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Posts tagged "predictions"

Home» Posts tagged "predictions"

Predictions for Trends and Changes in Commercial Real Estate in 2017

Posted on February 6, 2017 by Mike Kushner in Blog, Commercial Real Estate, Trends No Comments

2017 trends concept - handwriting on a napkin with a cup of espresso coffee

It’s the start of a new year and naturally this turns our attention toward what we predict will happen in the coming 12 months. Specifically in the commercial real estate market, there are several noteworthy trends and changes we predict to take place in 2017. What are these and how will they impact the various sectors of commercial real estate? Here’s the breakdown!

Office Real Estate

Experts are predicting that suburban markets will outperform downtown markets in 2017. Suburban rent growth is anticipated to exceed 2% while vacancies will only increase 10 base points (to 14.5%). In contrast, downtown vacancies are expected to increase by 30 base points (to 10.9%). The explanation to this growth is that suburban development is catering to millennials who want to live, work and socialize all in the same area. While national occupancy in downtown office space will still far exceed the suburban markets, suburban office space will have a much higher growth rate in 2017, relatively speaking.

Industrial Real Estate

Out of all of the sectors, industrial real estate will have the best year in 2017. Major growth in e-commerce as well as technological advancements, like driverless vehicles, have been fueling this sector’s growth. As these industries continue to thrive, so will industrial real estate! Availability sits at a 15-year low while net occupancy achieved its 26th quarter of record gains (as of Q3). Best of all, rents continue to climb toward a record-setting high. Because it wouldn’t be fair not to throw in a little bad news to keep things balanced, the sector is expected to slow down a bit as the result of a wane in user demand.

Retail Real Estate

2016 was not a good year for retail and it looks like 2017 will continue to get worse. Brick-and-mortar stores are closing and consolidating while e-commerce proves to be the way of the future. Online sales are expected to increase by 15.5% (to 9.2%) this year. On a brighter note, Class A malls are expected to maintain or increase their rents per square foot, as they have for the past five years. Also, experts predict that mixed-use lifestyle developments will be a possible solution for brick-and-mortar locations to compete with e-commerce. Finally, community strip centers are expected to grow by 1.7% in 2017.

Hotel Real Estate

In 2017 we expect to see a healthy labor market and wage growth which will ultimately benefit hotel real estate through an increase in leisure and business travel. However, major competitors to the hotel market, such as Airbnb and similar home-sharing businesses will continue to thrive. This is expected to steal sales from hotels as the concept of home-sharing becomes more mainstream and robust.

Multifamily Real Estate

Overall, experts are optimistic for the multifamily real estate market in 2017, but that’s not without a few key challenges. An increase in supply this year will drive up vacancy rates and impact rental rates as a result. Interestingly, it’s the high-end apartments that will experience the most shrinking rents, while Class B and Class C apartments will be less impacted. This is the first time since the Great Recession that supply outpaced demand, as it did in 2016. It’s expected to continue into 2017 which leaves some major hurdles to face moving forward.

What sector of commercial real estate do you think will be the most changed in 2017? Share your insights by leaving a comment!

2017, business, decrease, demand, growth, hotel, increase, industrial, investment, investor, local, Mike Kushner, millennials, multifamily, national, news, office, Omni Realty, predictions, retail, supply, trends, young professionals

Central Pennsylvania’s Largest Retail, Industrial and Office Lease Deals in 2015

Posted on March 23, 2016 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.


The New Year is well under way, but before we get too far into 2016, it’s worth taking a look back at the largest commercial lease deals that occurred in the Central Pennsylvania market in 2015. These deals represent significant trends and help predict where the market may be headed in future quarters.

Each sector within the commercial real estate market – retail, office and industrial – experienced a unique trend worth noting. Without further ado, let’s take a closer look at the largest lease deals that occurred in Dauphin, Cumberland, York, Lancaster and Lebanon counties for the retail, office, and industrial markets in 2015.

