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Posts tagged "facts"

Home» Posts tagged "facts"

Census Data: National and Local Trends You Need to Watch

Posted on June 3, 2019 by Mike Kushner in Blog, Commercial Real Estate, CPBJ Articles, Local Market, Trends No Comments

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


Census data provides a fascinating look into population growth trends that stand to have a profound impact on our economy, both locally and nationally. More than just being “interesting” data to study, population growth and decline points us to important trends that will reshape supply and demand in various industries, one of the most prominent being real estate.

Just last month, the US Census Bureau released new population estimates. These estimates account for and compare the resident population for counties between the dates of April 1, 2010 to July 1, 2018. The outcome? There are shifts in population taking place across the nation that may differ from what you might assume. Let’s take a look at some of the highlights from this data from a national and local level.

At a National Level

South and West Lead Population Growth

The census data confirmed that counties with the largest numeric growth are located in the south and the west regions. In fact, Texas claimed four out of the top 10 spots. Looking at population growth by metropolitan area, Dallas-Fort Worth-Arlington, Texas, had the largest numeric growth with a gain of 131,767 people, or 1.8 percent taking place in 2018. Second was Phoenix-Mesa-Scottsdale, Arizona which had an increase of 96,268 people, or 2.0 percent. The cause of growth in these areas is the result of migration, both domestic and international, as well as natural increase. In Dallas, it was natural increase which served as the largest source of population growth, whereas in Phoenix I was migration.

Fastest Growth Occurred Outside of Metropolitan Areas

Surprisingly, no new metro areas moved into the top 10 largest areas. Of the 390 metro areas within the US (including the District of Columbia and Puerto Rico), 102 of these areas, or 26.2 percent experienced population decline in 2018. The five fastest-decreasing metro areas (excluding PR) were Charleston, West Virginia (-1.6 percent); Pine Bluff, Arkansas. (-1.5 percent); Farmington, New Mexico (-1.5 percent); Danville, Illinois (-1.2 percent); and Watertown-Fort Drum, New York (-1.2 percent). The population decreases were primarily due to negative net domestic migration.

North Dakota Claims Fastest Growing County

Among counties with a population of 20,000 or more, Williams County, North Dakota claimed the top spot as the fastest-growing county by percentage. This county increased by 5.9 percent between 2017 and 2018 (from 33,395 to 35,350 people). The rapid growth Williams County experienced was due mainly to net domestic migration, 1,471 people, in 2018. The county also experienced growth between 2017 and 2018 by both natural increase of 427 people, and international migration of 52 people.

More Growth than Decline

Out of 3,142 counties, 1,739 (or 55.3 percent) gained population between 2017 and 2018. Twelve counties (0.4 percent) experienced no change in population, and the remaining 1,391 (or 44.3 percent) lost population. Between 2010 and 2018, a total of 1,481 (or 47.1 percent) counties gained population and 1,661 (or 52.9 percent) lost population. Though there has been more growth than decline overall, the numbers indicate that this can easily shift year over year.

At a Local Level

Dauphin County

 Lancaster County

York County

Cumberland County

Cumberland, Dauphin, Lancaster and York Experience Consistent Growth

The most notable trend to take place between 2010 and 2018 in Central PA is that these counties all experienced consistent growth year-over-year. Moreover the growth occurred fairly evenly over the last 8 years. This provides consistency and enables the economy to respond to the growth over a reasonable amount of time.

Counties Also Maintain Same Order of Ranking in Population

Another trend worth noting is that the counties have maintained the same order of ranking based upon population for 8+ years. For example, in 2010 these counties in order of smallest population to largest population was Cumberland, Dauphin, York, Lancaster. This is the same ranking we see in 2018, and every year in between. No county surpassed another at any point.

Lancaster Remains Largest and Fastest Growing County

Lancaster County has a major lead in population over the others. At 984 square miles, it is also the largest of the 4 counties. Between 2010 and 2018 it also experienced the largest numeric growth at 24,112 people. Number two in numeric growth was actually the smallest of the four counties, Cumberland County, which grew by 16,017 people. York County grew by 13,301 people and Dauphin County grew by 8,997 people.

