Welcome to our blog post and a warm welcome to our world of commercial real estate in Lancaster County.
We often get asked the question – what’s the commercial real estate market like in Lancaster County these days? To which my response is – well, it depends on your position and what property asset class you’re dealing with.
Industrial real estate:
If you’re a business looking to purchase an industrial property, you’re in a tough position. There’s a very limited supply of industrial properties for sale in our market. I know firsthand because I’m working with a few businesses in growth mode who’ve been looking for a few months now. During a recent negotiation, the winning bid secured an industrial property approx. 32,000 SF in size with almost no contingencies and a two week closing – tough to compete with! We managed to secure another industrial property that came up for sale but had to act quickly and aggressively.
Not many businesses are willing to go through the lengthy, arduous and expensive land development process for building new facilities. Many times, unless the property is of a certain size (at least north of 50,000SF), it doesn’t always justify the cost.
There are more options for lease than purchase but the lease rates are creeping up as well. Lease rates for good quality industrial real estate are easily in the $6-7/SF NNN (base rent) range, sometimes higher depending on amount of office space needed or if there are special requirements such as refrigeration etc.
Suitably zoned industrial land can also be a tough find.
On the other hand, if you’re an industrial property owner looking to sell or lease, the commercial real estate market is totally in your favor. You can expect bidding wars and aggressive offers – just make sure you have a place to relocate to lined up prior to giving up your property.
An opportunity:
We’re representing a client who recently secured some properties that were part of the Worley & Obetz bankruptcy sale. One such property is 55 Doe Run Rd in Manheim, PA. Located on 7+ acres, this is a mixed use property with 33,000+ SF of gross building area. The new owner is looking to better optimize the site and we are soliciting good quality tenants for the property. Kindly do reach out if you have an interest in exploring this opportunity further.
Investment real estate:
Depending on whether you’re looking to sell or purchase investment real estate, this can be an exhilarating experience in the former case or quite frustrating in the latter.
With interest rates being at an all-time low, purchasing power is strong and so is the dilemma. Owners of investment real estate such as multi-family units, self-storage facilities, mobile home parks, net leased properties etc. are selling their assets at record high prices (cap rates in the 5-6 % range which is quite aggressive for Lancaster county). These investors in turn are looking to tax shelter their gains by getting into tax-deferred exchanges (commonly known as a 1031 exchange) and are in turn buying at record high prices which still makes it attractive enough considering the tax savings that can be realized.
We often advise our clients to look at the big picture – deferring taxes does not automatically make a purchase a good one. It is important to look at the overall financial situation and closely evaluate whether the savings in taxes and low interest rates can justify the increased purchase price.
An opportunity:
One of our clients is potentially looking to sell a small investment property located very close to the Capital building in Harrisburg. The property has two leased residential units and a first floor office space with a long term leaseback by the seller, a high credit entity. Plus, the property is just minutes from the river front. So yes – investment, waterfront commercial real estate.
Office market:
It’s been very interesting to monitor this property type. As the pandemic continued and working from home (WFH) became a common occurrence, we expected to see an oversupply of office space (sale, leases, subleases). Although the demand for office space appears to have slowed compared to pre-pandemic times, many of our office clients are adopting the “wait and watch” approach. Many believe they’ll always need to maintain a certain level of office space for some type of hybrid arrangements for their employees.
Some opportunities:
We have available for lease, some great quality office spaces in Lancaster city, a 4900+ SF beautiful office suite on E. King St and an off-market opportunity ( approx. 1500- 2000 SF ) at a vibrant high-profile location in Lancaster city.
We also just listed for sale, a landmark property, the Benjamin Roberts building on N. Prince St. The business will be relocating and this is a tremendous opportunity for a new owner to either develop the property or utilize it for their own needs. The property is located in the Central Business District and LERTA tax district offering several advantages.
Retail market:
Our firm is not heavily involved in the retail commercial real estate market. However, we’re seeing a repurposing of real estate in that sector.
We came close to executing a long term office lease in a well located shopping center. Plenty of on-site parking, access to public transportation etc. were features attractive to our client. The landlords were excited about the business opportunities for their other retail tenants in the center with the many employees who would be occupying this space. Although the winning site was a freestanding new construction office building also offering on-site parking and access to public transportation, it was interesting to see how retail space could be repurposed for other uses.
We have also evaluated retail space for specialty uses such as medical offices, veterinary clinics, contractor showrooms and warehouse space etc. With the rise in e-commerce and lesser need for retail spaces, creative thinking is important.
So, the commercial real estate market in Lancaster County is anything but sluggish. It remains to be seen how things evolve over the next several months but indicators point towards plenty of opportunities and activity in the near future.