Largest Retail Lease Deals

1. Community Aid leased the first floor of a Class B retail space located at 25-31 Rohrerstown Road, Lancaster from Urban Edge Properties. The 40,712 square-foot lease was signed in January 2015 and began in June 2015.

retail 1

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

2. Blue Mountain Thrift Store leased the first floor of a Class B retail space located at 2-22 North Londonderry Square, Palmyra from Lavipour & Company. The 38,669 square-foot lease was signed in May 2015 and began in August 2015.

retail 2

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

3. HomeGoods leased a Class B retail space located at 5084-5098 Jonestown Road, Harrisburg from Cedar Realty Trust, Inc. The 31,436 square-foot lease was signed in June 2015 and began in November 2015.

retail 3

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

4. Tractor Supply leased a Class B retail space located at 100 Noble Blvd, Carlisle from Broad Reach Retails Partners, LLC. This 30,173 square-foot lease was signed in September 2015 and began in February 2016.

retail 4

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

Trends Worth Noting

Two of the top four largest retail lease deals of 2015 were thrift stores and HomeGoods is also a discount retailer, making 75% of the top leases related to discount shopping. Additionally, fourth quarter 2015 finished strong with a net absorption of 227,275 square-feet. Finally, the vacancy rate dipped below 5% (4.9%) for the first time since before the “Great Recession.” Combined, these trends tell us that the local market is recovering and absorbing 2nd generation space specifically for thrift-type retailers that budget-conscious consumers tend to prefer.

Largest Office Lease Deals

1. Pennsylvania College of Health and Science leased a specialty office space located at 850 Greenfield Road in Lancaster. This 213,000 square-foot lease was signed on January 2015 and began on January 2016.

office 1

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

2. Deloitte leased a Class A office space located at 100 Sterling Parkway, Mechanicsburg from Hoffer Properties. This 172,792 square-foot lease was signed on November 2015.

office 2

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

3. United Concordia Companies, Inc leased a Class A office space located at 4401 Deer Path Road, Harrisburg from DeSanto Realty Group. This 102,000 square-foot lease is a renewal and began on June 2015.

office 3

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

4. P.E.M.A. leased a Class A office space located at 2605 Interstate Drive, Harrisburg from Corporate Office Properties Trust. This 86,660 square-foot renewal was signed on June 2015 and began on January 2016.

office 4

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

Trends Worth Noting

Two of the top four largest office lease deals in 2015 were renewals (United Concordia and P.E.M.A). Additionally, the fourth quarter was a lackluster, producing only 15,921 square feet of net absorption. Finally, the vacancy rate is rising slightly. Combined, these factors tell us that the office market is not performing as strong as the other commercial sectors. More than half of the largest leases were from existing businesses, as opposed to new businesses moving into the area. A low net absorption and rising vacancy rate also tells us the market still remains slightly volatile.

Largest Industrial Lease Deals

1. Chew.com LLC leased a Class B industrial space located at 40 E. Main Street, New Kingston from SK Realty Management. This 600,000 square-foot lease is a renewal and began on January 2015.

Industrial 1

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

2. A business (not named) leased a Class A industrial space located at 950 Centerville Road, Newville from KTR Capital Partners LP. This 570,000 square-foot new lease was signed in May 2015 and began on November 2015.

Industrial 2

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

3. Unisource Worldwide Inc. leased a Class B industrial space located at 4501 Westport Drive, Mechanicsburg from I & G Direct Real Estate 33K LP. This 502,446 square-foot lease is a renewal and began on February 2015.

Industrial 3

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

4. GENCO leased a Class C industrial space located at 221 S. 10th Street, Lemoyne from GIC Real Estate International Pte Ltd. This 489,213 square-foot lease is a renewal and began on June 2015.

Industrial 4

Data provided by CoStar. Copyrighted report licensed to Omni Realty Group.

Trends Worth Noting

Central Pennsylvania maintains its role as a dominant player among logistic markets. Industrial buildings will continue to set new records for scope, as distribution centers greater than one million square-feet become more prevalent. Last year, the local industrial market experienced a total of 7.8M square-feet of net absorption and 3.5M square-feet of space was under construction at close of 2015. We can expect continued growth throughout 2016, which is great news for businesses and professionals impacted by local industrial real estate.

What largest lease deal in Central Pennsylvania in 2015 do you find to be the most impressive or telling of future market trends? Share your insights by commenting below!

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

[Online Resources] Real Estate, analysis, article, blog, camp hill, central pa, central penn business journal, commercial, cpbj, cumberland, data, dauphin, deals, harrisburg, hershey, industrial, lancaster, local, market, mechanicsburg, Mike Kushner, office, Omni Realty, pennsylvania, predictions, retail, stats, trends, writing, york

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.

