OMNI Realty Group
  • Email
  • Facebook
  • Linkedin
  • Twitter
  • Rss
  • Home
  • Omni Advantage
    • Success Stories
    • Our Clients
    • Completed Deals
    • In the News
  • Services
  • Resources
    • Market Reports
    • Local Market
    • Office Space Calculator
    • CCIM Advantage
      • User Investment
      • CCIM Brochure
      • Total Expertise
      • Distinguish Yourself
      • How Would You Rate
  • Global Reach
  • Property Search
  • FAQ
  • Blog
  • Contact Us

Trends

Home» Trends

Central PA’s Top Commercial Real Estate Sales in 2020

Posted on January 15, 2021 by Mike Kushner in Blog, Commercial Real Estate, Industrial, Local Market, Retail, Trends No Comments

2020 was quite the year, but even a global pandemic did not halt the exchanging of commercial real estate. In Central Pennsylvania, the sale of commercial real estate continued well through the end of the year with hundreds of millions of square-feet being bought and sold. As to be expected, the largest commercial real estate transactions in both  square feet and price was industrial space. More than 3.5 million SF of industrial space exchanged hands in 2020 with the most taking place in York and Carlisle which are major distribution destinations along the I-81 corridor.

The top 5 multifamily sales in Central PA ranged in price in location, from 160 Class A units in one transaction and 663 Class C units in a Manufactured Housing/Mobile Home Park in another. The largest exchange of space in a single transaction was 339,612 SF in a townhouse complex in Marietta.

Three of the top five office sales exchanged hands between the same two parties. AR Global purchased 50,800 SF of office space, primarily occupied by health centers, from RVG Management and Development Company. In retail sales, the Blackstone Group L.P. sold 274,764 SF of York retail space to a joint venture  between Triple Crown Corporation and J.C. Bar Properties, Inc. in three separate transactions.

Keeping reading for a full list of the top 5 commercial real estate transactions, for office, retail, industrial, and multifamily, that took place throughout Central Pennsylvania in 2020.

Top 5 Office Sales

#1 – 1171 S Cameron Street, Harrisburg, PA 17104

Olcam Corporation sold the 121,518 SF Class C Office Building built in 1989

to Boyd Watterson Asset Management on July 22, 2020 for $20,500,000 ($168.70/SF). At the time of sale, the property was 100% occupied by the Pennsylvania Department of Labor & Industry.

#2 – 300 Corporate Center Drive – Camp Hill Corporate Center, Camp Hill, PA 17011

LNR Partners LLC sold the 173,296 SF Class A Office Building built in 1989 (renovated in 2005) to Linlo Properties on July 6, 2020 for $14,394,731 ($83.06/SF). At the time of sale, the property was 62.5% occupied by Deloitte and Pennsylvania Health & Wellness, Inc.

#3 – 805 Sir Thomas Court – Arlington Place – Old English Gap Professional Park, Harrisburg, PA 17109

RVG Management and Development Company sold the 24,800 SF Class B Medical Building built in 1994 to AR Global Investments, LLC on January 16, 2020 for $7,812,000 ($315.00/SF). At the time of sale, the property was 100% occupied by Pennsylvania Spine Institute and PinnacleHealth Express.

#4 – 2140 Fisher Road, Mechanicsburg, PA 17055

RVG Management and Development Company sold the 15,000 SF Class C Office Building built in 1990 (renovated in 2016) on January 16, 2020 to AR Global Investments, LLC for $5,394,000 ($359.60/SF). At the time of sale, the property was 100% occupied by PinnacleHealth Shepherdstown Family Practice.

#5 – 5400 Chambers Hill Road – Swatara Medical Center, Harrisburg, PA 17111

RVG Management and Development Company sold the 11,000 SF Class B Office Building built in 1988 (renovated in 1993) to AR Global Investments, LLC on January 16, 2020 for $5,394,000 ($490.36/SF). At the time of sale, the property was 100% occupied by Chambers Hill Family Med Center and Select Physical Therapy.

Top 5 Retail Sales

#1 – 2449 E Market Street – Lowe’s – York Marketplace, York, PA 17402

The Blackstone Group L.P. sold the 125,353 SF Retail Freestanding (Community Center) Building built in 1955 (renovated in 2004) to Triple Crown Bar York Marketplace, LLC on November 3, 2020 for $13,916,926 ($111.02/SF). At the time of sale, the property was 100% occupied by Lowe’s.

#2 – 2415 E Market Street – Giant Food – York Marketplace, York, PA 17402

The Blackstone Group L.P. sold the 74,541 SF Retail Supermarket (Community Center) Building built in 1994 to Triple Crown Bar York Marketplace, LLC on November 3, 2020 for $11,939,079 ($160.17/SF). At the time of sale, this property was 100% occupied by GIANT.

#3 – 2501-2555 East Market Street – York Marketplace, York, PA 17402

The Blackstone Group L.P. sold the 74,870 SF Retail Storefront (Community Center) Building built in 1994 to Triple Crown Bar York Marketplace, LLC  on November 3, 2020 for $11,407,972 ($152.37/SF). At the time of sale, this property was 95.2% occupied by 13 tenants: Firehouse Subs; Gamestop; Kids First Swim School; Market Street Viet Thai Cafe; MyEyeDr.; Oreck; Pet Valu; PLCB Wine & Spirits Store; Red Lobster; Starbucks; Super Shoes; Verizon Wireless; VIP Nail & Spa.

#4 – 1360 Columbia Avenue – Stone Mill Plaza, Lancaster, PA 17603

Brixmor sold the 76,056 SF Retail Supermarket (Community Center) Building built in 1988 (renovated in 2007) to Tristate Ventures, LP on March 13, 2020 for $10,772,036 ($141.63/SF). At the time of sale, the property was 88.5% occupied by GIANT and Great Clips.

#5 – 1278 S Market Street – GIANT – Elizabethtown Shopping Center, Elizabethtown, PA 17022

Frist City Company sold the 65,146 SF Retail Supermarket (Neighborhood Center) Building built in 1982 to James Gibson on November 30, 2020 for $7,338,000 ($112.64/SF). At the time of sale, the property was 100% occupied by Citizens Bank, GIANT Food Stores of Carlisle, and Starbucks.

Top 5 Industrial Sales

#1 – 3419 Ritner Highway – Ritner Logistics Center, Newville, PA 17241

Artemis Real Estate Partners sold the 1,215,240 SF Class A Distribution Building built in October 2019 to Exeter Property Group on October 1, 2020 for $85,000,000 ($69.95/SF). At the time of sale, the property was unoccupied.

#2 – 4875 Susquehanna Trail – ES3 LLC Bldg 1, York, PA 17406

C&S Wholesale Grocers, Inc sold the 790,000 SF Class B Distribution Building built in 2002 to Ahold Delhaize on February 11, 2020 for $75,665,684 ($95.78/SF) as a sale leaseback. At the time of sale, the property was 100% occupied by ES3 (also the seller).

#3 – 4875 Susquehanna Trail – ES3 LLC Tower 2, York, PA 17406

C&S Wholesale Grocers, Inc sold the 705,000 SF Class B Distribution Building built in September 2009 to Ahold Delhaize on February 11, 2020 for $64,234,316 ($91.11/SF) as a sale leaseback. At the time of sale, the property was 100% occupied by ES3 (also the seller).

#4 – 192 Kost Road – Silver Springs Distribution Center, Carlisle, PA 17015

Black Creek Group sold the 422,400 SF Class A Warehouse Building built in June 2016

to Prologis, Inc. on January 8, 2020 for $30,218,510 ($71.54/SF). At the time of sale, the property was 100% occupied by Acme.

#5 – 100 Louis Parkway – Carlisle Distribution Center, Carlisle, PA 17015

Black Creek Group sold the 400,596 SF Class A Warehouse Building Built in 2006 to Prologis, Inc. on January 8, 2020 for $28,658,651 ($71.54/SF). At the time of sale, the property was 100% occupied by Overstock.

