Home» Posts tagged "expert"

Top 10 Issues Affecting Real Estate – Part II

Posted on September 6, 2021 by Mike Kushner in Blog, Commercial Real Estate No Comments

In Part I of the “Top 10 Issues Affecting Real Estate” we covered topics 1-5 of the top issues we expect to have a lasting and immediate impact on real estate here in Central Pennsylvania and across the United States. If you missed it, start here!

Keep reading if you’re ready to dive deeper into issues #6-10 as we continue down the list of the most pertinent topics to real estate as they apply to various sectors.

#6 Housing Supply and Affordability

Decades of underinvestment and underbuilding have created a shortage of housing in America that is more dire than previously expected and will require a concerted, long-term nationwide commitment to overcome. As it stands, there are three things that most can agree on in the current housing market: 1) there is a tremendous need for affordable housing; 2) there continues to be a sentiment of a “Not in My Back Yard” mentality; and 3) there’s an ongoing supply deficit of market-rate housing.

A severe lack of new construction and prolonged underinvestment has led to an acute shortage of available housing to the detriment of the economy and certain segments of the public. This trend affects every region of the country, creating an “underbuilding gap” of 5.5 to 6.8 million housing units since 2001.

#7 Political Polarization

Simply put, we are squandering resources as we try to address problems that arise from the partisan divide, rather than problems confronting us as common issues. This hinders our productivity and therefore the nation’s economic strength. And the real estate industry’s well-being is a function of our economic growth. The economy and the real estate industry would be far healthier, as would American society, if the pattern of party-line voting in the halls of Congress could be transcended in favor of something very traditional: the defining of politics as the art of compromise.

#8 Economic Structural Change

What we’re seeing is many investors increasing their focus on property management aimed at retaining tenants and defending cash flow, while selectively seeking ‘value-add’ properties amenable to active asset management. The thinking is “focus on what you can control” during this period where macro-level uncertainty is the governing headwind at the policy level in terms of the structural problems in this economy. This is a significant economic structural change. Additionally, Cap rates ranging, on average, from 5% for apartments to 6.6% for offices are keeping pricing rich compared with the risk inherent in that underwriting uncertainty.

#9 Adaptive Reuse Reinvented

Adaptive reuse is not a new terminology but since COVID-19 it’s evolved into a re-examination of our suburban communities to reposition them for transformation before the opportunity for change passes them over. The trend we see now, and one that stands to have a large impact on commercial real estate is addressing the challenge of what to do with hundreds of defunct suburban malls and thousands of empty Big-Box retail stores that are surrounded by desirable and affordable neighborhoods. This makes it to the Top #10 list for four main reasons:

Reconnecting our communities from what the Interstate Highway system divided from the 1950s to the 1980s
Preventing blight that developed in our dense urban cities from flowing to the suburbs and secondary MSAs
Restoring much-needed greenspace to our neighborhoods and cities that can germinate interaction of diverse demographic groups
Promoting good ESG and diversity, equity, and inclusion policies

#10 Bifurcation of Capital Markets

Looking back over the last year and a half, what becomes clear is how different the market-changing event of COVID-19 was compared to prior market corrections. While transaction volume is slowly recovering, it’s still well below pre-COVID levels. Furthermore, the market has not seen the volume of expected distress sales, but there is plenty of capital ready to deploy! As we look to the remainder of 2021 and into 2022, performance will dictate the amount of distress and losses, and risk management should dictate markets, property types, leverage, loan structure, and pricing for mortgage debt. The next year should also tell us if commercial real estate debt was too rich and whether perceived risk underestimated where pricing should have been.

*****

Among issues 6-10, which one do you believe will last the longest or have the greatest impact? Start a conversation by leaving a comment below!

And be sure to visit Part I to learn about issues #1-#5!

[Online Resources] Real Estate, advice, agent, blog, broker, businesses, buy, central pa, Commercial Real Estate, CRE, employees, expert, factors, funding, government, harrisburg, home office, industrial, infrastructure, insight, issues, landlord, laws, lease, logistics, Mike Kushner, office, office environment, Omni Realty Group, pa, pennsylvania, professional, property, remote working, retail, sell, taxes, top 10, trends, virtual office

Top 10 Issues Affecting Real Estate – Part I

Posted on August 23, 2021 by Mike Kushner in Blog, Commercial Real Estate, Local Market, Trends No Comments

We live in a rapidly changing world, and such changes impact every person, place, and industry either directly or indirectly. First, this was due to rapidly changing technology, which still has a profound impact on our daily lives. We live in a time where technology is changing more in a few months than it previously would in years or decades. This has led to great advancements, life-saving solutions, and modern conveniences, unlike anything the generations before us could imagine.

But in the shadows of the sudden onset of a global pandemic, some changes that have taken place recently were not so helpful or welcoming. Every business has felt the blow of COVID-19, and some did not survive the punch. For those who were able to adapt and survive, changes had to take place. Looking at commercial real estate, the most significant changes can be grouped into 10 core issues. Let’s take a look at the first five issues that have already and will continue to affect the real estate market for years to come.

