Posts Tagged ‘ commercial office space ’

Frederick’s 2014 Commercial Market: So Far, So Good

How is the 2014 commercial real estate market stacking up?

So far, so good indeed:  sales of Frederick’s commercial real estate market are posting double-digit gains over last year.  The total dollar volume of sales for the first half of 2014 increased by 15% over the same time period last year, and the total number of transactions increased by 12%.

Here at MacRo, our sales and leasing activity is up over last year as well, and there is definitely a positive buzz in the air when  local commercial real estate brokers gather to network.  The biggest complaint I hear on a consistent basis is the insufficient  inventory of commercial properties on the market.

This is all good news, and it’s certainly tempting to anticipate that double-digit gains in Frederick’s commercial market will continue into 2015 and beyond, but there are still uncertainties facing the national and local economies.

A big one putting tremendous pressure on the commercial office market is jobs.  On Wednesday September 17, the powers that be at the Federal Reserve abandoned their typically passive-aggressive communication style to declare that it will be “a considerable time” before we see a hike in interest rates, citing a cause as “significant underutilization of labor resources.”

Yes, the labor market is underutilitzed, but it is also evolving, and in such a dramatic way that it’s hard to imagine how it will ever look the same as it did before the Great Recession.  (If that is the case, the Fed and their economists desperately need a new “jobs” measuring stick before the government starts passing ineffective and potentially damaging legislation trying to prop up an obsolete jobs market model…but I digress.)

The trickle-down effect of a massive increase in part-time and self-employed workers (along with rapid technological advancements) is that office use is also changing dramatically, both in size of space and function.  The sluggish economic recovery and evolving labor market are wreaking havoc on office vacancy rates throughout the U.S., and Frederick is no exception.  No one really knows where the dust is going to settle or what the “new normal” will look like for the office segment.  A crystal ball would come in very handy for office building developers right about now.

On a local level, the November election will mark a new era in Frederick County government, as Frederick begins to govern itself in a very different way.  The outcome of this election will determine whether the next four years will be government by gridlock or a seamless, collaborative transition.  It may also result in yet another wild pendulum swing between growth and no-growth administrations, which could significantly impact Frederick’s commercial real estate recovery (as it depends heavily upon sustained political stability).  Timing-wise, this shift to charter government is a bit nerve-wracking for Frederick’s business community.

Despite these and other uncertainties in the local and national economies, activity continues to chug along pretty well in Frederick’s commercial market.  We will watch carefully this fall to see if underlying market fundamentals continue to strengthen.

Note: Statistics provided for commercial property sales in this report are based on thorough research of every recorded commercial sales transaction listed in SDAT for the quarter reported, and are deemed reliable.  

The author:  Kathy Krach is a commercial sales and leasing agent with MacRo.

Multifamily Deals Total $57,000,000 in Frederick during 2nd Quarter

Multifamily was the strongest segment during the second quarter, posting three of the top five deals and over 700,000 square feet sold.

Second quarter sales of Frederick County commercial real estate kept pace with the same time period last year, an encouraging sign that the local commercial market remains stable despite mixed economic signals nationwide.  Second quarter 2014 commercial real estate sales in Frederick  totaled $117.5 million, versus $119.5 for the second quarter last year and $19.5 million for the second quarter of 2012.

There were three large multifamily deals in Frederick during the quarter, as that segment continues to draw the most interest from REITs and national investment firms.  (MacRo Report will detail the top deals of the second quarter in a future post).

Industrial and warehouse properties placed a strong second, which reflects the activity we are seeing on the local level as small to medium-sized businesses are moving forward with long-postponed decisions regarding leasing and buying warehouse and flex space.  In reviewing second quarter transactions, it was interesting to note that there were several transactions in the municipalities of Brunswick and Thurmont, an indication that activity in the commercial market is increasing throughout the entire county.

It was a busy quarter for commercial land sales as well, with  double the number of transactions (but only 35 acres sold); the median price was $203,098 per acre.  That compares to 238 acres during the same quarter last year, at a median price of $90,000 per acre.

Note: Statistics provided for commercial property sales in this report are based on thorough research of every recorded commercial sales transaction listed in SDAT for the quarter reported, and are deemed reliable.  

The author:  Kathy Krach is a commercial sales and leasing agent with MacRo.

MacRo Brokers Lease of Office Space on Aviation Way

MacRo, Ltd. is pleased to announce the lease of Suite 240, 411 Aviation Way, Frederick, MD to CMA Purchasing.

