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The Red Flags of an Unfavorable Commercial Real Estate Lease

Posted on September 9, 2019 by Mike Kushner in Blog, Commercial Real Estate, Tenant Representative/Buyer Agent No Comments

As a tenant needing commercial real estate space to run your business, it can be challenging to navigate the many twists and turns of finding the right space and entering into a favorable lease agreement. Your lease with your landlord can have a large impact on the success of your business, or it could cause many headaches. To ensure you’re entering into a fair and favorable agreement, let’s look at some of the most common red flags that can pop up in a commercial real estate lease.

Term of Lease – One of the most important pieces in a commercial real estate lease, short of the price, is the duration of the lease and how it’s structured. You want to be sure you fully understand when your lease begins and when it ends, especially when the landlord is making improvements to the space. A landlord may provide more favorable pricing or terms when entering into a lease that has a longer duration. While this is helpful from a budget perspective, be sure you feel confident that you will want to stay in this space for that amount of time.

Lease Renewal – Another possible red flag in a commercial real estate lease is when and how the lease will renew. When your current lease comes to an end, a landlord may desire the lease to auto-renew. As a tenant, you will want to be aware of this well in advance so that if you do not want to renew your lease you have options to exit the lease. Additionally, look to see if the lease specifies a change in price upon renewal. Sometimes there will be an increase that could hit you unexpectedly.

Lease Termination – Next, be sure you know the terms and penalties for breaking a lease. While it may not be your intentions to break the lease early, various factors impacting your need for the space could make it necessary. If the Lease imposes a steep monetary penalty for breaking the lease early, you may wish to negotiate that down to more favorable (and reasonable) terms.

Environmental Considerations – Some commercial real estate leases may specify that a tenant may not store any hazardous materials on the premises. This is not typically an issue; however, you will want to be sure that included in the lease is a warranty from the landlord that the premises are free of such hazardous materials. In a situation where you plan to use the commercial space (such as a warehouse) for storage of consumables (i.e., food and drinks), you may want assurance that your inventory is not likely to be contaminated.

Insurance – Be sure to check the required minimum coverages for a tenant’s liability insurance. Typical coverage minimums are $1 million per occurrence and $3 million in the aggregate. If the lease specifies higher minimums at a price that is concerning, you will want to make this part of your negotiations before signing the lease.

Maintenance – A commercial real estate lease should outline who is responsible for the repairs and maintenance of all building systems, including HVAC, electrical and plumbing. Should the lease place the responsibility on the tenant, you may wish to renegotiate this. In a situation where the tenant is only leasing a small percentage of the overall building space, it’s unusual for the tenant to assume the costs of repair and maintenance for things that impact more than their rented space.

Defaulting – Closely review the language in the lease regarding missed or delayed rent payments. It is reasonable to request at least one written notice during any 12-month period (to account for a reasonable mistake), as well as a 5-day grace period for rent payments.

Relocation – Some commercial real estate leases may include a section about relocation. Does this grant the landlord the right to relocate the tenant? Under what terms? Pay attention to this piece as it could greatly inconvenience you, if it ever takes place.

While this is by no means an exhaustive list of red flags of which you must be aware when entering a commercial real estate lease, this should provide a great starting point. What’s most important is to review every document closely, ask for clarification, and seek professional tenant representation early in the process. Having an exclusive tenant representative on your side will provide an added layer of knowledge, experience, and protection that will put you in the best position to negotiate a fair and favorable lease.

Do you have a question related to your commercial real estate lease? Reach out to Omni Realty today so we can help you find an answer!

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Tips for Promoting Your Commercial Real Estate Business on Social Media

Posted on July 22, 2019 by Mike Kushner in Blog, Commercial Real Estate No Comments

Businesses in every industry have turned to social media as a marketing tool to share information, grow their band and cultivate an audience. While in many cases, this has proven successful, there are plenty of businesses who miss the mark, and wind up disappointed when their social media strategy fails to deliver its intended results.

For commercial real estate professionals, social media can be a highly valuable tool, but only when used correctly – and consistently. Take a look as we discuss five important points for using social media to promote your commercial real estate business – or any business.

Brand yourself as a thought leader.

We all have to start somewhere. The same is true for building your online brand. Who are you going to be? Your content, and how you share it, will have a profound impact on the answer to this question. In business, I would think most of us want to be branded as a thought leader in our industry. In commercial real estate, you can achieve this by sharing expertise on technical topics, offer an analysis of data and trends, and partake in thought-provoking discussion. One of the most powerful platforms for this is Linkedin. Here, you can use your profile to reinforce your personal brand, you can share content through regular posting, and you can spark discussion in groups.

Make your content unique.

A staggering amount of content hits the internet each and every second. What’s going to make people stop and read yours? If you’re asking for someone to take time out of their day to read your words, it’s important to make them at least one, if not all four of these things: timely, importantly, relevant and interesting. For some added input, we asked John Webster, Owner of The John Webster Company and digital marketing expert.

“There is a lot of ‘noise’ on social media so your content needs to stand out,” explains John. “When sharing information about available properties do not simply inform about the property (everyone does that) take an additional minute to describe something special about the property, who would be a good fit for the property and why this specific property caught your eye.”

Be responsive and engaging.

If you want to create a true “audience” for your business’s content on social media, you need to remain present. This means you need to check in regularly on your posts to monitor comments, and respond. People appreciate and remember a personal response. This also increase the reach of your content. Sure, it make take 15 minutes out of your day to diligently login to your various social media accounts to monitor content, and engage with other people’s content, but make it a point to do this habitually, and it will pay off greatly as you cultivate an active audience.

