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Why Banks are Cutting Back on Commercial Real Estate Lending

Posted on January 17, 2020 by Mike Kushner in Commercial Real Estate, Construction, Guest Blogger, Local Market, Trends No Comments

Commercial real estate lending, the bread-and-butter business for many smaller and regional banks, could further decrease in 2020. The cause is a combination of a few different factors – intense competition from non-bank lenders and rising delinquency rates to name a few. Mortgage lending is also predicted to be impacted by rising interest rates and tight housing supplies in many major markets.

This trend is not new, but rather has been slowly creeping in for years. In 2017, U.S. banks reported that demand for commercial real estate loans weakened in the second quarter, though foreign banks reported strengthened demand. Furthermore, loan growth slowed to 4.2 percent in 2018, down from 5.6 percent in 2017, according to bank call reports and Federal Deposit Insurance Corp. data.

Why exactly are banks cutting back on commercial real estate lending? And should this call for concern that a potential economic downturn is in the near future?

Rory Ritrievi, President and CEO of Mid Penn Bank

To lend some expertise on this topic, Omni Realty Group turned to Rory Ritrievi. Rory has more than three decades of experience in banking, specifically in Pennsylvania. For the last 11 years, Rory has served as President and CEO of Mid Penn Bank. Under his direction, the bank has grown from $550 million in assets and 14 retail locations to over $2 billion in assets and 39 retail locations.

Throughout his banking career, Rory has gained deep insight into when and why banks provide commercial real estate loans – and when they do not. Let’s learn what he thinks is going on in the current market, and the pending economic impact.

Omni Realty: How has commercial lending changed in the last 5 years?

RR: In the last 5-10 years, we have seen, for the most part, a return to credit fundamentals that seem to have been abandoned in the years leading up to the Great Recession. Back then it seemed like almost any deal made sense to Bankers. Now, the focus has been returned to analysis of absorption rates, discounted cash flows, borrower experience, reasonable cap rates, and strength of guarantors.

Omni Realty: In your opinion, what are the main causes of these changes?

RR: Losses. Loan losses of 2008-2012 gave a renewed focus to bankers on the true meaning of credit fundamentals.

Omni Realty: What changes would need to take place in the commercial estate market, or economy as a whole, to further improve commercial lending?

RR: Lenders need to evolve their underwriting and analytics to keep up with the evolving demographics. Baby Boomers are aging out so there is a need for more senior housing, multifamily rentals, luxury apartments, and assisted living. Additionally, high student loan balances are making the need for affordable housing in urban areas more prevalent. There is also a growing focus on renewable energy and green spaces. Finally, work from home is more prevalent which challenges the demand for traditional office space. When we look to retail, the shift toward online decreases the demand for mall space, while increasing demand for warehouse space. And we can’t overlook technology. Bankers need to not only know about emerging technology that stands to impact the market, but they must embrace it as a highly valuable tool to help them “keep up.”

Omni Realty: What do you anticipate the trend to be for commercial lending in 2020?

RR: In my opinion, 2020 will be a positive year in the lending business, particularly in Central Pennsylvania. We are in a good credit cycle and the interest rate yield curve is in decent shape compared to last year. There are geopolitical issues such as the impact of the general election, instability in the Middle East, and trade with China but I do not believe any of those issues will halt the progress of our local economy in 2020. Challenge it, yes and maybe slow it a bit, but not halt it entirely.

Omni Realty Group thanks Rory for sharing this valuable information and helping us to further understand the factors impacting how banks view commercial lending. Though banks are, for the most part, treading lightly in the market since the Great Recession, it’s encouraging to hear their renewed commitment to credit fundamentals, and helping both individuals and businesses make well-educated lending decisions.

Amidst a year that will no doubt bring change, it’s important we remain aware of the lasting impact factors such as elections and geopolitical issues may bring to our economy, both immediately and for years to come. Rory provides sound reason as to why we should not fear such changes, but rather maintain confidence in the banking economy, particularly here in Central Pennsylvania.

Do you agree with these insights, or have others to share? We welcome your feedback in the comments below!

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Central PA’s Growth in Commercial Construction Creating Workforce Challenges

Posted on December 19, 2019 by Mike Kushner in Blog, Construction, Local Market, Trends No Comments

With new commercial construction projects popping up all across Central Pennsylvania, it may appear as though it’s a great time to be in the industry. A demand for more commercial construction usually means businesses are growing or moving into the area, bringing with them jobs and economic growth. But there’s one looming challenge that stands in the way of this growth having only upside, and that’s the lack of commercial construction workers to take on this work.

According to Commercial Observer, this workforce challenge is not limited to the Central Pennsylvania region. Rather it’s a nationwide issue that could have wide-spread impact. A serious gap exists between the upcoming demand for labor and the number of available workers with the skills needed to fill those positions.

How does this gap in skilled laborers stand to impact the commercial real estate construction industry? And what, if any, solutions exist? For further input on this issue, Omni Realty Group turned to Dave Sload, President and CEO of ABC Keystone.

ABC Keystone was established in 1959 with the mission of advancing and defending the principles of free enterprise in the construction industry. Today, the organization is a powerhouse with 69 chapters and over 21,000 members. It is one of the leading organizations representing America’s business community and the construction industry.