Overall, the latest US Census offers valuable and insightful information related to population growth between 2010 and 2018. Understanding the cause of either growth or decline provides framework for how these shifts may continue on their course, or change in the future.

A deeper dive into the census data reveals several demographic changes impacting commercial real estate development: household formations, aging baby boomers, growing millennials, women in the workforce, and migration toward the South.

Today’s demographic changes present challenges for commercial real estate developers, but they also offer lucrative opportunities to firms creatively adapting to new demands.

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17 New Retail Buildings Under Construction in Central PA

Posted on September 18, 2017 by Mike Kushner in Blog, Local Market, Trends No Comments

Cost of retail space in Central Pennsylvania continues to climb despite negative absorption and rising vacancy.

If you’ve been paying attention you know that traditional retail space is undergoing a major shift in how and where it’s being used. Many stores have closed their doors and/or have embraced the growth of ecommerce over brick-and-mortar locations.

In Central Pennsylvania, we’re seeing quite a few interesting trends that indicate more change is yet to come. Net absorption plummets further into the negative with just 3 new buildings delivered this quarter. A total of 17 new buildings are under construction which begs the question of how the market will respond when 423,994 square-feet of new space is delivered in the coming months. Though vacancy rate is on the rise, so is the quoted rental rate.

How do these trends tie together and what do they tell us about the future of retail real estate in Central Pennsylvania? Let’s take a closer look.

SELECT TOP UNDER CONSTRUCTION PROPERTIES

Coming in at number five on CoStar’s list of Select Top Under Construction Properties is the Gateway Hanover Shopping Center on Wilson Avenue in Hanover. The 136,193 square-foot Target is expected to be completed in Q3 2017. Number seven on the list is the Crossings at Conestoga Creek in Lancaster. This mixed-use project, anchored by Wegmans, will deliver 90,000 square-feet of unleased retail space in Q4 2018. Coming in at number 14 on the list is the Shoppes on South Queen located at 1701 S. Queen Street in York. The 55,000 square-feet of space, which will be delivered in Q4 2017, is 53% preleased.

SELECT TOP LEASES

Among CoStar’s list of Select Top Leases for Q2, one Central Pennsylvania lease made it to the top 10. Red Rose Commons in Lancaster County leased 43,091 square-feet of retail space to Burlington Coat Factory.

ABSORPTION

Net absorption, which was already in the red from Q1, fell even lower this quarter to negative 268,916 square-feet. This is the greatest square footage of space to be negatively absorbed in any one quarter since Q3 2013. It is also only the fourth time the market has experienced a negative net absorption in four years. Three new retail buildings were delivered this quarter totaling just 43,825 square-feet; however, 17 additional building are under construction with a total of 423,994 square-feet of new space that will be dumped into the market in the coming months.

VACANCY & RENTAL RATES

Vacancy rates raised ever so slightly this quarter, from 4.0% to 4.4%. Even with a negative net absorption and increasing vacancy rates, the quoted rental rate rose in Q2 from $13.10 to $13.58 per square foot. This is a recent record high for vacancy rates that have been almost consistently decreasing since 2013.

What we can learn from the market’s performance in Q2 is that, while retail space nationwide has taken a major blow over the last few years, it’s still in demand. The shift toward ecommerce has changed the landscape of retail real estate, but it has not made it completely irrelevant. New buildings are under construction, retailers are moving into new space and the rising cost per square foot demonstrates the demand exists.

Over the coming months and years, it will be important to watch how retailers strategically place their brick-and-mortar locations and how they rebuild their business model to harness the popularity of ecommerce. The business that will thrive in this new landscape will be ones who embrace change and listen to consumer demand.

What trend in Central Pennsylvania’s retail market do you think will have the largest impact? Share your insight and join in the conversation by leaving a comment below!

Learn more from past market reports:

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

Central PA Experiences Highest Number of Retail Store Closings Since Recession

6 Things Disrupting Commercial Real Estate in 2017

 

[Online Resources] Real Estate, absorption, blog, central pennsylvania, Commercial Real Estate, costar, CRE, facts, harrisburg, lancaster, market report, Mike Kushner, mixed use, Omni Realty Group, pennsylvania, q2, rental rates, retail, retail real estate, retail space, statistics, stores, top leases, top sales, trends, under construction, vacancy, york

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

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

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

In the third quarter, we saw some interesting trends emerging in the local industrial real estate market that appear to be just the beginning of a bigger movement yet to come.