#1 Remote and Flexible Work Environments

Over the summer, businesses began to return to in-person work environments, some partially and others fully. As of mid-June, it was estimated that 32% of United States businesses had reopened their physical office locations and employees were returning to (somewhat) normal work schedules. Nevertheless, commercial properties need to be prepared for lasting changes as the result, not only of this global pandemic but other factors that had been on the rise for quite some time.

Remote working, the acceleration of internet retail, and the demand for larger and more natural spaces and other pandemic-era behaviors have created the “perfect storm” to drive significant change in remote work and mobility in commercial real estate. One of the greatest lessons learned during COVID is the escalating demand for more flexible, easily adaptable, and sharable spaces and CRE professionals need to be prepared to make their spaces more conducive in order to meet these demands and remain competitive.

#2 Technology Acceleration and Innovation

Technology continues to hold its place high on this top 10 list, but this year for a slightly different reason. In the wake of COVID-19, more people than ever before had to rapidly adapt and accept technology (particularly those who allowed for remote interactions with the world) as a way of life. The question before us now is what new habits have formed as such, and how many people will revert to “old tech” ways of doing things. Our prediction is that a lot of the new technology people had been trained to use over the last 18 months will “stick” and as a result, there is a higher comfort level – especially among older generations – with using remote technologies to live, work, and entertain.

For commercial real estate, the biggest impact can be seen in cybersecurity, supply chain logistics, and price instability. None of these are new concepts, but in a span of months if not weeks in some cases, the world saw high profile hacks, shortages of resources like microchips, lumber and labor, and rising prices across the board. The accelerated upgrade of connectivity, security, and hosted processes mean utilization is being maximized and any place is now a potential workplace. This creates new pools of vacancy and pools of availability enabled by technology.

#3 Environmental, Social, and Governance Initiatives

Environmental, Social, and Governance (ESG) programs in real estate continue to be one of the best ways to reduce carbon emissions, accrete value, and demonstrate reputational value in the market. This was greatly accelerated during the onset of COVID-19. At the same time, workforce development, Diversity, Equity, and Inclusion initiatives, and recognition of the importance of health and wellness in commercial real estate are setting new expectations for building operations and how to engage stakeholders and the communities in which real estate owners and users invest.

The expertise, creativity, and innovation that the real estate (and finance) industry is well known for are highly valuable for assessing and mitigating risk and creating value for investors, occupants, and the capital markets that serve them. The biggest shift to note for this trend is an increased value that real estate professionals can bring to other markets that are creating and implementing ESG programs in an effort to be socially responsible and attract top talent.

#4 Logistics

Simply put, logistics is what makes our economy “work.” It’s at the epicenter of every product-based service and that has never felt more evident than during COVID-19 when so many goods were delayed across the globe, and even domestically. The supply-chain funnel is still recovering as we continue to experience shortages and delays. Logistics post-COVID-19 will disrupt commercial real estate models for years to come. We can expect disruption in commercial real estate capital allocation, with more funding to industrial property and less to retail. There will also be less dependency on physical stores and more on modern eCommerce warehouses that will be increasingly automated with less reliance on labor. The biggest takeaway for commercial real estate professionals is to keep a keen eye on the changing logistical strategies and solutions of the economy. As these cause shifts in the market, the demand for CRE will also shift. Where one sector will turn down, another will rise. We can expect the waves of change to continue to roll in, impacting real estate for years to come in big and permanent ways.

#5 Infrastructure: New Imperatives Emerge

Similar to issue #4, it takes infrastructure to support logistics. The government has turned a keen eye to allocating funding and initiatives to support improved roads, bridges, airports, ports, mass transit, and other traditional infrastructure needs. With billions of dollars in proposed funding, many new imperatives to improve our nation’s infrastructure have emerged. This includes the expansion of broadband, last-mile deliveries to homes and businesses, automation and optimization of systems, and an increased focus on renewables. This is a huge issue to tackle and it seems we’re falling behind the clock with every passing second.

To put this issue into perspective, the American Society of Civil Engineers gives U.S. infrastructure a score of C-, classifying it as “poor” and “at risk,” while the World Economic Forum’s Global Competitiveness Report ranks the U.S. 13th in the world. If the American economy is to remain top tier, we need to invest aggressively and strategically in the future of our infrastructure to keep up with the competition and demand. The funding coming in from Capitol Hill attempts to do this, but the question remains whether it will come quickly enough. Change and improvements take time, even more so when we’re talking about major infrastructure improvements. The United States is racing the rapid advancements of technology and the mindset of an “I want it now” world.

*****

Among these top 5 issues, which one do you believe will last the longest or have the greatest impact? Start a conversation by leaving a comment below!

And stay tuned for Part II of this topic where we dive deeper into issues #6-10!

Jobs – Not Economy – Drive Commercial Real Estate Activity

Posted on August 22, 2018 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.

Earlier this month, it was reported that the number of Americans filing for unemployment benefits rose less than expected. To put this into perspective, claims dropped to 208,000 during the week of July 14, which was the lowest it has been since December 1969! After peaking at nearly 300,000 claims in October of 2017, we have seen a mostly steady (with some variation) decline in unemployment claims moving forward.

Dropping unemployment numbers indicate a strong labor market. The United States has an estimated 149 million jobs – 19 million more than it did just nine years ago. When you think about that type of job growth, it’s easy to see how it will have an impact on commercial real estate. To accommodate 19 million more workers, businesses have had to add space. Even for jobs that are run outside of traditional office space, there are still many more that do utilize office, retail or industrial real estate to some capacity.

