Tag Archives: commercial real estate


Cost Segregation Misconceptions Prevent Tax Savings

Cost Segregation MisconceptionsProperty owners misconceptions about cost segregation are leaving money on the table. In 2001, an IRS ruling allowing taxpayers to “catch up” on prior years’ depreciation deductions was a significant upgrade to the benefit of cost segregation studies. Yet, as we approach midyear 2018, it’s estimated that 9 out of 10 commercial real estate owners don’t take advantage of this exceptional savings tool on a regular basis.

This inaction can easily be traced to misconceptions that persist in today’s marketplace. They are preventing the capture of large tax savings and increases in cash flow for commercial property owners and investors.

Download Printable PDF>>>

Cost Segregation Misconception #1:

The real property (building) depreciable value should be at least $10 million. The size of any tax savings that results from a cost segregation study is tied directly to the value of the property. However, a building does not need to be worth several million dollars to benefit. Because the realized savings are generally 7-10% of the value, even a $500,000 property could generate a savings of $35,000-$50,000, a large sum for many small business owners. Multiply that by larger property values and the savings will quickly exceed six figures. Commercial properties valued at $500k-$5 million have been the most underserved due to this
most common misconception.

Cost Segregation Misconception #2:

Cost segregation studies are just too expensive to see any real return. For the $500,000 property, the net cost of a study would be in the $3500-$4500 range. This provides a return of 8-12 times the investment. What owner wouldn’t be pleased to get their money back several times over? There are few business investments that can generate that level of return, especially on an immediate basis, in a single tax year.

Cost Segregation Misconception #3:

A cost segregation study should be done within the first 3 years of ownership, or the opportunity is lost. This was addressed in the 2001 IRS ruling that created the single most awesome feature of cost segregation – “catch up” depreciation. In a given tax year, a study allows the taxpayer to deduct all of the depreciation they could have taken since Day One of acquisition, minus the depreciation that was taken. Accumulated over all the years of ownership, this difference, and the resulting tax savings, can be quite substantial.

To understand how this all comes together, let’s look at a real-life example:

Owners of a medical services business were making plans for retirement. This included the sale of their office building which they had acquired 12 years earlier. At that time, it had a depreciable real property value of about $1,340,000. A cost segregation study was never performed during their years of ownership.

The tax advisor for a potential buyer suggested a study be completed now to “unlock” the tax savings benefit they had been sitting on. They were then able to deduct $303,000 in additional “catch up” depreciation, leading to a tax savings of $121,300. This was a very surprising and welcome boost to their retirement fund, extra money they didn’t know they had. Cost segregation companies will typically provide a free, no-obligation analysis for any commercial property. Owners are then positioned to weigh the study’s cost against the possible huge financial return without wasting time or money.

About John Ottino:

John is a Consultant serving the Greater Philadelphia/South Jersey region for Fuller CSS. FullerCSS, cost segregation specialists, with on-staff engineers and accountants, has completed hundreds of tax-savings studies for real estate investors and commercial property owners.

john ottino

Sale and Leaseback of Commercial Real Estate

Sale and Leaseback of Commercial Real EstateConfer with the professionals at WCRE or ask us for a seasoned real estate or tax attorney but here’s one technique Abo has seen work well with business clients. Although real estate is generally thought of as an illiquid asset, some liquidity can be achieved by taking out a loan backed by the property. Alternatively, a sale and leaseback may be used effectively if a company’s balance sheet is burdened with excessive debt or just having difficulty in obtaining new capital. Typically, the transaction involves the company owned property being sold to a third party and then leased back to the company under a long-term lease.

Download Printable Article (PDF) >>>

Sale and leaseback transactions may be on the rise but clients need to be aware that the IRS often focuses on transactions between closely-held corporations and their controlling shareholder to make sure that these transactions benefit the company as well as the shareholder. In one common type of sale and leaseback transaction, the company sells the land with a building on it to the shareholder and, in turn, the shareholder leases it back to the company. Some of the financial and tax benefits we’ve seen have included:

The rental deductions the company could take might be significantly larger than the former depreciation deductions if the property had been in service for many years.

After the sale and the leaseback transaction, the shareholder’s basis in the property will be its fair market value which is usually greater than the price paid for the property by the corporation. Thus, the shareholder’s depreciation deduction would be much greater than what was previously available to the corporation (also still need to consider the tax consequences of the sale to the corporation).

The sale and leaseback may enable the shareholder to generate passive rental income that could be offset
against passive losses of the shareholder.

