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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!

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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.

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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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The Ultimate Guide for Finding and Leasing a Commercial Space for Your Business

Posted on February 10, 2015 by mike.kushner in Blog, Commercial Real Estate, Office Leasing, Tenant Representative/Buyer Agent No Comments

There are many aspects of running a business that can be daunting to navigate – finding and leasing a commercial space that fits both your needs and your budget is absolutely one of them.

Unless your expertise is in real estate, you can’t be expected to know the market or understand how to negotiate terms like a professional. The good news is a tenant representative, can help you! Even if you’re not planning to change locations right now, educating yourself on the basic process is always a smart idea.

There’s a lot of information floating around out there that can be quite confusing, so to make the task of finding and leasing a commercial space for your business just a little less challenging, we prepared this “ultimate guide” that will give you a crash course on the most important information. Let’s take a look!

Determine how much space you need and where you need it

It sounds pretty obvious that you’ll need to have an idea of your desired square footage before you begin to qualify properties. What’s not so obvious are all of the different factors that can contribute to how much space you need and where you really need it. Location is just one of these variables. Sure, you want an office that is convenient for your employees, but you may also want a space that is convenient for your customers and brings visibility to your business. For a retail business with a storefront, this is particularly important.

Additionally, you need to consider the space you need right now, but also the space you will reasonably need in the future as you grow. With the popularity of collaborative workspaces, you may also want to prioritize an open floor plan that allows you to create an open and flexible work environment. Don’t forget to include any special needs like extra storage space, multiple conference rooms, co-working areas, etc. Carefully think about all of these details when designing your “ideal space.”

Survey the market

Now that you have an idea of how much space you need and where you need it, you are ready to get to know the current market. This is an important step because it provides you with the knowledge to negotiate and to know the market rate for what you’re looking to rent. Compare multiple properties and make notes of the pros and cons of each. A tenant representative, like Omni Realty Group, can help you pull information on these comparable properties like when a tenant’s current lease ends, how much they’re paying per square foot and if they received any other special deals (like the first year rent-free) that could be used in your favor.

Create a short list

With a good understanding the market, you can begin to narrow down your ideal locations to a short list of qualified properties. If you’re a visual person, make a chart or spreadsheet that lets you see just how they stack up against each other. At the very least, you’ll want to closely compare the pros and cons of their location, amenities and services as well as the history of the current landlord.

Visit them first-hand

The next important piece of comparing those qualitied properties from your short list is to tour them in person to really see how the space looks and how it feels walking through it. It’s amazing how one property may appear to be in the lead on paper, but after visiting each in person, another will rise to the top. Since this is a space you’ll be spending quite a few hours in, it’s worth doing your due diligence and touring each one that you are seriously considering. To get the most out of these tours, you should have your tenant representative with you. He or she will offer a second set of (expert) eyes and ask questions or make note of details you might otherwise overlook.

Put together an RFP

After your site visits, your tenant representative will prepare a Request for Proposal (RFP) and distribute it to the qualified candidate buildings that have “passed the test” thus far. Once you receive the responses from the landlords, you can compare all of the offers side by side. A tenant representative can help you create a quality comparative lease analysis that will allow you to compare all proposals as close to apples-to-apples as possible.

Negotiate

Now the “fun” begins! Negotiations can be one of the most stressful steps of the leasing process, but they are a necessary part of formulating a lease both parties are comfortable with signing. It’s highly recommended to seek counsel to review all legal documents and protect your best interests. This is also where a tenant representative is an invaluable resource and can guide you throughout the process.

Customize the space to your needs

With a successful negotiation process, you are ready for one of the final steps which is planning your new space and customizing it with construction, if necessary. Your business is unique, so you can’t expect someone else’s former office space to fit your exact needs. Construction, whether that’s putting up a few cubicles or completely knocking down walls, is a delicate process for a renter. You need to make sure you have explicit approval from your landlord to protect yourself and any investment you’re putting into customizing your space. A tenant representative can expertly navigate the terms of construction and can sometimes negotiate the cost to be covered by the landlord, either in part or in full. This is yet one more very important scenario where you’ll want a TR on your side!

There you have our “Ultimate Guide for Finding and Leasing a Commercial Space for Your Business” with a lot of valuable information to get you started in the right direction. Most importantly, keep in mind that there is even more information you’ll want to consider throughout your hunt for office space and seeking the help from a professional tenant representative can save you time, money and headaches along the way – so don’t be afraid to start a conversation with one today!

