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Central PA Office Submarkets End Quarter with Very Different Outcomes

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

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

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

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

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

Harrisburg East

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

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

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

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

Harrisburg West

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

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

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

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

Lancaster

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

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

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

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

York

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

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

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

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

Key Takeaways

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

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

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

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

Share your ideas by leaving a comment below!

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How the Medical Office Market Can Benefit from Using Flexible Office Space

Posted on September 21, 2018 by Mike Kushner in Blog, Office Leasing, Trends No Comments

Co-working and shared office space is not a new model. Businesses, like Regus, have been providing flexible, monthly memberships for access to shared office space for years now. This rose out of a growing need for businesses to have short-term, extremely flexible work locations so that they can scale up or down rapidly. Particularly, early stage startups couldn’t afford to lock into even year-long contracts for office space, because from week-to-week their needs for workspace were constantly changing.

What shared co-working space provides is an extremely flexible option for businesses and their employees to have a professional workspace with the ability to increase or decrease their space quickly and frequently. Now other industries have taken note of the unique benefits of co-working spaces and have started to develop their own model. The healthcare industry has jumped on this bandwagon and we’re now beginning to see the idea of medical co-working spaces spread across the nation, starting in cities such as Scottsdale, Arizona.

It may be hard to envision how doctors and other medical professionals can use shared workspaces to see patients, especially given the privacy and health considerations that come with the nature of the business. However, when you dig a little deeper, you’ll see that it’s a well thought out model that stands to disrupt traditional medical offices that tend to carry a large overhead and are unable to easily adapt.

Benefits of Using a Medical Co-Working Space

Co-working spaces are usually newly remodeled and fully built-out to fit the exact needs of the industry they serve. For medical co-working spaces, these rooms will feature a clean and organized space with new furniture and all the necessary resources to see and treat patients. Medical professionals can reserve the space for only the days that it’s needed. For some, this might be just 2-3 days per week. In a traditional medical office setting, when not in use, the space must still be paid for even if it’s sitting vacant.

Additionally, the concept of medical co-working spaces allows medical professionals to “test out” a new area where they may consider opening an office in the future. By offering services in a co-working space in the new area, they can see if patients prefer to see them at this location, and about how often they can fill their schedule here.

Space That Can Change with Demand

Additionally, co-working spaces are extremely flexible. Most businesses offering this amenity require only a 12 week commitment, then charge month-to-month. This is a big difference from a traditional office lease which is at least one year, usually multiple years.

In the medical industry, providers typically experience one of two problems as it pertains to medical office space. Either their practice is growing, and they don’t have enough rooms to accommodate their patients, thus delays in appointments or appointments that must be made weeks in advance. Or, the practice is shrinking and they’re losing even more money paying for space that is not being used. In both scenarios, medical professionals could benefit from the flexibility of office space that can change with demand.

With flexible office space, like co-working spaces, the need for space can change week-to-week and month-to-month. This affords medical professionals extreme flexibility. The end result is more convenient options for patients and less overhead for doctors.

Privacy and Health Considerations

It’s important to take into consideration that the highest standard of privacy and cleanliness is always expected by patients. If medical professionals should choose to see patients in a co-working setting, they should be prepared to reinforce to patients that though this is a “shared” space, the room is completely private and always properly cleaned.

As with any new trend, there may be some initial hesitations to overcome from both the providers and the patients. It’s a new model and something that will take some getting used to. However, because there are so many pros to outweigh the cons, as more and more people experience medical care from a co-working space, soon it will feel as comfortable as a traditional office environment – if not more so!

A Trend on the Rise

The reality is the co-working model is exploding, taking real estate empires, like New York City by storm. The 1.7 million square feet that co-working providers, like WeWork, leased in the first half of 2018 accounts for 10 percent of all new leasing activity in New York City this year. In fact, WeWork is about one lease away from becoming the biggest private office tenant in Manhattan – beating out JP Morgan Chase! How this relates back to the medical office market is that a trend that so quickly proved its value and dominance in a place like New York City in just eight years, will next begin to expand into smaller markets and new industries. This is not some overnight trend that will be a flash in the pan. Rather, it’s the future of office real estate that traditional real estate owners and investors need to embrace if they want to keep and attract new tenants.