Share the spotlight.

Once you build a valuable platform for sharing content, whether this is on your website, blog, Linkedin, Twitter, etc., you should consider sharing the spotlight every so often with other professionals who have an interesting perspective to share. Omni Realty often features guest Q&A blogs that expand our area of expertise while growing relationships with other respected professionals. When sharing the spotlight, this also opens up the door for others to do the same. My blogs are often published by TheBrokerList, and shared on their social media, which greatly amplifies their reach.

Build relationships with media.

Most people view the media as a tool, or approach outlets in a very self-serving manner. While, yes, at the end of the day promotion is an objective, you must also work to forge trust, respect, and even friendship with reporters and editors. Omni Realty has received a lot of earned media by approaching local media outlets in this manner. Through relationships with reporters, I’ve had 25+ articles featured in the Central Penn Business Journal, and none of it was paid placement.

Whether it’s a commercial real estate business, or any business that you’re trying to promote on social media, the most important thing to keep in mind is that your content creates your brand. What you share, how often, and how you engage with your audience, will leave a lasting impact and frame how people view both you and your business.

How have you found success when promoting your business on social media? Share a tip or personal story by leaving a comment below.

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Legal Pitfalls That Could Impact Your Commercial Real Estate Deal

Posted on July 1, 2019 by Mike Kushner in Blog, Commercial Real Estate No Comments

Legal matters can arise just about anywhere and in any industry. Commercial real estate is no exception. In fact, commercial real estate transactions can be filled with legal pitfalls if you don’t take proper precautions or seek professional advice.

What legal challenges are common to commercial real estate? For the answers, we looked to an experienced real estate attorney who has helped many clients navigate through such challenges.

Hannah Dowd McPhelin is a partner with Pepper Hamilton LLP, resident in the Harrisburg and Philadelphia offices and vice chair of the firm’s Real Estate Practice Group. Attorney McPhelin concentrates her practice in real estate matters and other business transactions, including the acquisition, sale and financing of commercial real estate properties and leasing of office, retail, warehouse and industrial space, representing both landlords and tenants. She is an Accredited Professional and was named a member of The Counselors of Real Estate in 2017.

Omni Realty Group had the pleasure of interviewing Attorney McPhelin to further examine the legal pitfalls that could impact commercial real estate deals. Here’s what we learned.

Omni: Describe some of the most common legal challenges you’ve seen arise when working through a commercial real estate deal.

Hannah Dowd McPhelin: I’ve worked through a lot of different challenges on a variety of deals, but an enduring theme is that some level of trust between the parties is necessary to get a deal done efficiently. If there is no trust or trust erodes, it is extremely difficult to work through challenges and get to closing, and it makes the deal much more expensive for all parties.

Omni: What conflicts can arise between the LOI and the lease? How can this be avoided?

HDM: The issue I see most often is that, because LOIs are typically not binding, a party may not raise concerns at that stage and will believe those terms can be “re-negotiated” in the lease — this leads to mistrust and deal delays. It is better to raise material issues at the LOI stage so both parties do not waste time and resources when there is not a meeting of the minds. I also recommend that the LOI be a short and concise document containing only the most important terms. A long LOI slows down deals and makes it more likely that you will do a second round of negotiations on particular issues when you negotiate the lease.

Omni: How can an attorney help parties avoid legal pitfalls in commercial real estate transactions?

HDM: A good deal attorney should be creative and look to solve problems as they come up. Every deal has certain issues, but an attorney who only spots issues without offering useful and practical solutions to them is not helpful to the process and reduces the chance that the deal will get done. Frank and open discussions among the parties and their attorneys are the most useful tool in avoiding pitfalls and making sure that the deal is documented in such a way that each party understands its obligations and risks.

Omni: What are the benefits of using a commercial real estate broker?

HDM: Similar to a good attorney, a good broker can be very useful in moving a deal forward, particularly over any rough patches. A broker’s knowledge of the market and other options in the market is essential to understanding a party’s leverage, and a good broker has strong relationships in the relevant market that benefit his or her client.

Omni: For tenants/buyers, how will using an exclusive tenant representative help avoid conflict of interest in a CRE deal?

HDM: Exclusive tenant representatives are particularly helpful to companies that are not in the real estate industry but have real estate needs. The representative’s knowledge of the market, the tenant’s options, and the deal process helps set the tenant’s expectations and assists the tenant in making efficient decisions.

Omni: When entering a commercial real estate transaction, what is the best time in the process to engage outside professionals like attorneys and/or commercial real estate brokers?

HDM: As early as possible. A broker should be engaged when a tenant first considers a move in order to best understand the options in the market and to help the tenant make a considered decision. Ideally, an attorney is engaged in the LOI stage. As an attorney, I find it helpful if I can do a quick review of the LOI before it is signed, as I may see issues that will eventually become big problems in the lease if not addressed at the LOI stage. Often, what I am doing is asking a few follow-up questions to make sure the parties have considered how certain terms will play out in the lease.

Navigating commercial real estate transactions can come with many challenges. What’s most important to remember is that any successful deal must be built upon a foundation of trust. Additionally, seeking the input of an experienced commercial real estate broker, particularly one that is an exclusive tenant representative, will ensure your interests are represented. Finally, having the counsel of a real estate attorney on your side to review any documents and spot issues that could grow into bigger problems down the road can be invaluable to the success of your transaction.

To learn more about Attorney Hannah Dowd McPhelin or Pepper Hamilton LLP, please visit: www.pepperlaw.com.

