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Posts tagged "Class C"

Home» Posts tagged "Class C"

Central PA Office Submarkets End Quarter with Very Different Outcomes

Posted on November 8, 2018 by Mike Kushner in Blog, Local Market, Trends No Comments

Lancaster closes Q3 with the strongest market while Harrisburg West shows signs of distress.

The submarkets that make up Central Pennsylvania’s office real estate market each have unique advantages and disadvantages that really show through when you examine each individually. With the close of the third-quarter, we took a closer look at how the four main submarkets performed individually and comparatively.

The outcomes should surprise you! You may think you know which of the four submarkets outperformed the others, which one is most likely in distress and the others that are sitting pretty stagnant right now. But you’ll likely be shocked by the large variances in numbers, especially when compared to the historical averages and forecasted averages of what is yet to come.

Let’s take a closer look at some of the most interesting trends and numbers reported from CoStar’s Q3 2018 office report for Harrisburg East, Harrisburg West, Lancaster and York.

Harrisburg East

Vacancy – The vacancy rate for Q3 2018 in the Harrisburg East submarket is 6.4%. This is notably lower than the historical average of 7.8% and the forecast average shows this dipping lower to 5.7%. For comparison, the peak in vacancy rate occurred in Q4 2012 when it reached 10.8% and the trough was in Q4 1997 when it plummeted to 3.1%.

12 Month Net Absorption in SF – The twelve-month net absorption is 106,000 square-feet. While this is still lower than the historical average of 187,046 square-feet, the forecast average predicts the current net absorption will fall significantly to 61,648 square-feet. Though not by much, net absorption will at least remain in the black for now.

Rent Growth – The current 12 month rent growth is 2.0%. This is higher than the historical average of 1.4%, though the forecast average predicts that this will fall to 0.7%. For comparison, the peak in Harrisburg East’s rent growth occurred in Q1 2001 when it reached 8.3% and the trough was in Q4 2009 when it plummeted to -2.4%.

12 month deliveries in SF – Harrisburg East has a twelve-month delivery of 30,000 square-feet. This takes into account all of the deliveries that occurred over the last year; however no new buildings were delivered specifically in Q3 2018. Additionally, 20,000 square-feet of 4 and 5 star office space is under construction, which will be delivered in coming quarters.

Harrisburg West

Vacancy – The vacancy rate for Q3 2018 in the Harrisburg West submarket is 7.3%. This is slightly higher than the historical average of 7.0%; however, CoStar’s forecast average predicts this to dip to 5.6%. For comparison, the peak in vacancy rate occurred in Q2 2002 when it reached 9.8% and the trough was in Q4 1997 when it plummeted to 2.5%.

12 Month Net Absorption in SF – The twelve-month net absorption is negative 258,000 square-feet. The historical average is 95,454 square-feet and the forecast average predicts the market will again return to positive numbers with 25,193 square-feet. Q3 net absorption is not far from where it was in Q4 2014 when it was negative w 292,042 square-feet. Since then, it peaked in Q3 2016 at 611,057 square-feet before falling substantially to its current negative state.

Rent Growth – The current 12 month rent growth is 1.9%. This is higher than the historical average of 1.4%, though the forecast average predicts that this will fall to 0.6%. For comparison, the peak in Harrisburg West’s rent growth occurred in Q3 2000 when it reached 7.1% and the trough was in Q4 2009 when it plummeted to -2.8%.

12 month deliveries in SF – Harrisburg West has a twelve-month delivery of 40,000 square-feet, compared to the historical average of 127,660 square-feet. This takes into account all of the deliveries that occurred over the last year; however no new buildings were delivered specifically in Q3 2018. Additionally, 26,400 square-feet of 3 star office space is under construction, which will be delivered in coming quarters.

Lancaster

Vacancy – The vacancy rate for Q3 2018 in the Lancaster submarket is 3.6%. This is notably lower than the historical average of 6.8%; the forecast average predicts this remain fairly stable at 3.7%. For comparison, the peak in vacancy rate occurred in Q4 2004 when it reached 9.7%. The lowest the vacancy rate has ever been in Lancaster County is actually right now, in Q3 2018.

