Posts Tagged ‘ commercial office space ’

Property Virgins – Commercial Real Estate Edition

Got a brilliant start-up idea? Avoid 5 common mistakes new businesses make when leasing commercial space.

Macro Commercial Real Estate Virgins

One of the best things about practicing commercial real estate in Frederick County is the entrepreneurial culture.

It’s a rare week that MacRo doesn’t get a call from prospective clients launching new businesses or medical practices, or moving start-ups from dining rooms and garages.

A structure of bricks and mortar is a significant investment for any business, but particularly for one in its infancy.  Costly mistakes in real estate acquisition can often be the difference between start-ups that make it and those that don’t.

Following are just a handful of the missteps that commercial property virgins commonly make:

1)  No business plan.  

It’s not unusual for would-be entrepreneurs to show up at the MacRo offices with a great idea for a new business having no clue as to how much it will cost to manifest what the cash flows and revenues will be.  That’s okay–we actually prefer to begin advising on real estate acquisitions early in the process.

What we do find cringe-worthy are clients who decide to push forward and lease space before they develop that fleshed-out business plan.  Here’s why:

  • It puts the client in a terribly weak negotiating position.  This often means paying higher-than-market lease rates and tying up personal assets to guarantee a lease.
  • The client doesn’t have a clear sense of how much real estate the business can afford — potentially putting the business in jeopardy if cash flows ultimately can’t sustain lease payments.

2) Hire a commercial real estate virgin to represent them.

Unfortunately, a real estate license is a real estate license — agents can legally broker commercial or residential deals with it.  That doesn’t mean they SHOULD, however.  The world of commercial real estate operates very differently than residential real estate, which is a blog post in and of itself.

Here are just a few of those differences:

  • Residential real estate has in place an enormous amount of protection for buyers and tenants, which largely do NOT exist in the commercial world.
  • Price is only ONE of many negotiating factors in a commercial deal.  In leasing for example, every commercial market, including Frederick, has a selection of concessions routinely used to sweeten deals and lure tenants — these can be worth tens of thousands of dollars or more — and concessions differ for each segment of the commercial market.  (Get yourself a good commercial broker if you want to know the goodies you may be entitled to when you lease commercial space!)
  • There are a host of complexities in the commercial real estate world including zoning, building codes and change of use permits that need to be factored into the decision making process when a business is leasing property.  Failure to do so can result in unforeseen and sometimes catastrophic expenses down the road.
  • Seasoned commercial brokers KNOW THE COMMERCIAL MARKET.  The last thing a new business needs is a 10-year lease in a turning market.

Don’t get us wrong–Frederick has many real estate professionals who successfully straddle the residential and commercial real estate worlds, and they are competent professionals in both.  Just be sure you don’t hire one who is a commercial real estate virgin.

3) Underestimate the costs of rehabbing commercial space. 

In the Frederick market, the small-business tenant can often eat the lion’s share of tenant improvement costs to make space usable for its intended purpose –whether retail, office, restaurant or medical.  It’s a big investment, and as they say, you can’t take it with you.  When the lease expires on the dress shop, that gorgeous wide-plank wood floor now belongs to the landlord.

As a means of getting an accurate picture of the required improvements, take the time to get solid estimates from reputable contractors for costs of planned improvements BEFORE negotiating lease rates and concessions.

4)  Forget about parking.

This sounds like a no-brainer, but it’s surprisingly easy to get so caught up in the location and the interior of a property that prospective tenants forget to check whether available parking is adequate to their business needs.  Lack of parking can be a business killer!  Check lots and garages at various times of day to monitor the ebb and flow of parking usage BEFORE a lease is signed.

5) Fail to have an attorney review the lease. 

As mentioned earlier, there is little in the way of protection for tenants built into commercial leases, which are largely written in such a way as to protect the property owners.  A competent real estate attorney who knows Maryland real estate laws can ensure the tenant’s rights and best interests are represented as much as possible within the framework of the negotiated deal.

Planning to lease space for your new or expanding business?  MacRo can help you avoid the landmines that commercial real estate virgins often step into.

The author:  Kathy Krach is a commercial sales and leasing agent with MacRo.  Finding homes for new and expanding businesses is her favorite.


Frederick’s Top 5 Commercial Real Estate Deals 4th Quarter 2013

The sale and lease-back deal of Frederick’s State Farm operations building tops the list of 4th Quarter 2013 CRE sales.

MacRo’s 2013 year-end recap wouldn’t be complete without a “top five” list of the largest sales of the 4th quarter.  There were 34 sales transactions of commercial real estate assets in Frederick last quarter, totaling nearly $70 million.