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What’s the difference between a listing agent and tenant rep agent?

Posted on April 8, 2019 by Mike Kushner in Blog, Tenant Representative/Buyer Agent No Comments

The use of the term real estate agent casts a broad umbrella under which people tend to lump all real estate professionals into the same category. The truth is that there is a big difference between the role of a listing agent and a tenant/buyer agent. While both might be referred to as simply a “real estate agent,” it’s important to understand when and how you would use each when it comes to buying or selling real estate.

Listing Agent – A listing agent might also be referred to as a seller’s agent. This is the person who represents the seller or landlord in a deal. His or her job is to list and market the property to attract potential buyers, then negotiate an acceptable deal on behalf of the seller.

Tenant/Buyer Agent – On the other side of the deal you have the tenant/buyer agent. This is the person who represents the tenant or buyer looking to lease or purchase property. His or her job is to find and bring a tenant/buyer to properties which meet their criteria, then represent them in a deal to ensure terms and pricing is fair to the buyer.

How is a listing agent compensated?

Most commonly, a listing agent signs an exclusive right-to-sell/lease listing with the seller/landlord, meaning only the listing agent’s brokerage is entitled to an agreed upon commission upon the sale or lease of the property. The brokerage then typically shares the commission with the agent. Exclusive listings are bilateral agreements between a broker and a seller/landlord. It’s important to know that a listing actually belong to the broker or brokerage, not the listing agent unless he is also owner of the brokerage. However, it is important to make the distinction between a tenant/buyer agent and a subagent of the seller/landlord. If the tenant/buyer does not have a formal written agreement with the tenant/buyer agent then the agent who is showing the property and providing information to the tenant/buyer is considered a subagent of the listing agent and is not representing the interests of the tenant/buyer.

How is a tenant/buyer agent compensated?

Generally, the listing agent cooperates with the tenant/buyer agent and shares a portion of the earned commission in exchange for bringing a tenant/buyer to the table, if that tenant/buyer then submits an offer that the seller accepts. This is referred to as a “co-op” commission. It’s important to note that a tenant/buyer agent is at no cost to the tenant/buyer.

Do I really need to work with an agent?

Legally, no. You are not required to work with an agent and can opt to list your property as a For Sale By Owner (FSBO). But there are benefits to working with a listing agent. Foremost, it becomes their responsibility to market and sell your property in a timely fashion and for an agreeable price. They will schedule showings and handle all of this for you. Many sellers benefit from working with a listing agent because their property may sell faster and at a higher price point than if they decided to go it alone. Also, many people value having a professional to take these time-consuming tasks off their hands.

If you are on the other side of the deal as a tenant/buyer, again you do not legally need to work with a tenant/buyer agent in order to buy or lease a property. However, similarly to the points regarding working with a listing agent, a buyer may also experience benefits when working with a tenant/buyer agent. Foremost, you will have their knowledge and expertise to guide you through the buying/leasing process, and someone who will represent your best interests. A tenant/buyer agent can also make your property search less time consuming by showing you only properties that they know fit your criteria. Think of them as your tenant/buyer “concierge.”

Can the listing agent also be the selling agent?

Simply stated, no. A listing agent should not be the selling agent within the same deal. Why? Because there is a major conflict of interest in doing so. Think of it like having the same lawyer represent both the defense and the prosecution in a case. Neither side will receive fully unbiased, honest representation, and the counsel walks away with twice the compensation. In fact, states such as California have gone as far as making such “dual agency” practices illegal.

Too often, a tenant/buyer begins looking at property without hiring a selling agent (aka tenant/buyer agent) to exclusively represent them. Usually they do not realize that a selling agent is not at the cost of the tenant/buyer, since the tenant/buyer agent will normally co-broke a commission with the listing agent. A tenant/buyer agent is compensated by splitting the commission with the listing agent. So, the client gets representation at no cost. The commission arrangement between the owner and listing agent will be paid whether or not the tenant/buyer has representation.

Without representation, tenants or buyers often find themselves needing the expertise, advocacy and unbiased advice of a listing agent. This can result in a number of troubling issues and frustrations for the tenant/buyer. These include losing the upper hand in negotiations, being subject to unfair pricing and unsatisfactory terms and too late realizing that things could have gone far better if they had a professional dedicated solely to representing their best interests.

When it comes to understanding the differences between a listing agent and a selling agent (aka tenant/buyer agent), the most important take away is that whatever side of the deal you’re on, you want to be sure you have your own representation to advocate for your best interests and negotiate a favorable deal.

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Growing Demand for “Live-Work-Play” Communities in Central PA

Posted on December 4, 2018 by Mike Kushner in Blog, Commercial Real Estate, Community, Guest Blogger, Local Market, Trends No Comments

Photo: Walden in Mechanicsburg, PA

If you’ve been a resident of Central Pennsylvania for more than a few years, you’ve likely seen various live-work-play (LWP) communities – maybe you even live in one. What we’re talking about it mixed-use commercial and residential real estate where people have the opportunity to live, work and play (shop, dine, etc.) all in a relatively close distance to one another. A great example is the Walden community in Mechanicsburg, but there are many others that we will examine in this article.

To help us explore this growing trend, we turned to Chris LeBarton who is a Senior Market Analyst with CoStar Group. Chris covers commercial real estate data in Western Maryland, including the Baltimore metro area, up through Central Pennsylvania for CoStar’s Market Analytics platform.

Chris joins Mike Kushner of Omni Realty Group for a Q&A series where we specifically look at the growing demand for LWP communities in Central PA – and what this means for CRE professionals. Here is how Chris answers our most pressing questions.