Source: Bureau of Labor Statistics

Many people may assume that it’s the economy that drives commercial real estate activity, but really it’s jobs. The two are closely correlated, but for several compelling reasons jobs have the greater impact and drive businesses to either expand or contract their commercial space.

It all comes down to people and space.

Economic growth is measured by GDP and can be fueled by any number of factors, most of which won’t have a direct impact on commercial real estate. Businesses can earn more money without necessarily needing to hire more people or move into a different commercial location. Though it’s common that when the economy is growing, the commercial real estate industry becomes more active, the true driving force is jobs.

When businesses need more people, they also need more space to accommodate these people. A business using traditional office space is not likely able to hire more than three or so people before working quarters begin to feel a bit crammed. As a result, they move. It is increasing jobs, not just economy, that spurs new commercial real estate activity.

Change doesn’t happen overnight.

There is somewhat of a long tail on job growth driving commercial real estate activity. It takes time to catch up! When businesses are adding employees, they will usually make their current space “work” for as long as possible and then strategically move into a bigger space when they absolutely must. Conversely, when businesses are forced to lay off employees, they often stay in their current space, even if it means some space goes unused. The reason is it’s easier (and less expensive) to lay off employees as the first means of cutting costs than it is to downsize commercial space.

So, the job growth that we’ve seen over the course of many years is now driving the commercial real estate activity we are seeing today.

Slowing, but not stopping.

Job growth peaked in early 2015, then fell steadily through the end of 2017. Since then we have seen a modest, yet mostly steady increase in recent months. The reality is job growth, at any rate, cannot go on forever. The reason is, at some point, the United States will reach its “full employment” where everyone who wants a job, has a job. The unemployment rate, now at 4%, is about as low as it has been since the late 1960s, almost 50 years ago.

For commercial real estate, the link between job growth and space demand is clear and direct, though there may be lags. There will always be businesses who are looking to change their commercial space. Some will want more space, some will want less. Others will want to move to a newer space or will desire a different location. Businesses will close while others open. And so the cycle continues.

Short-Term Impact

Even with economic growth heating up, commercial real estate investors and property owners should not set their expectations for greater space absorption too high, at least in the short-term. Yes, there will be some pick-up in leasing associated with the spike in GDP growth. However, CRE professionals would be wise to focus more on job growth as the gauge for leasing prospects – and this outlook looks much more moderate because the ranks of unemployed workers available is largely exhausted. Looking at the short-term, we should not anticipate significant growth in property leasing this year. The surging industrial sector is the exception, which is the result of the shift from in-store to online shopping, not jobs.

Do you agree that it’s jobs, not the economy, that has the greater impact on commercial real estate activity? Why or why not? Join in the conversation by leaving a comment below.

[Online Resources] Real Estate, advice, blog, central penn business journal, Commercial Real Estate, cpbj, decline, Economy, effect, employment, expert, growth, impact, jason scott, job, jobs, labor, long-term, Mike Kushner, Omni Realty, opinion, rate, short-term, statistics, trends, unemployment

Amidst Massive Retail Closings, Central PA Commercial Real Estate Continues to Grow

Posted on June 26, 2017 by Mike Kushner in Blog, Local Market, Trends No Comments

We’ve watched it on the news, read about it in the papers and have seen it in person. Several large retailers in Central Pennsylvania have made the decision to close their doors, such as Sears, Kmart, and hh gregg, as well as a growing list of other retailers struggling to stay in the black.

The landscape of retail real estate is changing, and with that the market is reacting. While some retailers are looking to move out of brick-and-mortar locations, other mega brands like Amazon are looking to move in. What does this mean for the future of retail real estate, specifically here in Harrisburg, York and Lancaster? Let’s take a look at changes that have taken place and trends that have emerged over the last 12 months.

Harrisburg

The Harrisburg retail market has gained 162,000 square-feet of new space in the last 12 months. However, in this same amount of time, the market was only able to absorb 110,000 square-feet, causing the total net absorption for the quarter to drop to a negative 153,000 square-feet. The 4.2% vacancy rate is an increase from the recent low we saw in Q1 2017, when it dipped down to 3.7%. Though the market has 0.0% rent growth, there has been $82M in sales that is almost double the historical average of $52M. Harrisburg has just 1 under-construction retail property that will be delivered in 2017 and will add 12,000 square-feet of unleased space to the market. Though we have recently seen quite a few closings of retail locations, there remains more than 20 proposed projects for new retail space including general retail, community centers and strip malls.

York

The York retail market has gained 27,000 square-feet of new retail space over the last year, with a 12-month net absorption of 152,000 square-feet. The total net absorption for the current quarter is negative 10,000 square-feet. York’s vacancy rate is a bit higher than Harrisburg’s at 5.7%, but over the past 12 months, it has decreased by 0.6%. The market experienced a very small rent growth of 0.1% and did $19M in sales in 12 months’ time. York County has 4 under-construction retail properties that will be delivered in 2017-2018 and will add 264,217 square-feet of mostly unleased space to the market.