“The construction industry is already in a critical state when it comes to finding skilled workers. They simply are not out there and it is forcing companies to pass on some projects,” says Sload.

Commercial construction companies being stretched so thin on labor that they decline work illustrates the severity of the labor shortage and the ominous threat it poses on the industry. The real struggle is construction spending is not predicted to subside. In fact, growth over the next two years is substantial.

According to FMI’s 2019 Industry Outlook, total construction spending in the Mid-Atlantic region, which includes Pennsylvania, New York and New Jersey, should increase 5 percent year over year, from $153.6 billion to $161.3 billion. It is predicted that this trend will hold in coming years, with anticipated spending increasing at a rate of 4.5 percent between now and 2022.

Combine this with the fact that the construction industry unemployment has dropped to an 18-year low, and you have the recipe for a sustained labor shortage that will lead to higher labor costs, longer project schedules, and inevitably quality and safety issues that will result from understaffed crew and under-qualified workers.

Sload adds, “Things will only get worse in the future. 40% of the construction workforce will retire over the next ten years. It will not be just the skilled workers we lose but also decades of institutional knowledge.”

Construction jobs are a cornerstone of our local economy, with thousands of well-paying jobs created every year. The latest job openings data from the Bureau of Labor Statistics suggests that since 2014, while the number of jobs openings has almost doubled, the number of hires has increased by just 14 percent. This underlines the fact that it is not a lack of jobs, but a lack of laborers to hire for such jobs.

Sload continues, “If that is not enough, this country is in desperate need of infrastructure legislation to update our highways, airports, wastewater treatment plants and water systems. Should an infrastructure bill pass in the range of what has been proposed, we would immediately be another 500,000 skilled workers short.”

All of this begs the question, “What is the solution?” Construction business owners and other hiring entities have started exploring all viable options for employing and retaining qualified workers. Possibilities include increasing and improving recruiting efforts; retaining qualified workers during periods of slow work so they are more readily available; investing in skills training and continued education programs; and working harder to nurture internal talent, especially to retain institutional knowledge.

While none of these solutions may be the “silver bullet” the industry needs right now, it’s evidence that the issue is not being ignored, and companies are willing to get creative and collaborative with whatever combination of solutions prove to move the needle.

Have you felt the impact of workforce challenges, either personally or within your business? Or do you have a different opinion as to how the commercial construction industry may address this issue?

Join in the conversation by leaving a comment below.

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4 Reasons Why 2019 Was a Great Year for Commercial Real Estate

Posted on December 8, 2019 by Mike Kushner in Blog, Commercial Real Estate, Trends No Comments

For various reasons, 2019 proved to be a year of advancement and change. This was the year that the driverless revolution finally hit the road, China accomplished the first landing on the far side of the moon, and many other social and political issues advanced. We also lost legends like Doris Day and Karl Lagerfeld.

Beyond the tech, science, social, and political advancements, there were many other industries that were significantly shaped by 2019. Particularly for commercial real estate, there are four things that took place this year that changed the CRE industry for the better. Here’s why 2019 should be considered a great year for commercial real estate.

Low Interest Rates

An increased capital flow in the U.S. has helped to keep interest rates low despite an optimistic economic outlook. Additionally, the Federal Reserve issued three rate cuts in 2019, twice amid trade tensions with China. Economists predict that interest rates will remain low by historical standards for at least the near term. Additionally, multifamily originations are projected to hit an all-time high in 2020.

Despite the dip in mortgage rates, cap rates have stayed relatively flat, at 5.6% during the first half of 2019. Cap rates across all major segments, except for the retail sector, which has seen some cap rate expansion, have been largely unaffected by interest rate fluctuations and remain a favorable asset class. It’s expected that the hunt for yield will continue to drive more capital into real estate acquisitions in the near future.

Good GDP Growth

The United States kicked off 2019 with growth of 3.1% in the first quarter, the growth then slowed into second quarter. Ultimately GDP growth went on to exceed what was initially expected in the third quarter. The economy expanded by 2.1% between July and September, more than the initial reading of 1.9%, and more than the 2% growth rate in the second quarter. The last time it grew at a pace of less than 2% was in the final quarter of 2018.

Manufacturing, both in the U.S. and globally, was hit hard by the on-going trade war with China. On top of that, the positive effects from the 2017 tax reform (see below), which gave the economy a boost, also tapered off this year. Though economists are still expecting economic growth to slow further in the near-term, that slowdown appears to be more modest than initially expected

2017 Tax Reform*
It has been expressed that commercial real estate was the real “winner” of the tax reform of 2017. The new tax benefits these changes brought to commercial real estate investing include:

Individual tax rate – The tax changes made in 2017 included tax rate cuts across the board with corporate rates being slashed to 21% (which received most of the publicity). The individual rate reductions were not as dramatic, but do provide relief especially with the wider tax brackets.
Depreciation – The 2017 tax reform brought back 100% bonus depreciation through 2022, meaning the cost may be fully expensed in the year placed in service for qualifying property.
Interest expense limitation – As part of the 2017 tax reform, there is a new limitation that restricts the ability to deduct interest expense in certain situations. Fortunately, commercial real estate should not be impacted in most scenarios. The deduction for interest expense is limited to 30% of taxable income before interest, depreciation and amortization deductions.
Like-kind exchanges – Fortunately, the impact on like-kind exchanges on commercial real estate was minimal. Real property for real property exchanges are still allowed, meaning there is not a requirement to exchange into the same asset type. Meaning an apartment complex can be exchanged into a commercial property.
Tax-exempt Taxpayers – For tax years starting after January 1, 2018, losses from any CRE investment activity are only allowed to offset income or gains from that activity. Though this will likely accelerate tax liabilities for tax-exempt investors that have multiple investments generating unrelated business income, they can protect themselves by using an IRA to make additional investments in commercial real estate.