Omni: When did the LWP trend begin and how has it grown?

Chris LeBarton: The earliest usage of LWP spaces I can find was in 2005. The trend really started to grow in popularity leading up to the market crash, but there’s no correlation between the two that I can see. The term “live-work-play” was very likely used prior to that, but I’m guessing the branding of mixed-use development really took off as concepts of ‘walkable urbanism’ and ‘Transit Oriented Development’ (TOD) exploded across the country.

According to the Urban Land Institute’s Mixed-Use Development Handbook, which was published in 2003, mixed-use development: provides three or more significant revenue-producing uses (such as retail/entertainment, office, residential, hotel, and/or civic/cultural/recreation); fosters integration, density, and compatibility of land uses, and; creates a walkable community with uninterrupted pedestrian connections.

Omni: Describe a LWP community in Central PA.

Chris LeBarton: First, let’s clarify what a LWP community really is, and what it is not. Some economic development entities and marketing types play pretty fast and loose with the term. An area can be a really nice place to live, work and play in, but if there’s over a mile or so between one element of the triad and the other two legs of the stool aren’t in the same building/development, it’s not really a LWP dynamic. Of course, the likelihood that most people who live in one of these communities also works in the same office/industrial park nearby is fairly low. But being able to do all three and be largely reliant on public transportation or your own two feet is really the spirit of the LWP concept.

Another key element to understand is that LWP is not at all relegated to a city environment. In fact, part of these projects’ collective appeal is that they can recreate a city environment without being in the hustle and bustle of a CBD. Specifically in Central Pennsylvania, there are a number of LWP developments. Here are just a few:

Lime Spring Square (Lancaster/Hempfield Township): A multi-phase, mixed-use campus being developed by Oaktree Development Group, the end result will include over 100,000 SF of retail, several hundred high-end apartments, and components of office, medical and industrial space. Penn State Health has a 76,000 SF medical office building there, while PDQ Industries is expanding operations into an 80,000 SF building.
North Cornwall Commons (Lebanon/North Cornwall Township): Another phased project that has been delayed off and on since being proposed in 2004, North Cornwall Commons is finally seeing movement at what would be the largest mixed-use development in Lebanon County history. A retail strip center with at least one confirmed tenant (a local coffee business) is underway at 148-acre site that includes plans for roughly 165 townhomes, office space and a hotel.
The 1500 Condominium (Harrisburg): An example of how you don’t have to have everything in one place, 1500 has 43 units (mostly rentals) that sit over top of two restaurants and is within walking distance to the Broad Street Market and several small-to-medium sized employers.
Wyomissing Square (Reading/Wyomissing Borough): A quintessential brownfield redevelopment, Wyomissing Square now consists of 250 4 Star apartments, a Courtyard by Marriott, small-scale retail, restaurants, and a 60,000 SF medical office building.

Omni: Who is the target demographic for this type of community?

Chris LeBarton: As with anything that deals with where people live, shop/eat or work, I think the answer is “All of the Above.” We hear all too often about Millennials, or Boomers, or Downsizers, or Divorcees. Honestly, the more conversations I have with leasing agents and brokers the more I’m convinced the rule is diversity and the exception is homogeneity. Granted, most of these LWP sites cater to the more upscale or educated among society, but that doesn’t mean there can’t be families with two working blue collar parents who make a decent living and who want to save money on a car/parking and live close to work.

Omni: What advice could help commercial real estate professionals capitalize on the LWP trend?

Chris LeBarton: I don’t give investment advice, but here are a couple thoughts. First, find a way to make it authentic. Be it the retail mix, or a unique concept to the green space, or simply having the “town center” not look boiler plate, be conscientious of that buzz word “place making.” If you’re going to basically spend the majority of your waking life in a small area, it can’t be boring or cookie cutter.

Next, think ahead. What will you need to provide 3-5 years from now? Who would have thought that cities would be crawling with scooters?! Or even just electric vehicles. People looking to walk or be publicly transported or drive as little/cheaply as possible will likely demand options and flexibility. Things to consider are multiple charging stations, bike share platforms, car-share parking lots, etc.

Finally, identify fairly gentrified but not-yet-there locations that are retail/grocery deserts. LWP in the middle of a depressed community won’t work in many places (there are exceptions, of course). But cool/changing areas that are the next ‘it place’ often still need the food and fun to complete the shift.

Omni: Looking to the future, how do you predict LWP communities to evolve in Central PA?

Chris LeBarton: I think you can expect to see more of these types of projects turn up around dying malls or outlet centers that have to repurpose big blocks of space. Another interesting new trend that I could see taking off is the rise of co-living and co-working spaces in the same building.

The LWP trend stands to have a significant impact on Central PA’s commercial real estate market. Because LWP communities rejuvenate the local community, drive business and create employment opportunities, Central PA should be encouraged that so many of these communities are popping up across the region. Additionally this type of real estate appeals to a wide variety of demographics, making it a valuable investment opportunity for commercial real estate professionals. Looking to the future, LWP communities could be among the most powerful tools to breathe new life into struggling areas, and spur a burst of new economic activity that is greatly needed.

What are your thoughts on the growing demand for live-work-place communities in Central Pennsylvania? Is this type of community attractive to you? Why or why not?

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How Omni Realty Uses Research, Skill and Experience to Benefit Our Commercial Real Estate Clients

Posted on June 4, 2018 by Mike Kushner in About Us, Blog, CCIM No Comments

When in search of a service or product, you’re likely to start with a Google search. These results will lead you to visiting some potential businesses’ websites and possibly their social media pages. You may feel like you’ve gathered enough information based on the quality of their online presence, reviews and word of mouth recommendations to choose the right business to fit your needs.