Top 5 Multifamily Sales

#1 – 2035 Patriot Street – The View at Mackenzi, York, PA 17408

Morgan Communities sold the 224 Unit, 242,323 SF Class B Apartments Building built in 2006 to Larken Associates on March 2, 2020 for $28,058,244 ($115.79/SF; $125,260/Unit). At the time of sale, units were 90.6% occupied.

#2 – 310 Honeysuckle Drive – The Villas of Castleton, Marietta, PA 17547

Keystone Custom Homes sold the 160 Unit, 339,612 SF Class A Apartments Building built in 2009 to Steinman Real Estate LLC on February 28, 2020 for $25,191,760 ($74.18/SF; $157,448/Unit). At the time of sale, units were 96% occupied.

#3 – Fox Run Road – Chesapeake Estates of Grantville, Grantville, PA 17028

David Sherrill sold the 663 Unit Class C Manufactured Housing/Mobile Home Park built in 1987 to RHP Properties on October 29, 2020 for $21,040,000 ($18,785.71/SF; $60,634/Unit).

#4 – 1 Chesapeake Estate – Chesapeake Estates of Thomasville, Thomasville, PA 17364

David Sherrill sold the 663 Unit Class C Manufactured Housing/Mobile Home Park built in 1986 to RHP Properties on October 29, 2020 for $19,800,000 ($19,800.00/SF; $62,658/Unit).

#5 – 200 South Court Street – Mulberry Station Apartments, Harrisburg, PA 17104

AION Partners sold the 100 Unit, 116,667 SF Class B Apartments Building built in 1987 (renovated in 2020) to Post Road Management on January 16, 2020 for $12,100,000 ($103.71/SF; $121,000/Unit). At the time of sale, the property was 100% leased.

In the coming months and years, it will be important to keep an eye on the top commercial real estate sales in the region. As office, retail, industrial, and multifamily real estate exchanges hands, the businesses who own this space, and their tenants stand to have a great impact on the local, and global economy moving forward.

Among all the top transactions that took place in 2020, which do you think will have the largest and most immediate impact on the Central PA region? Share your thoughts by leaving a comment below.

*Data of the top commercial real estate sales provided by CoStar.

[Online Resources] Real Estate, camp hill, central pennsylvania, Commercial Real Estate, CRE, gettysburg, harrisburg, hershey, hummelstown, industrial, lancaster, lebanon, lemoyne, mechanicsburg, Mike Kushner, multifamily, office, Omni Realty Group, retail, sale, shoping center, sold, top 5 largest, warehouse, york

COVID-19 Prompts Manufacturing Companies to Make Long-Term Changes

Posted on October 28, 2020 by Mike Kushner in Blog, Commercial Real Estate, Industrial, Trends No Comments

According to a new study, more than 90% of companies expect the disruption of global supply chains caused by the pandemic to have long-term effects on their businesses. This has caused manufacturers to closely examine various aspects of their businesses and consider what may need to change, possibly permanently, to adjust to the new COVID-19 reality we are living in.

Furthermore, businesses have begun to realize the importance of continuously monitoring their suppliers, especially those overseas, for risks and disruptions as they try to accommodate many personnel issues, supply chain disruptions, and uncertainty in general.

Keep reading to learn what this new survey and other news sources are reporting about the change to manufacturing and supply chain businesses as the result of the pandemic, and how these changes stand to impact the commercial real estate market.

Widespread Impact in a Variety of Areas

Respondents to the survey estimated that on average about 43% of their entire supply chain suffered some kind of interruption. For the majority of respondents, this was due to fluctuation in supplier pricing and safety restrictions causing orders to be paused or slow to fill. The next most common interruption was the need to find suppliers in other geographic regions due to import/export restrictions, followed by the challenge of suppliers going bankrupt. Many manufacturing businesses didn’t experience just one of these interruptions, but a combination of several which made for an exceptionally chaotic time when COVID-19 first hit. Now that the world has gone on to accept where we are the new reality, at least for the foreseeable future, manufacturing and supply chain industries are shifting from short-term considerations to long-term changes that will make them more stable in the future to sustain a global event in the future.

What this means for commercial real estate: As businesses are reacting to the widespread impact of COVID-19 on manufacturing and supply chain operations, there is a valuable opportunity for commercial real estate owners and investors here in the United States to position their properties as solutions for addressing these changing needs. Businesses may need more space, or a different configuration of space to accommodate their new systems and processes. The more flexible CRE professionals can be with their space, the more they will be able to attract new tenants and even expand their portfolio.

Shift to Reshoring and Nearshoring

In an effort to learn from what this pandemic has already taught us, manufacturing businesses have shifted their focus toward solutions that stand to reduce risk and protect against future shocks as of the likes of COVID-19. Many businesses are taking steps toward retooling their supply chain, and one major shift in mindset is reshoring or nearshoring manufacturing that was once offshore. Reshoring is the process of bringing back overseas supply chain operations to the country of origin and nearshoring is the process of bringing supply vendors closer to the point of origin, from farther overseas destinations. Reshoring and nearshoring an operation’s most vital materials reduces the risk of being held hostage by offshore suppliers.

In that same survey, 97% of respondents said they agree that better visibility into their suppliers is imperative. When various components of a business are broken up and distributed all across the globe, it can be nearly impossible to keep your thumb on all aspects of operations and it can make it harder for these points of operations to communicate effectively with one another. Now more than ever, businesses are seeing the value of keeping their operations within the same country, if and when it’s possible.

What this means for commercial real estate: For commercial real estate owners and investors, this means the demand for industrial space is going to rise. As businesses look to retool their supply chain and bring components back to the United States, they will inevitably seek more warehousing and manufacturing space to accommodate their growing needs.

The Smartest Businesses Are Acting Now

In such a challenging environment, the most forward-thinking businesses are not wasting time addressing vulnerabilities in their supply chains. Many respondents (98%) are planning to take some kind of action to build resilience against future disruptions – and the top courses of action are identifying and employing alternative suppliers, continuous monitoring, and increasing reshoring capabilities. Additionally, diversifying or localizing supply chains are a way to reduce costs, as well as better prepare for future economic disturbances.

What this means for commercial real estate: Now is the time to position your CRE assets as solutions for manufacturing and supply chain businesses. If your space is a fit for such needs, you should market it as such. Be direct in the unique benefits your space can provide a business. For industrial businesses, this means a large and functional space located conveniently for transportation. The Central Pennsylvania region is accessible to major cities and transportation hubs on the East Coast. Commercial real estate space along the I-81 and I-83 corridors will benefit from any beefing up of supply chains and logistics in this area.

With the impact of COVID-19 causing many manufacturing businesses’ to change how and where they make, store, and transport goods, the silver lining is that the Central Pennsylvania is likely to experience an increase in demand for industrial and manufacturing space. This will in turn drive new construction, bring more jobs to the area, and strengthen the overall economy. This is not to overlook the many significant challenges the pandemic has caused to all industries, but it’s at least one path that is headed in the right direction, particularly for industrial real estate in Central PA.

Do you have a question or idea related to manufacturing, commercial real estate, and COVID-19? Join the conversation by leaving a comment below.

[Online Resources] Real Estate, agent, business, businesses, central pennsylvania, Commercial Real Estate, commercial real estate broker, commercial real estate invement, COVID, COVID-19, CRE, distribution, global, harrisburg, industrial, industrial supply chain, Mike Kushner, Omni Realty Group, onshore, overseas, pandemic, pennsylvania, processes, shipping, space, tenant representative, transportation, warehouse, warehousing

The Good, the Bad, and the Unbelievable: How the Pandemic Has Forever Changed Industrial Real Estate

Posted on October 13, 2020 by Mike Kushner in Blog, Industrial, Trends No Comments

Industrial real estate had been booming for the last five years, mostly propelled forward by e-commerce and changes in consumer behavior. If that wasn’t enough for industrial real estate owners to adapt to, a global pandemic hit and impacted the way just about everything worked previously. As we adjust to this new reality, there’s one looming question: can industrial success last in the age of COVID-19?

