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Mid Atlantic Real Estate Journal — Commercial Office Spotlight — February 27 - March 12, 2015 — 9C NAI S ummit
By John L. Crampsie, SIOR NAI Summit A Colorful Year Expected
C lass A, Class B, B+ sounds like the grades I would have liked in
seems to have trumped that. One thing a swift kick cannot energize is the fact office needs are not terribly influenced, by which as evidenced by its large amount of distribution space, is a prominent piece of the makeup for the Lehigh Valley. The biggest anomaly facing 2015 is the square footage dumped on the market by cor- porate downsizing/relocation. A conservative number is in the range of a half million s/f, which includes 250,000/ft at 1110 American Parkway. This building was the former head- quarters for Lucent Technol- ogy and is actually 600,000/ft with 250,000/ft actually being
marketed at this time. Am I safe in saying Class “A” space, beauty is in the eye of the be- holder, is in the $18/ft range on a NNN basis? I think so unless, of course, we are fortunate to see a real 20,000 s/f or above user in the market. We also have a new twist to the office market in the Lehigh Valley, and that is the emergence of urban markets as a real contender. The most talked about being the NIZ in downtown Allentown. City Center’s successful develop- ment of a number of 1st Class office buildings, in the eye of ev- ery beholder, and the tremen- dous amenities will continue
to make this a serious option for office users. The impact this will/has had on suburban markets continues to unfold. Simply put, we have begun to realize there are companies interested enough in downtown to take a look and others who will not consider an urban loca- tion. Since the grandchild of the NIZ, Bethlehem’s designated CRIZ is just in its infancy, the relevancy remains to be seen. Another take on the 2015 office market in the Lehigh Valley comes from Jessica Goffredo, the highly respected marketing rep for PennCap properties. According to Jes- sica, PennCap experienced
positive absorption in 2014 along with rental rate growth and few landlord concessions. They expect the same in 2015 which will provide PennCap the opportunity to put their money where their optimism is for office activity vs. availability primarily as it relates to trophy product. PennCap is expecting to break ground in 2015 on the first of a number of “high end” office buildings in Bethlehem Twp. More details on pricing for this development should prove interesting as should the real- ity vs. projections for the 2015 office market. John L. Crampsie, SIOR is a principal at NAI Summit. n
college. But there is more, t r i p l e ne t , gross, modi- fied gross, TI Al l owanc e , CAM, and the always elu- sive common area factor.
John L. Crampsie
Why so al a carte, because it all will play a role in how office buildings in the Lehigh Valley are positioned in 2015. The availability of office prod- uct looks like the inventory of the vegetable department in a grocery store. Second genera- tion space, distressed properties, corporate downsizing and a new building here and there mostly located in Allentown’s NIZ. To be sure, there will be prospects walking into the veggie depart- ment looking only for lettuce; a specific submarket in the Lehigh Valley or a certain quality of building. Then there will be the amount of square footage which always lessens the heap. Other clients walk in to the most color- ful section of the store and will take whatever they can get as long as the price is right. So the positioning always serves a psychological purpose. Great, it is a gross lease, ex- penses are included. What do you mean I am leasing 5,000/ ft and paying for 5700/ft. And, of course, 2nd generation space and distressed properties always provide an interesting challenge for TI allowance. Offer $30/ft, they use $20 and want the $10 difference. I don’t think so. The sophisticated prospect and/or the one who uses a knowledgeable broker will get to the bottom line rather quickly regardless as to how a proposal is presented. The fun begins when you go back to the fruit department and are comparing apples to oranges when proposals arrive. All of the above loses its luster if the 2015 office market is off the charts, or not even on the charts for that matter. Most forecasters are predict- ing a steady level of office ac- tivity. The office market, com- pared to industrial, requiring a better kick in the pants to get moving. One of the most stubborn being employment. An emerging bright spot on this horizon is the chang- ing attitude by corporations towards home offices. The synergy of working together
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