Compared to other submarkets in the country, the Office Market in the Lehigh Valley has fared well and is getting stronger every day. Is there vacancy? Yes. Is there existing competition? Yes. Are there new buildings being built? Yes. But, there is growth from local corporations and from out-of-market companies who are moving in or expanding in the Lehigh Valley. This new growth is a testament to their confidence in the workforce, roadway systems, proximity to major markets, and amenities such as hospitals, malls, parks and school systems. The Lehigh Valley is a great place to live, work and play and investors are interested in our Office Market. Of note, two large commercial office portfolios were purchased this year by out-of-state investors. Minnesota-based Castlelake purchased Commerce Corporate Center, and the DRA/Brandywine Realty Trust portfolio was acquired by Massachusetts-based Brookwood Financial Partners. Local investors are still in the game too. David Jaindl of Jaindl Properties purchased 7660 Imperial Way in Upper Macungie Township.
While the vacancy rate in the Lehigh Valley Office Market is low compared to other submarkets; our inventory of over 24 million rentable square feet seems to be hovering around the +/- 12% vacancy rate quarter after quarter. This indicates there is still competition between building owners. Therefore, landlords must put their best foot forward in order to win the tenant.
So what are tenants looking for in today’s market? The answer is simple: they want it all, the best of everything, and a landlord who really cares.
Let’s begin with amenities. Tenants are interested in on-site amenities. An on-site café is generally a welcome bonus because employers and employees like the convenience of not having to get into their cars to grab a quick drink or bite to eat. Another amenity that fares well in this market is a fitness center. Although I have never had a client state that their future building must have a fitness center, it always seems to be a positively viewed amenity. By “fitness center”, I am referring to a couple of mirrors, treadmills, elliptical machines, free weights and locker rooms; just the basics. Whether used or not, many tenants add that to the “+” column when determining where to lease. In that same vein, tenants respond favorably when there are walking trails, ponds and other outside green space on site; it’s a factor that weighs heavily on the decision to rent or not to rent.
Although office square footage had been shrinking overall in the past few years, confidence in the economy is growing, and tenants are beginning to expand their square footage requirements. While the needs of a tenant will vary from user to user, a majority of the space being leased consists of an open office concept focused on collaboration and productivity. Generally today’s office space consists of a few perimeter executive offices, a conference room and kitchenette, with the rest of the space in an open layout for workstations and collaboration areas.
PARKING!!! Did I say that loudly enough? Because office layouts are becoming more open and accommodating more employees, parking can be problematic. While a good rule of thumb is four parking spaces per 1000 square feet, there are tenants now seeking locations that provide eight parking spaces per 1000 square feet. Call centers, for instance, are parking-intensive users.
‘Location, Location, Location’ continues to be an important factor to tenants. The location is not only important from the standpoint of roadway and public transportation access, but also from a community standpoint. Many companies are moving to the downtown area so their employees can easily walk to lunch and enjoy the other professional services offered in urban areas. The millennial workforce, for instance, is usually drawn to a fast-paced downtown urban vibe. For employers who have multiple offices or a large work force of sales people, ease of access to major roadways is the priority, so a suburban setting is a better fit.
It is true that “you don’t get a second chance to make a first impression,” so landlords should keep a vacant suite or building in good repair. A fresh coat of paint goes a long way and brightens a suite. Clean windows allow in more daylight. If there is a preexisting mold issue, have a specialist remediate. If there are stained ceiling tiles, replace them; and if your previous tenant left trash, remove it. If the buildings are in disrepair, tenants will often make the assumption that the landlord will not care for the building once they move in either. Here is where a friendly and reliable property management group is a must! For smaller buildings, luxuries such as cafes’, a fitness center and/or walking trails, obviously do not apply. But, regardless of the square footage, a well-maintained building with competitive pricing will attract a stable tenancy.
One of the most important things to keep in mind as a landlord is that the tenancy relationship is much like a marriage; saying “I do” to a lease is much easier than “divorcing” in Landlord/Tenant Court. Put your best foot forward to attract the tenant, but always do your due diligence on the prospective tenant’s finances and prior tenancy history.