12 Month Net Absorption in SF – The twelve-month net absorption is 324,000 square-feet. The historical average is substantially lower than what it is currently and that is 109,103 square-feet. The forecast average predicts net absorption will decrease to 89,086 square-feet.

Rent Growth – The current 12 month rent growth is 4.9%. This is significantly higher than the historical average of 1.3%, though the forecast average predicts that this will fall to 1.6%. For comparison, the peak in Lancaster’s rent growth occurred in Q3 2000 when it reached 6.9% and the trough was in Q4 2009 when it plummeted to -5.0%.

12 month deliveries in SF – Lancaster has a twelve-month delivery of 12,000 square-feet, compared to the historical average of 114,237 square-feet. This takes into account all of the deliveries that occurred over the last year; however no new buildings were delivered specifically in Q3 2018. Additionally, 81,840 square-feet of 4 and 5 star office space is under construction, which will be delivered in coming quarters.

York

Vacancy – The vacancy rate for Q3 2018 in the York submarket is 5.3%. This is lower than the historical average of 6.9%; the forecast average predicts this remain fairly stable at 5.4%. For comparison, the peak in vacancy rate occurred in Q1 2008 when it reached 10.5%. The lowest the vacancy rate has ever been was 2.2% in Q4 1998.

12 Month Net Absorption in SF – The twelve-month net absorption is 29,500 square-feet. The historical average is 72,892 square-feet. The forecast average predicts net absorption will decrease to 8,847 square-feet.

Rent Growth – The current 12 month rent growth is 1.6%. This is fairly close in line with the historical average of 1.1%, though the forecast average predicts that this will fall to 0.6%. For comparison, the peak in York’s rent growth occurred in Q3 2000 when it reached 6.8% and the trough was in Q3 2009 when it plummeted to -4.3%.

12 month deliveries in SF – York has a twelve-month delivery of 0 square-feet, compared to the historical average of 80,056 square-feet. The forecast average predicts that this rise to 13,093 square-feet. Additionally, 22,000 square-feet of office space is under construction, 17,000 square-feet of 4 and 5 star space and 5,000 square-feet of 3 star space, which will be delivered in coming quarters.

Key Takeaways

Overall, York County and Harrisburg East have been very stable. Not much is moving the needle. There is not a lot of absorption nor much new construction that could spur activity.

The real positive news from Q3 2018 is Lancaster County. This submarket rose above the rest for several reasons. First is its 324,000 square-feet in net absorption and 4.9% rent growth (highest since Q3 2003). Additionally the vacancy rate decreased 2.3%. Currently there are 81,840 square-feet under construction and 89,166 square-feet of new construction proposed.

In contrast, the Harrisburg West submarket is showing signs of distress. Its negative 282,000 square-feet of net absorption combined with a modest vacancy rate increase of 1.6% does not offer much hope for a major turnaround anytime soon. Additionally, the submarket has 86,400 square-feet of new office space under construction and 225,596 square-feet of proposed new space that the market will struggle to absorb, further driving down the net absorption.

Based on the activity taking place in Central Pennsylvania’s office real estate submarkets, how do you think this will impact business growth and development throughout these counties? How will this have a ripple effect into other areas of our economy?

Share your ideas by leaving a comment below!

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Harrisburg West Office Rental Rates Also Decrease in First Quarter 2012

Posted on May 9, 2012 by mike.kushner in Local Market, Trends No Comments

Last week, we shared the first quarter 2012 office segment breakdown for the Harrisburg East submarket. This week, we reveal the first quarter 2012 office segment breakdown for the Harrisburg West submarket.

Overall rental rates ended the first quarter at $18.02, a decrease of 15 cents per square foot over the previous quarter. Meanwhile, the Harrisburg Area West office market ended the first quarter of 2012 with an overall vacancy rate of 10.1%, a decrease of 0.9% from the previous quarter.  There were no new deliveries or new construction at the end of this quarter.