Five new buildings have already been delivered so far in 2016 and there are 11 more buildings under construction with a total RBA of 4,820,849 sqft of space. Furthermore, much of this space is currently unoccupied which will have a big impact on net absorption and vacancy rates, among other things.

Let’s take a look at the most important trends we saw take place in Q3 2016 in the Central Pennsylvania industrial real estate market followed by our analysis of the effect this will have on the market.

Select Year-to-Date Deliveries:

Five of the top 15 Select Year-to-Date Deliveries in the Greater Philadelphia market took place in Central PA. Of these five, two were delivered in Q1 and three were delivered in Q2. None were delivered in Q3. For a quick recap, here are the square footage and occupancy of the buildings that have been delivered in the Central PA market so far this year:

  • 139 Fredericksburg Road (Lebanon Valley Distribution Center), 874,126 sqft and 0% occupied
  • 545 Old Forge Road, 500,000 sqft and 0% occupied
  • 10874 2nd Amendment Drive (Susquehanna Logistics Center), 423,300 sqft and 100% occupied
  • 192 Kost Road, 422,400 sqft and 0% occupied
  • 501 Old Forge Road (LogistiCenter 78-81), 405,000 sqft and 100% occupied (in the Q4)

Top Under-Construction Properties:

A large construction project broke ground this quarter in Central PA. United Business Park, located off Interstate 81 in Southampton Township plans to add 1,491,600 sqft of industrial space to the market by Q2 2017. This is one of two distribution centers that combined will offer about 2.7 million sqft of space in Franklin County. New Jersey-based Matrix Development Group is among the most active industrial developers in Pennsylvania and New Jersey. Sheetz will be the first tenant in this space in this space and they hope to offer other large companies like Proctor and Gamble who want to efficiently reach the Northeast and Mid-Atlantic populations.

Select Top Sales

Four of the nine Select Top Sales in the Greater Philadelphia Market between July 2015 and September 2016 have taken place here in Central PA. Though none have taken place specifically in Q3, here is a quick recap of the building that have been sold during this time:

  • 1 True Temper Drive (Carlisle), 1,226,515 sqft for $90,150,000
  • 234 Walnut Bottom Road – Park 81 (Shippensburg), 1,495,720 sqft for $83,000,000
  • 100 Louis Parkway (Carlisle), 400,596 sqft for $28,850,000
  • 1225 S Market Street (Mechanicsburg), 596,703 sqft for $21,350,000

Absorption and Demand:

This quarter, net absorption fell drastically from 164,650 sqft (Q2) to 28,978 sqft. Though still in the black, this is the lowest number we’ve seen for net absorption since Q2 2013 when it dipped into the red at negative 683,020 sqft. Only one building was delivered this quarter with an RBA of 165,800 sqft which is currently not occupied. Additionally, 11 buildings are under construction with a total RBA of 4,820,849 sqft of new space coming to the market soon. From what we’ve seen in the Top Under-Construction properties in the Q3 CoStar report, many of these are 0% occupied at this time. Should more unoccupied space hit the market, we could expect to see net absorption decrease even further, possibly dipping into the red.

deliveries-absorption-and-demand

Vacancy & Rental Rate:

The vacancy rate remained the same this quarter at 5.4% after its big increase from Q1 to Q2 where it jumped 0.6% to the highest rate we’ve seen since Q4 2014. Given the projects under construction, we might expect this to increase further in the coming quarters as these properties are delivered. While vacancy stayed steady, the quoted rental rate decreased by 1 cent to $4.29 per square foot.

vacant-space-and-quoted-rental-rate

Our Summary:

Construction activity continues to be one of the prime drivers of the Central Pennsylvania industrial market. Speculative construction currently accounts for 70.5 percent of all construction projects.  New construction has created opportunities for tenants in a market that has otherwise been difficult to enter.  As developers noticed requirements are larger than quality options in the market, speculative projects broke ground to meet the needs of the active requirements.