The IRS would obviously be concerned that these transactions have economic substance and that they are
based on reasonable market conditions, and not just designed to generate larger tax deductions. Thus, for
a sale to be valid, the controlling shareholder should have taken an equity interest in the property and also
assumed the risk of loss. For the leaseback to be valid, four tests come to mind that really should be met:

1. The useful life of the property should exceed the term of the lease.

2. Repurchase of the property by the corporation at the end of the lease term should be at fair market value and not at a discount.

3. If the leaseback allows for renewal, the rate should be at a fair rental value (speak to WCRE, not necessarily the accountant).

4. The shareholder should have a reasonable expectation that he or she will generate a profit from the sale and leaseback transaction based on the value of the property when it is eventually sold and the rental obtained during the lease term.

I suspect one of the biggest risks for the seller-lessee is the loss of a valuable asset that could have substantially appreciated over its useful life. Also, the rental market could drop, leaving the seller locked into a rental rate in excess of fair value. On the other side of the table, the seller could move or default, leaving the buyer with unattractive real estate in a soft market.

Even if there are no other problems, the benefits of the deal could be substantially reduced if the IRS deems that it is merely a “financial lease.” In that case, the IRS will treat the seller-lessee as the true owner of the real estate, with all the appropriate tax assessed, and the buyer-lessor will be treated as a lender-mortgagee.

Since sale and leaseback transactions can be quite complicated and also have to pass IRS muster, as I stated earlier, whether you are a buyer, seller or investor, you are well advised to consult with WCRE and seasoned real estate/tax counsel about your financial and tax consequences and the manner of structuring and implementing them to withstand possible IRS challenge.

FOR MORE INFORMATION:
Martin H. Abo, CPA/ABV/CVA/CFF is a principle of Abo and Company, LLC and its affiliate, Abo Cipolla Financial Forensics, LLC, Certified Public Accountants – Litigation and Forensic Accountants. With offices in Mount Laurel, NJ and Morrisville, PA, tips like the above can also be accessed by going to the firm’s website at www.aboandcompany.com.

 

Martin H. Abo, CPA/ABV/CVA/CFF
307 Fellowship Road, Suite 202
Mt. Laurel, NJ 08054
(856) 222-4723
marty@aboandcompany.com
For more information, contact:

Industrial Real Estate Sales Lead All Property Sectors

Industrial property sales outperformed other major commercial sectors across the country in the second quarter, driven by the popularity of online retailer Amazon and the migration of brick and mortar retailers to consumer-driven, e-commerce strategies.

While sales in all four sectors of the national and Philadelphia commercial real estate market — office, industrial, retail and multifamily — fell from the same quarter of 2017, industrial sales slid just 2 percent. That compares to sales falling 18 percent for retail, 17 percent for offices and 3 percent for multifamily, according to CoStar Group’s quarterly State of the Industrial Market webinar.

This report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

Industrial sales in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – are coming off a record year, contributing to the slight second-quarter drop as many larger industrial portfolios available for purchase already changed hands, CoStar analysts said. The good news is that prices for industrial properties are still climbing and investor appetite is voracious.

“The quantity of bidders has been surprising to us and to the listing brokers,” industry expert Marshall Loeb said in a conference call this past week. “You are getting well over a dozen to 20-something bidders. There is a lot of global capital chasing constructively leased industrial product.”

It is getting difficult to find value in some portions of the national and Philadelphia commercial real estate properties market, Loeb added, particularly outside the five largest segments. In markets such as Phoenix, Denver, Houston, Tampa, FL; and Charlotte, NC; yields have slipped to the upper 4 percent range.

Industrial rent growth outperformed office, retail and multifamily, according to CoStar analysts. Rents for distribution and warehouse space among U.S. and Philadelphia commercial real estate listings rose 5.9 percent from the second quarter of 2017. Rents for food processing, manufacturing, refrigeration/cold storage, showroom, truck terminal, and industrial service space came in even higher, at 6.5 percent. Rents for flexible industrial space that also includes some office space rose 4.7 percent.

Rents in three industrial segments of the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – increased more than their counterparts. Office rents were 1.8 percent higher, while retail rents rose 1.5 percent. Multifamily was up 3 percent in the quarter.

E-Commerce has been the best gift the industrial market could have asked for, CoStar industrial analysts said.

“As more and more shopping has been done online, that has been unequivocally positive for the industrial market, particularly the logistics sector,” said Shaw Lupton, senior managing consultant for CoStar.