Rental Rates

The average quoted asking rental rate for available office space, all classes, was $18.02 per square foot at the end of the first quarter 2012 in the Harrisburg Area West office market area. This represented a .15 cent per square foot decrease in quoted rental rates from the end of the fourth quarter 2011, when rents were reported at $18.17 per square foot.

The average quoted rate within the Class-A office market was $20.74 at the end of the first quarter 2012, while Class-B rates stood at $16.83, and Class-C rates at $17.52. At the end of the fourth quarter 2011, Class-A rates were $20.27 per square foot, Class-B rates were $17.12, and Class-C rates were $17.32.

Vacancy

Class-A projects reported a vacancy rate of 10.7% at the end of the first quarter 2012 compared to 13.7% at the end of the fourth quarter 2011.

Class-B projects reported a vacancy rate of 9.0% at the end of the first quarter 2012 compared to 9.3% at the end of the fourth quarter 2011.

Class-C projects reported a vacancy rate of 12.1% at the end of the first quarter 2012 compared to 12.9% at the end of fourth quarter 2011.

Absorption

Net absorption for the overall Harrisburg Area West office market was positive 61,200 square feet in the first quarter 2012. That compares to positive 20,290 square feet in the fourth quarter 2011.

The Class-A office market recorded net absorption of positive 21,132 square feet in the first quarter 2012, compared to positive 19,754 square feet in the fourth quarter 2011.

The Class-B office market recorded net absorption of positive 19,970 square feet in the first quarter 2012, compared to positive 92,214 square feet in the fourth quarter 2011.

The Class-C office market recorded net absorption of positive 20,098 square feet in the first quarter 2012 compared to negative (91, 678) square feet in the fourth quarter 2011.

Largest Lease Signings

The largest lease signing occurring in the first quarter 2012 in the Harrisburg Area West submarket was the Arbor Building, a 20,000-square-foot-property leased by the Holy Spirit Hospital Camp Hill from Kinsley Properties.

[Online Resources] Real Estate, building, Central PA Real Estate, Class A, Class B, Class C, commercial buying, commercial lease, Commercial Real Estate, Commercial Realtor, Construction, CRE, Going Green, Harrisburg west submarket, leasing rates, Mike Kushner, NAR, office lease, Office Leasing Market, office leasing marketing, Office Space, office space camp hill, office space Harrisburg, office space in centralpa, Omni Realty Group, planning and developing, rent office space

Harrisburg East Office Rental Rates Decrease Slightly in First Quarter 2012

Posted on May 2, 2012 by mike.kushner in Local Market, Office Leasing, Trends No Comments

Overall rental rates ended the first quarter at $16.86, a decrease of 16 cents per square foot over the previous quarter. Meanwhile, the Harrisburg East office market ended the first quarter of 2012 with an overall vacancy rate of 9.1%, a decrease of 0.3% from the previous quarter.  There were no new deliveries or new construction at the end of this quarter.

Rental Rates

The average quoted asking rental rate for available office space, all classes, was $16.86 per square foot at the end of the first quarter 2012 in the Harrisburg East office market area. This represented a .16 cent per square foot decrease in quoted rental rates from the end of the fourth quarter 2011, when rents were reported at $17.02 per square foot.

The average quoted rate within the Class-A office market was $19.31 at the end of the first quarter 2012, while Class-B rates stood at $16.25, and Class-C rates at $15.42. At the end of the fourth quarter 2011, Class-A rates were $19.76 per square foot, Class-B rates were $16.68, and Class-C rates were $14.48.

Vacancy

Class-A projects reported a vacancy rate of 7.5% at the end of the first quarter 2012 compared to 7.9% at the end of the fourth quarter 2011.

Class-B projects reported a vacancy rate of 10.2% at the end of the first quarter 2012 compared to 10.8% at the end of the fourth quarter 2011.

Class-C projects reported a vacancy rate of 8.0% at the end of the first quarter 2012 compared to 7.9% at the end of fourth quarter 2011.

Absorption

Net absorption for the overall Harrisburg East office market was positive 7,126 square feet in the first quarter 2012. That compares to negative (135,414) square feet in the fourth quarter 2011.