Moving forward for the remainder of 2016, speculative construction will continue to exceed build-to-suit projects.  While demand continues to be strong, a large volume of construction has delivered vacant this year, likely causing market conditions to shift to tenant favorable by 2018 due to large increases in Class A inventory and pending economic slowdown.

Based upon the data for Central PA’s industrial real estate market in Q3 2016, what do you find to be most interesting or important? Share your insight by commenting below!

[Online Resources] Real Estate, analysis, blog, camp hill, carlisle, central pa, central pennsylvania, costar, cumberland, data, dauphin, facts, harrisburg, hershey, industrial, lancaster, lemoyne, mechanicsburg, Mike Kushner, new cumberland, news, numbers, Omni Realty, report, statistics, summary, trends, york

Median Household Incomes Mostly on the Rise for Central Pennsylvania

Posted on September 26, 2016 by Mike Kushner in Blog, Local Market, Trends No Comments

According to the data from the U.S. Census American Community Survey, released on September 15, Central Pennsylvania is following in suit with greater Philadelphia – and the rest of the nation – which is experiencing an increase in median household incomes. Taking into consideration Cumberland, Dauphin, Lancaster, Lebanon and York Counties, here are some of the most notable trends published in the report.

The highest median household income is Cumberland County at $63,890; in contrast, the lowest median household income is Lebanon County at $52,571. Lancaster County increased the most in the last year, by $1,859. Decreasing the most was Lebanon County, by $1,497.

Lancaster County has the lowest median income for Black or African American households at $32,445. While the lowest median income for Hispanic or Latino households is Lebanon County at $25,422. The greatest difference in median income between male versus female householder (with no spouse present) is $18,429 in Cumberland County.

For all counties, the highest median income was for householders between the ages of 45 to 64 years old and for households of married couple families. Also, female householders (with no spouse present) always earned less than male householders (with no spouse present).

If you’re curious what other trends emerged and what these trends tell us about the health of our local economy, let’s take a closer look at each county’s specific numbers.

Cumberland County, Pennsylvania

The 2016 median household income in Cumberland County is $63,890. This number is up from $62,759 in 2014 and is the highest median income we have seen this decade. For householders between the ages of 45 to 64 years old, the median income rises to $78,960. Households of married couple families have the highest median income at $87,714. A male householder with no wife present has a median income of $54,837. In contrast, a female householder with no husband present has a median income of just $36,408. Black or African American households had a median income of $32,661 and Hispanic or Latino households had a median income of $35,097.

Dauphin County, Pennsylvania

The 2016 median household income in Dauphin County is $54,232. Up from $52,975 in 2014, this number has been on an almost steady rise for the last decade. For householders between the ages of 45 to 64 years old, the median income rises to $63,373. Households of married couple families have the highest median income at $79,328. A male householder with no wife present has a median income of $46,430. In contrast, a female householder with no husband present has a median income of just $35,520. Black or African American households had a median income of $37,823 and Hispanic or Latino households had a median income of $33,947.

Lancaster County Pennsylvania

The 2016 median household income in Lancaster County is $59,262. This county experienced the greatest increase in the Central PA region over the last year. Rising from $57,403 by $1,859, this is also the highest number we have seen this decade, which is especially notable since median income took a dip in 2010, falling to $51,740.

For householders between the ages of 45 to 64 years old, the median income rises to $73,155. Households of married couple families have the highest median income at $78,218. A male householder with no wife present has a median income of $47,391. In contrast, a female householder with no husband present has a median income of just $36,925. Black or African American households had a median income of $32,445 and Hispanic or Latino households had a median income of $38,125.

Lebanon County Pennsylvania

The 2016 median household income in Lebanon County is $52,571. Down from 2014’s median income of $54,068, Lebanon County experienced several ups and downs throughout the past decade. For householders between the ages of 45 to 64 years old, the median income rises to $60,578. Households of married couple families have the highest median income at $73,219. A male householder with no wife present has a median income of $44,239. In contrast, a female householder with no husband present has a median income of just $34,383. Black or African American households had a median income of $34,662 and Hispanic or Latino households had a median income of $25,422.

York County, Pennsylvania

The 2016 median household income in York County is $58,409. This was another Central PA county that decreased since 2014, though ever so slightly by just $178 ($58,587 in 2014). With several ups and downs in median income, the number has still mostly been on the rise over the past decade.