[Online Resources] Real Estate, advice, building, central pa, central penn business journal, co-star, Construction, cpbj, development, Economy, expert, future, growth, local market, market report, Mike Kushner, new, news, Office Space, Omni Realty Group, pennsylvania, predictions, region, space, third quarter, trends

A Year in Review: How Central PA Office, Industrial and Retail Markets Performed in 2014

Posted on February 26, 2015 by mike.kushner in Blog, Commercial Real Estate, Local Market No Comments

Each property sector within the Central Pennsylvania commercial real estate market had its own highs and lows throughout the course of 2014. This year was particularly tough for the Central Pennsylvania office market, closing out the fourth quarter with a negative net absorption of 241,723 square feet and a high vacancy rate of 8.5%. In contrast, the industrial market saw a significant drop in vacancy rates ending the fourth quarter at just 6.0% – the lowest it has been since before 2011. The retail market’s absorption rates and quoted rental rates went up and down with each quarter, alerting us to some interesting market trends.

To really see the whole picture as to how the Central Pennsylvania commercial real estate market performed in 2014, we need to look at each sector closely and separately. Most importantly, this data will shine a light on some trends we can expect to see carried into 2015 and beyond! Let’s get started…

Office

Vacancy and Availability: From the first quarter to the fourth quarter of 2013, vacancy rates dropped from 9.1% to 7.9%. In 2014, these rates quickly rose to 8.3% in the first quarter and slowly crept up to 8.5% in the fourth quarter. Closing the year out with 4,274,727 square-feet of vacant space indicates that this high vacancy rate will hold strong for a while longer.

Absorption and Demand: The Central Pennsylvania office market ended fourth quarter 2014 with a negative net absorption of 88,815 square feet. No new buildings were added to existing inventory and the total RBA stayed exactly the same throughout the year at 50,389,828.

Del Abs and Vac - Office

Rental Rates: From the beginning to the end of 2014, quoted rental rates also slowly climbed from $16.48 to $17.15. This is the highest rate the market has seen since first quarter 2012.

vacant space and rental rates - office

Industrial

Vacancy and Availability: The Central Pennsylvania industrial market saw a significant drop in vacancy rates, ending fourth quarter 2014 at 6.0% which is the lowest this rate has been since before 2011. The vacant square-footage available is the lowest it’s been in four years, ending 2014 at 14,620,392 square-feet.

Absorption and Demand: 2014 started off with a net absorption of 585,280 square-feet. It reached its highest point in the year in the third quarter with 2,260,906 square-feet, but dropped during the fourth quarter, closing out the year at 834,256 square-feet. One new building was added to existing inventory, bringing the total to 3,358. The total RBA increased from 243,124,494 in the first quarter to 243,821,836 by the fourth quarter.

Del Abs and Vac - Industrial

Rental Rates: Over the course of the past four years, quoted rental rates have remained relatively stable. 2014 continued this trend. The year began at $3.92, dropping to $3.87 in the second quarter, then to $3.86 in the third quarter and finishing off the year at $3.95.

vacant space and rental rates - Industrial

Retail

Vacancy and Availability: During 2014, the vacancy rates for the Central Pennsylvania retail market dropped from 6.2% to 5.8%. This 0.4% change made 2014 the lowest vacancy rate we have seen since before first quarter 2011. The vacant square-footage also decreased from 4,923,566 in first quarter 2014 to 4,576,145 in the fourth quarter.

Absorption and Demand: 2015 was an interesting year for net absorption in the retail market. Each quarter saw notable change; first quarter began at 61,080 square-feet, rising to 431,459 square-feet in the second quarter, followed by a major drop to negative 20,668 square-feet in the third quarter before ultimately ending the year at 58,580 square-feet. The market also gained four buildings in existing inventory, taking the total RBA from 79,432,940 in the first quarter steadily to 79,554,890 by the fourth quarter.

Del Abs and Vac - retail

Rental Rates: 2014 began the year at $11.19 per square foot – the second lowest rental rate the market has seen throughout the past four years. The rate then jumped to $11.49 in the second quarter, followed by a dip to $11.26 in the third quarter and then closed out the year out at $11.48.

vacant space and rental rates - retail

Our Summary/Analysis

The Central Pennsylvania Office Market was the weakest of the three major commercial property sectors in 2014.  The year ended with negative net absorption of 241,723 square feet.  The Harrisburg West Submarket contributed heavily to that number as reported in my January 2014 blog – “Harrisburg’s Class A Office Space Takes Major Hit in First Quarter 2014.” The combination of limited new construction, tenant expansion, and lessening office contractions should help to heal the office sector in 2015.

