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Let’s explore why performing pre-construction due diligence prior to the acquisition of a site or proceeding towards construction is critical.
We’ve heard it all before:
- “Do your homework.”
- “Measure twice….cut once.”
- “A little bit of knowledge is a dangerous thing.”
- “Hindsight is 20/20”
- “Snooze, you lose.”
My father didn’t author any of those lines, but he said them so often I thought he might have. And quite frequently, I can still hear his voice in my head giving me such sage counseling. But it was more than fatherly advice; it was sound advice that helped prepare me for the world of design and construction; as he would say: “Always be prepared.” He never used the term “due diligence;” but I knew what he meant.
Now that I’m all grown up, his words seem even more to the point. Performing pre-construction due diligence prior to the acquisition of a site or proceeding towards construction is critical. You need to protect your interests and investments of time and money, and the best way to accomplish that is to assess potential risks in every
It may sound like a simple task, but it is a complex process to identify and analyze the risks and arrive at sound and level-headed solutions to obstacles that may arise. After that, you’ll need to address and mitigate each through the planning and construction processes. If the obstacles appear too great, or reveal other issues that verge on being unsurmountable, it may be a good time to rethink and retool the project.
Pre-Construction Due diligence must be done for every project, no matter how big or small…be it single family home or multifamily housing, commercial, office or retail, educational or worship, healthcare or hospitality, industrial or government. So, before you take that leap and make the decision to proceed with a site and/or building project, take the time and effort to perform the investigation and assess if it (and its context) are suitable for a particular project, and if it is in balance with the other various risks involved.
Thorough pre-construction due diligence is critical to your project…from the selection of the site, to the designer and builder, delivery method and materials, to compliance, financial assessments and budget. Nothing can place you on a better course than proper pre-construction due diligence. It’s just as my dad said: “measure twice, cut once.”
Paul Stridick, AIA is Director of Design/Build at The Bannett Group. He is an award-winning architect that also has extensive government experience. Prior to joining TBG, Paul was the Director of Community Development for Cherry Hill Township, NJ, a 26-square mile suburban community in the Philadelphia metropolitan area. Before that, he was the Director of the Division of Housing and Community Resources for New Jersey’s Dept. of Community Affairs. His last article “IS THERE AN EASIER WAY TO GET SOMETHING BUILT?” was published on WCRE’s blog in August 2017.
The Bannett Group is a South Jersey firm that was founded in 1970. Since then, we’ve become one of the fastest growing design and construction firms in the region, with a portfolio of work that spans the country. The Bannett Group always views our design & construction services as a set of tools available to complete each job. We’ll pick the best tool or delivery method for each job…general contracting, construction management or even a fully integrated Design-Build package. Whatever the tool, we get the job done. With our steadfast history and fine-tuned in-house talent, we’re able to complete each project on time…on budget…every time.
There have been some proposed modifications to the Philadelphia Mixed Income Housing Bill. On June 22, 2017, City Councilmember Maria Quiñones-Sanchez introduced a bill proposing to provide for new affordable housing requirements in Philadelphia in the commercial real estate context. The bill, as originally drafted, would amend the Housing Code to require residential developers to include affordable housing units in their new and redeveloped residential projects. In return, developers would be rewarded with height and floor-area ratio bonuses. Since its initial introduction in June, the bill has been recently modified by its sponsor as part of the Planning Commission review process, resulting in certain substantive changes to its original form. A November 27 public hearing revealed dissension against the bill from neighborhood groups, housing advocates and developers, resulting in Councilmember Quiñones-Sánchez putting a hold on the bill. Further amendments to rectify the differing viewpoints are to be expected, and another hearing as well as a vote has been scheduled for December 5, 2017.
Background of the proposed modifications to the Philadelphia Mixed Income Housing Bill
Legislating affordable housing requirements in the commercial/residential real estate context is not a new trend in major cities nationwide. San Francisco and New York City, for example, have long had robust mixed income housing programs. Given Philadelphia’s high poverty rate, city officials view this bill as a way to provide increased affordable housing to its residents while still recognizing and meeting the needs of private developers.