While every sector of the market has challenges right now, there’s good reason to think industrial will continue to thrive. But tenant demands will continue to shift under the mounting pressures of the pandemic. From understanding the current state of leasing activity and e-commerce to getting in front of emerging trends like grocery deliveries, there are a lot of things that need to be considered, monitored, and adjusted.

Here are the main areas impacted by COVID-19 and what industrial owners need to know to meet tenant demand now and into the future. Take a look!

Construction Delays

Construction delays caused by COVID-19 are becoming increasingly common and many industrial real estate owners are having trouble securing permits. That’s ultimately forcing a slowdown of expansion efforts, something that needs to be overcome considering the continued growth of e-commerce.

The industrial sector ended Q1 of this year at a high point with near record lows hovering below 6%, and rents growing 8.8% year-over-year while leasing velocity accelerated. There’s no doubt the pandemic has slowed markets down, but experts anticipate the trends supporting them to stay fundamentally intact.

That’s not to say the industrial sector isn’t experiencing headwinds. Across the market, industrial owners recognize that many tenants are still facing serious risks, and bankruptcies are expected. As a starting point to protecting themselves against risk, some owners are considering COVID-19 clauses in future leases to help them navigate these situations again in a possible future outbreak.

Accelerated E-commerce Growth

E-commerce is one of the few sectors of the market to actually benefit from COVID-19, and it’s well-positioned to lead the recovery. That’s according to JLL’s report COVID-19: Global Real Estate Implications, which said the pandemic will likely boost demand for manufacturing and logistics facilities that e-commerce needs to continue expanding. The report also said the pandemic will accelerate many existing trends, including the growth of online retail as more of the economy moves to online sales.

In our new economy, a retailer might not necessarily need a storefront to succeed anymore, but it does need a robust supply chain strategy. To meet the growth in demand, industrial owners in major metro areas will likely have to look further afield for suitable sites as demand outpaces local supply levels. This isn’t anything new for industrial markets, but the trend is only going to accelerate.

Increase in “Safety Stock”

It’s expected that e-commerce demand is growing given that people are looking for the safest and most convenient shopping options that allow for social distancing, but the pandemic has caused something else unexpected. Many occupiers of industrial spaces are planning a 3-5% increase in their safety stock levels to help safeguard against the rampant supply shortages experienced at the start of the pandemic. These measures will add additional demand for warehouse space to keep larger quantities of key items in storage.

Unprecedented Demand for Food Storage

While still a relatively foreign concept to much of America, COVID-19 is driving major demand growth for online grocery orders. In early May, CNBC reported that only 3-4% of grocery spending in the U.S. was online before the pandemic, but now online grocery orders have surged to account for between 10-15% of all grocery spending. While online grocery orders are expected to recede after the worst of the pandemic subsides, experts expect U.S. online grocery sales to stay between 5-10% moving forward.

This is a huge opportunity for industrial owners. But to really capitalize on the trend, owners need to invest big in cold storage. A challenge is that this niche is operationally complex and requires specialized knowledge to succeed. Because most first-generation facilities are designed, owned, and already in use by grocery and foodservice companies, second-generation spaces offer the biggest opportunities for industrial investors.

A Local Perspective

It comes as little to no surprise that Central Pennsylvania experienced a sharp drop-off in absorption, which is what we are seeing everywhere. According to CoStar, Harrisburg has a slight uptick in vacancies, but that’s not troubling because there was spec space coming online and leasing activity has slowed. See below for the local probability of leasing commercial space a few months from now, which helps to show how quickly properties are likely to lease in the region moving forward.

It’s also worth noting that there is no negative absorption in Harrisburg through 2020. This is a positive sign for the local commercial real estate market because it means major tenants have not left, or if they did leave, the vacated space was instantly filled. That’s not normally much of a win, but in Coronatimes is a big deal.

 

And then there’s construction. Specifically, in Central PA there has not been a surge in construction in the region, but there are still millions that broke ground after the pandemic began, which testifies to the level of confidence in the local shipping market because most elsewhere construction has flatlined.

Looking Ahead

The industrial real estate market has been a remarkable success story both in Central Pennsylvania and beyond. And while the near future is likely to carry its fair share of challenges as the market faces tenant bankruptcies and construction delays, this sector is well-positioned to emerge from the pandemic less unscathed than others in the commercial real estate industry. Owners and investors who successfully navigate these challenges while getting ahead of evolving tenant demands, like grocery delivery and cold storage, will be the strongest moving forward.

[Online Resources] Real Estate, camp hill, carlisle, central pennsylvania, challenges, Commercial Real Estate, covi, covid-19 pandemic, CRE, development, Economy, growth, harribsurg, hershey, hummelstown, impact, industrial real estate, industrial space, lancaster, market, mechanicsburg, Mike Kushner, Omni Realty Group, online retail, real estate investing, retail ecommerce, storage, trends, warehouse, warehousing distribution, york

How the Pandemic Stands to Impact Property Taxes in PA

Posted on July 22, 2020 by Mike Kushner in Blog, Commercial Real Estate, Local Market, Trends No Comments

School districts in Pennsylvania are working to set their budgets for the 2020-2021 school year, and are potentially facing a $1 billion loss in local revenue as a result of coronavirus, according to the Pennsylvania Association of School Board Officials (PASBO) study. Even if the economy recovers quickly, and there’s no predicting if it will, that still leaves schools with a predicted loss of $850 in revenue.

So how will they make up for the gap? Naturally, the focus shifts to property taxes. Raising property taxes is never a desired solution, but it’s among the most obvious and effective. While some school districts in the capital region are not considering a property tax increase, and instead choosing to cut programs, contract out services to reduce spending, or drawing upon reserves, many others say a tax increase is unavoidable.

Pennsylvania is not unique in this dilemma, just last month Nashville approved a 34% property tax increase to account for revenue loss as a result of COVID-19. For a property appraised at $250,000, that would mean an increase of about $666.25 per year. This tax increase, compounded by any other financial hardships property owners have faced this year is a significant stressor.

It’s important to note that in Pennsylvania that the Act 1 index caps how much school property tax rates can rise. It takes into account the average statewide weekly wage, which is likely to be lower in wake of this pandemic. To go above the index requires state or voter approval.

School districts across the Commonwealth are having their budgetary discussions now. As property owners, it’s important to stay aware of what’s being proposed in case it stands to impact the tax rate on your residential or commercial property. Let’s take a look at a few local school districts to see how they are addressing their budgetary issues and whether this could result in a property tax increase in your township.

Camp Hill School District

The Camp Hill School Board is recommending a 3% tax increase to support its preliminary $24.7 million budget for 2020-21. By going with a tax increase of that size, it left the district facing a $403,458 revenue shortfall as opposed to one that would be double that amount if the tax rate was frozen. The district anticipates a post-COVID-19 loss of nearly $431,000 in local and state revenue so it trimmed its proposed spending by $116,740 to adjust for that. It is looking to use some of its $6.2 million unassigned reserves to bring the budget into balance.

Central Dauphin School District

Central Dauphin School Board says they are looking at every possibility including cutting nearly $300,000 from their budget without giving up things that would pose difficulties for students. The board must next consider approving a preliminary $204.2 million budget that still has a $2.4 million revenue shortfall to close to bring it into balance. The options laid on the table for the board include a mix of ideas that range from no tax increase and dipping into reserves to raising property taxes by the 3.1% allowable tax increase under the Act 1 index.

Cumberland Valley School District

Cumberland Valley School Board feels that a property tax freeze is not feasible for the district. The district anticipates a $3.1 million loss in local revenue, $300,000 in lost interest earnings, and a projected budget deficit of $2.4 million. Without the additional $2.3 million in revenue the district would receive from an Act 1 index allowable property tax increase of 2.6%, the deficit grows to almost $5 million.