*The full details of the 2017 tax reformed are quite complex and beyond the scope of this article. As always, investors are encouraged to discuss the potential impact of this limitation with their tax advisor.

Low Unemployment

Historically low unemployment rates were an earmark of 2019. Contributing to this was a boom in CRE construction which created an increased demand for commercial construction workers. To put the current state of real estate growth into perspective, demand over the past five years has exceeded housing inventory by 1.4 million units, and vacancies are at their lowest levels since 1984. All of this demand for more real estate creates a demand for new construction, and more construction workers to complete it.

While (most) growth is a good thing, there’s a flip side to every coin. The nationwide shortage of construction workers posed significant challenges for the commercial construction industry, including struggles to meet deadlines, raised costs to complete projects, and firms having to ask their existing skilled laborers to do more work. While there is no quick solution to resolve this in the near-future, those in the field are making efforts to resolve the problem while keeping their CRE projects on deadline.

What Can We Expect In 2020?

The commercial real estate industry has benefited from the unusually long length of the current expansion cycle. But more than 10 years in, while growth in many fundamentals has slowed, the cycle marches on. Many experts believe we’ve entered a new kind of cycle marked by prolonged periods of low growth, low inflation, and low interest rates. Such an environment would prove favorable for continued stability in the commercial real estate sector for the foreseeable future.

Which of these four changes in 2019 do you believe to be most powerful? How will any of these also impact your industry? Join in the conversation by leaving a comment.

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Considering a Commercial Real Estate Investment Property? Read This First!

Posted on November 26, 2019 by Mike Kushner in Blog, Commercial Real Estate No Comments

Investing in commercial real estate can be one of the most lucrative real estate investments you can make. Investors can realize extraordinary capital gains and huge cash flow wins. On the flip side, there can be quite a drastically different outcome when your CRE investment properties sustain long vacancies or big drops in market value.

For many reasons, investing in commercial real estate can be higher risk than other types of real estate investments. This is why it’s so important to be well versed with its nuances and trends – or to have a trusted advisor who is. To put yourself in the best position for a favorable return on your investment, there are certain things anyone thinking about investing in commercial real estate should know. Here is a brief overview of the things you should think about to determine if investing in commercial real estate is right for you.

Start with a Solid Plan

Before you embark on any big undertaking, you should always begin with a plan. The same is just as true for commercial real estate investments. Before investing your hard-earned cash or equity in a commercial property, you should first have a proper investment plan in place that fully equips you to identify the right property for your portfolio. Without a framework to guide your decisions, you may make the mistake of buying a property on impulse or out of pressure from others, even when it really doesn’t fit your goals for long-term strategy, risk mitigation, capital growth and, cash flow.

Understand the Time Required to See a Return

Next, do your research to gain an understanding of a realistic time frame to see a return. Many new investors dive into things thinking they’ll surely see a return in a fraction of the time it will really take to fully develop the investment and make it profitable. Pulling out too early can mean losing a substantial part of your investment, so be sure you plan for the appropriate amount of time that your money may be tied up in a particular commercial real estate investment.

Join with Other Professionals Who Share Your Goals

Successful commercial investors rarely go it alone. They build a team of other professionals who share their same goals. A successful team includes commercial buyer’s agent, appraisers, commercial property inspectors, engineers, lenders and closing attorneys. All of whom are all an essential part of achieving success in real estate investing and who work together to set a clear strategy, conduct detailed research, and source the correct property at a fair price, and with the right conditions that fit the team’s goals. When it comes to choosing your team, choose wisely. Others involved should complement your own shortfalls in knowledge, and in return you may be able to supplement theirs.

Compare and Contrast Your Investment Opportunities

It might seem obvious, but those new to commercial investing often overpay. One of the best ways to prevent yourself from making this mistake is to know where the value point is on the property, be fully aware of comparable prices for any similar properties, and not become focused on the cash flow and lease structure. Paying too much for commercial property locks up your funds in a more rigid way than it would with residential real estate. Banks are far more reluctant to provide equity releases or cash outs for commercial investing.

Do Your Due Diligence

It’s okay to start out cautious. One of the biggest mistakes new commercial real estate investors make is signing on the dotted line without doing their due diligence. If this feels like a daunting task to take on, consider working with an experienced buyer’s agent whose job it is to analyze the property cash flows, educate the buyer on market value and market lease rates, and recommend other professionals (mentioned above). It takes time, resources, and an understanding of market connections to fully vet a commercial investment opportunity.

Consider Additional Expenses Beyond Your Investment

Smart commercial real estate investors know they must carefully allocate their budgets so there is sufficient coverage for expenses such as the mortgage, taxes, insurance, and advertising. When you don’t have enough cash flow to fund these areas, your property can quickly become a liability when really it should be an asset.