Philadelphia Mixed Income Housing Bill NO. 170678
The bill directs private developers of new residential projects or substantially rehabilitated projects containing more than 10 units to set aside 10 percent of the units for affordable housing. The amended bill specifies, however, that its affordable housing requirements do not apply to student or subsidized housing. Under the original bill, the affordable units would have been available to prospective renters whose incomes were between 30 percent and 50 percent of the area median income (AMI) and to purchasers between 50 percent and 80 percent of the AMI, depending on the location of the units. Now, under the amended bill, the units would be available to prospective “low income” renters at or below 50 percent of the AMI and “moderate income” renters at or below 60 percent of the AMI. The amended bill would also make the units available to prospective “low income” purchasers at or below 70 percent of the AMI and “moderate income” purchasers at or below 80 percent of the AMI.
Originally, the bill applied to the entire city; as amended, however, the bill would only affect high-density zoning districts of RM-4, RMX-3, CMX-3, CMX-4 and CMX-5. These modifications result in both the affordable housing requirements and the incentives offered being inapplicable in zoning districts other than those listed above. The bill defines an affordable unit as one whose cost—whether rental or purchase—is 30 percent or less of the applicable maximum qualifying income level. These units were initially proposed to them should they opt to build affordable units. The amended bill grants substantial height and floor-area bonuses to developers who incorporate the affordable housing proposals, although the specifics of these bonuses may change in the next version of the bill. These developers will have enhanced development opportunities as a result of their assistance in providing homes to a wide range of Philadelphians.
The bill, if passed into law, would go into effect on July 1, 2018. Should it pass, the bill will not apply to construction pursuant to valid zoning permit applications that were filed prior to the effective date. Currently, a Rules Committee public meeting and the vote on the bill have been set for Tuesday, December 5, 2017.
Want More Information about the proposed modifications to the Philadelphia Mixed Income Housing Bill?
This Alert has been authored by Aaron R. Feinblatt, an associate in Duane Morris’ Real Estate Practice Group. If you have any questions about this Alert or otherwise, please contact Brad A. Molotsky at 856-874-4243.
Let’s set the stage for a Successful Commercial Move. Every move is challenging, but a commercial move has so many moving parts to it that it can seem like an overwhelming task. You have two options: coordinate the project yourself, or look to outsource it. If your relocation needs to be a seamless transition that doesn’t impact your day-to-day business, then the most expedient solution is to partner with a commercial move expert who has a field-tested logistics management program in place. So what is a logistics management program? It’s a 5-step protocol that relocation experts use to keep a project on budget and on time. Before you hire a company, interview several candidates, and see which ones will approach your move with these proven parameters:
Successful Commercial Move Step #1: Relocation Plan & Objectives
Your Logistics Coordinator should develop a project overview and outline that encapsulates all the details involved in your relocation, including:
• Projected timeframe
• Goals and budget
• Space evaluation
• Asset inventory/furniture analysis
• Space planning
• Contents move plan and asset liquidation
• Computer/phone/data migration
Successful Commercial Move Step #2: Physical Survey
An on-site logistics team should survey both the origin and destination locations in order to provide a comprehensive detailed work overview. It’s important to identify property/building management requirements and specifications so that decommissioning at the current office space complies with the guidelines, and any build-outs required at the new office space are completed prior to move day. A physical survey is especially important when relocating stock from several different locations — office, store, or warehouse. Each venue requires an entirely different logistical approach, so don’t assume just giving the logistics team the square footage total is enough information. Nothing takes the place of an actual boots-on-the-ground survey.
Successful Commercial Move Step #3: Budgeting
Your Logistics Coordinator should create a detailed budget that breaks down the move into individual line items. Any vendor services needed should be sent out for comparative bid. Final recommendations should slot into the comprehensive move plan with an associated sub-budget.
• Timeline with confirmed project dates
• Benchmarks and target dates for vendor services
• Budget goals and savings opportunities
Successful Commercial Move Step #4: Finalize Move Plan
Your Logistics Coordinator should develop a final move plan that incorporates all aspects of planning, scheduling, and budgeting. The entire work process should afford you complete transparency throughout your relocation project, so you are an integral part of the move without doing any of the heavy lifting.