Derry Township School District

While no tax increase is expected in the Derry Township School District, it is going to be a challenging year. And Derry Township is in a particularly unique situation. The amusement tax brings in about $1.5 million annually, and with Hersheypark and its related venues being closed due to the coronavirus, that could be a big hit to their bottom line. How they plan to make up for the delta is still in discussion.

Lower Dauphin School District

Lower Dauphin School District has also been dealt a uniquely challenging hand. Not only are they dealing with the financial fallout of the coronavirus like everyone else, but they’re also the school district that’s home to Three Mile Island Nuclear Generation Station. The shutdown of TMI is a loss of roughly $300,000 in payments in addition to taxes that the plant once made. Despite the loss, the school board already approved a budget on Monday, and they were able to make ends meet without raising taxes by borrowing about $4 million from their reserve funds.

Northern York County School District

Northern York was already looking at a $1.5 million shortfall pre-CVOID, which had to do with health insurance increases, pension payments and other increases. Now with the expected loss of close to $1 million in earned income tax and less revenue from realty transfer taxes because of the hold put on real estate activity, that gap grows closer to $3.5 million. To bridge this gap, the district does not plan to increase property taxes, at least yet. Instead, they announced they would cut costs by moving to full day kindergarten which reduces midday transportation. They will also put a hold on any construction or renovation, and outsource its instructional aid duties to an educational agency.

West Shore School District

West Shore School District is anticipating a significant reduction in revenues related to earned income tax. As a result, a budget with a property-tax increase is currently on the table. For West Shore’s Cumberland County communities, it’s a 1.63 percent tax increase, and it’s an increase of 1.16 percent in York County. The budget also relies on $1 million from the school district’s reserves.

How would an increase in property taxes impact you? If you own commercial or residential real estate, this will affect you directly. And even if you don’t own real estate, there will still be a trickledown effect. If you rent your home or place of business, landlords may be forced to increase rent to pass off some of these costs. Or businesses may increase the cost of their goods or services to help balance their own books.

There are many unknowns in our community, government, and economy right now. What we do know is that everyone has endured change and hardship to some degree as the result of the pandemic. School districts, just like all of us, are looking hard for solutions that will keep them afloat while having the least negative impact on teachers, students, and the community.

What is your opinion on increasing property taxes to help school districts make up for financial losses due to COVID-19? Join in the conversation by leaving a comment below.

[Online Resources] Real Estate, budget, central pennsylvania, Commercial Real Estate, coronaviruss, COVID, CVOID, economic downturn, Economy, finances, for sale, home, local economy, local schools, loss, Mike Kushner, money, Omni Realty Group, pennsylvania, property, property tax, public schools, residential real estate, school boards, school districts, schools, tax increase, tax rate, taxes

Commercial Spaces Likely to See New Requirements for HVAC Due to COVID-19

Posted on June 1, 2020 by Mike Kushner in Blog, Commercial Real Estate, Local Market, Trends No Comments

COVID-19 has changed life as we know it. The home office became the new workspace, video conferencing replaced in-person meetings, events shifted to virtual delivery, and parents became homeschool teachers while trying to balance career demands. It’s safe to say that the majority of people are looking forward to a time when they can return to work and feel a sense of normalcy again. One of the most important elements of this being possible in the near future is the ability for businesses to create a safe and sanitary work environment while adhering to CDC guidelines. The sooner this can be accomplished, the sooner commercial spaces can begin to reopen.

Some of the most important considerations are how to effectively filtrate, circulate and sanitize the air in shared and common spaces to reduce the spread of viruses. What options exist to improve air filtration and sanitization in shared office, retail, or industrial work spaces? And what new requirements might we expect commercial spaces will need to adhere to in order to ensure a safe work environment for their employees?

To lend some expertise on this topic, Omni Realty Group turned to John Gunning, who is the Senior Mechanical Engineer at McClure Company, based in Harrisburg, PA. Working within the Engineered Services division, he is responsible for the design of building mechanical systems for the commercial, educational and industrial markets. He is a licensed Professional Engineer in Pennsylvania and a LEED Green Associate. John is McClure Company’s in-house expert on the subject of ventilation and dehumidification and is frequently asked to speak at both technical and non-technical seminars regarding these subjects.

We asked John a series of questions related to how office, retail, and industrial spaces may need to adjust the functionality of their air filtration and sanitization in light of COVID-19. Keep reading to learn what he predicts to be the “new normal” of commercial HVAC requirements in Pennsylvania and beyond.

Omni: Prior to COVID-19, what was considered the standard level of air filtration in most office spaces?

JG: Pre-COVID we would expect to see 1-2” thick filters with a MERV 6 to MERV 8 rating. However, some systems may use lesser rated 1” filters, MERV 4 or less, with mesh or washable media.

Omni: As people return back to physical office spaces after stay-at-home orders are lifted, what changes do you anticipate businesses making to their office spaces to be more sanitary for their workers, particularly as it relates to HVAC and air-filtration considerations?

JG: With much of the discussion of the transmission of COVID revolving around the virus in aerosol form, we can anticipate businesses thinking of their HVAC system as more than just a tool to keep the space at the correct temperature. Building codes require outside ventilation air to be introduced into the building to dilute contaminants. Over time, outside air dampers may have been closed for reduced energy usage or for service and there may not be sufficient ventilation air being provided to the building. The American Society of Heating, Refrigeration and Air Conditioning Engineers (ASHRAE) has also issued this position document which includes recommendations for building owners. Among the recommendations are upgrades to a minimum MERV 13 filter and use of ultraviolet (UV) lights in the airstream. Previous studies have also shown that optimal humidity range for human health and reduced infection rates of seasonal Influenza and other viruses is 40-60% relative humidity.

Omni: What are the options available for a higher standard of air-filtration in commercial spaces?

JG: Most commercial HVAC equipment will except a 2” filter. A 2” filter can be manufactured with an efficiency rating up to MERV 13. However, there is a trade-off in both cost and in energy usage as the more efficient filter will have a higher air pressure drop. This higher pressure drop requires greater fan horsepower to move the same amount of air through the filter as compared to a lower efficiency filter.

Omni: In your opinion, what industries most need to make such improvements to air-filtration?

JG: At present, healthcare facilities and some manufacturing businesses are the industries whose filter requirements must meet or exceed the latest ASHRAE recommendations related to preventing the dissemination of airborne pathogens. Office, Retail, Education and Hospitality business are candidates for filtration upgrades as more people return to utilizing these spaces.

Omni: In addition to HVAC and air-filtration changes, what other improvements might you suggest to business owners to increase the cleanliness of their air quality?

JG: Active dehumidification is strongly recommended in order to keep the space’s relative humidity below 60 %. Limiting cooling season humidity can also reduce the risk of mold growth which can be a source of respiratory issues. On the other end of the spectrum, maintaining humidity levels above 40% is of equal importance. To that end, we expect more owners to consider the use of humidification in the heating season. Incorporating UV lights, in the supply air stream, is documented by ASHRAE as an effective method to deactivate genetic building blocks of viruses. While newer, bi-polar ionization shows potential as a technology capable of deactivating airborne viruses, it has yet to be recommended by ASHRAE. When outdoor conditions permit, increasing the use of outdoor air to dilute indoor contaminants is beneficial.

Omni Realty Group thanks John Gunning for sharing this valuable information and helping us to better understand the changes that may need to take place to improve air filtration and sanitization in commercial spaces as the result of COVID-19. During this unprecedented era in all of our lives –and the history of the world – it’s so important to arm yourself with knowledge and options that exist to continue to improve the health and safety of our communities where we live, work, and play. John’s insight and explanation of enhanced HVAC filtration requirements for commercial spaces should be helpful to all Central Pennsylvania businesses who are looking for additional health measures they can put in place for the safety of their workers.