For householders between the ages of 45 to 64 years old, the median income rises to $72,004. Households of married couple families have the highest median income at $81,711. A male householder with no wife present has a median income of $46,681. In contrast, a female householder with no husband present has a median income of just $33,911. Black or African American households had a median income of $44,525 and Hispanic or Latino households had a median income of $33,182

Our Analysis

Increasing median household income is just one trend that affects commercial real estate. The local employment gains continue to be strong, with seasonally adjusted unemployment rate holding below 5.0 percent. This adds to the demand for housing in a variety of forms: for office space, for the retail sector and for industrial/distribution facilities.

Underlying inflation is extremely tame, providing no impetus for significantly higher rates. Lending rates and fixed income rates of return will remain low by historical standards. For most metro areas (including Central Pennsylvania) and property types, lower oil prices have been a net positive. Spending less on gasoline encourages consumers to spend more on other items, which helps retail and hotel market fundamentals.

Lower prices directly translate into an increase in household disposable income. Overall, the commercial property market in 2017 will continue to be characterized by strong fundamentals, increased investor flows and high transaction volume.

What median income was most surprising to you? What do you think some these trends say about the health of our local economy? Share your thoughts by commenting below!

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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.

deliveries-absorptiona-and-vacancy

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.

vacant-space-and-quoted-rental-rate

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!

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Central PA Retail Market Reacts to 7 New Buildings Delivered in First Quarter 2016

Posted on June 27, 2016 by Mike Kushner in Blog, Local Market, Trends No Comments

2016 has already proven to be an interesting year for Central Pennsylvania’s retail real estate market. A total of seven new buildings were delivered this quarter alone with a combined RBA of nearly 150,000 square-feet of space – only some of which is occupied. As a result, this new space has impacted vacancy and rental rates as well as net absorption. Here is a more detailed look at some of the highlights from Q1 2016 for Central Pennsylvania retail.

Select Year-to-Date Deliveries:

Seven new buildings were delivered to the Central Pennsylvania retail market in Q1 2016. Six of these properties made it to CoStar’s list of the Philadelphia Market’s Top 15 Select Year-to-Date Deliveries. They are as follows:

  • Number 2 on CoStar’s list is the building at I-81 and Walker Road with an RBA of 109,237 square-feet that is 12% occupied.
  • Number 7 on CoStar’s list is the building at 968 Norland Avenue with an RBA of 10,500 square-feet that is 71% occupied.
  • Number 10 on CoStar’s list is the building at Cedar Crest Crossing with an RBA of 7,310 square-feet that is 100% occupied.
  • Number 11 on CoStar’s list is the building at 2101 Strickler Road with an RBA of 7,043 square-feet that is 0% occupied.
  • Number 13 on CoStar’s list is the building at Donegal Square with an RBA of 6,108 square-feet that is 0% occupied.
  • Number 15 on CoStar’s list is the Chik-Fil-A located at Chambersburg Square with an RBA of 5,000 square-feet that is 100% occupied.

Absorption and Demand:

After hitting a low of negative 152,049 square-feet in first quarter 2015, net absorption has been on a steady climb. However, this trend came to an end this quarter with a significant decrease in net absorption, dropping from 281,270 square-feet (Q4 2015) to 105,984 square-feet (Q1 2016). The seven new buildings, with a combined RBA of 149,898 square-feet, most certainly had an impact on the market’s ability to absorb the new space. It’s also worth noting that Central Pennsylvania comes in second, only behind suburban Philadelphia, in year-to-date net absorption and deliveries.

Deliveries, Absorption and Vacancy

Vacancy:

This quarter the vacancy rate barely budged, increasing from 4.8% to 4.9%. What’s worth noting is that this is one of the very few times we have seen the rate increase during a nearly four-year-long trend of decreasing rates. After hitting a high of 6.0% in the latter part of 2012, rates hit their lowest number last quarter at 4.8%. Could this quarter’s increase be the start of an ongoing trend of increasing rates? The seven new buildings delivered to the market this quarter would indicate yes, which brings us to our next area of focus.