Successful Commercial Move Step #5: Project Move Team
Organization and coordination are the foundation to any successful move. Your on-site logistics team should provide real-time updates to you, and act as the liaison with the vendors needed to complete the project. To help you further narrow down your logistics management team options, get answers to these questions when you interview candidates…
Q1. DO YOU HAVE MOVE EXPERIENCE IN MY SPECIFIC INDUSTRY?
When interviewing relocation experts, you should determine whether this company has expertise within your specific industry.
Special handling and insight is required when moving delicate medical and IT equipment, expensive pianos, or irreplaceable art.
If your commercial relocation involves any unique capabilities and resources, don’t settle for anything less. Industries that have
special moving needs include laboratories and hospitals, hotels, restaurants and bars, and libraries and museums.
Q2. DO YOU STORE DOCUMENTS AND RECORDS?
A well-appointed commercial specialist should offer records storage and document management solutions, where records and files
can be kept safe and accessible.
Q3. DO YOU OFFER SHREDDING SERVICES?
A full-service commercial professional should offer shred-on-demand services, as well as weekly shredding programs where pick up
Q4. CAN YOU DISPOSE OF THE FURNITURE AND ELECTRONICS THAT THE OFFICE NO LONGER NEEDS?
A solid relocation expert should provide purge services, and remove old, unwanted items for you. You’ll want a sustainable recycling
partner to handle plastics, metals, wood, paper and e-waste accordingly.
Q5. ARE YOUR MOVING PRACTICES SUSTAINABLE?
A reputable commercial relocation expert should have many options for unwanted furniture and equipment that doesn’t involve a
landfill. From recycling to liquidation to donation, a commercial move should not hurt the earth.
Q6. CAN YOU COORDINATE OFFICE AND RESIDENTIAL RELOCATION FOR THE ENTIRE COMPANY?
For a commercial relocation that involves a great distance, look for a logistics management team that can handle all the relocation
needs of both company and employees alike. Why? A comprehensive move plan that can coordinate the office relocation along with
the employees’ residential moves will transfer everything at the same time to maximize efficiency and minimize downtime.
A commercial relocation is a major step for any business. Make it your business to hire the best full-service professional for the job.
FOR MORE INFORMATION, CONTACT:
ABOUT ARGOSY MANAGEMENT GROUP, LLC
Argosy Management Group (AMG) is a leader in office relocation and logistics project/move management. AMG services companies throughout the U.S.
and worldwide. AMG delivers a wide range of comprehensive services: move management and transition planning, space planning and furniture needs,
office and industrial relocation and liquidation, storage solutions and asset management, furniture disassembly and installation, and I.T./data center
In its Fourth Year, WCRE’s Thanksgiving Food Drive Brings A Community Together
Wolf Commercial Real Estate (WCRE) wrapped up its fourth annual Thanksgiving Food Drive today by delivering 130 bags of food and $1,200 in supermarket gift cards to the Jewish Family and Children’s Service food pantry.
As in previous years, the firm spent the past several weeks collecting food and grocery store gift cards from friends, clients, and colleagues throughout the region. More than thirty area businesses contributed to the effort.
“Over the course of just a few years, WCRE has become an integral charitable partner in our efforts,” said Marla Meyers, MSW, executive director of Samost Jewish Family and Children’s Services of Southern New Jersey. “We thank Jason Wolf and the entire WCRE team for their generosity and leadership today and throughout the year.”
The food drive is part of WCRE’s Community Commitment program, which also includes donating a portion of the proceeds from every transaction to one of several local charities. In September the firm hosted its second annual celebrity charity hockey game, in which local business leaders played alongside several former Philadelphia Flyers. That event raised more than $65,000 that was shared among several local charities.
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.
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Let’s look at ways to encourage office creativity. Most people think that working hard is the most effective way of working. However, that is not always the case. A great way to accomplish everything on your to-do list is to do smart work instead of hard work. To encourage office creativity and welcome various thoughts from different channels at the work place, there needs to be a collaborative working environment. Here is a list of activities that will help you achieve maximum levels of creativity within your office.
1. Arrange for some games that encourage a team-building attitude to encourage office creativity
You should plan a small game for your employees and schedule it once every few weeks. Introduce such games that are to be played between teams. This will help you to educate your staff about the importance and benefits of team work.