Do you have a question about finding and leasing a space for your business? Ask Omni by commenting below!

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8 Things You Need to Know Before Renewing Your Lease

Posted on June 30, 2014 by mike.kushner in Blog, Commercial Real Estate, Tenant Representative/Buyer Agent No Comments

Negotiations of any sort can be nerve-wracking and intimidating, especially when it comes to negotiating a lease renewal. Landlords can drive a hard bargain, making you feel like you don’t have any other options or say in the matter. The good news is…you do! Here are 8 things that can boost your negotiation power when it comes time to renew your next lease.

1. Be a good tenant

This is so basic, yet so often it’s advice that isn’t followed. Taking care of your rental space will give you leverage when it comes to negotiating your lease renewal. If issues arise between you and your landlord, resolve them quickly and amicably. It’s only to your benefit to be on good terms with the person who determines your rental rates.

2. Start early and understand your options

Particularly in a very tight commercial real estate market, you’ve got to allow at least 9-12 months for the process to play out. It can take several months to research your alternatives, open up negotiations with prospective landlords (especially concerning tenant improvements), and then come back to your current landlord. And you’ll want to allow 2-4 months if you have to plan a move (assuming you’re an SMBE like us).

3. Understand your market – and concessions that new tenants can extract.

While market rental rates are important to understand, there are a number of other considerations new tenants may enjoy. These include tenant improvements, rent holidays and other benefits.

Understanding these will not only give you a sense for what you might expect if you go elsewhere, but it can also help you negotiate your current renewal. Why shouldn’t you enjoy at least part of those benefits on the renewal?

4. Consult with (if not retain) a broker.

I’m a big believer in at least talking to experts in a field. Brokers can give you a sense for the market, current conditions, and offer other valuable input. I generally recommend using them to represent you in a lease negotiation. Depending upon the size of your business, this can represent anywhere from a $350k to a multi-million dollar obligation over a 3 to 5 year period. The truth is, while you may know your business better than anyone, you’re probably not an expert in commercial real estate. Seek out advice from someone who is!

Bonus Tip: If you are going to use a commercial real estate broker, I suggest using a tenant only representative, as they are less likely to be conflicted than brokers who may represent either side.

5. Depending on how much leverage you have, work to “share the savings.”

Just as you may want to avoid the headaches and costs associated with moving, your landlord may have the same interest. If you’ve been a good tenant and are paying near market rents, the last thing your landlord wants to deal with is several months of vacancy, showing the space, negotiating and paying tenant improvements, and then having to deal with an unknown. So work to value how much benefit each side is getting out of the renewal and see if you can’t find some common ground.

6. Think outside the box and understand your landlord’s situation.

Your landlord is interested in three things: 1. the underlying value of the property; 2. current income/cash flow from the property; and 3. avoiding headaches. Understanding the relative importance of each can be very helpful in your negotiations.

For example, commercial property is essentially valued at a multiple of cash flow (it’s a cap rate if you want to be specific) over a period of time, with an emphasis on future cash flows. If the landlord is thinking about re-financing or selling the property in 2-3 years, she will want to boost the cash flow in that later period. This can provide you with a path to reducing your near term rental outlays in return for increasing the rent at a time when it particularly matters to the landlord.

7. Put together a spreadsheet balancing overall costs for your various rental options

Feel free to let your landlord know you’re doing this, and make sure that you’re getting all the information you need to make a balanced and informed decision. This will also alert them to the fact that you are exploring other options which can work to your benefit in lease negotiations. (A good tenant rep broker has software to run this analysis.)

8. Get your hands on a bunch of actual lease agreements and extensions.

This can help give you ideas for different terms that you might want to incorporate into the lease that you may not have thought of. Of course, if you have representation, you should encourage them to do this -you’d be surprised how often this valuable opportunity is overlooked.

No matter where you stand in your current lease, it’s always a smart idea to follow these pieces of advice now. Some you can do immediately and others you can plan for in the future. Doing so can provide you with a valuable return, especially if it helps you to negotiate a lease renewal with favorable terms that keeps you in a space you love for less while building a good relationships with your landlord.

Do you have a specific question about renewing a lease? Let us help you find an answer by sharing your question in the comments below!

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