The Central Pennsylvania Industrial Market continues to dominate the Pennsylvania industrial property sector along with the Lehigh Valley Market.  Net absorption topped 4 million square feet for the year.  This trend will continue into 2015 with 6.8 million square feet under construction.

2014 was the second consecutive year that the Central Pennsylvania Retail Market absorbed over 490,000 square feet. The York County Submarket led the way with accounting for close to 50% of the absorption.  The final takeaway, expect to see this slow but steady growth continue into 2015.

How did 2014’s office, industrial and retail markets’ performance affect you either personally or professionally? Join in the conversation by commenting below!

[Online Resources] Real Estate, 2014, analysis, central pa, commercial, Economy, fourth quarter, industrial, local, market, Mike Kushner, news, office, Omni Realty, overview, pennsylvania, performance, predictions, retail, review, trends

Commercial Real Estate Predictions for 2015: Central Pennsylvania and National

Posted on December 19, 2014 by mike.kushner in Blog, Commercial Real Estate, Local Market, Trends No Comments

With the end of the year upon us, we can finally take a complete look at how the commercial real estate market has performed throughout 2014. However, 2015 holds an endless array of unknowns. How will the market perform? What other factors can we expect to impact commercial real estate? How will this differ nationally to locally?

These questions do not yet have answers, but we can offer our best predictions for what we can expect to happen within the commercial real estate market for 2015. Let’s take a look at where the current trends are likely to lead us in the coming months for both nationally and locally within Central Pennsylvania.

National Market Predictions:

Multi-Family: The rent market is predicted to remain in the landlords’ favor in 2015. Vacancy rates are expected to stay below 5 percent which will likely lead to an increase in rental rates, well above inflation. Apartment rents were projected to increase 4 percent in 2014 and are again expected to increase by 4.1 percent in 2015.

Office: Vacancy rates are predicted to fall from 15.7 percent to 15.6 percent in 2015, with rents expected to rise by 3.3 percent.

Retail: Experts predict that vacancy rates nationwide will drop from their current 9.7 percent to 9.5 percent in 2015 with average retail rents increasing by 2.5 percent.

Industrial market: Industrial real estate vacancies are expected to rise from 8 percent to 8.4 percent next year, while annual rents will continue to rise by another 2.9 percent.

Central Pennsylvania Market Predictions:

Multi-Family: The multifamily investment sales market will see continued appetite for apartment properties. Rents will increase to more than $1.25 per square foot and the market will continue to absorb new units as they get delivered. Overall, 2015 will be a good year for multi-family real estate.

Office: Market fundamentals continue to trend in a positive direction. The combination of measured new construction, tenant expansion and lessening office contractions will continue to contribute to restoring health to the Central Pennsylvania market. We expect asking rents to continue to stabilize and rise modestly in 2015. On the office investment side, we anticipate medical office space will continue to receive the most investor attention.

Retail: The retail sector will continue to see retailers moving into smaller spaces as they balance brick-and-mortar locations with online shopping. We also predict continued growth of fast-casual restaurants and an expansion of fast-fashion and discount retailers. Owners of power centers and grocery-anchored retail properties will rethink how they use space to fill vacancies in 2015 and beyond.

Industrial: Three main themes are emerging in the industrial sector that will follow into 2015: Rents will continue to climb; tenants will begin shifting to leasing light industrial, or smaller industrial properties in the 50,000 to 250,000-square-foot range; and companies leasing industrial space and landlords developing these properties will increasingly begin to provide more on-site amenities to employees. Development of mega distribution facilities will be limited by the availability of suitable locations.

These predictions for the New Year are what you might expect when looking at the current trends in commercial real estate. It’s important to think ahead as to how they might impact your business or the community in which you live. While some sectors are expected to contract, others show signs of promising growth. In addition to the future of the commercial real estate market, the success of 2015 still lies in our own hands. Best wishes for your best year yet – from your friends at Omni Realty Group!

Share your own predictions for the commercial real estate market in 2015 by commenting below!

[Online Resources] Real Estate, 2015, business, central pennsylvania, commercial, development, Economy, growth, industrial, Leasing, market, Mike Kushner, national, new year, office, Omni Realty Group, predictions, rates, retail, trends, united states

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