Commercial confidence builds as market sectors improve
The phones are ringing a little more than they have in the past few years, and commercial showings are holding strong.
But that doesn't necessarily mean leases and sales are going to pan out in 2013, local agents said.
"If we can keep stability in place and hedge short-term risks, we'll have another stable year," said Blaze Cambruzzi, COO of York-based Rock Commercial Real Estate LLC.
Commercial activity was back up in 2012 compared to 2011 (see chart data on page 19), but there are never guarantees of a repeat performance.
"I think 2012 was, 'Welcome back, stability,'" Cambruzzi said. "2013 could be, 'Take off your hat and stay a while, stability.'"
Other commercial agents agreed.
"We're going gangbusters," said Bill Gladstone, head of the Bill Gladstone Group for Wormleysburg-based NAI CIR. "I think January 2013 is doing better than January 2012. The key is sustainability."
Signs of an extended recovery in the real estate market have been there, but there still are some unknowns about where the economy is going, added Jim Koury, a partner at Lemoyne-based RSR Realtors.
"A key component in real estate is the jobs market and employment (levels)," he said. "We need to see the unemployment rate go down and more jobs expansion from existing tenants."
Prices are still fairly attractive for buyers, but landlords are not as aggressive as they were in a slower economy, agents said. Stronger absorption rates and not as much new inventory are contributing to gradual price increases.
High land and development costs still threaten to restrict any speculative development, especially industrial, agents said. However, a decline in available warehouse inventory is sparking interest from developers.
Washington County-based Crossgates Inc., developer of the TecPort Business Center in Swatara Township, is researching new opportunities in Central Pennsylvania, said Matthew Crocker, assistant vice president for Crossgates' midstate office.
"We think the area is good enough. We're looking at land without a specific tenant (in mind)," he said.
But a lack of industrial zones could mean lengthy rezoning efforts, he said.
Crossgates has about 500,000 square feet of warehouse and distribution space under management, Crocker said.
The region continues to be well positioned geographically to attract additional industrial development, Cambruzzi said. With the strong highway network, Central Pennsylvania is close to many major metropolitan areas on the East Coast.
"I think we will see greater utilization of assets in the market," he said, which means greater economic output of current distribution facilities. "Those things will happen before we see an increase in supply."
As far as desirability of asset classes for investors, Cambruzzi said, multifamily residential continues to shine, followed by retail, industrial and general professional office spaces.
Medical office buildings, which generally are more specialized and command higher rents, is a segment to watch in 2013, he said.
There is growing diversity and segmentation in the area's office and industrial markets, Cambruzzi added, which means a wide price range and typically more inventory.
"I think there are a lot of office users that would like to buy," Koury said, but restrictive financial markets are making it tough.
Government-backed programs that make loans less risky for banks are helping to get some deals over the hump, Gladstone said.
Ongoing market recovery in 2013 should be known by the second quarter, agents said.
"I think activity in the second quarter is going to give us a feel of what 2013 is going to bring," Koury said.