2. Entertain employee suggestions to encourage office creativity
You should dedicate an area where employees can come and share their creative thoughts or suggestions. You can hang a notice board in a corner so that the employees may write their thoughts on paper and pin it on the notice board or you can place a suggestion box where employees can raise their concerns without revealing their identity. Make sure that you value their suggestions and reward them for creative ideas.
A notice board is preferable, as the content on the board can be seen by other employees as well and it provides a platform to interact. Employees can pin up suggestions as well as any challenges they are facing while accomplishing any given task. This way they will get input from others to get problems solved. This improves collaboration and teamwork.
If you have a huge office with thousands of employees, you can replace notice boards with digital
3. Encourage brainstorming to encourage office creativity
Brainstorming sessions are the best way to get the creative ideas flowing. Try to make every employee a part of the brainstorming sessions where everyone should be given freedom to express their thoughts.
4. Treat all your employees equally to encourage office creativity
A workplace is full of people with different backgrounds and thoughts. Everyone must be treated equally, and there should not be any bias to any particular group of employees. Plan a few informal get-togethers’ where all the employees gather and spend few hours together irrespective of their designation in the workplace. It is an awesome sight to see the director talking to a trainee and getting to know about him/her; an accounts person talking to a technical person and sharing thoughts; and many more such interactions. This is the sign of a great work culture within an organization.
Creativity is directly linked to the flow of ideas. The better the flow of ideas, the more creative your team will be. Creative resources are the assets of an organization and the creative atmosphere results in the best quality output. Give it a try today and let us know how successful your working environment
Josh Smargiassi: Principal
6950 Sherman Lane
Pennsauken, NJ 08110
Do you own an older building or is your building subject to significant building code changes, if it needed to be rebuilt? If so, then you may need Building Ordinance and Law insurance.
Most insurance policies are written to allow a building owner to rebuild to the condition it was in prior to the loss. If an ordinance requires more, such as being brought up to code if it sustains more than 50 percent damage to the entire structure, an owner could be facing significant ou tof-pocket expenses, which may range from slight modifications (installing hard-wired smoke detectors) to vastly more complicated and expensive modifications (installing fire sprinklers). To combat the cost of these projects, building owners can purchase Ordinance and Law Insurance. This protects an owner or association against losses resulting from the enforcement of new laws or ordinances, or changes to existing laws.
Ordinance and Law Insurance also protects against losses after a disaster. It serves to cover the following losses:
- Covers losses for rebuilding a portion of a structure when part of it is damaged from a fire.
- Covers losses when new building codes require that a partially damaged structure be torn down
and rebuilt, versus repaired after a loss.
- Covers losses when associations must install improvements that were not part of an existing
structure before a disaster.
Ordinance and Law Insurance Coverage Details:
- Demolition Coverage: If the undamaged portion of a structure must be demolished to rebuild the
entire structure to comply with building codes, this coverage pays for the cost to demolish the
undamaged part of the structure.
- Loss of Value: If the undamaged portion of a structure was not technically “damaged” based on
the verbiage in a typical fire protection policy, then this coverage pays for the loss to rebuild the
undamaged part of the building.
- Increased Cost of Construction: Coverage pays for increased expenses for getting a building up to
code, or to repair a damaged building that currently met building codes prior to a loss.
Ordinance and Law Insurance is Common Sense
Ordinance and Law Insurance is excluded from a typical Property Insurance policy but can be added as an endorsement for a reasonable premium. It is common sense that owners of older structures with greater exposures should purchase this policy to cover “losses” for repairs. To determine if you need this coverage, review your policy and contact Hardenbergh Insurance Group to discuss your exposures. We’re always here to help!
For more information, contact:
Hardenbergh Insurance Group
phone: 856.489.9100 x 139
Open Floor Plans: No issue generates more discussion in our industry than the architectural Pandora’s box: commercial open floor plans. In cities like Philadelphia, the workforce now skews younger; millennials tend to favor collaborative work environments. An open floor plan doesn’t intimidate them—they’re used to team cultures from their college years onward. However, wide-open spaces aren’t necessarily productive ones for an older generation that cherishes the privacy of four solid walls and a door. Per a 2017 Forbes Coaches’ Council blog post, the pros and cons of an open floor plan are subjectively debatable.
open floor plans can simultaneously:
• Disrupt deep work
• Offer a 360-degree viewpoint
• Drain introverts
• Foster inclusion and communication
An approach to open floor plans coincides with a crucial point in the article: it depends on your culture and line of work. If your company encourages constant collaboration as part of the workflow process, a hybrid open floor plan is a good idea. That’s because: you’ll still need secure spaces for confidential meetings. (We’ve NEVER seen a completely open floor plan!)