 

Rental Rates:

Lastly, the quoted rental rates have increased by $0.05, from $11.83 last quarter to $11.88 this quarter, returning them nearly to where they were in Q3 2015. Over the past four years, Central Pennsylvania’s rental rates for retail space have increased and decreased without much consistency. It will be interesting to watch these numbers throughout the rest of the year.

Vacant Space and Quoted Rental Rate

Our Summary/Analysis:

With nearly 150,000 square-feet of new retail space dumped into the market this quarter, Central Pennsylvania has responded to these changes well – all things considered. The vacancy rate moved just ever so slightly and rental rates actually increased, proving the market has a demand for this new space. Further proof is that Central Pennsylvania ranks second to suburban Philadelphia in year-to-date net absorption and deliveries. We should keep a keen eye on how the new construction will continue to impact our local businesses and economy as there is sure to be additional movement and emerging trends!

What trend this quarter do you find most noteworthy? Share your thoughts by commenting below!

[Online Resources] Real Estate, advice, analysis, buildings, camp hill, central pa, city, Construction, costar, cumberland, data, dauphin, expert, facts, harrisburg, hershey, lancaster, lemoyne, local, market, mechanicsburg, Mike Kushner, new cumberland, Omni Realty, opinion, pennsylvania, projects, region, report, retail, trends, york

Central PA Welcomes More Office Space, Rising Rental Rates

Posted on April 11, 2016 by Mike Kushner in Blog, Local Market, Trends No Comments

Overall, 2015 has proven to be an active and eventful year for Central PA office real estate. Six new buildings were delivered into the market with four more under construction. The vacancy rate rose slightly, but remains lower than it has been in recent years. Additionally, net absorption dropped by nearly 175,000 square-feet, though it still remains in the black.

How has this activity impacted the market? And how do we anticipate it will reflect on the local economy? Let’s first take a look at the numbers to help guide our predictions for the market’s performance in 2016 and beyond.

Select Year-to-Date Deliveries:

Six of the top 15 Select Year-to-Date Deliveries are within the Central PA submarket. Looking at just those that were delivered specifically in fourth quarter 2015, there are two worth noting. Coming in at number three on the CoStar list is the office building at 1250 Camp Hill Bypass. This building has an RBA of 82,000 square-feet and is 100% occupied. It broke ground in fourth quarter 2014 and was delivered one year later. Next is the Cornwall Health Center coming in at number five on the list. Located at 1701 Cornwall Road in Lebanon, this building has an RBA of 54,234 square-feet and is 100% occupied. This multi-million dollar project is estimated to bring a burst of new jobs to the area.

Vacancy:

This quarter, we saw the vacancy rate rise ever so slightly from 7.5% to 7.7%. This returns the market closer to where it began the year, but is still lower than where we were one year ago at this time when the vacancy rate was 8.0%. Still, the overall trend is a decrease in vacancy rates. Comparatively to 2013 and prior, the vacancy rates were consistently at 8.0% or greater.

Absorption and Demand:

Net absorption took a major hit this quarter, dropping from 189,032 square-feet in Q3 to 15,921 square-feet in Q4. This is the lowest the absorption rate has been since one year ago at this time when it was negative 90,015. Overall, absorption rates in the Central PA office submarket have been volatile and hard to predict, often increasing or decreasing by more than 100,000 square-feet each quarter and dipping into the red a total of five times since Q1 2013.

Image from CoStar

Image from CoStar

Rental Rates:

The quoted rental rates increased ever so slightly this quarter by $0.07 to $17.22. This continues a steady climb in rates that began at the start of 2013. Since that time, they have increased by a total of $1.11. This is also the highest rental rate we have seen in the Central PA submarket since prior to Q1 2012.

Image from CoStar

Image from CoStar

Our Summary/Analysis:

Looking to the future, we can expect even more square footage to be added to the local market in 2016 as four buildings, currently under construction, will be delivered between the first and third quarters. Combined, these new buildings will contribute 277,590 square-feet of office space. This will have an impact on nearly all aspects of the market including net absorption, existing inventory, delivered inventory and vacant square-footage.

As for the health and strength of the Central PA submarket, the seemingly ever-increasing rental rate is a sign that businesses are demanding more space and willing to pay for it. And with the majority of year-to-date deliveries and under-construction projects nearly fully occupied, new office space continues to be in-demand.