But how often do you consider a business’s mission statement in this decision making process? If you don’t, you should!

A business’s mission statement (or lack thereof) will tell you a lot about their focus, approach and how they treat their customers. A nice website, active social media and high ranking reviews only paint part of the picture of the quality of the company – and what they stand for.

For the benefit of our clients, whether they be past, present or future, we hope to give you deeper insight into our own mission so you can understand what we value and our commitment to serving you!

At Omni Realty, our mission is to secure the most effective space at the most favorable terms for our clients. We use research, skill and experience to offer unmatched, highly personalized service while carefully determining our clients’ needs and analyzing all possible solutions.

But our mission statement is more than just words on paper. The values it represents are closely woven into our daily client interactions as well as our long-term visioning. Here is how Omni Realty strives to live out our mission with everything we do.

Current and Consistent Research

We are strategic about maintaining access to the industry’s most comprehensive database of commercial real estate through our partnership with CoStar. Even though we specifically serve the Central Pennsylvania market, we have access to a combination of reliable tools, resources, and expert analysis on over 5 million commercial real estate properties in today’s market. This allows us to pull and compare market reports, keep a pulse on emerging trends and give our clients valuable advice even if it’s outside of our market.

Additionally, we have access to the most technologically advanced industry tools including:

Esri ArcGIS and Business Analyst – demographics and mapping
DataVu – business list data
Riskmeter Flood Maps – assess flood hazards and generate reports
RealNex MarketEdge – financial analysis

High-Level Skill

Mike Kushner is a graduate of University of Pennsylvania (Penn) with his degree in economics. This education is combined with Mike’s CCIM Designation, making him a uniquely qualified commercial real estate broker, developer and investor. CCIM stands for Certified Commercial Investment Member and requires advanced coursework in financial and market analysis. The CCIM designation demonstrates extensive experience in the commercial real estate industry. Furthermore, CCIM designees are recognized as leading experts in commercial investment real estate.

As part of Omni Realty’s mission, developing this high-level of skill is essential to offering our clients unmatched expertise backed by confidence. Just a few of our uncommon, but highly valuable skill areas include:

Property Management
Raw Land Development
Historic Rehab Property Development
Chairman of Local Zoning Hearing Board
Expert Witness Testimony

Diverse Experience

Skill can only be grown when it is applied. Over the last 25 years of being a licensed real estate broker, Omni Realty has grown a diverse portfolio of experience. We have served over 500 clients, brokered 1,250 commercial real estate deals and have helped businesses of all sizes and industries find the most effective space at the most favorable terms. Our diverse experience also includes extensive property management, both residential and commercial.

We love sharing our experience and applying it toward delivering favorable outcomes for our clients. Experience gives us negotiation power on behalf of our clients, a leg-up on emerging market trends and a vast network of contacts that we call upon to help our clients overcome any number of challenges, both inside and outside the scope of commercial real estate.

Unique Value Proposition

We understand that other businesses may tout that they are “different” and it can be confusing to cut through the clutter and determine which commercial real estate business truly offers a unique model. First, when we say we work with businesses of all sizes, we truly mean it. From a one-person startup looking for co-working space, to a Fortune 1,000 organization looking to develop a growing campus, we are excited to work at both ends of the spectrum because we are excited to see our locally-based businesses thrive.

Second, our skill and expertise comes at no cost to our clients. As an exclusive tenant representative/buyers agent, Omni Realty is compensated by the landlord or seller, not by our client. This also means we come to the table to represent only you and your interests. There is no conflict of interest like there might be if a single agent represented both the tenant and landlord in a commercial real estate transaction. Finally, our service is highly personalized and highly hands-on. You work with only the principals in our firm; and we are responsive and proactive in our communications.

With a better understanding of our mission, and the various pieces involved in bringing our mission to life, we hope you can see why Omni Realty is in a unique position to serve our commercial real estate tenants and buyers. And remember, a business’s mission should not be taken lightly. When looking to work with a commercial real estate broker in Central Pennsylvania, be sure to assess their mission and compare it to your own. The most successful partnerships come from businesses and clients who work together over a shared mission!

Have a comment or question? Join in the conversation by leaving a comment below.

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Real Estate Trends to Impact the United States in 2018

Posted on December 27, 2017 by Mike Kushner in Blog, CPBJ Articles, Trends No Comments

Note: This article was published by the Central Penn Business Journal. Click here to read the original version.

Rapid technological advancements and significant demographic shifts significantly influence the real estate industry. These various factors like growing urbanization, longevity of Baby Boomers and differentiated lifestyle patterns of Millennials are changing the way people value real estate. Add into the mix macroeconomic and regulatory developments, and you have the perfect storm for some significant changes to come to the real estate market in 2018.

With the many changes that have already taken place in 2017, many real estate companies find themselves searching for ways in which they can gain a competitive advantage and drive top- and bottom-line growth in the New Year.

To achieve this, we must identify and monitor emerging trends that are likely to impact the economy moving into 2018. Take a look at the top trends that are shaping the U.S. real estate industry right now!