Logistics construction is running on all cylinders throughout national and Philadelphia commercial real estate listings. About 210 million square feet of space has been delivered in the past four quarters. Demand has kept up with the supply. Vacancies in the sector are decreasing across the board even as new supply has poured in.

“Logistics has seen the most supply not only of any industrial subtype but indeed of any major commercial property sector,” Lupton said. “But demand has also been extremely strong — 2.1 percent demand growth in logistics in excess of supply.”

For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Are Your Rooftop Solar Panels Protected from Ground Fault

Solar powers largest growth period in New Jersey was in 2011 and 2012 with many roof top installations being installed. These installations were constructed prior to the adoption of the most recent code (National Electric Code NEC 2014) and most likely were not designed with the newly required arc/ground fault specifications.

Download Printable PDF Article >>>

SO, WHAT DOES THAT MEAN FOR YOU?

Most likely, nothing if your system is well maintained on a monthly basis. But there are no guarantees that a fault might not occur even on a well-maintained system. Chances are that the solar panel system was designed and installed in accordance with the code at the time of the installation and the system is safely operating. But with the adoption of the new code came new requirements that has added levels of protection that can detect faults in the system. In addition, code changes added a rapid shut down system that acts as a panic button and can disconnect certain parts of the solar array to provide a better and safer system and help avoid potential roof fires that could lead to structure fires and extensive damage.

DO YOU NEED TO UPGRADE YOUR SYSTEM NOW?

It’s not currently code-required, but if you want that comfort level of knowing that there is more protection, it may warrant an upgrade. But upgrades do not come cheap; some of the hurdles that one may face can range from replacing inverters and associated wires and strings, to just swapping out combiner boxes. Many previously-installed solar panel arrays are typically 600-volt systems using a 600-volt inverter. Unfortunately, many of the inverter manufacturers do not currently offer a line of 600-volts inverters because systems have generally been increased to 1000-volts and 1500-volts. Therefore, if the system would require an inverter change, selections may be limited and an alternate design might be required.

IN SUMMARY

If your building has an older solar array built prior to the new electric code, chances are that arc/ground fault protections may not be in place; however, the system may be able to be modified to provide some or all of the new protections. Whitman has experience in reviewing and designing upgrades to existing arrays and provides full turnkey design and support services. Whitman has more than 270-megawatts of solar design experience
in multiple States, that’s about 43,200 houses.

If you have any questions regarding solar panel systems or would like a quote to review an existing solar array, please contact Carey Ruetsch, Vice President of Engineering at 732-390-5858, or cruetsch@whitmanco.com.

carey-ruetsch

WCRE 2018 SECOND QUARTER REPORT

SOUTHERN NEW JERSEY & PHILLY CRE MARKETS SEE MODERATE GAINS WHILE WAITING FOR ANTICIPATED BENEFITS FROM TAX REFORM LAW

July 11, 2018 – Marlton, NJ – Commercial real estate brokerage WCRE reported in its latest quarterly analysis that the Southern New Jersey market remains in good shape, making moderate gains and showing strong fundamentals. The firm believes the market may be poised for strong growth as benefits of the new tax law begin to materialize.

“Our market continues to show quiet strength and may take off as consumers and businesses feel the effects of lower tax rates,” said Jason Wolf, founder and managing principal of WCRE. “We expect the new law to be a net positive for overall economic growth in 2018 and be especially beneficial to the commercial real estate industry.”

There were approximately 303,656 square feet of new leases and renewals executed in the three counties surveyed (Burlington, Camden and Gloucester), which was a gain of about 10 percent over the previous quarter. Leasing picked up, and the sales market stayed active, with about 1.46 million square feet on the market or under agreement and an additional 317,961 square feet trading hands.

Download Printable PDF >>>

New leasing activity accounted for approximately 61.4 percent of all deals. Overall, net absorption for the quarter was in the range of approximately 253,000 square feet.

Other office market highlights from the report:

● Overall vacancy in the market is now approximately 10.4 percent, which is nearly one point better than the previous quarter.
● Average rents for Class A & B product continue to show strong support in the range of $10.00- $15.00/sf NNN or $20.00-$25.00/sf gross for the deals completed during the quarter. These averages have stayed near this range for most of 2018, though they are trending a bit higher.
● Vacancy in Camden County improved dramatically, to 11.6 percent for the quarter.
● Burlington County vacancy was at 9.2 percent, which was also lower than the first quarter.

WCRE has expanded into southeastern Pennsylvania, and the firm’s quarterly reports now include a section on transactions, rates, and news from Philadelphia and the suburbs.