Do you work in a commercial space – office, retail, or industrial? How do you feel like impact of COVID-19 will require changes be made to the air filtration and sanitization in your space? We welcome you to share your questions or reflections in the comment section below.

[Online Resources] Real Estate, air conditioning, air filtration, air sanitization, central pa, changes, Commercial Real Estate, commercial real estate market, cooling, coronavirus, COVID, COVID-19, COVID19, energy, enhancements, guest blog, harrisburg, heating, HVAC, industrial, mcclure company, Mike Kushner, office, Omni Realty Group, pennsylvania, Q&A, real estate market, retail, shayne homan, solar, space, trends

What does the major shift to virtual offices mean for commercial real estate?

Posted on April 28, 2020 by Mike Kushner in Blog, Commercial Real Estate, Trends No Comments

What does the major shift to virtual offices mean for commercial real estate?

All across our nation, businesses that once functioned from physical office space had to quickly transform their processes to function remotely as the government mandated stay-at-home orders to prevent the spread of the Coronavirus. This proved to be a strenuous and uncomfortable transition for most businesses, regardless of size or structure. Businesses with just a handful of employees, all the way up to organizations and institutions with thousands of employees scrambled to piece together the technologies and protocol that would allow them to remain functional, even when separated physically.

The typical boardroom meetings turned into Zoom calls, workshops and trainings that were to be conducted in-person, needed to mold into virtual delivery, and much more. As is to be expected, there was a steep learning curve and many technological challenges to overcome.

Now that Pennsylvania is more than a month into its statewide stay-at-home orders, many businesses have found new normal of working virtually. This is encouraging for those businesses who have managed to survive, and even thrive amidst such volatile times for our economy. However, it presents an uncertainty as to how businesses will choose to resume their traditional work environment, when they have permission to do so.

The Impact on Commercial Office Space – Nationally

Before COVID-19, around 43% of workers “occasionally” worked from home [versus 39% in 2012], 62% of workers said they could work remotely, and 80% of workers wanted to work from home at least “some of the time.” Working (remotely) through this pandemic will likely increase those percentages, spelling rough waters ahead for office landlords. Now during the stay-at-home and work-from-home orders, employers are seeing how they can operate with some or all their employees working remotely, and even do so as or more efficiently than when working from their traditional work environment.

As a result, it’s likely many employers will closely consider how they might leverage the cost-savings associated with reducing or completely eliminating the overhead of physical office space, which will result in increased office space vacancies, shorter leases, reduction of space needs from renewing tenants and less money available for tenant improvements. Vacancies will rise dramatically before they slowly decline. With approximately 8.1 billion square feet of office space nationally, the expected addition of another 335 million square feet through 2024 is very much in doubt.

The Impact on Commercial Office Space – Locally

Being the home of Pennsylvania’s capital will provide the Central PA region with some shelter, but there is little chance this market does not cool in the very near future. Employment gains have underperformed the national average for the duration of this cycle, and demographic trends are unfavorable. Residents are older, population growth is slow, and the state’s fiscal situation is, quite frankly, a mess.

Harrisburg is an underdeveloped capital compared to Columbus, Albany, and Annapolis; and the cultural epicenter of central Pennsylvania is in Lancaster. Harrisburg is trying to evolve into a knowledge-based economy and has adopted business-friendly incentives that have helped create nearly two dozen tech startups, which have generated 1,000 jobs. But the backbone of the economy still lies with Hershey and Rite Aid, which have headquarters in the region.

Fortunately, Central PA also has a strong education and medical economy that is reflective of statewide employment. Education and health services jobs, which now track evenly with government jobs in the state’s capital, grew by more than 4% annually. Expanding employment opportunities have increased demand for office space, and employment in office-using industries is well above pre-recession figures; but this remains, and likely will remain, a slow-growth market. Additionally, Pennsylvania as a whole will likely face significant financial problems after the virus subsides.

Vacancies currently sit at close to 6.6%, representing a year over year change of 0.0%, but are almost certain to spike in the very near future. While 12 month absorption figures (9,300 square-feet) can be negative, vacancies remain under control thanks to limited levels of new supply. The limited demand, and high number of small businesses operating here, could hamper the city for years if the quarantine carries on for months, as the federal government is estimating it will.

A New Work-From-Home Paradigm

When it comes to navigating the new work-from-home paradigm, we can expect “work-from-home” policies to be established to assure proper decorum, productivity standards, communication, and online protocols. Also watch for the adoption of four-day work weeks, shorter workdays, and greater reliance on technology for current employees. Extensions of sick leave “banking” and “healthy-to-come-to-work” standards are likely to become commonplace.

From the tech side of things, the use of platforms like Zoom, Go To Meeting and Blue Jeans video conferencing technology will become more popular alternatives than traditional in-person meetings. There will also be an increased expectation that these meetings will be as, or more productive than in-person meetings. Board management software and other secure online document management such as DocuSign, DropBox, and shared drives could electronically account for 70% – 75% of all “approval” transactions, for businesses who require such. Robust CRM (customer relationship management) platforms will be used increasingly to interact with customers and clients. Additionally, automation and outsourcing could replace 20% – 30% of employees who perform clerical, accounting, and administrative functions.

A Looming Recession

No matter how you look at things, the bottom line is that this pandemic will push the U.S. into a recession. There’s simply no way around it, at least immediately. Overall GDP growth in 2020 is expected to decline 10% – 13% which is the deepest recession on record. Some expect unemployment could rise to 10% – 15%, or higher, assuming a COVID-19 peak occurs by the 3Q.

The Central PA region has been significantly impacted by the Coronavirus. As of first quarter, the country closed up businesses and the federal government is estimating it will take months before there is a return to normalcy. There is no telling how long the shut out will occur, or what impact it could have on the Central PA office market, though it will likely be immense. Unemployment numbers are beginning to spike, and in the coming weeks, it is likely that hundreds of more businesses could fail, even with the Governor’s promise of reopening the Commonwealth on May 8. Additionally, rents will likely decline as vacancies skyrocket, and construction and investment activity will likely remain extraordinarily limited through the remainder of 2020.

The fundamentals of how Americans live, work, shop and play have changed and will not return to historical norms of behavior, consumption and lifestyles. The year 2020 will be analogous to the impacts of and transformative changes resulting from the Great Depression [1929 – 1932], which took more than 10 years to recover.

Where do we go from here?

Commercial real estate must look at this as an opportunity, just like every industry, to pause and pivot. The market prior to COVID-19 will not be the same market to which we will return. But we will return to something and we must learn to navigate this new landscape by remaining flexible, thoughtful, and strategic. Historically, Central PA has been able to withstand some of the most tumultuous economic storms on the past. Yes, gains are about to take a hard hit as the Coronavirus tears through the commercial real estate world, but this only means we need to bear down an be open to opportunities wherever they may arise.

One of the hardest hit areas of commercial real estate will be new construction. With little supply underway at second quarter, and the Coronavirus halting construction across the world, there is very little chance this market sees any notable projects deliver this year. Most projects since 2015 have either been build-to-suit efforts or significantly pre-leased prior to ground break.

With most new construction on hold, there could be the opportunity for existing office renovations. Many businesses may be looking to reconfigure their space to better isolate employees, adhere to whatever new social distancing protocols come from this, or install sanitary features like air purifying systems. Commercial real estate construction companies and developers would be wise to shift their focus to this type of work.

Another hard hit sector will be companies that provide shared and collaborative office space, like WeWork. In fact, society as a whole is likely to question the open office, collaborative work space, and creative office floor plans. Many businesses and sole proprietors chose to cancel their memberships to such services during the pandemic and it will be exceptionally challenging to regain all that was lost once the stay-at-home orders are lifted. For those who have found that they can effectively work from their own home office spaces, they may continue to do so in an effort to lighten overhead costs. Others may have been hit so hard by the pandemic that there is not a business to which they can return, further reducing their need for office space.