ECONOMIC OUTLOOK: Increasing interest rates could temper growth

Federal Reserve is likely to raise interest rates in the short-to-medium term. Volatile global markets have led to continued low interest rates, but that’s expected to come to an end in 2018. Higher interest rates are likely to increase mortgage costs and could deter real estate investments to some extent.
Gross domestic product growth will likely increase 2.5 percent in 2018. It’s the same as in 2017, but better than the 2.1% growth in 2016. The modest economic improvement could temper the pace of commercial real estate (CRE) transaction activity.
Improving labor markets and household wealth will boost consumer confidence. The U-5 unemployment rate which includes discouraged workers and all other marginally attached is expected to drop under 5 percent. The employment-to-population ratio is projected to peak in 2018, as retiring Baby Boomers may reduce the share of employed.

REGULATORY OUTLOOK: Greater compliance means greater cost

Increased compliance and administration costs will result from the new accounting standards on lease accounting and revenue recognition that will primarily impact real estate investment trusts (REITs) and engineering and construction (E&C) companies.
Risk retention rules will lower issuance of commercial mortgage-backed securities (CMBS). We are also likely to see a reduction in capital availability in secondary and tertiary markets.
The Protecting Americans from Tax Hikes (PATH) Act of 2015 will ease REIT tax provisions and R&D tax credits for E&C companies, while increasing the flexibility to invest in startups for R&D experimentation. However, corporate tax reforms will reduce flexibility for corporations to spin off real estate assets into REIT structures.

DISRUPTIVE TRENDS: These factors are reshaping the face of CRE

Collaboration and Sharing.These sound like two positive trends, right? They certainly are for startups who utilize new platforms and business models like Airbnb or WeWork to reduce their real estate overhead. However, this type of collaboration and sharing of space is disrupting the way organizations lease and use commercial real estate space for their businesses. Traditional CRE companies will need to rethink their approach toward space design, lease administration, and lease duration in order to compete.
CRE data is becoming more ubiquitous and transparent thanks to technological advancements. The traditional brokerage model is being threatened by the increasing ease and efficiency of online leasing. Traditional brokers will need to diversify their services to include consulting and collaboration.
A growing demand for mixed-use developments as consumers prefer to “live, work and play” in proximity. This demand is the result of a shortage of workers with strong STEM skills, rising urbanization and Millennials’ preference for an open and flexible work culture. Companies trying to compete for this type of talent should choose office locations in areas that cater to the living and working environments preferred by their ideal candidates.
Rising demand for fast and convenient online retailing is disrupting the retail and industrial markets. Innovations in speed and mode of delivery (such as same-day delivery and e-lockers) will decrease the demand for large retail and industrial spaces. This trend will also cause a blurring of the lines between these two properties. For example, some retail space could double as fulfillment centers. To stay afloat, retailers will need to try different store formats to appeal to the consumer, while industrial properties should focus on smaller, more flexible spaces located near cities.
A change in how we get around will also change how we use real estate. With each passing year, more and more people rely upon “pay-per-use” vehicles and rideshare platforms like Zipcar, Uber and Lyft. We also get closer to self-driving vehicles. This major disruption to the entire mobility ecosystem will result in fewer people owning and driving their own vehicles, especially in urban areas. This will free up large parking spaces in prime locations that can be put to different uses. Real estate companies should begin to explore ways to reduce and repurpose parking space as a means to generate more income.

Over the course of the next 12 months, the U.S. commercial and residential real estate industry can expect to be hit with various changes and challenges. Some of these changes may have a favorable impact, while others could impose some serious setbacks. For real estate businesses to gain a competitive advantage and drive top- and bottom-line growth in 2018, they should take note of these emerging trends and work on developing a strategy now to react to the changing market, when the time comes.

What real estate trend do you think will have the most significant impact on the United States in 2018? Share your insights by leaving a comment below!

[Online Resources] Real Estate, 2017, 2018, buyers agent, central pennsylvania, commercial, demand, Economy, growth, industry, Mike Kushner, Omni Realty, prediction, regulation, residential, tenant representative, trends, united states

What Real Estate Needs to Learn from the Legal Industry

Posted on October 15, 2017 by Mike Kushner in Blog, CPBJ Articles, Tenant Representative/Buyer Agent No Comments

This article was originally published on the Central Penn Business Journal and DukeLong.com.

The issue of conflicts of interest between parties exists in a variety of industries. Ethics rules prohibit a single lawyer from representing competing sides in the same transaction. It’s common sense. You can’t ensure fair and equal representation to competing parties if you represent both sides. And clients want more than just fair representation; they want to feel they have an advocate who puts their interests above all others.

So why then, are real estate agents not restricted from representing competing parties in the same way lawyers are? In Pennsylvania, as in many states across the United States, real estate agents are permitted to represent both a buyer and seller (or tenant and landlord) in the same real estate transaction. It’s great for the real estate agents since they make full commissions, but what about the clients they represent?

The regulations and restrictions (or lack thereof) surrounding a real estate agent’s conflicts of interest when representing both parties is cause for concern. If real estate agents were required to approach conflicts of interest in the same way lawyers do, here is how the real estate industry would be reshaped.

The Legal Model

The American Bar Association published and periodically revises Model Rules of Professional Conduct, which have been adopted as legally binding ethics rules governing lawyers in most States. The Model Rules govern conflicts of interest with both current and former clients. Under the Model Rules (and under the ethics rules of the States that have not adopted the Model Rules), law firms may not represent both parties in a single transaction. This means a buyer/tenant must have separate legal representation from the seller/landlord. This gives clients complete assurance that their lawyer is committed solely to their interests. Moreover, one party cannot be pressured into using the other party’s lawyer, because it simply isn’t an option.

Real vs. Perceived Conflicts of Interest: Does It Make a Difference?