The Class-A office market recorded net absorption of positive 15,831 square feet in the first quarter 2012, compared to positive 68 square feet in the fourth quarter 2011.

The Class-B office market recorded net absorption of positive 1,419 square feet in the first quarter 2012, compared to negative (121,830) square feet in the fourth quarter 2011.

The Class-C office market recorded net absorption of negative (10,124) square feet in the first quarter 2012 compared to negative (13,652) square feet in the fourth quarter 2011..

Largest Lease Signings

The largest lease signings occurring so far in 2012 include three properties represented by NAI/CIR: the 16,839-square-foot property at 30 North Third Street in Harrisburg as well as two properties at 8170 Adams Drive in Hummelstown – a 14,085-square-foot property and a 10,084-square-foot- property.

Stay tuned next week for the first quarter 2012 office market breakdown for the Harrisburg West submarket.

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The ABCs of Office Building Classifications

Posted on February 15, 2012 by mike.kushner in Commercial Real Estate, Office Leasing No Comments

Omni blogIn the world of commercial real estate, tenants will find that office buildings are generally classified as a Class A, Class B, or a Class C building.  The difference between each of these classifications varies by market.  Building classifications are used to differentiate buildings and help the reporting of market data in a manner that differentiates between building types.

To help you better understand the office space you’re selling, leasing or buying, we’ve created a “cheat sheet” to give you the information you need to rapidly assess any building you’re considering.

“CLASS A” OFFICE BUILDINGS

Age:                                             New(er)

Quality:                                      Highest

Appearance:                             Highly attractive, impeccable

Infrastructure:                         High quality, technologically-advanced

Location:                                   Well-located with excellent access to amenities, restaurants, highways, etc.

Management:                           Professionally managed

Tenants:                                    Typically high quality

Rent Rates:                               High

Other Common Attributes: Skyscrapers (or tallest buildings in the area), high ceilings, central atrium area(s), target spot for “known” businesses (e.g., banking firms, law firms, real estate brokers)

“CLASS B” OFFICE BUILDINGS

Age:                                             Slightly older than “Class B” office buildings

Quality:                                      Attractive, but aged

Appearance:                             “Dated” look, in need of physical (not structural) enhancement

Infrastructure:                         Good quality may need technology-related upgrades

Location:                                   Good to excellent location w/generally easy access to amenities/transportation

Management:                          Good quality

Tenants:                                   Good quality

Rent Rates:                              Mid-priced

Other Common Attributes: Fewer than five stories in height, may once have been “Class A” buildings that were downgraded due to age

“CLASS C” OFFICE BUILDINGS

Age:                                            Typically 20+ years old

Quality:                                      In need of structural renovations

Appearance:                             Architecturally in need of extensive renovations

Infrastructure:                         Outdated

Location:                                   Poor to acceptable

Management:                           Low quality

Tenants:                                    Low quality

Rent Rates:                               Lowest

Other Common Attributes: May be unoccupied entirely or mostly, could be upgraded to “Class B” office space with renovation and repair

The above is just a general guideline of building classifications.  No formal international standard exists for classifying a building, but one the most important things to consider about building classifications is that buildings should be viewed in context and relative to other buildings within the sub-market; a Class A building in one market may not be a Class A building in another.

No matter what kind of commercial office space you’re interested in purchasing or leasing, contact us for the best representation.

Want to know more about the Central Pennsylvania Commercial Real Estate Market?  Omni Realty Group has the data!

Over the coming months, we’ll be targeting different product types and market segments in an effort to help you better understand the intricacies of the Central Pennsylvania commercial real estate market.

[Online Resources] Real Estate, Central PA Real Estate, Class A, Class B, Class C, commercial lease, Commercial Real Estate, Commercial Realtor, CRE, Going Green, Mike Kushner, Office Building Classifications, Office Class A, Office Class B, Office Class C, office lease, office leasing marketing, Office Space, office space camp hill, office space Harrisburg, office space in central pa, Omni Realty Group, rent office space

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