The Bottom Line

Major healthcare trends are sweeping the nation and they stand to greatly change the way healthcare-related businesses view and use commercial real estate. The concept of co-working spaces that doctors and medical professionals can use to see patients is just one of these trends, and potentially a very disruptive one.

The benefits are clear. Being able to add or lose space on short notice and without penalty will allow medical professionals to save a ton of cost on overhead while having access to adequate space, if their practice grows. The most critical piece that will make this trend a success is that patients “buy into” the idea that they will be receiving care in a space that could be shared by other medical professionals on different days. So long as privacy and sanitary conditions are maintained, this trend has a lot of potential to benefit all parties.

What are some other benefits or drawbacks you see as the result of using medical co-working space? Share your thoughts and ideas by leaving a comment below!

[Online Resources] Real Estate, co-working, Commercial Real Estate, coworking, doctor's office, flexible office space, healthcare, hospital, industry, lease, medical office, Mike Kushner, office, Office Space, Omni Realty Group, patient, trends

How to Prepare For a Commercial Business Relocation

Posted on June 25, 2018 by Mike Kushner in Blog, Commercial Real Estate No Comments

For any business who has navigated the challenges of moving into new office, retail or industrial space, you likely learned some valuable lessons along the way of things you would choose to do differently if you had to do it again. A commercial business relocation has a major impact on company culture, customer service and your bottom line. For this reason, it’s critical to be strategic about how you approach your move to set yourself up for a smooth and seamless transition.

To provide valuable insight on the topic of commercial business relocation, Omni Realty interviewed Dick Michaelian. Dick is a principal of Relocation Consulting & Management, Inc (RC&M) located in Mechanicsburg, Pennsylvania. Having been in the moving and storage business for over 36 years, with 26 of those with RC&M, Dick has helped local, state and federal governments, schools, colleges, healthcare, courthouses, museums and corporate businesses successful relocate to new facilities.

We asked Dick to answer five important questions regarding commercial business relocation covering everything from the biggest challenges to planning for a successful move. Take a look at Dick’s insight and advice that can be applied to any business or organization considering a relocation.

Omni: What are the biggest factors that cause businesses to relocate?

Dick Michaelian: The number one factor is change. While that sounds quite simple, it can be very difficult for an organization to change. Growing, shrinking, change of ownership or leadership are all examples of change. Other factors include the expiration of a lease or sale of a building as well as a desire to change a location because of customers or taxing entities.

Omni: For businesses considering a relocation, what are the most important details they should think through?

Dick Michaelian: A business should begin with the end in mind. How do you want everything to look and operate when the move is completed? From there, you should work back to where you are now and then determine how much time, money and effort will be required to get to where you want to be. Businesses often under estimate the amount of resources required for a good, effective relocation.

Another consideration is how to maintain your level of productivity during the transition. The last thing that should ever happen during a move is for a customer to be told “we can’t be of service to you because of our move.” The entire relocation should be virtually invisible to customers!

Finally, a business should strongly consider what and how it wants to change as a result of the relocation. Change will happen whether it is desired and planned or spontaneous and intrusive.

Omni: How early should businesses begin to plan for their relocation?

Dick Michaelian: The planning should begin as soon as the decision is made that the business is going to move. I’m working with a client now whose move is planned for late 2020 and they want to get a clear picture of what is required for their budget. Planning can never begin too early. The actual implementation of the plan usually begins about four to six months prior to the relocation.

Omni: Describe your recommended planning process for corporate relocation.

Dick Michaelian: The planning process begins with leadership setting the path and goal. From there, it’s getting everyone to work together using the same data. Effective communication is critical. A ‘team’ approach works best, utilizing resources from different facets that will be playing a part in the move – large or small: IT, procurement, facilities, operations, administration and leadership. It’s essential to have a “big picture” perspective of the project while assigning expectations and due-dates to the players.

Once the plan is agreed upon and set, any changes should be well considered. You never want to change a plan in the middle of the move. That rarely proves successful in the end, as often the goal changes as well.

Omni: In your experience, what factors most commonly impact the success of a business’s relocation?