Highlights from the second quarter in Pennsylvania include:

● Philadelphia’s office market vacancy rate was unchanged during Q2 2018. Though positive absorption was 547,339 square feet, a 20 percent improvement over the first quarter. Vacancy rates for Class A properties stood at 10.5 percent, while Class C properties had vacancy of 5.5 percent.
● Average asking rent across all office property classes in the Philadelphia market was $22.72/SF in the second quarter. Within the CBD it was $29.64/SF.
● There are about 3.8 million square feet of office space currently under construction in Philadelphia. During the second quarter 590,632 new square feet became available via completed new construction.
● Philadelphia’s retail market is moving in the right direction. Average asking rents have jumped the past few quarters, net positive absorption was 909,884 square feet, and retail vacancy rates ticked down to 4.4 percent.
● Industrial vacancy in Southeastern Pennsylvania was down to 5.6 percent. The market saw positive net absorption of more than 6.6 million square feet.

WCRE also reports on the Southern New Jersey and Philadelphia retail market. The second quarter saw a drop in consumer confidence as well as a generally positive outlook for consumer spending, buoyed by a strong job market.

Other highlights from the retail section of the report include:

● Retail vacancy in Camden County stood at 7.7 percent, with average rents in the range of $13.75/sf NNN.
● Retail vacancy in Burlington County stood at 9.8 percent, with average rents in the range of $14.59/sf NNN.
● Retail vacancy in Gloucester County stood at 7.4 percent, with average rents in the range of $14.74/sf NNN.

The full report is available upon request.

About WCRE

WCRE is a full-service commercial real estate brokerage and advisory firm specializing in office, retail, medical, industrial and investment properties in Southern New Jersey and the Philadelphia region. We provide a complete range of real estate services to commercial property owners, companies, banks, commercial loan servicers, and investors seeking the highest quality of service, proven expertise, and a total commitment to client-focused relationships. Through our intensive focus on our clients’ business goals, our commitment to the community, and our highly personal approach to client service, WCRE is creating a new culture and a higher standard. We go well beyond helping with property transactions and serve as a strategic partner invested in your long term growth and success.

Learn more about WCRE online at www.wolfcre.com, on Twitter & Instagram @WCRE1, and on Facebook at Wolf Commercial Real Estate, LLC. Visit our blog pages at www.southjerseyofficespace.com, www.southjerseyindustrialspace.com, www.southjerseymedicalspace.com, www.southjerseyretailspace.com, www.phillyofficespace.com, www.phillyindustrialspace.com, www.phillymedicalspace.com and www.phillyretailspace.com.

Commercial Construction Surges as Demand Counters Higher Labor, Materials Costs

Robust commercial construction is projected to carry through the second half of 2018 and into next year, overcoming a shortage of skilled workers and any effects of tariffs on the cost of lumber, steel, and other building materials.

Total spending on new construction and engineering in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – is projected to rise six percent and surpass $1.3 trillion for the first time by the end of this year, exceeding the four percent increase for all of 2017, according to construction management and consulting firm FMI Corp. The gains will be powered by an almost 10 percent increase in transportation, residential, and office projects, FMI reports.

Building on that forecast, the Commerce Department recently reported total construction spending in the national and Philadelphia commercial real estate markets rose 0.4 percent in May from the previous month, with spending at a record $1.31 trillion on an annual basis. Multifamily construction jumped 1.6 percent in May, while single-family building rose 0.6 percent.

This report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

“As we enter the dog days of summer, the weather isn’t the only thing getting hot. Construction spending is heating up just as much, about a 50 percent increase in total growth from last year,” said FMI Managing Director Jay Bowman. “What’s even more impressive is this will mark the seventh-straight year of growth since 2011, one of the longest sustained periods we’ve ever seen.”

About 150 million square feet of offices in the national and Philadelphia commercial real estate properties market were under construction as of June 30, up slightly from the 144 million square feet under way a year earlier, according to CoStar data. That’s more than the historical annual average of 126 million square feet under construction, the data show.

Nonresidential building starts were up 18 percent in May, boosted by transit projects in Los Angeles and Boston that each are valued at more than a $1 billion, and the start of a $1 billion Facebook data center expansion in Nebraska. Other large projects include the $764 million expansion of the Washington State Convention Center in Seattle and a $740 million airport terminal project at Salt Lake City International Airport, according to Dodge Data & Analytics.

Total new construction starts included among U.S. and Philadelphia commercial real estate listings rose 15 percent in May from the previous month to a seasonally adjusted annual rate of $783.6 billion, according to Dodge. The increase follows a 12 percent decline in April, with total construction activity reaching an eight-month high.