This Class A, contemporary office building has a modern glass/stone exterior, 2 story grand foyer, and abundant natural light.  Other amenities include elevator access, cafeteria service, and on-site building maintenance / engineering service.  Located minutes from major shopping, restaurants, and Historic Downtown Frederick with quick and easy access to I-270, I-70, and US-15.  In addition, it is located in the City of Frederick’s HUB Zone

Steve Cranford represented the landlord, AOPA, in the transaction.  Jim Coiner of Marsh Realty represented the tenant.

For more information on how MacRo, Ltd. Real Estate Brokerage Services may be able to assist you in the sale or leasing of your commercial or industrial property, contact Steve Cranford at 301-788-4373 or steve@macroltd.com.

MacRo Leases Warehouse Space on Yukon Court

MacRo, Ltd. is pleased to announce the lease of a 4,800 square feet space at 5415 Yukon Court, in Frederick.

The property leased is a warm, lit warehouse with 20 foot ceiling heights and excellent visibility from MD Route 180.  The building is located south of the City of Frederick, just off the US-15 /340 and Mount Zion Road interchange.  David Wilkinson represented the landlord, OK Properties, LLC in the transaction.  The tenant is STROSEC automotive, a firm specializing in the maintenance, leasing and sales of Ford, Chevrolet and GMC pick-up trucks and vans.

For more information on how MacRo, Ltd. Real Estate Brokerage Services may be able to assist you in the sale or leasing of your commercial or industrial property, contact David Wilkinson at 301-748-5670 or dave@macroltd.com.

MacRo Brokers Lease of Office Space on Monocacy Boulevard

MacRo, Ltd. is pleased to announce the leasing of 1,500 square feet of office space at 93 Monocacy Boulevard to Horizon Facilities Services, LLC.

Steve Cranford of MacRo represented the tenant in the transaction.  Nancy Green of Mackintosh Commercial represented the landlord.

For more information on how MacRo, Ltd. Real Estate Brokerage Services may be able to assist you in the sale or leasing of your property, contact Steve Cranford at 301-788-4373 or steve@macroltd.com.

Frederick Office Market Posts Modest Gains First Quarter 2014

Buyers snapped up Frederick office condos , while tenants leased four times as much flex space as office.

It’s apparent when viewing the chart reporting square footage of commercial real estate transactions by segment in Frederick Commercial Sales Jump 66% during 1st Quarter, that warehouse properties were the darling of Frederick’s first quarter commercial real estate market.  The office segment, on the other hand, continues to face a difficult climb out of the recession, as office use continues to evolve dramatically and inexpensive flex spaces absorb tenants who would have been class A or B office tenants less than a decade ago.

That said, the office sales market in Frederick appears to be making some modest gains, at least in terms of sales price and volume.

The median price per square foot of Frederick office space increased about 10% compared to Q1 2013, while total square feet sold jumped 135%.  There were no purchases of flex properties by traditional office owner/users during the first quarter of this year, and only one sale of a flex condo during the first quarter of 2013 at a price of $106.12/SF.  Medical office condominiums fetch higher prices; a medical office condominium at Conley Farm sold for $237.51/SF last quarter.

Small businesses and medical practices seeking office condos represented most of the activity in office sales last quarter, as low interest rates and loosening credit markets tipped the scales in favor of owning versus leasing.

But speaking of leasing, flex was the clear winner last quarter with office tenants.   Vacant flex properties like those offered by St. John Properties continue to put pressure on the office leasing market, mainly due to the affordability factor:  compare the median per square foot lease rate for flex of $7/NNN versus $11/NNN for office space during the past quarter.  On a square foot volume basis, flex outpaced office by nearly 4 to 1 during the first quarter of 2014.

 

St. John Properties, which about 18 months ago had 1/4 million square feet of vacant flex space in Frederick, appears to be leasing that inventory at a brisk pace, which is good news for the traditional office segment in Frederick.

Note: Statistics provided for commercial property sales in this report are based on thorough research of every recorded commercial sales transaction listed in SDAT for the first quarter of 2014, and are deemed reliable.  Lease transactions are not recorded with Frederick county government.  Lease rates for this report were researched in CoStar.  Lease rates, if reported at all, are usually estimated.  Median lease rate calculations for the quarter are based upon available estimates and are meant to be used as a baseline trend versus hard data.  

The author:  Kathy Krach is a commercial sales and leasing agent with MacRo.

MacRo Brokers Lease of Retail Space in Downtown Frederick

MacRo, Ltd. is pleased to announce the leasing of 3,190 square feet of office space at 154 N. Market Street to Smokestack Studios.

Kathy Krach of MacRo represented the tenant in the transaction.  Dee Perry of Noahs’ FMC represented the landlord.

Smokestack Studios is a high-end home furnishings and accessories store; the store owner and operator is a former designer for Restoration Hardware and plans to open for business in June of 2014.