Again, the opportunity here is to reconfigure both the physical shared office spaces to be better isolated and sanitary, but also rethink the business model of how companies charge for space. Being flexible and fluid for business owners as they navigate the new normal is key right now.

To close on a positive not, the one clear winner in the office sector will be healthcare, medical office buildings, and biotech facilities. This sector is expected to grow 10% – 16% annually over the next decade as the entire local, county, state, and national healthcare facilities infrastructure and platform are reshaped, integrated and expanded as society mends and strengths as a result of a pandemic like the world has never seen.

If you are a commercial real estate professional, how have you been impacted thus far by COVID-19. Or if you are a business owner or employee who has transitioned to a virtual work environment, how do you anticipate this experience to transition your “new normal” once the stay-at-home order is lifted?

Join in the conversation by leaving a comment below.

[Online Resources] Real Estate, business, camp hill, changes, Commercial Real Estate, coronavirus, COVID, COVID-19, CRE, decline, economic impact, Economy, employees, gettysburg, harrisburg, hershey, impact, industrial, lancaster, lease, mechanicsburg, Mike Kushner, negotiation, office, office market, office real estate, Office Space, offices, Omni Realty Group, pennsylvania, property, recession, retail, stay at home, technology, terms, trends, unemployment, virtual, virtual work environment, work from home, york

Cannabis-Friendly States Get Major Boost in Commercial Real Estate

Posted on February 25, 2020 by Mike Kushner in Blog, Commercial Real Estate, Local Market, Trends No Comments

Already there are 33 states and the District of Columbia that have legalized marijuana use in some form. Many of these states, like Pennsylvania, allow for limited medical use. According to a recent article, dispensaries in Pennsylvania have sold more than seven hundred million dollars of medical marijuana since the Commonwealth implemented the program, just under two years ago. In that time, nearly 150,000 Pennsylvanians are now certified to buy weed.

While the debate of whether to legalize marijuana – medicinal or recreational – is heated, there is one aspect of this topic that is clear. The demand for the production and sale of medical marijuana is evident, both locally and nationwide. And for cannabis-friendly states, the demand for commercial real estate is on the rise. What does this mean for commercial real estate here in PA? Let’s take a look at a few key points.

Increased Demand for Both Commercial and Residential

States where medical and recreational marijuana are legal have seen increased property demand in both the commercial and residential sectors, according to a new study by the National Association of Realtors. The study also revealed that more than a third of real estate professionals polled said they saw an increase in requests for warehouses and other properties used for storage. In the same states, up to a quarter of members said they saw a spike in demand for storefronts, and one-fifth said there was a greater demand for land. States where marijuana has been legal the longest have seen the largest impact on both commercial and residential real estate.

A Double Edge Sword for Residential Real Estate

However, the residential sector has not benefited as much as the commercial sector; in fact there have actually been a few drawbacks as buyers assess the “new normal” of living near a grow house or dispensary. While between 7% and 12% of those polled said that they had seen increases in property values near dispensaries, between 8% and 27% said they’d seen property values fall. Homeowners are still adjusting to how they feel about purchasing property near areas of marijuana growth and consumption. In states where recreational marijuana is legal, 58 to 67 percent of residential property managers have seen addendums added to leases which restrict smoking on properties. The most common issue was the smell, followed by moisture issues.

CRE Investors See This as a Big Opportunity

Cannabis investors are buying up commercial property, particularly warehouses, in states where recreational and/or medicinal cannabis use has been legalized for more than three years, which was revealed in the same NAR study referenced above. Investors realize it is important to understand the supply and demand, and the regulatory dynamic in each state. Focusing on states with higher barriers to entry makes a license more valuable and makes that real estate more valuable. In 2018, warehouse demand in states with only medical use outpaced demand in states with recreational use, 34% to 27%, respectively, according to the NAR study.

The Economic Impact in Pennsylvania

Sales and participation have ramped up significantly since the program’s inaugural year. Last February, total sales had amounted to just $132 million, per the PA Department of Health. Fast forward twelve months, and the tally has risen to $711 million. That puts the Commonwealth  at 439% sales jump from year one to year two. In a snap shot, Pennsylvania’s medical marijuana program has:

  • 287,000 people registered
  • 261,000 patients
  • 1,800 registered doctors
  • 1,300 approved doctors (practitioners)
  • 168,000 active patients (2-2.5 visits a month)
  • 4 million patient visits
  • $711 million in total sales
  • $288 million wholesale
  • $423 million in retail sales
  • $110 avg. purchase per visit
  • 22 of 25 GPs are approved
  • 15 of 25 GPs are shipping product
  • 77 dispensaries are operational

Furthermore, dispensary operators don’t seem to think we’ve reached the saturation point yet. As more licenses are made available, and whatever lie ahead for further legalization of marijuana, one things is certain. As demand increases for marijuana, so will the demand increase for commercial estate.

What’s next for marijuana in Pennsylvania?

Back in October 2019, Governor Tom Wolf came out in favor of legalizing cannabis for recreational use. Last spring, a Franklin & Marshall College Poll showed that 59 percent, or nearly seven in 10 voters, support the idea of legalizing marijuana. But voter support alone is not enough. The legislation will have to pass both the House and the Senate, with much opposition particularly from the Republican Party.

While this doesn’t mean the possibility of someday legalizing recreational marijuana in Pennsylvania is off the table, it does mean there will be many hoops to jump through – just as there was for the legalization of medicinal use. Looking at the issue solely from an economic standpoint, there is much to be gained by continuing to open this market and remove barriers; however there are many other issues to consider.

Given the boost this has brought to commercial real estate, with the demand for more industrial and retail space, combined with more interest from CRE and cannabis investors, it’s wise to continue to watch for trends – both negative and positive. Looking to other states as examples also gives us insight into what to expect as the cannabis market in Pennsylvania grows, and how CRE professionals can continue to capitalize on the opportunity.

Do you agree with these trends and insights? Or do you have another viewpoint to share? Join in the conversation by leaving a comment below.

[Online Resources] Real Estate, blog, buyers agent, camp hill, cannabis, carlisle, central pennsylvania, Commercial Real Estate, commercial real estate agent, commercial real estate broker, CRE, demand, Economy, growth, harrisburg, industrial, lancaster, lebanon, legalization, lemoyne, marijuana, mechanicsburg, medical marijuana, Mike Kushner, new cumberland, office, Omni Realty Group, pennsylvania, retail, space, tenant representative, trends, york

Growing U.S. Economy Drives Demand for Commercial Real Estate

Posted on February 13, 2020 by Mike Kushner in Blog, Commercial Real Estate, Trends No Comments

The current economic climate in the United States has been a bit of a roller coaster, and depending upon the industry you’re examining, you may find more ups than downs or vice versa. Trade wars, combined with a slowdown in the U.S. manufacturing sector and around the globe, shook up equity markets and businesses in 2019. But robust job growth has extended the spending power of American consumers, which is ultimately our nation’s economic engine, according to CoStar’s 2019 Year in Review of the U.S. Economy.

To put this into perspective, the United. States is currently experiencing the longest economic expansion since World War II. Additionally, key indicators point to the economy staying solid in 2020, which will extend the record bull run for U.S. commercial real estate. While there are some risks that could eventually move the nation toward a recession, as it stands, the growing U.S. economy is driving demand for commercial real estate, with many factors emerging as a result. Let’s take a look at what the most profound outcomes of this CRE growth.

The growing economy bodes well for demand for commercial and multifamily real estate.

What it means for CRE: Expanding payrolls will continue to fuel demand for office space, while rising incomes and consumption will boost demand in industrial and retail sectors. As job growth continues, consumers appear quite optimistic and unconcerned by the trade war and any economic slowdown abroad.

Migration of workers from the Northeast and Midwest is growing the labor markets, which is fueling real estate demand, specifically in the South and U.S. West.