There are, however, signs of slowing for next year. Annual new office construction starts are declining and deliveries are forecast to peak this year. With supply largely in check with demand in most cities, average U.S. rents grew at roughly a 2 percent rate while occupancy hovered near 90 percent during the first quarter, according to CoStar Portfolio Strategy data.

Ken Simonson, chief economist for Associated General Contractors, warned growth in private nonresidential spending remains modest and inconsistent. Rising costs for materials and shortages of qualified workers “may stall all kinds of projects,” he said. The rising cost of steel and aluminum, which could stem from higher government tariffs may make some projects unaffordable, according to Associated General Contractors.

Even so, total construction spending in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – is projected to increase by double digits in Nevada, Arizona, New Mexico, Missouri, Florida, Maryland, and Virginia in 2018, according to FMI’s Bowman. In addition, this spending is increasingly concentrated, with 20 U.S. markets representing half of all expenditures over the next five years. At the state level, California, Texas, Florida and New York comprise 50 percent of total construction spending.

Total spending next year in relation to both national and Philadelphia commercial real estate listings is forecast to increase at a slightly lower 5 percent, still well above the historical rate of inflation, Bowman said.

For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Zeroing in on Center City Philadelphia’s Tightest Office Micro Markets

Market Street West – the portion of Market Street running from City Hall to 21st Street – is seen by most Philadelphia office space brokers and investors as Center City’s premier office district, and with good reason.

Public transit access is exceptional along that corridor, which is home to more than 12 million square feet of Philly office space, Philly retail space and Philly industrial space as part of the U.S. commercial real estate market. This is more than double the amount of office space located on other major Center City thoroughfares such as JFK Boulevard, South Broad Street, or Market Street East.

This CoStar report is being offered through Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm specializing in Philadelphia commercial real estate listings.

However, Market Street West’s concentration of modern office skyscrapers has made it a favorite among large, publicly traded companies based in Philadelphia, a feature which is both a blessing and a curse for local office landlords working in the national and Philadelphia commercial real estate markets.

Clearly, Market Street’s popularity among large tenants is a plus for landlords that can retain them. Giant long-term leases by companies such as Independence Blue Cross or Beneficial Bancorp help some office owners keep large portions of their national and Philadelphia commercial real estate properties filled for years or even decades on end.

The problem is that thanks to high business costs, Center City’s Philadelphia office space does not have a strong track record when it comes to attracting and retaining large corporate headquarters among U.S. and Philadelphia commercial real estate listings. Many of Philadelphia’s largest white-collar employers such as Sunoco, Dow Chemical and PNC have all either vacated or downsized their Market Street office space in recent years as part of cost-cutting efforts.

The result is that, in terms of the percentage of office availability rates, Market Street West does not currently stand out as particularly tight in the overall U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space.

The tightest Philadelphia office space micro markets (in terms of both physical vacancy rates and percentage of space listed as available for lease) among all national and Philadelphia commercial real estate listings currently are Rittenhouse Square and Logan Square. Both are located a few blocks off Market Street and are home to some of Center City’s most coveted public greenspaces.

In contrast to Market Street West, the bulk of Philly office space stock in the Rittenhouse Square area is comprised of office properties located along Walnut Street, smaller than 350,000 square feet and built before 1970.

These properties cater almost exclusively to tenants looking for Philadelphia office space of less than 15,000 square feet, often in industries like legal services, healthcare, and accounting. These mostly privately-held firms do not face the same scrutiny from public shareholders and as a result, are less likely to relocate out of Center City to cut costs.

For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

Bala Cynwyd Office Market Appears to be on the Rebound

Bala Cynwyd’s office market, while not currently experiencing five percent rent growth, currently is experiencing its highest occupancy rate in 15 years – 92 percent – and has seen gradual tightening annually since 2010.

Coming out of the Great Recession, Bala Cynwyd struggled to compete for office tenants in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – with nearby suburbs like Conshohocken or Radnor, both of which offer prospective lessees a larger stock of newer or more recently renovated office properties.

However, a gradual progression of development and renovation projects in the national and Philadelphia commercial real estate markets has helped Bala Cynwyd reassert its competitive edge.

This report on U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

The 2007 opening of a 120,000 square foot Target across City Line Avenue from Bala Cynwyd added an additional anchor for retail traffic to the area’s national and Philadelphia commercial real estate properties. That new Target had helped support a range of popular restaurants along the periphery of the relatively new shopping center, including California Pizza Kitchen, Naf Naf Grill and Starbucks.