Dick Michaelian: The single most important factor are people moving. The reliability of the planning team members and their dedication to the success of the project is critical. No one person can be responsible for a fantastic move – it’s a team effort. However, one person can really make it hard for everybody else if they don’t want to move or change. Management has to set the tone. Getting the different elements to buy into the change that needs to occur is difficult; but, with the right vision and passion, good leaders will help their organizations through the necessary transition. I always enjoy observing this process with successful businesses.

Moving can be very difficult. Good leaders who recognize that they are in the “people business” have the most impact on the success of a relocation.

Another factor is timing. You never want to move until the new space is ready. And yet, most relocations occur without a new, completed space. Construction delays, last minute changes and contractors not performing are the major causes of this situation.

You can create a great new working environment for your business; but, if the move goes poorly, that’s what everyone will remember. Don’t underestimate the vital importance of a well-planned, smoothly executed relocation from beginning to end!

Is your business considering a relocation to new retail, office or industrial space? What piece of advice did you find most helpful? Join in the conversation, or ask a question by leaving a comment below!

[Online Resources] Real Estate, advice, business, central pennsylvania, commercial, Commercial Real Estate, company, industrial, Mike Kushner, move, moving, office, Office Space, Omni Realty Group, organization, relocate, relocation, retail, tips

How Commercial Real Estate Owners and Investors Can Capitalize on the Co-Working Movement

Posted on May 9, 2018 by Mike Kushner in Blog, Local Market, Office Leasing, Trends No Comments

To younger generations who are making up more and more of our work force every day, work is no longer a physical space, but rather an activity that, for better or worse, can be taken nearly everywhere we go. For this reason, the movement toward co-working spaces has emerged in virtually every city that has a business industry. Co-working is present here in Central Pennsylvania with spaces like the Park and St@rtUp in Harrisburg, the Candy Factory in Lancaster and the Techcelerator in Carlisle, to name just a few.

Even though co-working spaces are present in Central Pennsylvania, the majority of our workplaces are still modeled after the “old” economy assembly line, where workflow was linear and corporate structures were hierarchical. For commercial real estate owners and investors who want to capitalize on the growing demand for co-working spaces, here’s what you need to know.

Understand how the modern day “office” has changed

Foremost, we must take a step back to understand how the modern day “office” has vastly changed from what was desired decades ago. Simply put, stop thinking like a baby boomer! Nearly 10,000 baby boomers retire every year. It’s estimated that millennials will comprise the largest segment of our work force (75 percent to be precise) within the next decade.

If you’re a commercial real estate landlord or investor, you know the importance of understanding your clients’ wants and needs. So let’s examine what millennials want out of an office. First, the word “office” isn’t really appropriate anymore. What’s desired is a workspace that in one instance can provide quiet and solitude for “head-down” work, and the very next moment, provide an energizing and collaborative group work environment. Should it come as a surprise that millennials want it all without having to commit to one style of space? This brings us to the next important point, which is design.

Design spaces that quickly adapt to changing needs

Co-working spaces are high on function and that means being able to quickly adapt to a variety of work situations. In a single day, a business and its employees may need quiet, private work stations where people can work independently; open, collaborative space where people can work in groups; and traditional meeting space where people can meet with clients. Over time, growing businesses also desire the ability to easily accommodate more employees without having to uproot and find a bigger office every few months.

With traditional office space, businesses usually have to settle for dysfunctional work spaces that don’t quite fit the number of employees or their work styles. As a result, employees are less efficient, communication is disjointed and company culture suffers. For those who own or invest in commercial real estate, the focus needs to be on redesigning traditional office space to function more like a co-working space. This means large, open work areas where employees can interact and collaborate. Also, look for furniture that can be easily reconfigured as often as needed to provide more work spaces and private offices for independent work and meetings. These features will be huge selling points for businesses who want an office that will meet their immediate needs as well as grow with them.

Offer shared amenities to attract and retain tenants

The good news about co-working spaces is that people get used to sharing amenities. Multiple businesses working in the same building could all benefit from a shared conference room, snack bar, lounge or gym. While this would be far too much for any one of these businesses to individually afford in their own office, a building that provides all tenants with access to such amenities has quite a leg up over the competition.

Look at how Google and Apple have designed “campuses” for their employees. You can create the same effect out of your office building. Give businesses a place to interact with other businesses. Now you not only offer work space, you offer networking and business development opportunities for all!