Lancaster

In Lancaster County, 34,000 square-feet of new retail space was delivered to the market in the last 12 months. The 12-month net absorption is 169,000 square-feet and the total net absorption for the current quarter is negative 13,000 square-feet. Lancaster’s vacancy rate is much lower than York and Harrisburg, coming in at 2.4%. In the last 12 months the vacancy rate has decreased by 0.6%, reaching its lowest point back in Q4 2016 when it was 2.3%. Like Harrisburg, Lancaster did not experience a rent growth in the last 12 months, but did do $39M in sales. Lancaster County has 5 under-construction retail properties that will be delivered in 2017-2018 and will add 159,500 square-feet of space to the market, more than half of which is preleased.

Trends & Overview

In the current market, each city has its strengths and weaknesses. Harrisburg has the highest 12-month sales of the three, but the lowest net absorption for the current quarter. Lancaster has the lowest vacancy rate of the three, but has relatively unimpressive new construction projects, sales and rental growth. York has the most new retail space scheduled to be delivered in the next few years, but has the lowest 12-month sales of the three.

All things considered, each market appears to be stable and poised for additional growth. Vacancy rates have remained mostly the same or experienced a decrease, the markets are demonstrating their ability to absorb most of the new space that is being delivered, and there continues to be under-construction projects and plan for new space. These indicators provide us with confidence that real estate investors, developers and retailers continue to see value in doing business in Central Pennsylvania.

Between Harrisburg, York and Lancaster, the area offers some unique benefits including more space and at a lower cost compared to big cities. We are also a main corridor for commuters and travelers going to New York, Philadelphia, Baltimore and Washington, D.C. Simply put, Central Pennsylvania has the right combination of resources and advantages to remain a vibrant location for retail growth.

Do you agree? What Central PA market is having the best year so far? Share your thoughts by commenting below!

central pa, Commercial Real Estate, Construction, costar, Economy, expert, growth, Mike Kushner, new, Omni Realty, pennsylvania, rental rate, report, retail, space, statistics, trends, vacancy

Central Pennsylvania Industrial Real Estate Report for Q1 2017

Posted on April 20, 2017 by Mike Kushner in Blog, Commercial Real Estate, Local Market, Trends No Comments

Region gains more than two million square feet of new industrial space in first quarter

2017 is on track to becoming one of the best years yet for industrial real estate in Central Pennsylvania – and we’ve only just wrapped up the first quarter! The market absorbed more than 2 million square feet of new space, while increasing net absorption and holding on to the highest rental rate per square foot that we’ve had in over four years. The vacancy rate also holds steady at 5.5%, even with an increase in vacant space.

The market almost can’t get its hands on space fast enough. Five of the six buildings delivered this quarter made it to CoStar’s Top 10 list. Additionally, nine new buildings are under construction and will deliver yet another 4,410,916 square feet of new space.

To see the full impact of the growth taking place in Central Pennsylvania’s industrial real estate market, take a look at the highlights from Q1 2017.

SELECT YEAR-TO-DATE DELIVERIES

Within the first quarter of 2017, Central Pennsylvania received six new industrial properties, totaling a combined 2,244,371 square feet of space. Five of these made it to CoStar’s list of Select Year-to-Date Deliveries. The first and largest is the Eden Road Logistics Center in York with 754,881 square feet of space. Next, Carlisle Distribution Center – Building 5 delivered 582,000 square feet of space. The Crossroads Logistics Center in Jonestown delivered 398,250 square feet of space. The property at 51 Commerce Drive – Building 1 in Reading delivered 339,200 square feet of space. And the property at 1451 Stoneridge Drive in Middletown contributed an additional 10,200 square feet of space.

SELECT TOP UNDER CONSTRUCTION PROPERTIES

If six new properties delivering in the Q1 wasn’t enough to prove the rapid growth of industrial real estate in Central Pennsylvania, there are yet nine more properties under construction, four of which made it to CoStar’s list of Select Top Under Construction Properties. A 1.1 million square-foot property located at 100 Fry Drive, Mechanicsburg is expected to deliver in Q3. A 1,002,000 square-foot property located at 575 Old Forge Road, Jonestown is also expected to deliver in Q3. The Goodman Logistic Center Carlisle – Building 2 will deliver 938,828 square feet of space in Q2. Finally, Orchard Business Park II – Building A will deliver 780,000 square feet of space in Q4.

SELECT TOP SALES

Among the year’s select top sales, are three worth noting that took place in Central Pennsylvania. The Ames True Temper building in Carlisle (1,226,525 square feet) sold for $90,150,000 to Clarion Partners. Target Distribution Center in York (785,400 square feet) sold for $60,000,000 to AEW Capital Management. And the building at 100 Louis Parkway in Carlisle (400,596 square feet) sold for $28,850,000 to Industrial Property Trust.

ABSORPTION

2017 is setting records all around for industrial real estate in Central Pennsylvania. Q1 boasts the largest number of buildings in existing inventory (3,635) and the largest total RBA (262,658,186 square feet) we have ever seen. In less than four years, the local market gained 45 new buildings, with nine more under construction. Even with all of this new inventory entering the market, net absorption continues to increase, proving the demand for more space. Net absorption this quarter rose from 992,800 square feet to 2,107,328 square feet. This is the highest net absorption we’ve seen since Q2 2015 and the third highest since it plummeted into the negatives in Q2 2013.

