9-14-12

10C — September 14 - 27, 2012 — Pennsylvania — Mid Atlantic Real Estate Journal

www.marejournal.com

C ENTRAL PA

By John Birkeland, ROCK Commercial Real Estate The secret of successful class “A” office buildings in York, PA

rom our research, we discovered class “A” office buildings in York, PA are

location, building materials, finishes, operating systems and technology).

derstanding the difference. For example Ritz Carlton is class “A”, full of modern amenities

finishes. To answer our question, it comes to understanding market supply

wide there is more class “A” s/f than either class “B” or class “C”, and class “A” occupancies are the highest in the county. No new additional supply is anticipated - Dividend Capital’s market cycle report shows this is currently the case nationwide, as the vast majority of office markets are still in the recovery phase and average rents and occupancies are not justifying any new office construction. From the office market demand perspective, companies got lean &mean during the Great Reces- sion, generally becoming more efficient. According to Federal Reserve Economic Data, today corporate profits are at the high- est levels since FRED started tracking the information in 1947. To verify employment trends, consult the Bureau of Labor Statistics website. From January 2010 to March 2012, professional and business em- ployees in the area grew from approximately 15,400 to over 19,000. 23.4% growth in about two years. If supply is low and demand is growing, and tenants have mon- ey to spend, then it follows that class “A” property rents should be increasing. Using company records to compare lease rates, class “A” office space leased at an average of $13.55/ s/f in 2009 vs. $14.18 / s/f in 2012. LoopNet’s market trend data verify area office lease rates remained flat since 2006. So there is limited supply, increased demand, and the pricing has not adjusted. Therefore, class “A” office space will continue to lease well until rates adjust to the market. The true lesson here is to know the factors affecting your market. Know where to find the needed information and taking the time to analyze it is the se- cret to understanding. John specializes in retail leasing and sales, investment properties, and corporate services. He has been active in commercial real estate for the past eight years, most re- cently holding the position of Broker of Record for Spring- wood Commercial Realty. He has a strong background in hotel and restaurant prop- erties, and earned a master degree in Management from the Cornell University Hotel School. John is a native of Colorado, where he special- ized in resort management and commercial leasing be- fore moving to York County in 2003. ■

outperform- ing the class “B” and “C” counter parts. This leads to the obvious question of, “Why?” First things first, define terms.

“If supply is low and demand is growing, and tenants have money to spend, then it follows that class “A” property rents should be increasing. Using company records to compare lease rates, class “A” office space leased at an average of $13.55/ s/f in 2009 vs. $14.18 / s/f in 2012.”

• Class “A” office properties are modern, either new construction or recently renovated. • If not regularly updated, class “A” properties easily slide into class “B” properties, and even- tually “C”. Hotels are a good analogy to un-

and services. Marriott Court- yard would be an example of class “B”, nice however finishes, services, and amenities are not comparable with class “A”. For class “C” think EconoLodge, limited services and ameni- ties, simple construction and

and demand trends, from global to local. On the supply side, the City of York contains 1,168,006 s/f of class “A” office with a 5.54% vacancy rate, 1,413,674 SF of class “B” with 17.09% vacancy, and 625,649 s/f for class “C” with 19.74% vacancy. Also , county-

John Birkeland

What differentiates class “A” office from “B” and from “C”? • Class “A” office properties are superior in most every way (e.g.

John Buchart Golf Classic for ALS Research - 8th Annual

John Buchart was a mentor and colleague to ROCK and he was the inspiration for this golf classic In the past 7 years the community has helped us to raise $268,968 to benefit the Muscular Dystrophy Association to fight ALS Disease. Help us exceed our goal of reaching $300,000 in 2012 by registering to golf or sponsor this event.

— The event will be held at Cool Creek Golf Club — Wrightsville, PA 17368 Save the date - October 4, 2012