Since then, more than 750,000 square feet of office space comprising U.S. and Philadelphia commercial real estate listings has been renovated along the portion of City Line Ave., stretching from Interstate 76 to the Bala Regional Rail Station at Conshohocken Road. Lower Merion Township also approved new zoning ordinances to promote dense, mixed-use, and transit-friendly development, and Post Brothers renovated and up-scaled roughly 1,000 apartment units at Presidential City.

Office owners in this area of the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – are beginning to see the benefits of these upgrades as existing financial tenants such as Investedge and Allied Mortgage both chose to stay in Bala Cynywd and expand their office space within the submarket during 2017.

For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.

The Impact of Energy Efficient Building Upgrades on NOI and Asset Value

Energy Conservation Measures (ECM) or efficient building upgrades which include LED Lighting, Plumbing and Mechanical and HVAC upgrades, are proven to reduce energy and operating costs. Mechanical and HVAC upgrades could include Building Management Systems, Variable Frequency Drives on fans, pumps and motors, Free Cooling, installation of Condensing Boilers and Demand Based Domestic Water Boosters to name a few opportunities to reduce costs.
Investing in energy efficiency can yield a Return on Investment (ROI) of 30 to 40%, and an improvement in Net Operating Income (NOI) and significant Valuation Enhancement. By reducing energy and operating expenses NOI can be quickly improved giving the owner increased profits and/or a competitive advantage in the market.

NOI improvements from ECMs can be achieved in Hospitality, High and Low Rise, single and multi-tenant Office buildings, Manufacturing and Distribution Centers as well as High and Low rise multi-family buildings. Today the value of energy efficient upgrades are further increased because of favorable tax treatment – 100% expensing and generous Utility Company Cash Incentives.

Download Printable Article (PDF) >>>

Efficient building upgrades to a property 10 years of age or older to deliver:

• Energy Cost Reductions up to 40%
• Overall OpEx Reduction of 5 to 10%
• Value Enhancement of 5 to 15%
• Increased unlevered ROR by ½ to 2%
• Competitive Market Advantage

Energy efficient building upgrades are good for buyers and sellers!

A completed Energy Efficiency project in a 25 Story Office building located in center city Philadelphia reduced annual operating costs by $208,000. The Energy Efficient Measures (ECM) included LED lighting, free-cooling, premium efficiency motors for the condenser and hot water heating pumps with variable frequency drives and Retro-commissioning of the HVAC systems.

In the two tables below observe the actual energy efficiency upgrade costs and the energy cost savings generated by the above mentioned upgrades (Project Matrix) and in the NOI Improvement table the effect these real savings would have on NOI and the “Cap” rate against typical market Rents, OpEx Costs and a hypothetical property value of $33,600,000.

Energy efficient building upgrades offer VALUE ENHANCEMENT

An Owner of a $33,600,000 property making these improvements at a Cap rate of 8.57 would see the value of the
property increased to $36,008,000 due to the improved NOI. This is a 7.2% valuation enhancement or an ≈ $3,000,000 value growth with an ≈ $500,000 investment in CapEx!

Energy efficient building upgrades offer INVESTMENT ENHANCEMENT

A buyer of a $33,600,000 property would realize an increase in their unlevered Rate of Return of .60% in net dollars by installing similar Energy Efficient building upgrades.

Energy efficient building upgrades offer ADDITIONAL BENEFITS

Reduced Maintenance Costs – Another typical benefit of installing ECMs is the reduction in maintenance expense that comes from replacing aging equipment that is in need of repair or replacement. Quite often energy savings derived from certain high ROI ECMs can help offset the cost of equipment replacement.

“Green” Building Tenants Pay Higher Rent – That’s right, a CBRE Global Research and Consulting Review reported that the overall vacancy rate for green buildings was 4 percent lower than for non-green properties—11.7 percent, compared to 15.7 percent—and that LEED-certified buildings routinely commanded the highest rents.

• Higher productivity and better occupant health
• Promotion of a culture of sustainability among all building users
• Reduced environmental impacts
• Improved public image and marketing tools for both landlord and tenant

ABOUT US

Rich Energy Solutions’ experience runs from small to large HVAC efficiency upgrades, wireless Building Management Systems and energy saving LED lighting system upgrades to displacing city steam and chilled water loops, in-house thermal and co-generation plants.