Keep an Open Mind

Just because your former tenant was a medical office doesn’t mean your new tenant has to be. This is why buying versatile commercial properties that allow a number of options is a wise investment strategy. When the real estate market fluctuates, you’re better prepared to tackle unexpected situations and experience fewer losses when doing so.

Have Contingency Plans

Finally and most importantly, you need to have at least one, if not multiple contingency plans in place in case things should take an unexpected turn. Investing in commercial real estate always comes with risks, some more than others. You need to be prepared to lose it all; therefore, you should have a plan in place of how you will react – and rebound – if that happens.

What is your experience with commercial real estate investments? Whether you’re a seasoned expert in this field, or have just started to explore the options available to you, giving these topics close consideration with each and every investment will put you in the best potion for a favorable return.

Do you have something to add to this list? Share your input by leaving a comment below!

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Ancillary Income Opportunities for Commercial Real Estate Property Owners

Posted on November 12, 2019 by Mike Kushner in Blog, Commercial Real Estate, Guest Blogger, Local Market No Comments

When businesses and individuals consider commercial real estate development as an investment opportunity, often the primary focus is on the potential income from tenants who will lease the space. However, given the growing demand for outdoor advertising and the increased revenue opportunities that digital billboards can provide landowners in terms of rent, there is an extra revenue opportunity that should not be overlooked.

To further explain, Omni Realty Group spoke with Pat Lyons, Owner of Premier Media and a leader in developing outdoor advertising income opportunities for commercial landowners. Headquartered in Harrisburg, Pennsylvania, Premier Media assists real estate investment trusts (REITs) and landowners grow ancillary revenue streams by identifying, permitting, building, and managing outdoor advertising assets within their company portfolio.

When we asked Pat to share with us how he works with commercial real estate properties to develop streams of ancillary income, here’s what he had to say.

Omni: Describe the core services do you provide to commercial real estate clients.

Pat Lyons: There are four main components to the services Premier Media provides and they’re designed to flow in a process. First is asset review. We approach every new project with a complete asset review of the client’s property portfolio conducted by our fulltime team of researchers who do a comprehensive review of both the local and state sign ordinances and provide a full on-site evaluation.

Once we identify opportunities within the property owner portfolio, we present them with a proposal of what they can expect in land lease revenue from a digital unit on sites that we feel are potential candidates to move through the permitting process for approval. If our proposal is accepted, then we move to a signed land lease agreement. In essence, Premier Media leases a portion of the property that is mutually agreed upon by both parties for the billboard installation.

Next is permitting. We work through all aspects of researching and securing the appropriate local and state permitting applications necessary to build the desired advertising displays. This includes all engineering, survey work, building permits, electrical permits and sign permits.

Once permits are secured, we assume the responsibilities of marketing and operating the billboard displays or work to find a regional or national billboard operator as a credit tenant for the property. This revenue stream is truly ancillary revenue for our clients and adds additional lease and sale value to the property itself. We can permit, build, and operate the advertising unit. Simply put, landowners receive increased property value and ancillary income in the form of monthly or yearly lease payments on a long term, secure lease.

Omni: What type of clients do you most commonly work with?

PL: Though we have and will serve a wide variety of clients, we tend to focus on clients with industrial space, such as large warehouses and distribution centers along the highway. These are very desirable locations for digital displays because they are highly visible and in many cases zoned Industrial, which is also a common zoning for billboards. Another core client group is commercially zoned real estate investment trusts (REITs).

Omni: What is the general range of ancillary income your commercial clients receive from the signage you place?

PL: As you might imagine, this is extremely subjective to each and every client, depending upon their property, how it’s zoned and the terms of the agreement. To give you some rough estimates, the base income for our clients is $10,000 per year, growing up to $200,000+ per year in some cases! I would say average is about $30,000 per year. What’s most important to keep in mind is that this comes with no capital expenditure and no upfront cost. Plus, we typically sign 20-25 year land leases, with income increasing every 5 years.

Omni: Let’s debunk the biggest myths or misconceptions that hold clients back from embracing these ancillary income opportunities you offer.

PL: Honestly myths or misconceptions that actually prevent businesses from taking advantage of this new income opportunity is rare. Once they understand the agreement and the potential value to their property, it’s a no-brainer. However, if I had to think of a few it would be potential tenant restrictions in their own tenant leases regarding billboards and competitive language. Most of these concerns however can be alleviated in the billboard lease agreement.

Also people mistakenly think once a billboard is placed they can never relocate it. Again, that is all addressed in the lease agreement. A final misconception is that placing digital signage could be a detriment to the value of the property. This couldn’t be further from the truth as we have seen a tremendous increase in property value due to the long-term lease agreements and higher rents for digital billboards.. In reality, digital billboards create a great opportunity where landowners have the flexibility to use some of this ad placement to promote their tenants, advertise available space for rent – or to donate it to local nonprofits as pro bono advertising.

Omni: In your opinion, how has the outdoor advertising industry changed since the introduction of digital signage?

PL: Digital billboards give commercial landowners the ability to earn exponentially more on these types of investments. Where some real estate investment deals may be seen as only marginally profitable on what you’ll make off of traditional tenants, leasing part of your property for digital displays explodes your income potential as well as the value of the property overall while only using a 42” diameter portion of the property to place the pole.

