loom 17 stories high just south of the city’s center, looking like the tangled metal masts of a ghost ship that has found its last home off the banks of the Lehigh River. But the valley’s fortunes are changing for the better, as more people move here for the proximity to New York City and Philadelphia. This, in turn, is fueling a demand for retail that many expect will further boost those fortunes.

“I think everyone would agree that the Lehigh Valley is underserved from a retail perspective,” said Tony Hanna, the city of Bethlehem’s director of community and economic development.

The Lehigh Valley did know prosperity at one time. The once-bustling Bethlehem Steel plant with its five furnaces employed nearly 12,000 people as late as 1979, cranking out product for such national landmarks as the Golden Gate and George Washington bridges. Then, in the1980s, demand fell as cheap steel from abroad ate up market share. Bethlehem Steel cut production and shed workers, finally closing the plant in 1995.

The valley cities of Allentown, Bethlehem and Easton were devastated, and the suffering spread to the retail. The area’s pre-eminent department store, Hess’s, in downtown Allentown, shut its doors in 1996.

“Lehigh Valley 10 years ago epitomized what the struggles were with an economy moving from industrial to service,” said Anthony Iannelli, president of the Lehigh Valley Chamber of Commerce.

But that was then. High-income residents have moved into the area, drawn by comparatively cheap housing and a relatively easy commute to metro New York City (some 80 miles east) or Philadelphia (about 60 miles south). The population now stands at about 590,000, up from just over 538,000 in 1990, according to The Lehigh Valley Planning Commission. Thus the new demand for retail, says Iannelli.

Currently, the main shopping destinations are the local retailers that line the streets of downtown Bethlehem and Easton, some strip centers with big-box tenants and a few discounters. Besides those, there are three Pennsylvania Real Estate Investment Trust malls: the 1 million-square-foot Lehigh Valley Mall in Allentown, and two smaller ones in the 400,000-square-foot range.

National developers are now vying to fill the demand. The three projects proposed so far are open-air, lifestyle-type centers — an upscale format that would have been unthinkable in the decidedly downscale Lehigh Valley of a few years ago. One developer reports that the average annual household income within five miles of its proposed project is $100,000; another says 85,000 of the households around its site earn more than $75,000 per year.

“This is the first shot at the market, and it speaks to the influx of the higher-income [residents],” Iannelli said.

The contenders:

• Bayer Properties and Forest City Enterprises have proposed a $100 million, 800,000-square-foot open-air center called The Summit in Bethlehem Township, bordering that city to the northeast. The developers are planning the center in the style of Birmingham, Ala.-based Bayer’s other Summit lifestyle centers in Birmingham and Louisville, Ky. — large open-air centers that cater to high-income residents. Those centers boast such tenants as Barnes & Noble, Chico’s and Saks Fifth Avenue.

“There are many tenants within our Summit projects that could be candidates for the Lehigh Valley project,” said David Silverstein, a Bayer principal.

The Summit would sit on what is now farmland along Route 33. The companies have set no ground-breaking date, but they’re aiming for a 2006 opening.

Poag & McEwen plans a lifestyle center about seven miles outside Bethlehem.

• Poag & McEwen, the Memphis, Tenn., development firm that coined the term “lifestyle center,” is also eyeing the area. The company plans to build a 700,000-square-foot lifestyle center called The Shops at Saucon Valley off Interstate 78 in the town of Center Valley, about seven miles south of Bethlehem. The center would feature four still-unidentified anchor stores, possibly a theater and a few national restaurants and specialty tenants.

The project, whose ground-breaking is scheduled for this summer with an opening next year, would be on the grounds of Stabler Center, an existing 190-acre business park that will include a residential community, a convention center and a golf course.

“The better national specialty stores and restaurants are not in the market,” said Terry McEwen, the company’s president.

• Stanberry Development wants to build the Shoppes at Lehigh Valley, a 410,000-square-foot, hybrid lifestyle-power center at the intersection of routes 22 and 512 in Hanover Township, less than five miles north of Bethlehem. The Columbus, Ohio-based developer is planning to allocate 120,000 square feet for lifestyle space and the remaining area for the power tenants.

Stanberry has no ground-breaking date but plans to open in the fall of next year.

The company had been looking in the area for two and a half years, according to Raymond Brunt, a Stanberry leasing partner. The firm picked Hanover Township after watching a unit of Wegmans, an upscale East Coast grocery chain, perform well across Route 22.

“Wegmans obviously knows what they’re doing,” said Brunt. (Rochester, N.Y.-based Wegmans, with 65 stores, declined to comment for this article.)

There is a catch, however. All three development teams agree that the area can handle just one of the proposals, at least until the market expands some more. The valley’s population is projected to grow to over 620,000 in 2010, says the valley planning commission. The firms also acknowledge that the winner will be the company that emerges first with committed tenants.

“I think everybody is concerned about competition,” Brunt said. “Anybody who tells you differently is lying through their teeth. There’s probably room for one to be done right and be successful.”

Ironically, the project that goes ahead could wind up striking yet another blow at the closed Bethlehem Steel plant, as it were. In the mid-1990s the steel company and the city of Bethlehem began formulating a plan to replace the plant with Bethlehem Works, a mixed-use center with up to 675,000 square feet of retail (including some lifestyle tenants), a museum and a hotel, among other components.

Those plans have yet to get off the ground. Bethlehem Steel filed for bankruptcy in 2001; in May 2003 International Steel Group bought the company. The new owner is now negotiating with the Delaware Valley Real Estate Investment Fund to sell the factory site; the fund is interested in a retail-entertainment development there.

But a lifestyle center elsewhere in the area could jeopardize Bethlehem Works’ future, says the city of Bethlehem’s Hanna. “We’re going to continue to push for retail, because we do feel it’s a good retail site,” he said. “But as more of these retail projects are announced in the suburbs, it makes it more difficult. How many Williams-Sonomas can the Lehigh Valley support?”

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