Builders hope the lean years are over
For Drew Simpson, council representative for the Greater Pennsylvania Regional Council of Carpenters and the man representing Local Union 645 Northeast, things are looking up.
Already tracking “many” projects with confirmed start dates of spring 2013 — many of which are already under contract — it could be said that Simpson is happy, although not entirely carefree.
“The spring building season looks to be very busy and there appears to be many more new projects starting than the same time last year,” Simpson said. In fact, spring 2013 appears to be one of the busiest for new commercial job starts for their signatory contracts in many years. “We already have a handful of multimillion-dollar projects under contract and there are many more on the books to start.”
2012 was a very different story. Other than some leftover projects from 2011, Simpson said the only project with a large manpower need was the PNC Field project which put hundreds of local union tradesmen and women to work.
The 2013 outlook already has at least 10 projects that will be starting. Projects slated to start this spring or summer include, among others: the Geisinger Office Building in the Mt. Pleasant Office Park; the Geisinger CMC addition and renovation; the Marywood University library; the Goodwill housing project in the old North Scranton Junior High; and, per sale agreements, the renovations of the Moses Taylor Hospital and Regional Hospital of Scranton.
Also scheduled to start this spring or summer is a Pennsylvania American Water Company renovation project, some additional building at The University of Scranton, the Intermodal Transportation Center, bridge work and heavy highway work.
Despite these positives, some lingering doubt remains. The concern — no matter what — is always, “Will the momentum continue for the entire year and into next year?” said Simpson. “Last year fell into the typical four-year Presidential election cycle where everyone sat on their money until after the election, and usually we see a burst of money funding new construction projects after the election. Naturally, our concern is with the federal and state government and funding of area projects, or the reduced budgets that keep projects from getting started.
“The other concern the construction industry is seeing is the influx of out-of-town or out-of-state contractors coming into the Northeast with their out-of-town workforce, taking work away from area tradesmen and keeping our unemployment numbers too high,” he said, adding that any surprises that may lay in wait this spring will come from the Marcellus Shale.
“You can never quite grasp what type of work and projects will be coming out (of the Shale) to start building. That industry is very tight-lipped on future work. This industry could create a very large building boom. Take, for instance, the proposed Moxie Energy projects, one in Bradford County and one in Lycoming. Both projects are budgeted at over $800 million and at least one could start this spring. The issue is making sure local tradesmen and women are working on the project, not out-of-state workforce.”
Considering the past few years in the construction industry, Simpson said 2013 appears to be a welcome sight.
“The Scranton Chamber of Commerce does a fantastic job in bringing in new business to the area — many who build or renovate buildings. The local universities, colleges and school districts, along with the local hospitals, have kept the building industry going during the lean years and they should be thanked, said Simpson. “We look forward to working with all of the sectors in the future.”
Commercial real estate
With so much space at the ready, Hinerfeld Commercial Real Estate looks forward to marrying business with homestead. John Cognetti, Hinerfeld broker and owner, said the Suburban Class A Market is along the I-81 Corridor from Clarks Summit to the I-80 crossroads in Greater Hazleton, a distance of approximately 35 miles.
“There exist other Class A buildings in the market,” said Cognetti. “They are either in free-standing locations, considered part of one of the three CBD (Central Business District) submarkets, or located in parks where the majority of buildings are industrial.”
Within Scranton’s city limits, said Cognetti, the Mt. Pleasant Corporate Center, can accommodate four or five freestanding office buildings in a park setting adjacent to Scranton’s CBD.
“A 30,750-square-foot spec building was constructed, occupied by medical tenants, and was fully leased in the last three years,” he said.
About the Suburban Class A Office Market, said Cognetti, look to the CAN DO Corporate Center in Drums, Hazleton. The park contains three buildings with a total square footage of 100,000 and land is available for new construction.
In the last year, a spec office building that sat vacant for four years at 40 Azalea Drive (51,560 square feet) was sold to the Hazleton Area School District for a magnet school. At 10 Azalea (39,429 square feet), Network Solutions decided to renew their lease. At 10 Fox Run Road, a 10,000-square-foot office building is on the market for sale at $675,000. The vacancy rate is just 10 percent.
In Wilkes-Barre, Cognetti notes the East Mountain Corporate Center contains 10 buildings with a built-out square-footage of approximately 500,000 square feet.
“In addition, there is a 42,000-square-foot spec office building under construction, land is available for new construction, the tenant mix is medical, government and private businesses. The vacancy rate for that park is also approximately just 10 percent,” he said.