What fourth quarter 2015 market trend do you find most interesting or impactful? Share your insights by commenting below!

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New Construction in Central PA Predicted to Increase Office Space Vacancy

Posted on October 21, 2015 by Mike Kushner in Blog, Construction, Local Market, Trends No Comments

In third quarter 2015, the Central Pennsylvania submarket for commercial office space showed some positive trends for growth and demand. We have four projects under construction that will deliver more than 400,000 square-feet to the market within the coming year, with a majority of this space already preleased.

However, this promising news for the market is tempered by the fact that many tenants will vacate other office space within the Central Pennsylvania market to occupy these newly constructed office buildings. How will this impact net absorption and vacancy rates? Let’s first take a look at the data for third quarter 2015 and apply this toward what we can expect to see in the future.

Select Top Under Construction Properties

Currently four different commercial office properties are under construction in the Central Pennsylvania submarket. The Cornwall Health Center, located in Harrisburg Area East, broke ground in fourth quarter 2014 and is scheduled to be delivered in fourth quarter 2015. It has an RBA of 54,234 square-feet and is 100% preleased. The TecPort Business Campus – Building A broke ground this quarter and is scheduled to be delivered in third quarter 2016. It has an RBA of 7,590 square-feet. It is not preleased and its quoted rental rate is listed as negotiable.

Additionally, a Class A office space project is under construction at the intersection of Carlisle Pike and Hogestown Road. The two buildings that make up this project have a combined 259,000 square-feet of space are expected to be completed in spring 2016. Finally, there is Class B office space at 1250 Camp Hill Bypass that is under construction. Its 82,000 square-feet of space is 100% preleased.

Select Deliveries this Quarter:

Although four of the top 15 Select Year-to-Date Deliveries in 2015 were from the Central Pennsylvania submarket, just one was newly delivered in third quarter 2015. The Vista Plaza consists of three floors and 32,500 square-feet of office space. It is 45% occupied and is currently priced at $21.23 per square-foot. ECI Constuction, LLC completed the new addition to Vista Plaza on Manor Drive in Mechanicsburg, PA. The addition nearly doubled the original square footage of the building by adding a new wing to match the existing wing. Some of the current tenants include Duck Donuts and MS Consulting, Inc.

Rental Rates:

This quarter showed an increase in quoted rental rates. The current price of $17.14 per square-foot is a $0.07 increase from last quarter and the highest rate we have seen since prior to 2011.

Vacancy:

In third quarter 2015, the vacancy rate in the Central Pennsylvania submarket for office space decreased from 7.8% to 7.5%. The vacant square-footage also decreased from 4,120,331 square-feet to 3,962,599 square-feet.

vacant space and quoted rental rate

Absorption and Demand:

With one more building being delivered to the market this quarter, the total RBA increased to 52,581,663 square-feet. Net absorption also experienced a substantial increase, more than tripling last quarter’s 50,466 square-feet to the 190,232 square-feet that closed out third quarter 2015. But take note, both net absorption and vacancy rates will soon be greatly impacted by the 400,000+ square-feet that will be delivered to the market in the next year!

deliveries, absorption and vacancy

Our Summary/Analysis:

Central Pennsylvania has four under-construction office space projects that have a combined 402,824 square-feet of space that is soon to be delivered to the market. As new inventory is added, with many tenants vacating existing space in Central Pennsylvania to do so, we can expect this to impact net absorption and vacancy rates significantly.

It will be important to closely watch this data over the coming quarters as some of these large projects reach completion. As a result, we expect net absorption to drop back into the negatives. Also, we expect vacancy rates to rise as high as 8.1% (assuming no outside business move into the market or existing businesses expand which has not been the trend in 2015, but was in 2014). Quoted rental rates may also dip because of this increase in vacancy.

While new construction certainly has its benefits, adding this much square-footage in such a short amount of time to the market can have some not so desirable effects from the standpoint of landlords and sellers. On the flip side, businesses looking to move or expand within Central Pennsylvania should be encouraged by the larger and more competitive selection of space available.

How do you anticipate new office space construction impacting the Central Pennsylvania market into the future? Share your personal insights – or ask a question by commenting below!