For qualified customers Rich Energy Solutions will conduct free, no obligation on-site building assessments to develop cost savings analyses and system design and provide turn-key installation of all energy conservation measures. The Rich Family has provided construction management, mechanical construction and energy saving solutions in 38 states for public and private businesses since 1918. www.richenergysolutions.com

To learn how Energy Efficiency can impact your NOI contact:

Tony Lepre
Rich Energy Solutions
www.richenergysolutions.com
tlepre@richenergysolutions.com
609.214.5520
(888) 718-RICH

WCRE Opens Center City Philadelphia Office

New Exclusive Assignments and High Volume of Transactions Lead Growing Commercial Real Estate Firm to Expand into Philadelphia’s Central Business District

June 5, 2018 -Marlton, NJ – Wolf Commercial Real Estate (WCRE) is pleased to announce that it will be opening a new office at 1601 Market Street in Philadelphia. This will be the firm’s third office, in addition to its headquarters in Marlton, NJ and an office in King of Prussia that opened in 2014.

Download Printable PDF >>>

“We’ve been serving numerous clients in and around Center City for a while now, so it makes sense to strengthen those relationships by opening an office here,” said Anthony Mannino, chief operating officer of WCRE. “This move will help create more opportunities for our professionals to network and collaborate with clients and partners, and to expand our commitment to community initiatives.”

Since its founding in 2012, WCRE has grown into a market leader in Southern New Jersey and southeastern Pennsylvania. The team has set a new standard in serving the needs of owners, tenants, and investors. The firm currently has more than 175 properties comprising 4.2 million square feet of office, retail, medical, industrial, flex and investment property in the region under exclusive watch.

Along with Mannino, WCRE’s Philadelphia team includes several well-known business leaders with deep roots in the city. Among them are Brian Propp, director of strategic relationships, Andrew Maristch, vice president corporate services & portfolios, Tony Banks, vice president, and Joseph Nassib, sales associate. Each brings a unique skill set, along with energy, passion, and the signature WCRE commitment to the community. Founding principal Jason Wolf, and Lee Fein, a senior vice president and industrial space specialist, will assist the Center City team from their respective bases in Southern NJ and King of Prussia.

Last year WCRE became affiliated with CORFAC International, a network of independently-owned, entrepreneurial commercial real estate firms with 78 offices worldwide. The move has helped elevate the firm and contributed to its latest expansion.

About WCRE

WCRE is a full-service commercial real estate brokerage and advisory firm specializing in office, retail, medical, industrial and investment properties in Southern New Jersey and the Philadelphia region. We provide a complete range of real estate services to commercial property owners, companies, banks, commercial loan servicers, and investors seeking the highest quality of service, proven expertise, and a total commitment to client-focused relationships. Through our intensive focus on our clients’ business goals, our commitment to the community, and our highly personal approach to client service, WCRE is creating a new culture and a higher standard. We go well beyond helping with property transactions and serve as a strategic partner invested in your long term growth and success.

Learn more about WCRE online at www.wolfcre.com, on Twitter & Instagram @WCRE1, and on Facebook at Wolf Commercial Real Estate, LLC. Visit our blog pages at www.southjerseyofficespace.com, www.southjerseyindustrialspace.com, www.southjerseymedicalspace.com, www.southjerseyretailspace.com, www.phillyofficespace.com, www.phillyindustrialspace.com, www.phillymedicalspace.com and www.phillyretailspace.com.

# # #

Is the AIA Contract Set In Stone?

Is the AIA Contract Set In StoneIf you’re in the business of commercial real estate, you are bound to have come across the sometimes dreaded American Institute of Architects (AIA contract), the most commonly used contract for construction projects in the United States. We say that its sometimes dreaded because the form is lengthy and somewhat dense. There is also a misconception that because the contract is a pre-set form, it cannot be negotiated or amended. But as you know, everything can be negotiated.

Download Printable Article (PDF) >>>

Below is a summary of some provisions in the AIA contract that you should pay particular attention to and if needed, should be negotiated in a way that helps your clients. While we are lawyers, the list below should not be taken as legal advice for you or your clients. Each deal and client is different and may require a different review of the contract. Should you need a legal review of a contract, please contact us.

PERIOD OF PERFORMANCE

Make sure that the commencement date and the substantial completion date of the project is a timeframe that makes sense and works for you. Not completing a project on time can lead to delay costs including liquidated damages and other ancillary costs of additional project construction.

PROGRESS PAYMENTS

Contractors want most of their payment at the beginning stages of the project while the other party always wants to hold money for substantial completion. You can negotiate the amounts and trigger dates for payment so that you can protect your client against delays in the project.