What it means for CRE: With the increase in labor as well as a growing demand for real estate in the South and U.S. West regions, CRE developers and investors should look to these markets as viable areas of growth. An increase in job creation also means a rising demand for office spaces and apartments. Property management will benefit from high occupancy rates, and job growth will lead to an increase in leasing. With low interest rates, commercial prices will likely see some gains.

The answer to combat rising development costs and rental prices in urban areas may be micro-apartments.

What it means for CRE: Simply put, micro-apartments extract the most value from every square foot. Standardized designs and “pre-fab” or modular construction cut development costs and shorten construction time, meaning developers could reduce expenses and start generating rental income more quickly. Some developers are designing studio apartments that are one-fifth the size and 40% of the cost of a typical studio, netting out to as little as 175 square feet.

Investing in industrial real estate, over retail, is the safer bet.

What it means for CRE: The industrial vacancy rate is extremely low, in many cities it’s below 5%, even 1% to 2% in some areas. Meanwhile, internet sales are cannibalizing traditional retail spaces, such as department stores, malls, and shopping centers. A unique aspect of this changing market is the emergence of “click-to-brick” retailers, like Amazon, that are establishing small retail stores in key areas. These spaces don’t carry much inventory, but they give customers the opportunity to interact with physical products and place an order. So for CRE investors and developers, industrial real estate carries more certainty and less risk than retail at this time.

Moving into the new decade, economists expect economic growth to slow somewhat as the labor market cools.

What it means for CRE: Consumer spending may lose some momentum and persistent global and trade policy headwinds weigh on business sentiment and investment. For commercial real estate, 2020 should remain a solid year of growth, especially for the industrial market. Though real estate professionals should remain strategic and always be looking ahead to factors that could impact economic growth, and CRE growth as a result.

What is your view of the current state of the nation’s economy right now? How do you anticipate this changing in 2020? Share your thoughts and insights by leaving a comment below.

[Online Resources] Real Estate, buyers agent, central pennsylvania, Commercial Real Estate, Construction, demand, economic impact, Economy, growth, industrial, jobs, Mike Kushner, office, Omni Realty Group, pennsylvania, retail, tenant adviser, trends, united states

Central PA’s Largest Commercial Real Estate Sales of 2019

Posted on January 27, 2020 by Mike Kushner in Blog, Commercial Real Estate, Industrial, Local Market, Office Leasing, Retail, Trends No Comments

There is much we can learn by analyzing a market’s largest commercial real estate sales in a given year. Looking at each the industrial, retail, and office sectors, it’s interesting to see the varying demand for size, price and class from sector-to-sector. This tells us a lot of about the direction of economic growth for a region; and for a real estate investor, it also showcases where the best investment opportunities for the future may lie.

Here is a look at the largest commercial real estate sales that took place in Central Pennsylvania in 2019, grouped by sector and sorted by highest sell price.

INDUSTRIAL

  1. 400-500 S. Muddy Creek Road – Albertsons Distribution Center (Lancaster County)

U.S. Realty Advisors purchased the Albertsons distribution facility for $117,050,000, or approximately $76 per foot for the 1,539,407-square-foot property on January 2, 2019. The subject Albertsons Industrial portfolio is comprised of a dry bulk/cold storage facilities in Denver, PA and in Melrose, IL. The sole tenant of the portfolio is Albertsons and they signed a 20-year lease with nine five-year extension options (and a one-year extension option) as part of the sale-leaseback transaction. Albertsons is under an Absolute Net lease paying $5/sf in base rent. Their lease requires that the tenant is responsible for operating expenses, real estate taxes, utilities, repairs, maintenance and capital expenditures, in addition to its obligation to pay base rent.

  1. 221 S. 10th Street – (Cumberland County)

This 885,802 SF, class B industrial warehouse sold on September 26, 2019 to Blackstone Real Estate Income Trust for $84.8 million, or $96 per square foot. The sale is part of an industrial portfolio (see #4 below). At a total price of $18.7 billion, this sale of 179 million square feet of urban, infill logistics assets constitute the largest private real estate transaction in history. The portfolio includes high-quality logistics assets across 36 major U.S. markets that GLP aggregated over the past four years.

  1. 2601 River Road – Turkey Hill (Lancaster County)

W.P. Carey purchased the Turkey Hill food production and distribution facility for $70 million, or approximately $170 per foot for the 412,248-square-foot property on June 27, 2019. Built in 1980, Turkey Hill leased back the property for 25 years; the lease is triple net, with annual escalations. The buyer reported a weighted average cap rate of 7.1% for their acquisitions for the quarter, which totaled approximately $123.5 million, indicating this was probably priced in the 6s as the largest acquisition. The site was described as mission critical for the tenant, which has invested in many additions and improvements. It was noted that the site is powered through clean energy sources including wind turbines and hydroelectric energy. Turkey Hill had been a division of Kroger, but was sold earlier in the year to Peak Rock Capital.

  1. 21 Roadway Drive – (Cumberland County)

On September 26, 2019, Global Logistics Properties Ltd sold the class B industrial facility for $53.5 million, or $96 per square foot. The buyer was Blackstone Real Estate Income Trust. The 558,700 square-foot industrial facility was built on 36.16-acre site with an 8-acre pad site available to be developed into a 150,000 SF facility. The sale is comprised of an industrial portfolio totaling 64 million SF that Blackstone Real Estate Income Trust acquired located throughout the U.S. The sales price was reported at $5.3 billion. The portfolio was 95% leased at the time of the sale. The sale is part of a larger transaction in which Blackstone Real Estate Partners fund acquired 115 million SF for $13.4 billion; therefore, the overall sales price was reported at $18.7 billion for 179 million SF among two translations.

RETAIL

  1. 950 Walnut Bottom Road – Stonehedge Square Shopping Center (Cumberland County)

On November 25, 2019, this 88,657 square foot Giant anchored grocery center was sold for $30.7 million, or $346 per square foot to RW Partners, Inc.

  1. 2547 Brindle Drive – Shoppes At Susquehanna Marketplace (Dauphin County)

On April 1, 2019, The Shoppes at Susquehanna Marketplace in Harrisburg, PA were sold to an individual investor for $33.5 million, or $305 per square foot. The 110,000-square-foot shopping center was completed in 2004 and about 98% occupied by 25 tenants at the time of the sale. It was previously owned by a joint venture between Clarion Partners and Bayer Properties. The property was initially listed in January 2019 with an asking price of $38.17 million.

  1. 235-295 Cumberland Parkway – Parkway Plaza Shopping Center (Cumberland County)

On November 25, 2019, this 82,599 square foot Giant anchored grocery center was sold for $22.3 million or $270 per square foot. Parkway Plaza and Stonehedge Square (see #1) were part of a portfolio of Giant supermarket-anchored shopping centers in mid-to eastern Pennsylvania sold to RW Partners, Inc. for $127,000,000. The Giant grocery stores make up approximately 75% of this portfolio’s gross leasable area generate 80% of the portfolio’s revenue.

  1. 903-905 Loucks Road – Two Guys Commons (York County)

On August 19, 2019, Urban Edge Properties sold Two Guys Commons to Vastgood Properties, LLC for $13.15 million, or about $119 per square foot. At the time of the sale, the 110,980-square-foot retail property was fully leased to five tenants which included Crunch Fitness, Aldi, Ashley Furniture HomeStore, Tractor Supply, and Old Country Buffet. Based on in-place NOI, the transaction yielded a cap rate of about 7.5%.

OFFICE

  1. 100 Crystal A Drive – The Hershey Company (Dauphin County)

The three class B office buildings totaling 239,089 SF were sold on December 2, 2019 to the Penn State Medical Group for $28,445,835. Built in 1991, the buildings were sold by The Hershey Company for $118.98 per square foot. The seller was motivated to sell the property as they moved their operation into their corporate headquarters. The buildings will serve as Penn State Health headquarters and allow for moving some personnel from the Hershey Medical Center campus, creating space there to allow for expanded clinical services. Penn State Health leased office space in 2017 at that time The Hershey Company gave option purchase rights to the building. Penn State Health exercised their option to purchase the building.

