M id A tlantic Real Estate Journal — March 2026 — 3A
www.marej.com
M id A tlantic R eal E state J ournal
any sectors of com - mercial real estate have recovered sub - By Christopher Moore & Joe Latina, LMT Commercial Realty, LLC/CORFAC International Changes to Commercial Real Estate – Rising Costs for Industrial Real Estate M values back in alignment with market values. Rising Insurance Premiums Insurance
replacement and repair costs for commercial properties have reportedly increased about 44% since the pandemic. Mul - tifamily premium rates have doubled in many cases in the last five years, with some carri - ers abandoning entire markets, resulting in less competition. Increased Maintenance Expenses Roof repairs, HVAC systems, lighting and parking lot main - tenance (including snow plow - ing) have experienced notable cost increases since 2021. While the days of year long deliveries for industrial electrical equip -
ment and HVAC have improved substantially, the costs owners are required to pay have never recovered and remain high. Utilities and Energy Costs Energy costs have risen sig - nificantly since COVID, driven by greater power demand from automated warehouses and cold storage, as well as infra - structure upgrades for modern logistics facilities. While many states have allowed consumers to choose who provides their power, the local utilities have greatly increased their deliv - ery charges for gas and elec - tric. Since 2015 gas delivery
charges have increased 46% and electric delivery charges have doubled. These increas - ing charges have far outpaced inflation. Volatility in natural gas prices, changing fuel use for electricity generation (coal being replaced by gas peak - ing), rising grid infrastruc - ture costs (70% of transmis - sion lines in the US are over 25 years old), and extreme weather have all contributed to higher utility costs. While the industrial sector of commercial real estate has re - mained one of the most resilient continued on page 17A
stantially since CO - VID, with rising base rental rates in industrial, increased rents in mul - tifamily and positive retail
premiums have expe- rienced in- creases up - wards of 45% in recent years due to several fac - tors includ -
Christopher Moore
Joe Latina
absorption. Downtown office, especially class B and C have faced challenges, while class A suburban office has been very active. Unfortunately, all the classes of commercial real estate have faced chal - lenges with rapidly increasing operating expenses. The lion share of rising operating costs come from rising insurance premiums, property taxes (specifically school taxes in Delaware), maintenance, labor costs, higher construction and systems costs, and rising util - ity costs. We are anticipating that the growing operating costs will begin to put down - ward pressure on base rent prices if these costs continue to rise unchecked. Historically, industrial prop - erties have benefitted from operating expenses much lower than other commercial real es - tate genres such as retail and office. Just a few years ago, total operating costs for indus - trial buildings rarely eclipsed $2 psf /annually. However, ris - ing costs are now driving these traditionally lower operating costs much higher, in some cases in excess of $3 psf and beyond. These increase costs are hitting from a variety of different sources; Rising Property Taxes Property Taxes are most often the largest operating expense for an industrial build - ing typically accounting for as much as 60% of the total oper - ating costs. A recent state-wide property tax reassessment for the State of Delaware was very poorly managed and resulted in a secondary round of school tax assessments levied directly against commercial properties resulting in increases in some cases of 300%. All commercial designated properties were impacted with widely ranging assessed values, generated by computer algorithms, and higher tax mileage rates. Com - mercial property owners will now have to pay to appeal in order to bring the assessed
ing a recent surge in climate- related disasters such as floods, hurricanes, wildfires, and the large amount of claims payouts that followed. Historically high
We see deals from your perspective.
Our global network of 75 commercial real estate offices is the clear choice. Local CORFAC affiliates: Wolf Commercial Real Estate - NJ, PA, NY
Chilmark Real Estate Services - NJ, NY Cronin Capital Real Estate - NY
LMT Commercial Realty, LLC - DE Blue & Obrecht Realty, LLC - MD
corfac.com
Made with FlippingBook - professional solution for displaying marketing and sales documents online