For more information on how MacRo, Ltd. Real Estate Brokerage Services may be able to assist you in the sale or leasing of your commercial or industrial property, contact Kathy Krach at 301-332-7891 or kathy@macroltd.com.

Retail Strip Centers as Local Wellness Centers

For the near future, health care real estate decisions, like the medical business, focus on economies of scale to compensate for the lower insurance payments while adjusting to the new medical measuring stick of outcome or wellness care.

Like the old real estate mantra, “location, location, location”, the new medical business model will also have a similar mantra: large, local, and logical.

How do medical practitioners and investors locate large affordable structures that can service the community and make financial sense? If you ask the medical investors/redevelopers, the likely answer is the local retail center. The facility is in place, and the community infrastructure is there. The cost savings between repurposing empty or underutilized space versus ground-up development is considerable. This approach also satisfies sustainability opportunities, and saves the patient time and travel costs because of its local presence.

The upside for retail owners can be noteworthy. First, the owners get to convert their current investment into a brand new business model that comes with the opportunity for long-term economic growth. Second is the strong possibility that instead of several small to medium size tenants, the owner could likely see one or two tenants utilize the entire center. Over time, the medical office building has become the health care facility, which is likely to morph into the Local Wellness Center, conveniently located near you.

To learn more about how your real estate investments are being affected by all the upcoming health care changes, contact Steve. 

Contact Steve Cranford at
301-698-9696 ext. 207 or
steve@macroltd.com

1 Simple Leasing Tip for Commercial Real Estate Landlords

Sometimes Landlords feel like they are running a concession stand at the local carnival. 

They say timing is everything, but if you are a landlord who has invested in the commercial real estate market for the long haul, you can expect to see everything the market has to offer.

MacRo, Ltd. is in the business of assisting property owners with making wise investment decisions, such establishing lease terms that will maximize the value of their real estate.

Very often I meet with an investor who has been managing and leasing his own property for many years.  As a matter of policy the owner has offered below market rents to fill vacant units quickly.

Since the rent rolls of properties have a significant impact on the property value, many investors often find themselves held hostage by those leases.

It is important for the owner of a commercial real estate investment properties (be in a retail, office, flex space or industrial space) to practice some basic leasing strategies when marketing vacancies.

Here is one to chew on:

Free Rent is often better than Low Rent

At first glance this may appear to make no sense, but all too often, I find that property owners will negotiate a low base rent with a tenant, just to get a vacant unit filled.  That base rent sometimes may (or may not) have an annual rent escalation clause built into the terms of the lease.  In the Frederick County commercial real estate market the typical escalator is about three percent.

The long term impact of lower than market rent can have a negative impact on the future value of the property.  Sometimes under the right circumstances offering as much as several months or more in Free Rent, and using a base market rate rent, can provide the tenant with the necessary incentive to lock into to a long term lease without giving away future increased cash flows.

The left half of Figure 1, shows a simple example of how this logic works.  Consider a situation where the market rate is $15.00 per square foot and a tenant offers $12.00 for a ten year lease.  In the long run the Landlord makes out better if the tenant will agree sign at $15.00/SF with a concession equivalent to a one year rent abatement verses a $12.00 rate without abatements.

From an appraisal perspective, if one were to value such a property based upon an income approach alone (using a capitalization rate of say 8%), after the first year the $15.00 rate shows the value of the real estate to be worth 25% more than that of the $12.00 lease rate.

The right half of Figure 1 gives an example of the value differential for a 5,000 square foot free standing office building using the above lease terms, showing that the factor 25% carries over from lease rate to value.

Now obviously, other factors will go into a full appraisal, such as consideration of comparable sales, property condition and replacement costs … just to name a few.

Do you have a commercial leasing question for our team at MacRo, Ltd?

We are just a phone call away.

The author: Rocky Mackintosh is President of MacRo, Ltd., a Land and Commercial Real Estate firm based in Frederick, Maryland. He also writes for TheTentacle.com.

MacRo Assists Tenant in Leasing Office/Warehouse Space on Bailes Lane

MacRo is pleased to announce the lease of 19,500 SF office/warehouse space at 295 Bailes Lane, Unit C, Frederick.

This unit is a combination of 1,500 SF of office space and 18,000 SF of high-bay warehouse space, which includes 3 docks and 2 drive-ins.

The tenant, Showtime Sound, is expanding from its current facility in Frederick.  Showtime Sound is a full service event production company providing audio, lighting, video and staging for any size event or venue.

Rocky Mackintosh represented the tenant in this transaction.  Tony Checchia of Frederick Land Company represented the landlord.

For more information on how MacRo, Ltd. Real Estate Brokerage Services may be able to assist you in the sale or leasing of your commercial or industrial property, contact Rocky Mackintosh at 301-748-5655 or rocky@macroltd.com.

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