  1. 425 N. 21st Street – Plaza 21 (Cumberland County)

This 62,304 SF class B Office Building sold on September 16, 2019 to J & R Investments, Inc. for $9,300,000. Built in 1970 and renovated in 2009, this building was sold by Select Capital Commercial Properties for $149.27 per square foot. The building is leased to primarily to Geisinger System Services.

  1. 2400 Thea Drive – Synertech Building (Dauphin County)

On December 2nd, 2019, Istar Harrisburg LP sold the building in Harrisburg PA, to Real Capital Solutions, Inc for $9,100,000 or approximately $43.94 per square foot. The subject property is a 207,115, four-story class B office building located at 2400 Thea Dr in Harrisburg, PA 17110. The building sits on a 10.62-acre lot. It was constructed in 1999.

  1. 305 N. Front Street – (Dauphin County)

On July 17, 2019, this 120,000 SF office property was sold by Harrisburg Riverfront Development to Select Capital Commercial Properties for $7,950,000 or $65 per square foot. Built in 1989, this property sits on 1.2 acres

Closing Thoughts

In Central Pennsylvania and across the nation, it’s fair to say that the commercial real estate market delivered its fair share of ups and downs. Now that we’ve taken a closer look at the largest industrial, retail and office real estate sales of 2019, there are a few interesting points worth noting in each sector.

Industrial – Industrial real estate continues to lead all other real estate sectors with $1.2 billion in sales volume in 2019. The average price was $56.80 per square-foot, with the average property selling for $7.15 million.

Retail – A total of $200 million was invested in Central PA’s retail real estate market in 2019, a decrease from 2018. The average sale price was $142 per square foot.

Office – Annual volume levels for Central PA’s office real estate market stayed consistent with 2018 with $270 million in total sales. The average office property sold for $1.16 million. The average sales price was $102 per square foot.

What do you feel is the most important or interesting trend to emerge from the largest commercial real estate sales to take place in Central Pennsylvania in 2019? Share your thoughts by commenting below.

[Online Resources] Real Estate, camp hill, carlisle, central pa, central pennsylvania, commercial, Commercial Real Estate, CRE, harrisburg, hershey, industrial, lancaster, lease, lebanon, Mike Kushner, new cumberland, office, Omni Realty Group, pennsylvania, retail, sales, transaction, trends, wormleysburg, york

Why Banks are Cutting Back on Commercial Real Estate Lending

Posted on January 17, 2020 by Mike Kushner in Commercial Real Estate, Construction, Guest Blogger, Local Market, Trends No Comments

Commercial real estate lending, the bread-and-butter business for many smaller and regional banks, could further decrease in 2020. The cause is a combination of a few different factors – intense competition from non-bank lenders and rising delinquency rates to name a few. Mortgage lending is also predicted to be impacted by rising interest rates and tight housing supplies in many major markets.

This trend is not new, but rather has been slowly creeping in for years. In 2017, U.S. banks reported that demand for commercial real estate loans weakened in the second quarter, though foreign banks reported strengthened demand. Furthermore, loan growth slowed to 4.2 percent in 2018, down from 5.6 percent in 2017, according to bank call reports and Federal Deposit Insurance Corp. data.

Why exactly are banks cutting back on commercial real estate lending? And should this call for concern that a potential economic downturn is in the near future?

Rory Ritrievi, President and CEO of Mid Penn Bank

To lend some expertise on this topic, Omni Realty Group turned to Rory Ritrievi. Rory has more than three decades of experience in banking, specifically in Pennsylvania. For the last 11 years, Rory has served as President and CEO of Mid Penn Bank. Under his direction, the bank has grown from $550 million in assets and 14 retail locations to over $2 billion in assets and 39 retail locations.

Throughout his banking career, Rory has gained deep insight into when and why banks provide commercial real estate loans – and when they do not. Let’s learn what he thinks is going on in the current market, and the pending economic impact.

Omni Realty: How has commercial lending changed in the last 5 years?

RR: In the last 5-10 years, we have seen, for the most part, a return to credit fundamentals that seem to have been abandoned in the years leading up to the Great Recession. Back then it seemed like almost any deal made sense to Bankers. Now, the focus has been returned to analysis of absorption rates, discounted cash flows, borrower experience, reasonable cap rates, and strength of guarantors.

Omni Realty: In your opinion, what are the main causes of these changes?

RR: Losses. Loan losses of 2008-2012 gave a renewed focus to bankers on the true meaning of credit fundamentals.

Omni Realty: What changes would need to take place in the commercial estate market, or economy as a whole, to further improve commercial lending?

RR: Lenders need to evolve their underwriting and analytics to keep up with the evolving demographics. Baby Boomers are aging out so there is a need for more senior housing, multifamily rentals, luxury apartments, and assisted living. Additionally, high student loan balances are making the need for affordable housing in urban areas more prevalent. There is also a growing focus on renewable energy and green spaces. Finally, work from home is more prevalent which challenges the demand for traditional office space. When we look to retail, the shift toward online decreases the demand for mall space, while increasing demand for warehouse space. And we can’t overlook technology. Bankers need to not only know about emerging technology that stands to impact the market, but they must embrace it as a highly valuable tool to help them “keep up.”

Omni Realty: What do you anticipate the trend to be for commercial lending in 2020?

RR: In my opinion, 2020 will be a positive year in the lending business, particularly in Central Pennsylvania. We are in a good credit cycle and the interest rate yield curve is in decent shape compared to last year. There are geopolitical issues such as the impact of the general election, instability in the Middle East, and trade with China but I do not believe any of those issues will halt the progress of our local economy in 2020. Challenge it, yes and maybe slow it a bit, but not halt it entirely.

Omni Realty Group thanks Rory for sharing this valuable information and helping us to further understand the factors impacting how banks view commercial lending. Though banks are, for the most part, treading lightly in the market since the Great Recession, it’s encouraging to hear their renewed commitment to credit fundamentals, and helping both individuals and businesses make well-educated lending decisions.

Amidst a year that will no doubt bring change, it’s important we remain aware of the lasting impact factors such as elections and geopolitical issues may bring to our economy, both immediately and for years to come. Rory provides sound reason as to why we should not fear such changes, but rather maintain confidence in the banking economy, particularly here in Central Pennsylvania.

Do you agree with these insights, or have others to share? We welcome your feedback in the comments below!

[Online Resources] Real Estate, analysis, banks, blog, building, camp hill, carlisle, central pennsylvania, commercial lending, commercial loans, Commercial Real Estate, Construction, construction loans, CRE, data, Economy, finances, gettysburg, guest blogger, harrisburg, hershey, industrial, lancaster, lemoyne, lending, loans, market, mechanicsburg, mid penn bank, Mike Kushner, money, new cumberland, office, Omni Realty Group, pennsylvania, retail, Rory Ritrievi, trends, united states, york
  • 1
  • 2
  • 3
  • ›
  • »

Subscribe To Our Blog

  • This field is for validation purposes and should be left unchanged.

Mike J Kushner, CCIM

  • Contact me for a FREE Lease Review!
  • This field is for validation purposes and should be left unchanged.

Categories

  • About Us
  • Blog
  • CCIM
  • Commercial Real Estate
  • Community
  • Construction
  • CPBJ Articles
  • CREDC Articles
  • Feature
  • Featured Opportunities
  • Guest Blogger
  • Healthcare
  • In the News
  • Industrial
  • Local Market
  • Office Leasing
  • Retail
  • Success Stories
  • Tenant Representative/Buyer Agent
  • Trends

(c) 2019 OMNI REALTY GROUP- Website Design by The John Webster Company