Deliver a seamless experience – even if it comes at a premium

By adding luxury amenities to your office building, like mentioned above, you give businesses a seamless experience. Their employees will have incentive to do more at the office, even if that is relaxing, eating or exercising. Best of all, this higher level of employee engagement comes at a premium. Businesses will pay more for office spaces that keep employees happy, healthy and invested in their jobs. When you invest in adding luxury amenities to you work spaces, you will stand out among the competition and be able to charge more for your space.

Focus on building your own brand!

If you want to engage the growing millennial workforce, you need to pay attention to your brand. This demographic is used to polished and prominent branding. If you want to attract them to your office space, you need to present them with a brand worth buying into. Many co-working spaces brand themselves with a trendy name and logo. They have professional websites and a strong social media presence. How does your “brand” compare? Any effort put into properly branding your properties will bring exponential benefits as time goes on.

Which of these tips do you believe is most valuable to commercial real estate owners and investors capitalizing on the growing trend of co-working spaces?

Join in the conversation by leaving a comment below!

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How a Good Workplace Strategy Impacts Your Business

Posted on June 15, 2017 by Mike Kushner in Blog, Commercial Real Estate, Office Leasing No Comments

Smart businesses know that in order to be successful, you have to have a strategy. The first types of strategies that often come to mind are marketing or business development, but what about your workplace strategy? The vast majority of businesses would agree that their people are their greatest asset, making it all the more important to have a strategy to create a work environment that is conducive to your business model and helpful in recruiting and retaining top talent.

The following should be key considerations you keep in mind when selecting the location and setup of your office space. If you can achieve harmony with all of these factors, you will have created a strong workplace strategy that will reap long-term benefits for your business. Take a look!

Central Location

There is a lot of strategy behind what is the “best” location for your business. One of the first considerations should be the commute of your employees. Think about where most people are coming from and narrow your options to within a distance between home and office. Picking an office location that is convenient for most existing employees will help you retain this talent and increase their efficiency of getting into the office and getting to work.

Another consideration as it pertains to office location is how this impacts cost. It’s tempting to want your office in a big city, but there are costs and inconveniences that come with this, including higher price per square foot, additional cost of parking and city taxes. These drawbacks might not be a deal-breaker for you, but it’s still important to weigh them in your decision.

Demographics of Your Employees

Again, it comes back to employees. Consider their demographics. Are they mostly young singles who would appreciate a cool work environment in a trendy part of town? Or are they mostly married with families that would prefer a quiet and spacious work environment close to home? Knowing what your employees value most in their work environment will help you develop the best workplace strategy.

Take for example the Central Pennsylvania SEO company, WebPage FX. They’re located in a historic mansion in Old Uptown Harrisburg. Knowing that their business is mainly comprised of millennials, they have branded their business as “more than just a place to work.” WebPage FX has successfully created a company culture of employees who spend a lot of time together outside of work, winning them the title of “Best Place to Work in Central PA” multiple years. And with the social activities, restaurants and nightlife within walking distance of their office, choosing the City of Harrisburg as their location was a key part of their workplace strategy to attract talent.

Physical Work Environment

Next let’s talk about the physical surroundings in your work environment. Does it feel modern, upbeat and energizing or is it dark, outdated and depressing. Your employees are directly impacted by the feel and layout of their workspace. Even minor updates like new furniture and light fixtures can drastically improve your work environment. Prioritize these enhancements and ask your employees what would make the biggest difference for them.

Flexible and Multi-Use Space

Many businesses cite that only 30 to 50 percent of their offices are used at capacity at any given moment. That’s a lot of wasted space that you’re still paying for even if its unused! A smart workplace strategy is to pick a space that is flexible and able to be easily configured for multiple purposes.

Take for example, the Lititz based digital marketing company, Listrak. They have just moved into a 93,000 square-foot custom-built office space that includes amenities such as a cafe, on-site gym and an open floor plan for 300 Listrak employees. With their growing business, it was important to have freedom to use their space in a variety of different ways. Pop-up workstations that can be quickly added or removed, flexible meeting spaces to accommodate various numbers of employees, and common areas where employees can enjoy some social time are all elements that are incorporated into Listrak’s workplace strategy that was modeled after a Silicon Valley lifestyle.