Following are the top five commercial real estate sales transactions for Frederick during the fourth quarter of 2013, ranked by sales price:The list below does not include the sale of several buildings at Riverview Plaza in December, as those sales haven’t been recorded with the county yet so we couldn’t get final sales price data.  Those buildings were part of a massive 285-property, $1.1 billion portfolio sale of shopping centers and multifamily properties across the mid-Atlantic, and public financial documents did not break out price-per-property on the deal.  We’ll report on that deal in our first quarter of 2014 update.

1.  $30,788,333   State Farm Frederick Headquarters – 1 State Farm Drive

In November, State Farm Mutual Auto Insurance, Inc. sold 23 Class A office buildings throughout the U.S. to Lone Star Funds, a global investor of distressed assets, in a $750 million portfolio sale-and-leaseback deal.  State Farm has signed long-term 15+ year leases for the buildings; Lone Star plans to flip about half of the properties.   

2.  $3,520,000   Worman’s Mill Industrial Park – 15 Worman’s Mill Court

First Potomac Realty Trust sold this multi-story Class A flex building to Ritchie Road Investors, LLC in November.  The building is over 40,000 SF and sold for $87.89/SF.  It was nearly 90% leased at the time of the sale.

3.   $2,974,470   Exxon Service Station – 1561 Opossumtown Pike

H. Ruskin and M. Lustbader of Illinois purchased the Opossumtown Pike Exxon station along with 7 others throughout the mid-Atlantic region in October from Mesirow Financial Investment Management; the portfolio deal totaled $28,000,000.  The building of 2,856 SF sold for $1,041/SF and sits on nearly an acre.

4.   $2,500,000   Avanti Marble & Granite – 3909 Cornell Place

Decorative Films, Inc.  acquired this Class A industrial building in Stanford Business Park from Avanti Marble & Granite in December in a purchase and lease-back deal.  Avanti will lease the building back for two years, after which time Decorative Films will expand operations into the space (Decorative Films is an owner/occupier of two other buildings in Stanford Business Park).  The building is 26,000 SF on over six acres, and sold for $81.70/SF.

5.  $2,425,000   Jeanne Bussard Center  – 555 S Market Street

ARC Properties purchased the Jeanne Bussard Center in November.  The Class C industrial building is 25,585 square feet in size and sits on 3.79 acres.  The sale netted $94.78/SF.

If you are curious about MacRo’s 2014 commercial real estate outlook, don’t miss Rocky’s post from last month: 2014 Economic Forecast: Bankers Cautiously Optimistic.

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

MacRo Brokers Lease of Office/Warehouse on Yukon Court

MacRo is pleased to announce the lease of 7,200 square feet of space at 5411 Yukon Court, in Frederick.  

The leased premises includes 2,700 square feet of finished office space and 4,500 square feet of warehouse space with 20′ ceiling heights.  The building is located just south of the City of Frederick at the US-15/340 and Mount Zion Road interchange.

David Wilkinson represented the landlord, OK Properties, LLC in this transaction.  The tenant is NexGreen, a lawn care and landscape maintenance company.

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: 301-748-5670 or

2013 Commercial Real Estate Sales in Frederick Jump by Nearly 40%

2013 was a year of growth for Frederick’s CRE market, in both year-over-year dollar volume and transaction volume.

Since 2012, MacRo  has been tracking all sales of commercial real estate in Frederick County by segment.  We were pleased to see Frederick County post $275 million worth of commercial real estate sales, versus about $200 million in 2012.  That’s a nearly 40% increase in dollar volume.  In addition, the number of CRE sales transactions increased by over 20% from 2012 (149 transactions versus 123).  While two years is hardly enough data to begin tracking trends, it is nevertheless encouraging to see sales growth heading in the right direction–up!

Considering our local economy had to dodge sequestration, the fiscal cliff, AND the rollout of Obamacare (not to mention Governor O’Malley) the results aren’t half bad.  Frederick’s office segment is still limping, but overall activity in our local commercial real estate market appears to be improving.

Below are a couple of charts highlighting commercial real estate sales in Frederick County for 2013 and those for the 4th quarter of 2013 by market segment, based on both dollar volume and number of transactions.  In the coming weeks we’ll share the top commercial real estate deals of the 4th quarter of 2013, as well as those of 2013 overall.

This graphic was created from data in the Frederick County tax and land records.  The information is deemed to be accurate, although MacRo has not independently verified it and does not guarantee that it is correct.

MacRo Sells Two-Story Professional Unit on Chairmans Court

MacRo, Ltd. is pleased to announce the sale of Unit 102 at 5216 Chairmans Court for $240,000 to a professional counseling practice.

The sale closed on December 20, 2013. 

The two-story, 2,000 SF unit in this 7-unit complex offered an excellent layout for medical and professional uses and was within walking distance to Westview Shopping Center.