VACANCY & RENTAL RATES

Total vacant space increased from 14,255,260 square feet to 14,392,303 square feet this quarter. Even with this increase, the vacancy rate holds steady at 5.5%, where it’s been since Q2 2016. The quoted rental rate also remains steady at $4.36. This is the highest price per square foot we’ve seen prior to Q2 2013, again proving a healthy demand for industrial real estate in Central Pennsylvania!

What trend from the first quarter did you find most interesting or impactful to Central Pennsylvania industrial space? Share your insights by leaving a comment below.

Learn more from past market reports:

Central Pennsylvania CRE Market Reports Q4 2016

Predictions for Trends and Changes in Commercial Real Estate in 2017

Influx of New Construction Impacts Central PA’s Industrial Real Estate Market

[Online Resources] Real Estate, central pennsylvania, Commercial Real Estate, Construction, costar, CRE, demand, expert, facts, first quarter, industrial, market report, Mike Kushner, more space, new space, Omni Realty Group, pennsylvania, space, statistics, supply, trends, vacancy

Central Pennsylvania CRE Market Reports Q4 2016

Posted on March 2, 2017 by Mike Kushner in Commercial Real Estate, Local Market, Trends No Comments

The Cost of Commercial Real Estate in Central PA Rises Across All Sectors: Office, Retail and Industrial

2016 wrapped up with quite an interesting quarter for Central PA’s commercial real estate market. Out of all the sectors, office space was the weakest performer. However, even though it dropped to a negative net absorption, its rental rate continued to rise. Retail and Industrial space were the stronger performers. Both finished out the quarter with the highest sales price per square foot that the market has seen for at least four years. In all sectors, new space is rapidly being delivered to the market, which should make it interesting to see how this impacts absorption in future quarters. Take a look at the breakdown of each sector of commercial real estate in Central PA and how it performed in Q4 2016, according to CoStar.

OFFICE

In Q4 2016, Central PA’s office real estate market saw an increase in vacancy, rising to 6.1%. It also dipped into a negative net absorption of -14,026 square feet. Only one building, located at 300 Winding Creek Boulevard in Mechanicsburg (20,000 sqft), was delivered this quarter while four more remain under construction. Once they deliver, they will add a combined 133,590 square feet of new space to the market. Interestingly, the quoted rental rate rose this quarter to $17.38 per square foot, an increase of $0.09 from last quarter and an overall record high from prior to 2013.

RETAIL

In Central PA’s retail real estate market this quarter, a total of 12 new buildings were delivered. Combined, these added 126,296 square feet of new space to the market. Additionally, 12 buildings remain under construction, but once completed will add a combined 272,338 square feet of additional retail space. All of this added space barely impacted vacancy, and in fact, moved the needle in the opposite direction than what might be expected. The percentage of vacant space available dropped down by 0.1% to 4.1%. This is the lowest vacancy has been since prior to 2013. The quoted rental rate jumped up $0.32 to a total of $12.47 per square foot. This is the highest price we have seen also since prior to 2013. Though net absorption decreased by 108,583 square feet, it remains in the black at 262,060 square feet.

Two properties in Central PA made it to CoStar’s list of Select Year-to-Date Deliveries. They are located at I8-1 and Walker Road (109,239 sqft) and 700 West Main Street, Annville (33,000 sqft). Among the 15 Select Top Under Construction Properties featured by CoStar, only one from Central PA made the list and this is the project located at 101 Wilson Avenue in Hanover (136,193 sqft).

INDUSTRIAL

Central Pennsylvania’s industrial market gained four new buildings this quarter with a combined RBA of 1,114,800 square feet. Another 14 buildings still remain under construction and are projected to deliver 6,630,117 square feet of space, once complete. Despite the influx of new space, vacancy has not budged from last quarter and remains at 5.4%. The quoted rental rate even increased by $0.07 from last quarter to $4.37 per space foot. This is the highest rental rate we have seen since prior to 2013. Although net absorption did decrease, it remains in the black at 987,110 square feet.

Of the Select Year-to-Date Deliveries, Central PA made the list three times for the following buildings: Lebanon Valley Distribution Center (874,126 sqft), Trade Center 44 (620,000 sqft) and Gateway Logistics Park – Building B (500,000 sqft). Central PA also had a strong presence on the list of Select Top Sales with 3 of the top 9 properties located in Carlisle and Mechanicsburg.

What trend from Q4 2016 did you find most interesting or impact to the Central Pennsylvania Economy? Share your insights by leaving a comment below.

Learn more from past market reports:

Central Pennsylvania’s Retail Real Estate Market Experiences Record-Setting Quarter

Central PA’s Office Market Sets Recent Records for Vacancy, RBA and Rental Rates!

Influx of New Construction Impacts Central PA’s Industrial Real Estate Market

[Online Resources] Real Estate, 2016, central pennsylvania, Commercial Real Estate, costar, expert, fourth quarter, industrial, investment, investor, local market, Mike Kushner, office, Omni Realty Group, q4, report, retail, trends

The 12 Days of Christmas in Central PA’s Commercial Real Estate

Posted on December 13, 2016 by Mike Kushner in Blog, Commercial Real Estate, Local Market No Comments

The 12 Days of Christmas in Central PA’s Commercial Real Estate

We’re all familiar with the classic holiday song, “The 12 Days of Christmas.” But did you know that each of the 12 presents also relates to something currently taking place in Central Pennsylvania’s commercial real estate market?