Conflicts of interest between two parties can be real or perceived. While real estate agents may argue that they always take a fair and balanced approach in their real estate transactions, if they represent both parties how that can be guaranteed? If one party doesn’t get exactly what it wants, it may question whether its real estate agent did everything possible to represent its interests. It doesn’t make a difference whether a conflict of interest is real or perceived, for both parties to feel adequately represented they cannot use the same real estate agent.

Why Dual Agency Doesn’t Work

Full service commercial real estate firms and brokerage houses tout the fact that they can “do it all.” They represent both a buyer/tenant and seller/landlord in a real estate transaction through what is called dual agency. However, dual agency is not in the best interest of either party, just the real estate agent who makes commission on both sides.

In dual agency, a real estate agent is more likely to steer buyers/tenants toward properties they represent on behalf of their seller/landlord clients. When it comes to negotiating terms, parties represented by the same real estate agent have less negotiation power and may have to compromise more than they would have if they had exclusive representation. And the list of potential abuses goes on.

The challenge is many commercial buyers and tenants aren’t aware that they can work with a real estate agent who is 100% exclusive to representing the interests of the buyer/tenant, often at no cost to them. There are real estate firms right here in Central Pennsylvania that only represent corporate business space users (buyers and tenants) and have resolved to never represent landlords or developers. Buyers and tenants need to be made aware they have options for sole representation and it’s critical they seek this out as the first step when looking for commercial space.

One Real Life Example

In 2016, the California Supreme Court upheld a challenge to dual agency in the case of Horiike vs. Coldwell Banker. The case has gone on to receive national attention regarding the practice of dual agency and the question of whether a single brokerage company can actually represent the interests of two competing parties in a fiduciary capacity.

The original case was based on a dispute regarding the square footage of a property purchased by the plaintiff, Hiroshi Horiike, who was represented by the same company marketing the property for sale, Coldwell Banker. The court determined that Coldwell Banker did not provide the same degree of care to the buyer as compared to the seller of the property, but owed both the same degree of care and representation.

Many of the world’s largest real estate companies both practice and encourage dual agency. The case of Horiike vs. Coldwell Banker brings to light the inherent conflicts of interest in such practices. Some states, like Colorado, have made dual agency illegal. It’s likely that California will follow suit. Given the national attention of this case, it’s reasonable to think other states will now consider outlawing dual agency as well, or at least putting regulations in place to reign in abuses.

The Issue from a Legal Perspective

Tim Anderson, Partner at Pepper Hamilton LLP, represents a variety of clients in real estate conveyancing, leasing, financing, foreclosures and litigation. He shares his perspective on conflicts of interest in real estate transactions.

“In real estate law, we take conflicts of interest very seriously. For example, we cannot represent both parties to a single transaction. We may represent each party in separate transactions if we conclude that we can provide competent and diligent representation to each affected client, the representation is not prohibited by law, and each affected client gives informed consent in writing,” explains Anderson.

“I routinely caution clients about the inherent risks of dual agency in real estate transactions. I warn clients about the risk that their agent’s representation of their interests may be limited by the same agent’s responsibilities to the other party. I’ve found that clients who agree to dual agency, because they think they can protect their own interests, often do not treat their own agent with complete candor,” says Anderson.

Lastly, Anderson offers this advice, “In my opinion, the real estate industry would benefit from adopting rules similar to the rules for lawyers. This does not necessarily require real estate agents to represent only buyers or sellers (landlords or tenants), but real estate agents should not try to represent the buyer and seller (landlord and tenant) in the same transaction.”

To close, I hope that the real estate industry as a whole will reflect on the ways in which other industries handle the issue of conflicts of interest. To allow even the perception and possibility of the conflicts of interest that occurs in dual agency is unfair and unnecessary.

To tenants and buyers looking for commercial space, I urge you to do your research and find an exclusive tenant representative or buyer’s agent who will strictly represent your interests in a real estate transaction. All parties are entitled to exclusive representation; be sure to seek out yours!

This article was originally published on the Central Penn Business Journal and DukeLong.com.

[Online Resources] Real Estate, buyers agent, conflict of interest, dual agency, exclusive, fair, law, lawyer, legal, mike kusher, Omni Realty Group, Tenant Representation, unbiased

Central Pennsylvania Office Real Estate Report for Q2 2017

Posted on August 14, 2017 by Mike Kushner in Blog, Commercial Real Estate, Local Market, Trends No Comments

Decrease in vacancy and recent record high for rental rates indicate a healthy demand for Central Pennsylvania Office Space.

Central Pennsylvania’s office real estate market should have very few concerns or complaints based upon its performance in Q2 2017. Three new office spaces were delivered this quarter, all of which are 100% preleased. As a result, net absorption continued to rise into the black by more than 50,000 square feet. Vacancy declined as did vacant square footage. Most noteworthy, the quoted rental rate jumped by $0.10 per square foot, making this quarter the highest quoted rental rate the market has seen since prior to Q3 2013!

In addition to these highlights, there is a lot more we can take away from the local office real estate market’s performance this last quarter. Here are the major actions that have taken place in Central Pennsylvania according to CoStar’s Q2 Office Statistics.

SELECT YEAR-TO-DATE DELIVERIES

Three new office spaces entered the market in Q2 2017 and they all made it to CoStar’s Select Top Year-to-Date Deliveries. The largest of the three is at 100 Millport Road in Lancaster. The 93,000 square-feet of B Class office space is 100% prelease. Next on the list for Central PA’s Q2 deliveries is the Goodville Mutual Expansion located in Lancaster. Goodville Mutual Casualty Company added on an additional 20,000 square-feet of Class B office space that is 100% prelease. Last but not least is the 13,000 square-foot Class B office space located at 40 Old Willow Mill Road in Mechanicsburg that is 100% preleased to Penn State Medical Group.