Shaping Company Culture

Workplace strategy has a major impact on shaping company culture. A work environment that encourages employees to be social and get together outside of work will strengthen the relationship and retention of your talent. Additionally, the energy of your workplace will be directly felt by your employees. A vibrant and upbeat environment will energize employees and attract more of this type of talent. Also, providing perks like a ping pong table, putting green or a café with free coffee and snacks will make your office a place for more than just work, but where people can learn, thrive and grow!

With a better understanding of the key factors that go into creating a workplace strategy, how do you feel your current work environment stacks up? What steps could you take to improve your workplace strategy?

Share your thoughts by leaving a comment below!

[Online Resources] Real Estate, business, business development, central pa, Commercial Real Estate, company culture, culture, employees, harrisburg, lancaster, listrak, lititz, Mike Kushner, Office Space, onmi realty, plan, talent, webpage fx, workplace strategy, workspace

First Thing to Do When Looking for New Office Space

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

First Thing to Do When Looking for New Office Space

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

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

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

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

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

Someone Looking Out for Your Best Interests

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

Master of Their Trade

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

No Cost to You

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

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

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

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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!

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How Will New Office Space Construction in Central PA Impact the Market?

Posted on November 18, 2015 by Mike Kushner in Blog, CPBJ Articles, Local Market, Trends No Comments

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

business, building, paperwork and people concept - happy builder in hardhat with clipboard and pencil over group of builders at construction site

Photo Credit: Dollar Photo Club

2015 has brought a boost in office space construction to Central Pennsylvania and there is even more space to come! While this may be exciting news for businesses looking to expand into the local market, we need to watch this trend closely and cautiously because the potential impact may not be so favorable for landlords and sellers of commercial office space.

The good news is 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 nearby to occupy these newly constructed office buildings.

Once delivered, this square footage will most certainly impact net absorption and vacancy rates in the Central Pennsylvania submarket. What can we do to prepare and attempt to reduce any negative impact? Let’s first take a look at what’s going on in the market and then analyze what will likely result from these trends.

Third Quarter 2015: 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.

Third Quarter 2015 Rental Rates & Vacancy

This quarter, rental rates rose to $17.14 per square-foot. This is the highest rate we have seen since prior to 2011. The vacancy rate 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.

Third Quarter 2015 Absorption and Demand

The total RBA in Q3 2015 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!

Future Trends and Their Impact

New construction certainly has its benefits, and for the time being, the Central Pennsylvania office submarket is receiving a positive boost from the activity. But as this new square-footage is delivered in the next 12 months, causing businesses to vacate other space within the region, we can expect to see some new trends emerge.

Let’s take a look at a highlight of predictions we expect to see in the coming quarters:

Inconsistent Net Absorption: The only real pattern in net absorption of office space over the last 15 quarters has been inconsistency. Year-to-date for 2015 we are at 630,738 square-feet; 2014 totaled negative 311,827 square-feet; 2013 was 909,658 square-feet; and 2012 was negative 226,424 square-feet.
Increased Vacancy Rate: The addition of 340,000 square-feet of new construction in the Harrisburg West market that is being occupied by Hewlett-Packard (HP) and Deloitte will result in an increased vacancy rate in 2016 due to the occupants relocating from existing space. In addition, the Walgreens- Rite Aid merger will contribute to the market’s increased vacant space as the two companies integrate corporate back-office functions.
Decreased Employee Square-Footage: Square-feet per employee have been in a long term decline and will continue on this trend. E-commerce, telecommuting, and the desire for open and collaborative work spaces are squeezing the office space sector given that square footage per office employee is diminishing.
Increased Demand for Medical Office Space: The one bright spot in the office market segment is the increasing demand for medical office space. Orthopedic Associates of Lancaster is constructing a 73,529 square foot facility in North Cornwall Township. Good Samaritan Hospital is opening a new 22,000 square foot center at 840 Tuck Street in Lebanon. And Pinnacle Health is opening an 80,000 square foot Advanced Care Center in a former retail shopping center located at 1251 East Main Street in Annville.