With a little creativity, we’ve found these fun facts that you likely didn’t know about our local real estate market. We’re willing to bet that the next time you hear this song, you’ll associate turtle doves and gold rings with something more than Christmas gifts. Take a look!

Partridge in a Pear Tree: Pennsylvania farmers of specialty crops will benefit from nearly $925,000 in federal grants dedicated to research, education and marketing to help strengthen the industry. This grant may not call out pear trees per se, but it does include the National Peach Council and the Pennsylvania Apple Marketing and Research Program.

2 Turtle Doves: After eight years without a direct flight to the state’s capital, “turtle doves” flying from Pittsburgh are finally able to get a nonstop ticket to Harrisburg, fixing a big missing link between the two cities. Beginning in October, Southern Airways Express began offering three daily flights to Harrisburg on weekdays and one each weekend day in an effort to position themselves as “Pennsylvania’s airline.”

3 French Hens: Suez, a French-based multinational corporation, is the second largest supplier of water to U.S towns and cities. Suez provides services to many Central PA communities. In November, Suez opened a new advanced water treatment plant that deploys innovative and highly-effective water treatment processes in Bloomsburg, PA.

4 Calling Birds: Comcast has laid 50 miles of fiber-optic transmission lines throughout Center City Philadelphia and University City. This $30 million project will provide companies on commercial corridors, such as Market Street, with superfast data speeds. It extends the Comcast backbone network to 3,000 Philadelphia businesses and big institutions, among them the University of Pennsylvania and the Thomas Jefferson University Hospitals complex.

5 Gold Rings: The Olympics are contributing to our economic growth right here in Central Pennsylvania. Spooky Nook, home of the Olympic Women’s Field Hockey Team, is having a strong economic impact on the local community that extends beyond Lancaster County. More than 450 new jobs have been created with the opening of the facility in 2015. Through partnerships with over 65 regional hotel properties, the business has contributed more than 60,000 room nights within a 50 mile radius of the location in 2014.

6 Geese a-Laying: We’ve taken a little creative liberty here by replacing geese for a crane, but it’s a pretty interesting fact nonetheless! Philadelphia has an interactive “Crane Watch” website where you can see all of the city’s commercial real estate projects in progress.

7 Swans a-Swimming: A proposed Aquatic Center in Derry Township could be another catalyst for local economic growth. The facility could host large swimming competitions and would also include therapy pools for health and wellness partners as well as a recreational pool.

8 Maids a-Milking: Pennsylvania is still the 5th largest U.S. milk producing state, but may not continue to hold this position for long. An overall decline in fluid milk sales has caused more milk to be used to produce other dairy items such as yogurt. Additionally, Pennsylvania’s rolling herd average is the lowest of its closest competing states.

9 Ladies Dancing: When it comes to Central Pennsylvania’s nightlife, it appears that the ladies prefer to “dance” on the West Shore. Several restaurants that have locations in downtown Harrisburg have opened second locations on the West Shore, including Cork and Fork, Duke’s, Gilligan’s and Federal Taphouse. While many people hope that this will encourage more people to venture into downtown Harrisburg for even more dining options, it remains evident that crossing shores is just too far to travel for some.

10 Lords a-Leaping: Central Pennsylvania landlords are having a banner year as vacancies are down and rental rates are up. With more single families looking to rent a home over purchasing one, rents have been rising all across the board – which is all the more reason these landlords are a-leaping!

11 Pipers Piping: Natural gas pipeline companies and residents continue to clash on the issue of pipeline safety and gaps in regulation and oversight. The natural gas industry has the potentially to significantly impact the local economy. The Panda Patriot plant alone will contribute an estimated $5.85 billion to the area’s economy, with thousands of jobs created during its construction.

12 Drummers Drumming: 2017 should bring higher wages for a broad range of workers. In 2016, CA, NY, and D.C., passed new laws that would raise the minimum wage to $15 per hour. PA remained consistent with the federal minimum wage at $7.25 per hour; however, there were 15 minimum wage bills in the 2016 legislative session that indicate legislators are “drumming up” momentum to make a change to our state’s minimum wage.

Which of the 12 Days of Christmas in commercial real estate did you find most interesting? Or do you have another suggestion to offer? Share your ideas by commenting below!

[Online Resources] Real Estate, 12 days of christmas, camp hill, christmas, Commercial Real Estate, Economy, expert, harrisburg, hershey, holiday, industrial, lancaster, local, market, mechanicsburg, Mike Kushner, news, office, Omni Realty, pennsylvania, retail, space, trends, york

Central Pennsylvania’s Retail Real Estate Market Experiences Record-Setting Quarter

Posted on September 15, 2016 by Mike Kushner in Blog, Local Market, Trends No Comments

This quarter has posted some of the highest and lowest numbers we have seen since 2012. In Central Pennsylvania’s local retail real estate market, vacancy rate is low, rental rate is high and both net absorption and total RBA have increased. But overall, what does this tell us about the state of our economy and what we can expect in future quarters?