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The Obamacare Effect on Local Real Estate

Posted on September 6, 2015 by Mike Kushner in Blog, Commercial Real Estate, CPBJ Articles, Healthcare No Comments

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

The Obamacare Effect on Local Real EstateNo matter your age, income or current bill of health, in some way or another, we will all be impacted by the major changes taking place in the health care industry nationwide.

The Affordable Care Act, or Obamacare, represents the most significant overhaul of the U.S. health care system since the passage of Medicare and Medicaid in 1965.

While it’s easy to predict the industries where these waves of change will come crashing down the hardest, less obvious industries, like commercial real estate, have also felt the impact of these ripples — and there are more to come.

For real estate investors, the big question is what impact this regulatory overhaul of health care mandates, subsidies and insurance exchanges will ultimately have on the commercial market. The best clues can be found in the emerging trends taking place in local health care real estate across the region.

Simply put, there are two major trends we should be watching closely right now.

Monetization

Noncore real estate, such as medical office buildings and outpatient facilities, have become a common asset that health care systems are monetizing first to help stay financially afloat. Selling off real estate and consolidating square footage is a necessary tool for health care systems right now. Here’s why.

1. Provide an infusion of capital for core investments. Selling off noncore real estate assets can provide health care systems with a quick and significant infusion of cash, allowing them to reinvest this capital back into essential items like construction, renovation and upgraded medical equipment.

2. Focus on strategic growth. Rather than holding on to an underperforming or noncore real estate asset, health care systems are selling them off and using this money to prioritize physician recruitment and retention, clinical expansion and growing their market share.

3. Strengthen balance sheet. The capital gained from monetization will improve liquidity — and a health system’s balance sheet as a result — allowing it to earn a better credit rating.

4. Reduce legal and regulatory exposure. More properties mean more opportunities for a costly violation. Health care systems benefit from reduced legal and regulatory exposure by monetizing their noncore real estate assets.

Mergers and Acquisitions

Some of Central Pennsylvania’s largest health care systems have engaged in discussions regarding merging or acquiring another facility. Specifically, four different mergers have already taken place or are currently in the works, each for unique reasons, but with the same goal in mind — to rein in costs and expand access.

1. PinnacleHealth (JC Blair Health System) and Penn State Hershey (St Joseph Regional Health Network). The most compelling reason for this merger is the projected economic savings. The recurring long-term savings is estimated to be at least $86 million annually through avoided capital and operating costs.

2. Holy Spirit and Geisinger (AtlantiCare Regional Medical Center and health care system, Shamokin Area Community Hospital, Bloomsburg Health System and Lewistown Hospital). In this “affiliation,” a small Catholic health system formally joins with a large, technologically-advanced system in an effort to continue to make health care accessible and affordable to the most people.

3. Lancaster General and University of Pennsylvania Health System. One of the largest benefits of this merger, aside from their entry into a new market, is the ability for patients to receive treatment at one facility and follow up at another. LG Health President and CEO Tom Beeman identified health care reform as the driving force behind this merger.

4. WellSpan (Good Samaritan, Ephrata Community Hospital and Philhaven).Wellspan/Good Samaritan is primarily focused on physical health while Philhaven specializes in behavioral conditions and mental health. Combined, these organizations will be better equipped to serve a broad range of patients at a fraction of the cost of trying to add these specialties independently.

The future

The velocity at which the health care industry is changing cannot be overestimated. While we are already experiencing disruption and change resulting from health care reform, technology, big data, regulatory and other impactful forces in the health care industry, I believe it is simply too soon to accurately predict the full impact these changes will have on the commercial real estate industry.

Despite the many uncertainties surrounding the hot-button issue of health care reform, there is one certain conclusion I will draw. Health care systems are prepared (and have already begun) to proactively make changes to their real estate in an effort to stay afloat.

They will do whatever it takes, even if this means selling off large properties or merging with/acquiring another health care system. We should be prepared to continue to see health care systems tighten up and team up to make their services efficient and competitive.

While there are many more changes yet to come, ones that are sure to be both positive and negative, the real estate industry should remain ready to quickly react to the changing needs of health care systems during this time.

Read more by Mike Kushner on CPBJ.com…

Regional rental demand: What it means for economic growth

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