Industries most conducive to modified open floor plans include:
• Creative-design or engineering firms
• Light-industrial production and staff assembly
• Product engineering and fabrication
• Small offices with tight spaces
• Technology start-ups
The practical benefits of an open floor plans:
1. Reduced wall, door, and partition costs
2. Lighting can be an open grid
3. Day lighting can flood the space better
4. Both fire suppression and HVAC design are easier
5. More people can occupy less dense floor plans.
Whether you’re a light-industrial manufacturer in need of collaborative design-fabrication space or a business suffocating from “we’re all walls” syndrome, A corporate or industrial architectural firm can reformulate the ideal layout. To discuss opening up your workplace, please contact us at either 856-547-6414 or firstname.lastname@example.org. Anchor Point Architecture, Inc.
About Anchor Point Architecture, Inc.
Our clients, CEO’s, Facility Managers and Investors are Building projects in the Industrial Fabrication, Corporate office and Real Estate Development Project Sectors. They find value in early Budgets, Planning approval assistance and Design that improves Branding and Employee increased productivity.
Eliseo “Lee”: DiPrinzio, RA, PP
Anchor Point Architecture, Inc.
Audubon, NJ – Princeton – Philadelphia
Let’s explore Corporate Owned Real Estate. A frequent mistake made by small business owners is to have the operating corporation own the real estate, or to have a separate C corporation own the property and lease it to the business. The reason is that when the company eventually disposes of the property, usually after it has significantly appreciated and been substantially depreciated, a double tax bill will result. First, the corporation will be taxed on the appreciation upon the disposition of the real estate, and then, the shareholder(s) will be taxed on the proceeds of the disposition when they are distributed to them as a dividend or through liquidation. The tax traps are not limited to C corporations. Holding real estate in an S corporation has its own pitfalls. Mortgage debt does not constitute “basis” for tax losses when the accompanying real estate is owned in an S corporation. As most real estate investments yield potentially deductible losses after factoring depreciation on the structure, this could eliminate the tax benefits for a great deal of investors. There are great alternatives to corporate owned real estate.
A Better Approach to Corporate Owned Real Estate
A better approach than corporate owned real estate is for the business owners to own the real estate personally in a limited liability company or in a partnership with other investors, and then lease it to the operating business. Among the advantages:
• The business owner can sell the real estate interest for his or her own account, avoiding tax at the corporate level.
• The owner can refinance the property for his or her own benefit.
• Lease payments received by the property owner are not subject to employment taxes and are deductible by the company as a business expense.
• If the property owner dies while still owning the property, heirs will get it at its stepped-up basis, eliminating tax on all of the gain resulting from appreciation.
It’s particularly important for small business owners to engage in careful tax planning with respect to real estate being acquired for use by their business, and we receive frequent requests for assistance with appropriate tax strategies.
While we’re talking real estate and hopefully that which is not titled in corporate form, do you own a property that has appreciated considerably and that you want to sell? Are you concerned about incurring a large capital
gains tax liability? One option is to structure the sale as an installment sale. Here the buyer pays the cost of the property plus interest in regular installments, frequently for a period of 5 years, enabling the seller to reflect the capital gain for tax purposes over the entire payment period. Sellers who decide on this strategy are cautioned, however, that an installment sale carries more risk than an outright sale of the property. Thus, the seller needs to:
• Carefully assess the creditworthiness of the buyer and possibly obtain personal guarantees, if the purchaser is a business.
• Evaluate the future income producing capability of the property to make sure it provides sufficient cash flow to enable the buyer to make the payments.
• Use an interest rate that is competitive with current market rates in the area so as not to squash the deal.
• Obtain a down payment of at least 20% to have a cushion in the event of buyer default, and to cover the expenses if foreclosure becomes necessary.