Omni: Do you have any other advice you’d give to REITs or CRE property owners/investors?

PL: The best advice I have for commercial landowners is to think outside the box with your investment. Whether you own one property or have a large portfolio, ancillary income opportunities like digital billboard displays can open up a significant revenue stream for you and greatly increase the value of your property. And it truly is ancillary. If you work with a company like Premier Media, we handle absolutely everything from start to finish with transparency and a partnership mentality throughout the entire process. Simply put, there’s nothing to lose and everything to gain.

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Omni Realty Group is very grateful for Pat’s insight into this fascinating industry. One of the smartest things any business owner can do is to seek opportunities for ancillary income. Not only does this grow profits needing minimal or no additional resources, it also greatly increases the overall value of your business in the eyes of prospective buyers.

No matter the industry in which you work, what ancillary income opportunities could be available to you right now?

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How Central PA’s Growing Population Impacts Local Businesses

Posted on October 25, 2019 by Mike Kushner in Blog, Local Market, Trends No Comments

According to a 2018 report from the Pennsylvania Data Center, Pennsylvania’s population is expected to grow approximately 1% from the 2010 to the 2020 population, which is 1% better than no growth or a loss. What’s even more remarkable, is Pennsylvania’s growth is focused in about 16 counties, 14 of which are in Pennsylvania’s South Central Region, South East Region and Lehigh Valley, including Pennsylvania’s fastest growing county population in our own Cumberland County, here in South Central PA.

Furthermore, estimated population growth in those 14 counties is about 3.8%, which is driving Pennsylvania’s overall modest population growth, while counties in Pennsylvania’s West and Northern Tier are losing population with only Butler and Centre Counties showing expected population growth.

All of this data raises a very important question…

How does Central Pennsylvania’s changing population stand to impact the economic development of our local businesses?

To help answer this, we asked David Black, President and CEO of the Harrisburg Regional Chamber and CREDC, to weigh in from his perspective and the changes he is seeing taking place in Central Pennsylvania. Here is what he shared.

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Focusing on South Central Pennsylvania, which includes Adams, Cumberland, Dauphin, Franklin, Lancaster, Lebanon, Perry and York, it’s pretty good news for us. Population growth drives demands for products, services and community amenities – quality of life factors. The quality of life factors – everything from good restaurants, entertainment, quality public education, exceptional health care, transportation access and cost of living – are in part driven by more people paying more taxes and needing more services that feed into our positive economic cycle.

Given our region’s transportation advantage via highways, rail and air and other amenities, South Central Pennsylvania is a great place to live, raise a family and have fun, plus we are close enough that if large metros like Washington, Baltimore, Philadelphia or New York is your thing, just a few hours will get you there. Quality of life issues help to attract and retain workforce, which is the business community’s number one issue these days, due largely to the fact that 10,000 baby boomers nationwide are retiring each and every day, leaving workforce challenges in many industries.

People want to live in vibrant communities. Some people prefer urban lifestyles, some are suburbanites while still others prefer the more natural rural lifestyles. Guess what? South Central Pennsylvania has it all. You can live on your 10 acres in Perry County and be to work in 30 minutes in downtown Harrisburg or walk to your job in center city Harrisburg from your apartment downtown, or your own home in Midtown, or commute 10 or 15 minutes from your suburban community to your job.

Population growth helps to drive business growth, it helps to drive additional growth in our region. While we think of ourselves as Harrisburg or Lancaster or York, commuting patterns show us that people commute from county to county to work because they can. I have a theory, with no disrespect to Lebanon County, that everyone in the Palmyra area actually works in Dauphin County at someplace with Hershey in the name! Businesses provide jobs, but people with the ability to spend drive local economies while our strategic location and transportation advantage help to connect us to the global economy and make South Central Pennsylvania such a special place to call home.

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To offer additional insight, specifically on working age population growth in Pennsylvania, we asked Ben Atwood of CoStar, a national commercial real estate research firm.

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One of Costar’s recent articles entitled “Latest Census Data Shows Lehigh Valley Leading Pennsylvania in Working-Age Population Growth” stated that the latest data from the Census Bureau shows Pennsylvania continues struggling to lure in new industries and working age residents. The U.S. population aged 20-64 increased by 0.25% last year, but of Pennsylvania’s 67 counties, only seven surpassed this growth rate and 55 experienced net declines.

Harrisburg and its satellite markets are pretty underdeveloped (excepting Lancaster), relatively speaking. And the lack of modern office supply and relatively stagnant population growth means there likely won’t be major companies relocating into the area. Right now, that capital investment would have to be largely local, and how much are people locally willing to risk?

Central PA is in the position to grow in ways other areas in the state aren’t, but that doesn’t mean that growth will be rapid, or even guaranteed. The new developments will be riskier, hampering investor interest. This combined with stagnant, even waning growth in working age population can be cause for concern both near and long-term.

To some extent, the optimism about population growth is misplaced because it could just mean these areas will have a slightly easier go of it over the next few decades, as automation continues to eat away at blue collar jobs in retail, shipping, and professional services in the Commonwealth’s smaller markets.

Things change and evolve, and no one can predict the future, but a lot of growth in these areas is in transportation and manufacturing, industries with long term automation risks, and there’s plenty of reasons to believe automation will expand into white collar employment in the near future.

