Building 52 at Glenmaura Plaza couldn’t have cut the ribbon at a worse time — 2000, start of the dot-com crash.
But now, the third office building erected by Sordoni Construction Inc. in Moosic is nearly fully rented for the first time.
The demand for office space in Northeastern Pennsylvania is the strongest it’s been since the late 1990s, when the dot-com crash emptied offices and the Sept. 11, 2001, attacks gave office-based companies second thoughts about expanding.
“The market moves in 10-year cycles, and we are moving out of the trough,” said John Cognetti of Hinerfeld Commercial Real Estate.
Companies that would have purchased or built their own buildings when interest rates were rock bottom are looking to rent now that rates inched up, Mr. Cognetti said.
With the exception of a 5,000-square-foot corner section, the Sordoni building is nearly full thanks to Compression Polymers Group renting an entire floor for its corporate headquarters, Lehigh Valley Physicians Group moving in, and the expansion of existing tenant Deluxe Digital Studios.
There are still big vacancies — even at Glenmaura Corporate Center, the region’s premier suburban office park. The Bank of America building has 20,000 square feet for rent and the former State Farm building has 15,000 square feet.
Large tracts still wait for development, but empty lots are moving to private hands. In recent weeks, two local private developers made moves to buy more property although neither had immediate plans. Sordoni purchased land near its other office buildings. Mericle Commercial Real Estate Services exercised an option on property owned by the Scranton Lackawanna Industrial Building Co.
Building 52 is a microcosm for the nation, where office space has been filling up from coast to coast. This year office building construction slowed and higher interest rates made purchasing property more expensive. Companies who needed space looked for leases.
“We see vacancies decreasing across the board and rental rates gaining strength,” said Brain Velky, vice president of the Chicago-based Real Estate Research Corp.
In Wilkes-Barre, a 47,000-square-foot, one-story office building near the Wachovia Arena that had been occupied by the state has generated interest from two companies looking for a call center, said John Augustine, vice president at the Greater Wilkes-Barre Chamber of Business and Industry.
The Jewelcor Building, one of Wilkes-Barre’s newer privately-owned office buildings, is just about full.
In Wilkes-Barre, office space inquiries increased three-fold over the last three years, Mr. Augustine said, mostly from technology, service firms or computer operations.
The shiny glass fortresses in suburban office parks have an advantage over older downtown buildings.
Companies looking for downtown office space usually want free, contiguous parking, which makes leasing space in parking-challenged buildings such as the Wilkes-Barre Center difficult.
Even buildings that have parking, such as the Citizens Bank building, face an uphill battle as potential tenants look to suburban plazas for offices. The professional offices that provided the bread-and-butter of downtown landlords have migrated to suburban strip plazas and medical complexes.
Building office space without a ready tenant is risky. For one, office space costs about three times as much to build as warehouse or factory space. The average construction cost for Class A office space is more than $100 per square foot. Other types of commercial real estate cost about $50.
After an office building is up, it could sit empty. Sordoni got burned by putting its third building up just before the office space market collapsed. Unlike office space, which is limited to office or service uses, other commercial space is more flexible. For example, a 150,000-square-foot industrial building could be used for manufacturing, distribution, even retail.
“Building office space is a chicken-egg thing,” Mr. Augustine said. “You don’t want to stick your neck or your money out there.”
The region could benefit from being isolated from major metro areas.
Risk of natural disasters in the South and West and of terrorist attacks in places such as New York City and Washington, D.C., has prompted huge increases in insurance costs there, in some cases as much as 300 percent, Mr. Velky said.
– Courtesy of The Times-Tribune