Similarly, a topic for another alert is our frequently suggested use of Section 1031 which provides an alternative strategy for deferring the capital gains tax that may arise from a business/investment property sale. As of the writing of this Abo and Company Tip-of-the Month, we’ve read that the days of deferring 100% of gain via likekind
exchanges of real-estate could be numbered if the much talked about tax reform occurs in this particular arena does take place. Republican lawmakers are seeking tax breaks to trim or scrap to offset the cost of significantly cutting the income tax rate for businesses. We’ve seen tax-free real estate exchanges/swaps targeted before nixing like-kind swaps, immediately taxing the full amount of gain or in President Obama’s proposal to cap the deferral at $1 million. If the deferral is curbed, we don’t think the break will be axed retroactively but who really knows at this point.
Business property transactions are often complex, and the services of a knowledgeable CPA (hopefully we at Abo and Company) can be vital in developing strategies that make it possible to bring a contemplated transaction to a successful conclusion.
FOR MORE INFORMATION:
Martin H. Abo, CPA/ABV/CVA/CFF is a principal 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.
With the fall season in full swing, it’s time to start preparing commercial HVAC systems for winter, well before Ol’ Man Winter comes to town. Hutchinson, a leading energy services and mechanical services contractor serving the region’s commercial customers, offers tips to help add life to your systems, enhance comfort and improve your bottom line.
Five Tips for Preparing Commercial HVAC Systems for Winter
1. Use Energy Star Portfolio Manager
Use Energy Star Portfolio Manager to see how your building rates with other similar buildings. If you rate low, there are many things you can do to improve the operation of your building.
2. Check HVAC settings
Check HVAC settings to get maximum efficiency. Set your thermostat at 68°during the day and at 60° at night. You can save approximately 3% on heating costs for every degree under 70.
3. Install a programmable thermostat.
A web and cloud based control system offers peace of mind by keeping settings maintained during and after office hours.
4. Establish a preventive maintenance program.
• Change or clean all air filters, preferably every month.
• Repair leaks in piping, air duct s, coils, fittings and at the unit(s).
• Replace defective equipment insulation, ducting and piping.
• Install/upgrade HVAC controls to include new energy management systems technologies.
5. Clean Heating Ducts
Heating ducts should be cleaned periodically to allow efficient heating and provide fresh, clean air. Also check to make sure the ducts are properly insulated.
6. Take Advantage of Energy Efficiency Programs
Hutchinson is a designated contractor of Direct Install, a program offered by New Jersey Office of Clean Energy. Upgrade to energy efficiency with Direct Install and 70% of the cost will be covered for energy upgrades, including lighting and HVAC equipment. Instead of pumping money into your outdated, inefficient units, why not upgrade to a new, state-of the-art energyefficient system?
7. Conduct daytime/nighttime audits.
Check to see if the lights are on. Is the building comfortable? Make adjustments as needed.
Contact Hutchinson at 888-777-4501 or email@example.com for help preparing commercial HVAC systems for winter
Hutchinson is a leading energy/mechanical service contractor performing energy services, mechanical construction and retrofit installation work in the Greater Philadelphia Tri-State Region. Hutchinson’s
technicians are factory trained, NATE certified and are on-call 24/7 365 days a year. Visit www.hutchbiz.com for more information.
Let’s explore fixtures, trade fixtures and who owns what at lease expiration. In order to facilitate a smooth transition between commercial tenants, it is important for landlords to understand their rights regarding items attached to their property. Generally, a lease will govern these rights. However, if the lease is silent on the issue, articles annexed to the property deemed “fixtures” must stay with the property, while articles deemed “trade fixtures” may be removed by a vacating tenant.
In New Jersey, a fixture is an object that “become[s] so related to particular real estate that an interest… arises under real estate law.” N.J.S.A. 12A:2A-309(1)(a). In contrast, an article may be considered to be a trade fixture if: (1) the article is annexed to the property for the purpose of aiding in the conduct of a trade or business exercised on the premises; and (2) the article is capable of removal from the premises without material injury thereto. Handler v. Horns, 2 N.J. 18, 24-25 (1949). As such, an important distinction between fixtures and trade fixtures is whether removal of the item will cause material injury to the premises. See e.g. GMC v. City of Linden, 150 N.J. 522, 534 (1997). In applying this test, courts infer that if removal of an article would cause material injury to the premises, the parties must have intended for the article to remain beyond the lease term. Id.