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Omni Realty Group is very grateful for David and Ben’s expertise and input. It’s fascinating, yet not surprising that population growth can have such a profound impact on quite literally everything else. Here in Central Pennsylvania we have a valuable opportunity to harness this growth and use it to fuel our economy. This further emphasizes the point that there are many unique benefits to live, work, and play in this region. Whether you call Central Pennsylvania home, are employed in the region, or simply enjoy visiting to experience its social offerings, you are playing an important role in the growth of our economy.

How else do you feel that our region’s changing population stands to impact local businesses? Join in the conversation by leaving a comment below.

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Beyond the Bio with Mark Disanto from Triple Crown

Posted on October 21, 2019 by Mike Kushner in Blog, Guest Blogger No Comments

For more than four decades, Triple Crown Corporation has shaped Pennsylvania real estate through construction, land acquisition, and residential and commercial property management. The company has built an impressive portfolio of properties ranging from warehouses, office and retail space, rental communities, and even vacant lots that can be developed into just about anything to need.

At the heart of Triple Crown Corporation is its people. As part of the senior leadership team, Mark Disanto, the company’s CEO offers valuable insight into the industry, and the vision for the company. Mark has built a successful career from a blend of hard work, knowledge, and experience. But beyond his professional resume, there is a lot we can learn from Mark on a more personal level.

Take a look as Omni Realty Group goes “beyond the bio” and asks Mark for answers to questions you’re not likely to read on his Linkedin profile.

Omni: Describe a “typical” work day for you.

Mark Disanto: A typical day for me starts around 5:30 or 6:00 AM. I either exercise at home or play tennis in the morning. I am usually at the office between 7:00 and 8:00 AM and very rarely leave before 6:00 PM. Throw in a couple nighttime meetings with municipalities and extra time on Saturdays and in the evenings and the work week is usually 60 to 70 hours.

Omni: What is the best part of your job?

Mark Disanto: I have great flexibility in my job. I have time in the office. I have time inspecting job sites and looking at new acquisitions. I like the flexibility. However, the best part of my job is watching the company grow and seeing the new leadership expand the company both in the property management and construction divisions as well as our geographical footprint.

Omni: What has been the most difficult part of your job?

Mark Disanto: The continued regulation of our industry is probably the most troublesome and difficult part of our business. There are so many regulations in the building codes, the land development and subdivision codes, other state permitting processes, as well as federal regulations. None of these take into account the reasonableness of the burdens placed upon the builder and developer, cost versus benefit and time delays. We continue to hear about a shortage of affordable housing and the reason for this is strictly due to the regulatory environment we live in today.

Omni: If your career never took you into real estate, what else would you likely be doing?

Mark Disanto: I would probably be on Wall Street running a hedge fund and giving Ray Dalio a run for his money.

Omni: What has been your favorite Triple Crown project, and why?

Mark Disanto: I think I have two. The first was done about 17 years ago in Silver Spring Township. Georgetown Crossing was our first large apartment community containing 400 townhome and flat stack apartments. It is a beautiful property off route 114 in Silver Spring Township and our premier community. We still own it and will probably never sell it.

More recently Blue Ridge Village tops the list. This is an exciting mixed use community in lower Paxton Township that combines retail, commercial, apartments, townhomes and single-family homes along with a 32 acre park. This is a true livable, walkable community. The approval process was collaborative and respectful of the community and the Township. It took a lot of effort on our part, but I can assure the residents that this will be a premiere community that will significantly enhance the township.

Omni: What project has been your biggest failure or disappointment?

Mark Disanto: We bought a property out of market about 20 years ago at an auction and did not have sufficient due diligence completed upon it. When we went to the township for the first time it was like walking into a hornets’ nest. We eventually decided to cut our losses and re-sold the ground at auction for a loss. Out of the hundreds of developments and projects that we have done, we’ve only lost money on two deals. We are pretty proud of this.

Omni: What motivates you?

Mark Disanto: I just like to be engaged and like to see the company and the employees succeed. We set our strategy for three-year time frames and have quarterly meetings with our strategy review team and make sure we are all rowing the ship in the same direction. When everybody has purpose and they are all heading to the same goal line and supporting one another along the way, it makes for a very fun journey. I don’t need to work as hard as I do, I just have too much enjoyment with it to slow down.

Omni: Do you have any pet peeves?

Mark Disanto: I don’t think so. I get very frustrated when my volleys are not crisp on the tennis court!

Omni: When you’re not in the office, where can you most likely be found?

Mark Disanto: When I am in Harrisburg, it is usually with the family which includes the five grandkids, or working around the house and in the garden in the summertime, or in a tree stand in the fall trying to find the elusive big buck, or on the tennis court 2 to 4 days a week. If out of Harrisburg it could be anywhere in the world!

Omni: And finally, what career advice would you give to your younger self?

Mark Disanto: I would say, do not doubt your abilities. If you have an idea you want to execute then write it down and write a plan on how to achieve it. Review the plan both upstream and downstream with your staff. If you don’t have a staff, take it to people you respect and really try to poke holes in it. Once it’s well vetted, then work diligently and hard at it. A lot of people say this person was “lucky.” That’s usually not the case; a lot of strategic thought and hard work creates what people call luck.