Let’s take a closer look at some of the record-setting numbers we experienced in Central Pennsylvania’s retail real estate market in 2016’s second quarter and what they mean to the health of the economy.

Select Year-to-Date Deliveries:

Coming in at number three on the list of select year-to-date deliveries is the retail property located at I-81 and Walker Road in Chambersburg. Phase I and II, delivered in Q1 2016, total 109,237 square-feet of space that is 92% leased (44,000 square-feet with 4,400 square-feet vacant). Some of the major tenants include Kohl’s, Target, Giant, Red Robin, Staples, PetSmart, Michael’s, Olive Garden, VisionWorks, ATT&T and many more. Palisades Development, LLC are currently processing LOIs for the remaining space. Phase III is planned and construction will proceed when leasing warrants.

At number 15 on CoStar’s list, is another Palisades Development, LCC retail property located at 968 Norland Avenue in Chambersburg. This 10,800 square-foot building is 100% occupied and was also delivered in Q1 2016.

Select Top Retail Leases:

On the list of Select Top Retail Leases, Harrisburg area east claimed the top spot. Listed at number one is the Harrisburg East Shopping Center with 69,954 square-feet of space. Although not listed by CoStar’s as a “Select Top Retail Lease” for this quarter, plans are in place for the Giant currently in Colonial Commons, to make a move 0.2 miles down Jonestown Road to the Harrisburg East Shopping Center into the retail space formerly occupied by Gander Mountain. This will provide more space for Giant and is already attracting additional retail businesses nearby including a CVS Pharmacy and potentially a fast-casual restaurant, reports KIMCO, owner of the shopping center.

Select Top Sales:

Only one of the nine Select Top Sales from April 2015-June 2016 is from the Central Pennsylvania submarket. The Shoppes at Susquehanna Marketplace sold for $44,000,000 to Clarion Partners. With an RBA of 110,365 square-feet, this came at a cost of $398.68 per square foot.

Additionally, the West Porte Center, listed by CoStar as a Select Top Retail Lease, is more accurately represented as a sale. PennDOT purchased 67,126 square-feet of land for a new Amtrak station in Middletown that is expected to be finished in 2018. This is estimated to be a $32 million project which will include features like a covered pedestrian bridge to provide direct access to Penn State Harrisburg’s campus.

Absorption and Demand:

Net absorption increased this quarter from 64,467 square-feet (in Q1) to 110,449 square-feet, currently. Total RBA also increased, though just slightly, from 88,822,714 square-feet (in Q1) to 88,854,312 square-feet, currently. Six buildings were delivered with a total RBA of 31,598 square-feet. Additionally, five buildings are under construction.

Vacancy:

This quarter, the vacancy rate decreased by 0.1% to 4.7%. This once again matches the vacancy rate of Q4 2015, which is the lowest rate the Central PA submarket has experienced since prior to Q3 2012.

Rental Rate:

The quoted rental rate increased this quarter by $0.11 to $12.00. This is the highest price per square-foot the local retail real estate market has experienced since prior to Q3 2012.

Our Summary/Analysis:

Q2 2016 provided to be an exciting and record-setting quarter for Central Pennsylvania’s retail real estate market. We experienced a recent record low for vacancy rate at 4.7% and a recent record high for quoted rental rate at $12.00 per square-foot. These two trends go hand in hand, so it’s no surprise they would correlate together.

Another positive indicator for the health of the retail real estate market is the increase in net absorption and total RBA. Though neither were record-setting per se, net absorption nearly doubled in a single quarter which is impressive in its own right. It’s safe to say that the market is growing in demand, increasing in price and is able to absorb the new buildings that have been delivered.

What trend do you think will have the greatest impact on the Central Pennsylvania retail market? Share your insight by commenting below!

[Online Resources] Real Estate, 2016, advice, analysis, blog, building, business, buy, commercial, Construction, costar, data, Economy, expert, facts, growth, lease, market report, Mike Kushner, new, news, numbers, Omni Realty, opinion, prediction, project, q2, retail, sale, second quarter, sell, space, statistics, store, trends

5 Signs You Need New Office Space

Posted on August 7, 2016 by Mike Kushner in Blog, Office Leasing, Tenant Representative/Buyer Agent No Comments

It can be difficult to see the signs that you need new office space for your business. Maybe it’s the fear of change or the discomfort of moving all of your files, equipment and employees to a new office. Whatever the hesitation, the consequences of not moving to a better functioning space can be far worse than the temporary inconvenience of relocating.

Take a look at these five signs that you might need new office space and think about how they relate to your own work environment.

You’re struggling to retain/attract talent

Is your turnover rate increasing? Are potential hires turning down your job offers? While many other factors contribute to these issues, don’t underestimate how your office space may be playing into the struggle to find and retain talent. People want to work in an energizing, fun and inspiring environment. If your office space is crowded, disorganized and in desperate need of repairs, it’s time to look for an upgrade or risk having talent walk right out your door.

There’s a lack of privacy

While it may seem fun and hip to have your employees work in one big open space together, keep in mind that people need privacy, just as much as they need community, to get work done. If your office space lacks a private area for holding meetings or making phone calls – or even just a space where employees can go to work in silence for a few hours, it’s time to look for an office that provides a little more privacy.