These predictions are not going to be music to the ears of landlords and sellers, but this market provides some prime opportunities for new and growing businesses to expand within Central Pennsylvania. Increasing vacancy rates and inconsistent net absorption creates a competitive market in which the buyer or renter has the upper-hand. So businesses take note. If you were thinking of moving to or expanding within Central Pennsylvania, 2016 is the prime time to do so!

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

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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

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.

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!

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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Central Pennsylvania’s Largest Retail, Industrial and Office Lease Deals in 2014

Posted on January 14, 2015 by mike.kushner in Blog, Local Market No Comments

We’ve officially closed the books on 2014 and now is the perfect time to take a look back at some of the most notable real estate transactions for the year. Not only does this give us full insight into the trends of 2014, but it also helps shape the predictions of future trends we may see coming our way in 2015.

Join us as we take a closer look at the largest lease deals that occurred in Dauphin, Cumberland, York, Lancaster and Lebanon counties for the retail, industrial and office markets.

Largest Retail Lease Deals

1. Giant Food located at 848-852 E Main Street, Ephrata signed into a lease for a 66,472 square-foot space in April 2014.

Giant Food located at 848-852 E Main Street, Ephrata

2. Regal Cinemas located at Manor Shopping Center, 1246 Millersville Pike, Lancaster signed into a lease for a 51,450 square-foot space in December, 2014.

3. GIANT located at Cumberland Market Place, 6560 Carlisle Pike, Suite 100, Mechanicsburg signed into a 45,000 square-foot space in May, 2014.

4. White Oak Furniture located at North Londonderry Square, 2-22 N Londonderry Square, Suite 300, Palmyra signed into a 38,869 square-foot lease in June, 2014.

5. Halloween Adventure located at Colonial Commons, 5070-5082 Jonestown Road, Suite 1510, Harrisburg signed into a 31,436 square-foot space in April 2014.

Largest Industrial Lease Deals

1. Georgia-Pacific located at ProLogis Shippensburg, 234 Walnut Bottom Road, Shippensburg signed into a 1.4 million square-foot lease.

Georgia-Pacific located at ProLogis Shippensburg, 234 Walnut Bottom Road, Shippensburg

2. Federal-Mogul Corporation located at First Logistics Center @ I-83, 20 Leo Lane, York signed into a 708,000 square-foot lease in September, 2014.

3. Cardinal Logistics located at Building 1, Key Logistics Park, 950 Centerville Road, Newville signed into a 570,000 square-foot lease in August 2014.

4. Lindt and Sprungli located at Bldg 4, Carlisle Distribution Center, 40 Logistics Drive, Carlisle signed into a 421,200 square-foot lease in December 2014.

5. School Specialty located at 1156 Four Star Drive, Mount Joy signed into a 400,000 square-foot lease in September, 2014.

Largest Office Lease Deals

1. Comcast located at 2801 Valley Road, Harrisburg signed into a 141,778 square-foot lease in August, 2014.

Comcast located at 2801 Valley Road, Harrisburg

2. Golden State Fruit located at 515 N Reading Road, Ephrata signed into a 25,841 square-foot space in October, 2014.

3. RMS located at 1910 Harrington Drive, Lancaster signed into a 16,000 square-foot space in February, 2014.

4. Coventry Health Care located at 3721 Tecport Drive, Harrisburg signed into a 14,566 square-foot space in September, 2014.

5. EHD.located at Greenfield Corporate Center, 1857 William Penn Way, 201-203, Lancaster signed into a 12,627 square-foot space in August, 2014.

What this means for 2015

The Largest Deals of 2014 give us some insight into what to expect in 2015. In the retail sector, owners of power centers and grocery anchored retail properties continue to rethink how they will use space to fill vacancies. Halloween Adventure and White Oak Furniture are great examples of creative re-use.

Central Pennsylvania continues to be a dominant player among major logistics markets. Industrial buildings will continue to set new records for scope, as distribution centers greater than one million square feet become more prevalent.

The office market is benefiting from market fundamentals that continue to move in a positive direction. Comcast, Golden State Fruit, and RMS are fast growing companies that have expanded operations in Central Pennsylvania. The combination of measured new construction, tenant expansion and lessening office contractions will continue to contribute to restoring health to the Central Pennsylvania office market.

Do you have an additional thoughts or questions about the largest lease deals for 2014? Join in the conversation by commenting below!

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