Omni Realty Group thanks Mark for such candid and thoughtful answers to these questions. There is a lot of inspiration that can be found “beyond the bio” and on a more personal level. You can learn more about Triple Crown Corporation and its services by visiting them at https://www.triplecrowncorp.com or on Facebook and Twitter @TripleCrownCorp.

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The Red Flags of an Unfavorable Commercial Real Estate Lease

Posted on September 9, 2019 by Mike Kushner in Blog, Commercial Real Estate, Tenant Representative/Buyer Agent No Comments

As a tenant needing commercial real estate space to run your business, it can be challenging to navigate the many twists and turns of finding the right space and entering into a favorable lease agreement. Your lease with your landlord can have a large impact on the success of your business, or it could cause many headaches. To ensure you’re entering into a fair and favorable agreement, let’s look at some of the most common red flags that can pop up in a commercial real estate lease.

Term of Lease – One of the most important pieces in a commercial real estate lease, short of the price, is the duration of the lease and how it’s structured. You want to be sure you fully understand when your lease begins and when it ends, especially when the landlord is making improvements to the space. A landlord may provide more favorable pricing or terms when entering into a lease that has a longer duration. While this is helpful from a budget perspective, be sure you feel confident that you will want to stay in this space for that amount of time.

Lease Renewal – Another possible red flag in a commercial real estate lease is when and how the lease will renew. When your current lease comes to an end, a landlord may desire the lease to auto-renew. As a tenant, you will want to be aware of this well in advance so that if you do not want to renew your lease you have options to exit the lease. Additionally, look to see if the lease specifies a change in price upon renewal. Sometimes there will be an increase that could hit you unexpectedly.

Lease Termination – Next, be sure you know the terms and penalties for breaking a lease. While it may not be your intentions to break the lease early, various factors impacting your need for the space could make it necessary. If the Lease imposes a steep monetary penalty for breaking the lease early, you may wish to negotiate that down to more favorable (and reasonable) terms.

Environmental Considerations – Some commercial real estate leases may specify that a tenant may not store any hazardous materials on the premises. This is not typically an issue; however, you will want to be sure that included in the lease is a warranty from the landlord that the premises are free of such hazardous materials. In a situation where you plan to use the commercial space (such as a warehouse) for storage of consumables (i.e., food and drinks), you may want assurance that your inventory is not likely to be contaminated.

Insurance – Be sure to check the required minimum coverages for a tenant’s liability insurance. Typical coverage minimums are $1 million per occurrence and $3 million in the aggregate. If the lease specifies higher minimums at a price that is concerning, you will want to make this part of your negotiations before signing the lease.

Maintenance – A commercial real estate lease should outline who is responsible for the repairs and maintenance of all building systems, including HVAC, electrical and plumbing. Should the lease place the responsibility on the tenant, you may wish to renegotiate this. In a situation where the tenant is only leasing a small percentage of the overall building space, it’s unusual for the tenant to assume the costs of repair and maintenance for things that impact more than their rented space.

Defaulting – Closely review the language in the lease regarding missed or delayed rent payments. It is reasonable to request at least one written notice during any 12-month period (to account for a reasonable mistake), as well as a 5-day grace period for rent payments.

Relocation – Some commercial real estate leases may include a section about relocation. Does this grant the landlord the right to relocate the tenant? Under what terms? Pay attention to this piece as it could greatly inconvenience you, if it ever takes place.

While this is by no means an exhaustive list of red flags of which you must be aware when entering a commercial real estate lease, this should provide a great starting point. What’s most important is to review every document closely, ask for clarification, and seek professional tenant representation early in the process. Having an exclusive tenant representative on your side will provide an added layer of knowledge, experience, and protection that will put you in the best position to negotiate a fair and favorable lease.

Do you have a question related to your commercial real estate lease? Reach out to Omni Realty today so we can help you find an answer!

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Tips for Promoting Your Commercial Real Estate Business on Social Media

Posted on July 22, 2019 by Mike Kushner in Blog, Commercial Real Estate No Comments

Businesses in every industry have turned to social media as a marketing tool to share information, grow their band and cultivate an audience. While in many cases, this has proven successful, there are plenty of businesses who miss the mark, and wind up disappointed when their social media strategy fails to deliver its intended results.

For commercial real estate professionals, social media can be a highly valuable tool, but only when used correctly – and consistently. Take a look as we discuss five important points for using social media to promote your commercial real estate business – or any business.

Brand yourself as a thought leader.

We all have to start somewhere. The same is true for building your online brand. Who are you going to be? Your content, and how you share it, will have a profound impact on the answer to this question. In business, I would think most of us want to be branded as a thought leader in our industry. In commercial real estate, you can achieve this by sharing expertise on technical topics, offer an analysis of data and trends, and partake in thought-provoking discussion. One of the most powerful platforms for this is Linkedin. Here, you can use your profile to reinforce your personal brand, you can share content through regular posting, and you can spark discussion in groups.

Make your content unique.

A staggering amount of content hits the internet each and every second. What’s going to make people stop and read yours? If you’re asking for someone to take time out of their day to read your words, it’s important to make them at least one, if not all four of these things: timely, importantly, relevant and interesting. For some added input, we asked John Webster, Owner of The John Webster Company and digital marketing expert.