Kathy Krach of MacRo, Ltd. represented the seller.  Tim Connolly of Avison Young represented the buyers.  

For more information on how MacRo, Ltd. Real Estate Brokerage Services may be able to assist you in the sale or acquisition of property, contact Kathy Krach at 301-332-7891 or


MacRo Brokers Lease of Office/Warehouse Space on Mack Avenue

MacRo is pleased to announce the lease of a 16,900 SF office/warehouse space at 4519 Mack Avenue in Frederick.

The total warehouse space includes a 1,500 SF office area and as well as a 20′ ceiling with interior security and fenced outside area.  It is also located just 2.5 miles south of Exit 31 / the I-270 interchange.

Rocky Mackintosh represented the landlord, Johnco, LLC., in this transaction.  The tenant is RCS Construction Services.

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

MacRo Brokers Lease Renewal for Office/Warehouse Space on Industry Lane

MacRo, Ltd. is pleased to have brokered a lease renewal for 5713 Industry Lane, Suites 49 & 50, Frederick.

Rocky Mackintosh, President of MacRo, Ltd., represented the landlord for this 5,664 SF combination office and warehouse space.

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


MacRo, Ltd. Sells Office Townhouse Condominium in Westview Corporate Center

MacRo, Ltd. is pleased to announce the sale of Unit 107 at 5216 Chairmans Court for $263,000.

The sale closed on December 6, 2013.

The two-story, 2,000 SF unit in this 7-unit complex offered an excellent layout for medical and professional uses.

it is located within walking distance to Westview Shopping Center.

For more information on how MacRo, Ltd. Real Estate Brokerage Services may be able to assist you in the sale or acquisition of property, contact Kathy Krach

She can be reached at 301-332-7891 or

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 March 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

Frederick’s Office Market: 3rd Quarter 2013 Update

 Small businesses and medical owner/users dominated Frederick’s office market during the third quarter of 2013.

The office market lingers in the doldrums, even as the remaining segments of Frederick’s commercial real estate market have shown signs of sustained recovery.  This is due to several factors:

  • dependence on government employment and spending in this region;
  • the loss in Frederick of several large office-using employers that left substantial pockets of vacant office space; and
  • continued rapid evolution of business office use.

The silver lining in this uncertain economic environment is that corporate profits are now at 12.5% of GDP, the highest level ever recorded.  When (if?) we do begin to get some clarity on how congressional budget issues will be resolved–and when quantitative easing will begin to wind down–U.S. corporations as a whole are in fine shape to ramp up hiring and investment.

In the meantime, here in Frederick, the office market had a relatively quiet quarter.  The chart below outlines a few big-picture stats on the office market’s 3rd quarter 2013 transactions:

 As you can see by the average square footage of the offices sold and leased during the quarter, the small business owner/user dominated activity in the market.  This is consistent with what we are seeing on the street, as well. 

Institutional and local investors aren’t seeing the return in local office buildings right now (with the exception of medical office buildings) and are focusing instead on multifamily and industrial properties.  Owner/users (particularly medical), on the other hand, are finding that favorable prices, low interest rates and ready capital make purchasing a viable option over leasing. 

Rumblings that the Fed may be considering (possibly, someday) a scale-back on quantitative easing has also put some urgency into the market.  Prices on a per-square-foot basis inched up about $10/SF over the 3rd quarter of last year.  (Given that there were only a little over a dozen transactions both quarters, this is not robust data, but hopefully a start to a trend.  We’ll keep an eye on it.)

The commercial leasing market is much harder to pin down accurately than sales transactions.  Commercial real estate agents are loath to share lease rates in order to protect their landlords and their bargaining positions. 

While CoStar is estimating the average lease rate for office space in Frederick at about $21/SF, on the street we are seeing the average come in closer to $11/SF for NNN leases.  The abundance of vacant flex space that Frederick is still absorbing is putting significant pressure on lease rates for traditional Class A and Class B office spaces in this area.  Another pressure is lease turnovers–five- and seven-year leases are renewing at current lower market rates, which are $3-$4/SF lower than the market rates were back when they were first originated. 

Generally speaking, if an office space in Frederick is leased in the $20-$25/SF range for a NNN lease, it’s a medical office.

CoStar reports that vacancy rates in Frederick office space are still hovering between 14-15%.  (Most Frederick commercial agents would argue that number is probably higher.)  Once vacancy rates reach a more stabilized 10-11%, and the market works through its inventory of higher-rate turnovers, lease rates will stabilize and begin a sustained increase. 

With 1.25 million square feet of office space to fill, and more new-build commercial office space under construction, we are more than likely still several years off from a full recovery of Frederick’s office market.

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

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