In Scranton and Moosic Borough, Glenmaura Corporate Center and the W.W. Scranton Office Park are two parks within one mile of one another that contain 10 office buildings with a total square footage of 976,120. There is additional land available for new construction in Glenmaura Plaza, said Cognetti, and the tenant mix is banking, insurance, health care, financial services, legal and private corporations.
Two of the largest buildings are occupied by single tenants — Bank of America (300,000 square feet), Prudential (171,000). The Cigna Building (189,000) is being transformed from single-tenant to multi-tenant occupancy and approximately 90,000 square feet is available.
Glenmaura Plaza consists of three buildings. Total square footage: 180,000. The former JC Penny Building in the W.W. Scranton Park (29,120) has been vacant for two years. This building, built as a call center, would require upgrades to bring it up to Class A standards. The remaining two buildings are occupied by single tenants. One is a 35,000-square-foot multi-tenant building with a less than 1 percent vacancy. The vacancy rate for both parks is approximately 18 percent, (175,000 square feet).
Finally, Cognetti discussed the South Abington Township and the Abington Executive Park. The park has four buildings with a total square footage of 378,000, additional land is available for new construction, and the tenant mix: insurance, non-profit and professional services. Its largest tenants: Met Life (214,000), Allied Services (129,700). The current vacancy rate is below 1 percent.
“Between October and January of this year, a four-month span, over 13,000 square feet was absorbed in Glenmaura Plaza by Xerox. And, market activity has also increased based on the amount of incoming calls for large square footage — 20,000 to 60,000 square feet. Indications from the tenant brokers are that these tenancies would occur in the third quarter of 2013. This,” said Cognetti, “is an improvement in market activity over the last few years.”
Ready to Go
Mericle is fortunate, said James Cummings, Mericle Commercial Real Estate’s vice president of marketing, “Very fortunate in that we are seeing a steady stream of inquiries for our properties.”
Cummings attributes the activity to the fact that Mericle has developed the types of industrial, office, and spec space that companies are seeking in locations with exceptional highway access and proximity to labor.
This spring, Cummings said his company plans to construct a 22,601-square-foot office building on speculation in CenterPoint Commerce & Trade Park West, and continue to prepare new sites for immediate construction in 10 area business parks through Mericle’s “Ready to Go” program.
Other than Mericle, said Cummings, no one else is constructing commercial buildings on speculation. That tells him competing developers in his market are not seeing a dramatic increase in inquiries, certainly not enough for them to feel that new construction is worth the risk.
For their Ready to Go Sites, said Cummings, Mericle secures all permits and full subdivision, land development and utility approvals, and, in most cases, completes all grading, including the placement of compacted stone sub-base in the building and pavement areas, and makes the parcels completely read for immediate construction.
The firm has designed the program for small and large businesses seeking manufacturing, distribution, office or medical space, has completed Sites in CenterPoint Commerce & Trade Park East, CenterPoint Commerce & Trade Park West, East Mountain Corporate Center and Jessup Small Business Center, is currently working in the Grimes Industrial Park, and plans in 2013 to prepare two large Sites in Humboldt Industrial Park in Hazle Township.
In total, Mericle plans to develop 90 Ready to Go Sites in 10 NEPA business parks and will construct speculative industrial, flex, and office buildings on many of those sites.
As for prognostication, Cummings said that although, “our success in 2012 leaves us optimistic about this spring and all of 2013, overall I expect to see the modest national recovery continue, but with limited new construction in the region,” said Cummings. “Owners of existing commercial real estate will probably see some positive lease or sale activity.”
Cummings said he expects to see a steady growth and a demand for space by health-care-related companies, as well as very large “big box” distribution companies. Having existing office space that can be converted for medical users, as well as large industrial sites that can fit buildings in excess of one million square feet will win the day, said Cummings.
Mericle has completed leases with 70 companies over the last five years. These companies, he said, have occupied approximately five million square feet in Mericle buildings and have created and retained about 5,000 jobs.
In 2012, Mericle, said Cummings, signed leases with 17 companies that occupied more than 1.2 million square feet of Mericle industrial, flex, and office space, companies including Neiman Marcus, GENCO, PECO Pallet, E.S. Kluft & Company, and C3i.
“To us, the summer of 2013 will be no different. We’ll continue to move forward as aggressively as we can, constructing new buildings on spec, preparing new sites for construction, and completing leases with as many job creating companies as possible.
“We just have our fingers crossed that neither decisions by our federal government nor an unexpected national crisis derails the momentum we saw in 2012. If neither happens, we expect to lease many additional spaces in 2013 that hopefully create and retain a significant number of jobs.”