INDEMNIFICATION

Indemnification means that one contractual party agrees to assume responsibility for certain judgments resulting from third-party claims against the other party. This clause deserves special attention in every contract and should at the very least be made mutual so that each party gets its costs covered if it is sued because of something caused by the other party.

DELAYS

Delays are inevitable in many different kinds of projects. But the risk of dealing with the fallout from project delays can be managed through contract negotiation. You don’t want your client to bear the brunt of delay costs caused by the other party. Liquidated damages or other compensable damages can be negotiated here.

CONCLUSIONS:

Although the AIA contract is seen as a boilerplate static document, there are important provisions that should be on your radar and amended if necessary so that your client is protected. We suggest that any amendments be drafted by an attorney with experience in construction and ancillary industries.

For more information contact:

Marc Snyderman, Esq.
Snyderman Law Group
923 Haddonfield Road, Suite 300
Cherry Hill, NJ 08002
856.324.8267
E-mail: marc@snydermanlawgroup.com
Website: snydermanlawgroup.com

 

Antonella Colella, Esq.
Snyderman Law Group
923 Haddonfield Road, Suite 300
Cherry Hill, NJ 08002
856.324.8267
E-mail: antonella@snydermanlawgroup.com
Website: snydermanlawgroup.com

Banks Ease Lending Standards for CRE Loans

For the first time in nearly three years, U.S. banks report they have loosened their lending requirements for some types of commercial real estate loans.

The latest Federal Reserve survey of senior loan officers in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – found banks are easing standards and terms on commercial and industrial loans to large and middle-market firms, while leaving loan standards unchanged for small firms.

Meanwhile, banks working in the national and Philadelphia commercial real estate markets eased standards on nonfarm nonresidential loans and tightened standards on multifamily loans. Lending standards on construction and land development loans were left unchanged.

This report involving U.S. and Philadelphia commercial properties is being made through Philadelphia commercial real estate broker Wolf Commercial Real Estate, a Philadelphia commercial real estate brokerage firm.

The survey of senior loan officers on the topic of bank lending practices in both the national and Philadelphia commercial real estate properties market included a special set of questions intended to give policy makers more insight on changes in bank lending policies and demand for commercial real estate loans over the past year. In their responses, banks reported they eased lending terms, including maximum loan size and the spread of loan rates over their cost of funds.

Almost all banks that responded they had eased their credit policies cited more aggressive competition from other banks or nonbank lenders as the reason. A significant percentage of banks dealing in U.S. and Philadelphia commercial real estate listings also mentioned increased tolerance for risk and more favorable or less uncertain outlooks for property prices, for vacancy rates or other fundamentals, and for capitalization rates on properties for easing these credit policies over the past year.

A modest number of domestic banks in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – indicated weaker demand for loans across the three main commercial real estate categories, citing a reduced number of property acquisitions or new developments, rising interest rates, and shifts of customer borrowing to other bank or nonbank sources.

Reports of reduced loan demand involving national and Philadelphia commercial real estate listings coincided with the latest Lending Momentum Index, which tracks the pace of U.S. commercial loan closings. The index fell by 8.8 percent between December 2017 and March 2018.

For more information about Philly office space, Philly retail space and Philly industrial space or other Philadelphia commercial properties, please call 215-799-6900 to speak with Jason Wolf (jason.wolf@wolfcre.com) at Wolf Commercial Real Estate, a leading Philadelphia commercial real estate broker that specializes in Philly office space, Philly retail space and Philly industrial space.

Wolf Commercial Real Estate, a full-service CORFAC International brokerage and advisory firm, is a premier Philadelphia commercial real estate brokerage firm that provides a full range of Philadelphia commercial real estate listings and services, property management services, and marketing commercial offices, medical properties, industrial properties, land properties, retail buildings and other Philadelphia commercial properties for buyers, tenants, investors and sellers.

Wolf Commercial Real Estate, a Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, provides unparalleled expertise in matching companies and individuals seeking new Philly office space, Philly retail space or Philly industrial space with the Philadelphia commercial properties that best meets their needs.

As experts in Philadelphia commercial real estate listings and services, the team at our Philadelphia commercial real estate brokerage firm provides ongoing detailed information about Philadelphia commercial properties to our clients and prospects to help them achieve their real estate goals.  If you are looking for Philly office space, Philly retail space or Philly industrial space for sale or lease, Wolf Commercial Real Estate is the Philadelphia commercial real estate broker you need — a strategic partner who is fully invested in your long-term growth and success.

Please visit our websites for a full listing of South Jersey and Philadelphia commercial properties for lease or sale through our Philadelphia commercial real estate brokerage firm.