It doesn’t reflect your brand or company culture

Are you an innovative tech startup, but you’re working in an office space that looks like it belongs to a law firm from the 1950’s? When your work environment contrasts with your brand and company culture, it can have a negative impact on your employees. It’s important to work in a space that complements the brand you’re working to create. This is a subconscious reminder to employees of the business’s core values you want them to represent in everything they do.

There’s no room for growth

If you’re a business that has plans to grow your operations and add to your number of employees, yet you don’t have room for one more desk, let alone a filing cabinet, it’s time to start looking for new office space! Don’t wait until you are desperate to move, or you may make a desperate decision that isn’t in your best interest. Start looking for more space preemptively and work with a qualified commercial real estate broker who can help you negotiate the best deal possible.

You’re paying too much

Finally, if you’re dumping too much of your profits into your office lease, it’s time to look for a more financially responsible work space. Sure, a pricy loft with views of the Harrisburg Capitol is great for your ego, but it’s terrible for the sustainability of your business. This is a red flag that it’s time to work with a tenant representative who can show you a wide variety of attractive options while staying within your budget.

Can you relate to one or more of these signs? Ask us your office space related questions and we will personally respond with our expert advice!

[Online Resources] Real Estate, advice, business, Commercial Real Estate, dauphin, expert, harrisburg, hershey, lancaster, lease, Leasing, lemoyne, mechanicsburg, Mike Kushner, new, new cumberland, office, Office Space, Omni Realty Group, tips, york

Hundreds of Thousands of Square-Feet of New Office Space Coming to Central PA in 2016

Posted on August 1, 2016 by Mike Kushner in Blog, Local Market, Trends No Comments

Two new construction projects, located at the intersection of Carlisle Pike and Hogestown Road in Mechanicsburg, will deliver 258,000 square-feet of office space to Central Pennsylvania this year. Silver Spring Township is calling this construction “Class A Office Space Project” and are confident that, by attracting new businesses to the area, this space will benefit the entire community and its existing businesses.

Here’s a look at how the market has responded to this new space, as well as our analysis of the long-term trends that are yet to come.

Select Year-to-Date Deliveries/Top Under-Construction Properties:

In Q2 2016, Central Pennsylvania had just one building delivered, but it was substantial. Ranked number one on the Greater Philadelphia list of Year-to-Date Deliveries is the office space located at 974 Hogestown Road, Building 200, Mechanicsburg. It is Class A office space that is 100% occupied. Another 129,000 square-feet building, also located on Hogestown Road is under construction and projected to be completed in Q3 2016.

Absorption and Demand:

In Q2 2016, the net absorption has almost doubled since Q1 2016 and is nearly six times larger than it was in Q4 2015. In Q4 2015 it was 50,949 square-feet, increasing to 162,531 square-feet and further increasing this quarter to 301,337 square-feet. This is the largest net absorption we have seen in over a year, compounded by the fact that Central Pennsylvania’s last four years of net absorption has been varied and volatile. One new building delivered this quarter contributed 129,000 square-feet of pre-leased space to the market. There are 2 more buildings currently under construction and they are expected to deliver 136,590 square-feet of space to the market later this year.

Vacancy:

The vacant square footage decreased from 3,705,257 square-feet (Q1) to 3,532,920 (Q2). The vacancy rate also decreased to 6.5% (down 0.3% from last quarter). This is the lowest vacancy rate we have seen since prior to Q3 2012 and is only the second time it’s dipped into the 6.0% range, with last quarter being the first time. Though the vacancy rates have bounced slightly between increasing and decreasing each quarter since 2012, the overall trend has been a decrease.

Rental Rate:

This quarter, the quoted rental rate decreased from $17.32 (Q1) to $17.25. This is the first decrease that we have seen since Q3 2013. However, the fact that the price per square foot still remains above $17.00 makes it a higher price point than the market has experienced between the years of 2012-2015.

Employment:

Pennsylvania’s unemployment rate rose to 5.6% in June. The local labor force declined by 4,000 from May’s record high level of 6.54 million. The Pennsylvania Department of Labor reported that nine of the 11 sectors actually posted job increases in June; however, the two sectors that posted a loss, mining and logging and trade, transportation and utilities, were enough to cause the unemployment rate to rise. They each posted job losses of 600.

Our Summary/Analysis:

Silver Spring Township’s “Class A Office Space Project” is drawing new business into Central Pennsylvania. With 129,000 square-feet of 100% occupied space delivered to the market this quarter and another building of the same size to be delivered next quarter, there is a proven demand for this space. Furthermore, this spur of activity has the potential to draw even more businesses into the area who want to be part of the growing business community. This would come at an opportune time as the local market is experiencing a rise in unemployment.

What trend this quarter do you think will have the greatest impact on the Office Real Estate market moving forward? Share your insight by commenting below!

[Online Resources] Real Estate, absorption, analysis, buildings, business, camp hill, central pennsylvania, commercial, Construction, costar, data, east shore, Economy, employment, expert, harrisburg, hershey, impact, jobs, lancaster, market report, mechanicsburg, Mike Kushner, office, Omni Realty, pa, pennsylvania, rental rate, report, space, statistics, unemployment, vacancy rate, west shore, york