SELECT TOP LEASES

Of the Select Top Leases featured in the Q2 CoStar Office Market Report, just one lease from the Central Pennsylvania submarket made the list, but it did so at number 5. A large healthcare company, Centene leased the office space at 300 Corporate Center Drive, Harrisburg from Cushman & Wakefeld. The total space of the lease is 68,846 square-feet.

ABSORPTION

Net absorption is back on the rise, after taking a hit last quarter. In Q2 it was just 35,817 square-feet; now it is 88,814 square-feet. Though there is a long way to go to reach the recent record high of 421,430 square-feet that we saw in the beginning of 2015, we are at least headed back in the right direction. Considering three new buildings entered the market this month with a combined 126,000 square-feet of space, it’s a good indicator of market demand that net absorption rose.

OVERALL VACANCY & RENTAL RATES (ALL CLASSES)

This quarter, the market experienced a decrease in vacancy from 6.0% last quarter to 5.7% currently. This correlates with the decrease in vacant square-footage, down from last quarter’s 3,273,675 square-feet to 3,080,214 square-feet currently. Most noteworthy, the quoted rental rate has risen significantly, $0.10 per square foot in just one quarter. It now stands at $17.67 per square foot which is higher than it’s been since prior to Q3 2013. With only one building under construction, new space will not be entering the market anytime soon, forcing businesses to continue to use up existing inventory.

CLASS A TRENDS

Specifically looking at class A office space, vacancy is at 8.2% and the quoted rental rate is $20.80 per square-foot. The year-to-date net absorption is 20,217 square-feet, with 60,000 square-feet in year-to-date deliveries and 40,000 square-feet currently under construction.

CLASS B TRENDS

Specifically looking at class B office space, vacancy is at 5.5% and the quoted rental rate is $17.36 per square-foot. The year-to-date net absorption is 235,677 square-feet, with 126,000 square-feet in year-to-date deliveries. No new buildings are currently under construction.

CLASS C TRENDS

Specifically looking at class C office space, vacancy is at 4.7% and the quoted rental rate is $15.79 per square-foot. The year-to-date net absorption is negative 131,263 square-feet. This is a major drop compared to the other classes and the overall net absorption for the Central PA submarket as a whole. There are zero year-to-date deliveries and zero projects under construction for class C space.

What trend from the second quarter did you find most interesting or impactful to Central Pennsylvania’s office market? Share your opinion by leaving a comment!

Learn more from past market reports:

Central Pennsylvania Industrial Real Estate Report for Q2 2017

Central Pennsylvania Industrial Real Estate Report for Q1 2017

Central PA’s Office Real Estate Market Hangs on to Low Vacancy, Slows Down on Net Absorption

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First Thing to Do When Looking for New Office Space

Posted on May 12, 2017 by Mike Kushner in Blog, Tenant Representative/Buyer Agent No Comments

First Thing to Do When Looking for New Office Space

If you’re just starting the journey of exploring new office space options for your business, you may be tempted to independently start browsing online or stop in a few locations that are advertising space for lease. What’s the harm in getting a head start?

A phone call to inquire about the details of a vacancy may lead to an appointment to view the space. While these may seem like innocent, even advantageous, actions, you’ve already made a critical error that could cost you your ability to represent your best interests as the tenant.

In most instances, once you have seen a property with the listing agent, prior to engaging your tenant rep or buyer’s agent, who serves to represent your interests, you lose the ability to do so for that deal. Now you’re left alone to navigate the often challenging and one-sided process of outlining the terms of the lease.

For this reason, it is critical to carefully think about your first move when looking for new office space. The first real estate professional you should speak to is your tenant representative or buyer’s agent. In addition to securing them to represent you for any and all real estate deals, you also gain their valuable expertise to make the process as painless as possible.

Here are just a few key benefits of working with a real estate professional who exclusively represents tenants and buyers and why it should be the first call you make when leasing commercial space.

Someone Looking Out for Your Best Interests

Be sure to qualify your tenant representative. You want someone who only serves the interests of their clients – who are all tenants/buyers. This ensures that the properties they show you are properties they believe will be a good fit for your needs, not because they are also the leasing agent for that property. Additionally, your tenant rep is there to aggressively represent you in negotiations. They have the tools and knowledge to understand fair market value, and will ensure you receive this or better.

Master of Their Trade

When working with a tenant representative, you receive the benefit of specialization. Representing tenants and buyers is what they do all day, every day. They are always thinking like the tenant, and so they are skilled and efficient at brokering deals in your favor. Rather than working with a broker who “dabbles” in both sides of the deal, you gain the peace of mind of working with someone who exclusive represents tenants and buyers.

No Cost to You

Most notably, tenant representatives are not paid for by the tenant; instead, the broker is paid commission by the landlord/owner (99.9% of the time). The commission fee is negotiated before the property is marketed, and that fee is usually paid regardless of whether or not you have a tenant representative/buyer agent (i.e. bigger commission for the leasing agent). Keep this in mind when you ask yourself whether you need a tenant representative. It comes as no cost to you personally and the commission is money that is paid out regardless. There is no downside to having a tenant representative on your side!

No matter where you are in your search for new office space, it’s always worth a phone call to a trusted tenant representative. Even if they cannot represent you for that particular deal, they are often still willing to offer advice to ensure you are getting a sound deal.

Have you recently navigated a search for new office space? Did you first engage a tenant representative? Either way, share your experience by commenting below!

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