“There is a lot of ‘noise’ on social media so your content needs to stand out,” explains John. “When sharing information about available properties do not simply inform about the property (everyone does that) take an additional minute to describe something special about the property, who would be a good fit for the property and why this specific property caught your eye.”

Be responsive and engaging.

If you want to create a true “audience” for your business’s content on social media, you need to remain present. This means you need to check in regularly on your posts to monitor comments, and respond. People appreciate and remember a personal response. This also increase the reach of your content. Sure, it make take 15 minutes out of your day to diligently login to your various social media accounts to monitor content, and engage with other people’s content, but make it a point to do this habitually, and it will pay off greatly as you cultivate an active audience.

Share the spotlight.

Once you build a valuable platform for sharing content, whether this is on your website, blog, Linkedin, Twitter, etc., you should consider sharing the spotlight every so often with other professionals who have an interesting perspective to share. Omni Realty often features guest Q&A blogs that expand our area of expertise while growing relationships with other respected professionals. When sharing the spotlight, this also opens up the door for others to do the same. My blogs are often published by TheBrokerList, and shared on their social media, which greatly amplifies their reach.

Build relationships with media.

Most people view the media as a tool, or approach outlets in a very self-serving manner. While, yes, at the end of the day promotion is an objective, you must also work to forge trust, respect, and even friendship with reporters and editors. Omni Realty has received a lot of earned media by approaching local media outlets in this manner. Through relationships with reporters, I’ve had 25+ articles featured in the Central Penn Business Journal, and none of it was paid placement.

Whether it’s a commercial real estate business, or any business that you’re trying to promote on social media, the most important thing to keep in mind is that your content creates your brand. What you share, how often, and how you engage with your audience, will leave a lasting impact and frame how people view both you and your business.

How have you found success when promoting your business on social media? Share a tip or personal story by leaving a comment below.

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Power Landlords Part II: Who Owns the Most Industrial Space in Central PA?

Posted on July 8, 2019 by Mike Kushner in Blog, Industrial, Local Market No Comments

You might think that Central Pennsylvania is defined by its natural resources or agriculture, or maybe you don’t think we’re known for much of anything. The truth is that there is a lot this region brings to the economy with our industrial market being one of the country’s top core industrial markets.

If this surprises you, consider the following. This particular region is well positioned along the nationally-recognized I-81 transportation corridor with immediate connections to I-78, I-76, I-83 and I-80, as well as immediate access to major deep-water ports at New York/New Jersey, Philadelphia and Baltimore. With our ability to provide manufacturers and distributors access to nearly 70% of the total consumer markets in North America within one day’s drive, the region has benefitted from significant demand, especially most recently with the emergence of the e-commerce which promises customers even faster ship times.

Additionally, nearly 8 million square feet of new Class A regional and super regional distribution facilities are under construction. Even with this much new space entering the market, vacancy rates remain right around 5% which is well below the historical market standard of 7%. Combine all of this with a backlog of millions of square feet of new tenant requirements in the market, and you can see why Central PA’s industrial real estate market is ripe for opportunity among investors and landlords.

So, who owns the most industrial space in the market? The combined square footage of the top 5 landlords in Central PA is 32,820,237 square-feet of space. Moreover, the combined vacant square-footage for all of this space is just 2,448,898 square-feet or 7%. So, who are these power landlords and what buildings account for most of this space? Let’s take a deeper dive.

Prologis Inc.

It should come at no surprise that Prologis Inc. tops this list with its portfolio of 22 industrial buildings. Combined, this accounts for 11,242,938 square-feet of real estate. The largest building, which is Key Logistics Park located at 950 Centerville Road in Newville, is home to 1,170,000 square-feet of industrial space.

Global Logistics Properties, Ltd. (GIC Real Estate)

Next on the list is Global Logistics Properties, Ltd. with 19 buildings and 7,075,922 square-feet of real estate. The largest of these buildings is Lemoyne Industrial Park located at 221. S. 10^th Street in Lemoyne which is 885,802 square-feet of industrial space.

Clarion Partners

With 10 buildings totaling 5,676,191 square-feet, Clarion Partners ranks number three on our list of “Power Landlords” in Central PA. Their largest building, located at 1 True Temper Drive in Carlisle, is 1,226,525 square-feet in size.

First Industrial Realty Trust, Inc.

At number four we have First Industrial Realty Trust, Inc. Their portfolio of 15 buildings accounts for 4,804,210 square-feet of industrial real estate. The largest building, 1,100,000 square-feet in size, is located at 5197 Commerce Drive in York.

Liberty Property Trust

Coming in at number five on the list is Liberty Property Trust with 7 buildings totaling 4,020,976 square-feet of industrial space in the Central PA region. Their largest building, which is the Carlisle Distribution Center located at 40 Logistics Drive in Carlisle, is 972,000 square-feet.

It can be hard to wrap your head around these numbers and the amount of industrial space that is located right here in Central PA. Often, these are huge buildings we drive by daily but fail to notice unless we pay attention. The products that are made in and shipped from these facilities impact the global economy and provide us with every item imaginable, from basic essentials to toys and tools to match a wide variety of hobbies. So the next time you drive by the Key Logistics Park in Newville or the Carlisle Distribution Center, you now have a little more intel into who the power landlords are behind these massive facilities.

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