By Phil Yacuboski
With just a few months left in 2015, commercial realtors are busy pitching their best inventory of all shapes and sizes and places throughout the region.
John Cognetti, Hinerfeld Real Estate said there are not many industrial properties to choose from in the 50,000 to 200,000-square-feet range. He said there are large properties from 300,000 to 500,000-square-feet, with a mix of those being both old and new. He said the market has been “lukewarm” in northeastern Pennsylvania for industrial properties.
“Things will begin to heat up in the third and fourth quarters,” he said. “I think one of those things has to do with the economy. It’s improving all across the state. The other thing that is happening is the rate of absorption and the demand for industrial real estate in the Lehigh Valley is so high, that I anticipate that sooner or later, we will look like a bargain compared to the Lehigh Valley.” He said he expects to see a spillover effect eventually. “That whole dynamic (the Lehigh Valley) has grown tremendously,” he said.
Cognetti said “big boxes” have been harder to sell simply because these spaces—usually vacated by a manufacturer—would need a lot of employees to fill. He said a distribution facility could use that amount of space, but many of those companies are locating their operations in the Lehigh Valley and the Harrisburg, which is why a spill over” would be beneficial to NEPA.
Office space continues to be at a premium at Glenmaura, where all of the office space (with the exception of the Cigna building) is occupied. The Cigna building is in Scranton, with the rest of that office park located in Moosic. Cognetti said the biggest areas where office space is plentiful are in the downtowns of both Wilkes-Barre and Scranton. “They have the vacancy and the space to lease,” he said.
In retail space, Cognetti said within the past year several strip malls have changed hands, with some being repositioned. Those at higher occupancy are being sold at a premium, he said.
He also noted the old Valley Crest Nursing Home in Wilkes-Barre Township continues to be a premium institutional space, as well as the Scranton State School for the Deaf campus in Scranton. “In Scranton, that will most likely be adaptive use,” he said of the property, which includes nine separate buildings. “The Valley Crest property is prime real estate, but a significant amount of money would have to be spent to make it developable,” which includes traffic and environmental issues.
Other commercial realtors say they have a good availability of space for prospective clients.
“We have a good mix of industrial, commercial and flex space available,” said Jim Cummings, Mericle Commercial Real Estate. He said Mericle currently has a more-than-500,000-square-foot building in the Humboldt Industrial Park available, as well as a 940-square-foot office space in Forty Fort. “What we’ve been doing over the past several years is analyzing the market and to see what is most in demand,” he said, noting that flex space and “ready-to-go” properties have become a Mericle specialty.
Cummings said what has changed over the years is the amount of turn-around time realtors have. “Clients used to give us time,” he said. “Now, they want the property almost immediately.”
He said ready-to-go space and flex spaces allow a client to speedily get into space they need. Using existing funds, Mericle locates a space, renovates it for commercial use and then leases it to a client. “It’s a product that we’ve been building for a long time and that we’ve had a lot of success with,” he said. “There have been a few other flex buildings put up, but not nearly as many as we have built.”
He said new construction takes time—sometimes years—because of all of the regulations and permits, hence the need for instant space. “We are taking 90 sites of various sizes—some industrial and some office—in 11 business parks in northeastern Pennsylvania and we’re doing all of that work up front. We take a raw site, make it new and then it’s ready,” he said. Mericle has already completed 40 such sites.
[colored_box title=” Pennsylvania: Economic Outlook: August 2015 WELLS FARGO SECURITIES LLC” variation=”silver”]
- Scranton-Wilkes-Barre Scranton is perking up, with nonfarm payrolls increasing to a favorable 2.3 percent year-over-year pace in June. A large portion of this increase can be attributed to the health services sector. As a result of increasing employment, Scranton’s nonfarm payrolls are only 0.2 percent below their pre-recession peak.
- One of Scranton’s largest employers, Tobyhanna Army Depot, is in the middle of an expansive renovation project that seeks to modernize the depot and provide its employees with cutting-edge technology and a highly efficient workplace environment. Developers expect the $105 million renovation to be completed in 2017. The large investment signals the organization’s commitment to staying in the metro area. The project is also an encouraging sign for employment in the federal sector, which declined a slight 0.3 percent over the year.
- Scranton continues to struggle with population declines. The area had a mild period of growth during the mid-2000s; however, Scranton has reported decreases in population during the past two years. The lack of growth has had a negative effect on Scranton’s tax base, and has created fiscal problems for local governments. The reoccurring issue presents challenges to policy-makers hoping to move past budget concerns and grow Scranton’s economy.
- While Scranton’s population experienced declines in 2013 and 2014, there have been modest employment gains in population-driven industries such as leisure & hospitality, retail and health care. The growth may reflect stronger-than-reported population gains or an increased proportion of part-time jobs. Ongoing declines in population and softening demand have also held back residential construction. Single-family permits are on a downward trend and are well below their most recent peak. Even with less new supply, Scranton’s home prices have fallen 0.8 percent from their year-ago level.
- Growth in Scranton should improve modestly in coming years. Population declines should subside as improving job growth encourages more residents to remain in place and pulls in job seekers from surrounding areas. Home building and commercial construction should strengthen modestly.[/colored_box]