A typical conflict involving this nuanced distinction may involve a vacating tenant removing an item from the leased premises under the assumption that it was (1) attached to the premises for the purpose of conducting a trade or business; and (2) capable of removal without material injury to the premises. A landlord may dispute one or more of these assumptions, arguing that the article was not used in the conduct of business (that it was in fact attached to improve the structure) or is not capable of removal without material injury to the premises. Over the years, vacating tenants have attempted to remove countless items from leased premises, including air conditioning systems, irrigation systems, bolted down light fixtures and even circuit breaker panels, by arguing these items were trade fixtures. See e.g. In re Jackson Tanker Corp., 69 B.R. 850 (Bankr. S.D.N.Y. 1987).
However, it isn’t difficult to imagine a hypothetical where the traditional landlord and tenant arguments are reversed – that is, where the tenant argues that the article must remain with the property and the landlord argues that the tenant is responsible for its removal. This unusual fact pattern may especially arise where the tenant’s business is specialized in nature, and where equipment is not easily removed from the premises.
For example, Landlord rents out space to Tenant, who plans on operating a restaurant. The lease does not specifically address what does and does not constitute a trade fixture. Tenant plans on installing a walk in freezer and other specialized, complex systems. After several years of operating, Tenant declines to renew the lease, closes, and vacates the premises. Tenant removes the furniture, appliances not fixed to the premises and other items it deems to be trade fixtures and leaves the walk-in freezer infrastructure.
Tenant refuses to remove the walk-in freezer, arguing its removal will cause substantial damage to the premises. Unable to re-let the premises to a restaurant tenant, Landlord is left with a walk-in freezer occupying a substantial portion of the premises.
It is important that during the lease negotiation, landlords think carefully about the business their prospective tenant is in, the kinds of equipment the tenant will install and what will happen to that equipment upon termination of the lease. This same thought process applies when landlords receive requests for alterations. In the above hypothetical, Landlord could have avoided being left with a walk-in freezer and a less than desirable space if it addressed the issue during negotiation of the lease. A discussion with prospective tenants concerning the specific kinds equipment the tenant will install is always a good idea, followed by specifications and drawings for approval. Landlords are wise to reduce these conversations to writing, and specifically address each party’s expectations regarding the disposition of specific equipment when the lease inevitably comes to an end. As always, an ounce of prevention is worth a pound of cure.
The contents of this article are for informational purposes only and none of these materials is offered, nor should be construed, as legal advice or a legal opinion based on any specific facts or circumstances.
William F. Hanna, Esquire
Hyland Levin LLP
6000 Sagemore Drive, Suite 6301
Marlton, NJ 08053-3900
SOUTHERN NEW JERSEY & PHILLY CRE MARKETS PERFORMING STEADILY
October 6, 2017 – Marlton, NJ – Commercial real estate brokerage WCRE reported in its latest quarterly analysis that the Southern New Jersey market is in good shape, but remains in somewhat of a holding pattern.
“For most of 2017 we have seen an overall positive tone and conditions that usually indicate a period of strength,” said Jason Wolf, founder and managing principal of WCRE. “The national economy has been adding jobs, the financial markets are on a hot streak, and our market continues to attract outside investors – yet increased activity and enthusiasm are tempered by trouble in the retail sector and uncertainty related to current events.”
There were approximately 421,113 square feet of new leases and renewals executed in the three counties surveyed (Burlington, Camden and Gloucester), which represents an increase of approximately 6.6 percent compared with the previous quarter, and a 15 percent increase over the same period last year. While leasing showed moderate gains, the sales market was quite active during the third quarter, with more than 1.76 million square feet worth more than $105 million of completed sales transactions trading hands.
New leasing activity accounted for approximately 43.3 percent of all deals. Overall, net absorption for the quarter was in the range of approximately 91,600 square feet.
Other office market highlights from the report:
- Overall vacancy in the market is now approximately 9.75 percent, which is a solid improvement over the previous quarter.
- Average rents for Class A & B product continue to show strong support in the range of $10.00-$14.50/sf NNN or $20.00-$24.50/sf gross for the deals completed during the quarter. These averages have stayed within this range for most of this year.
- Vacancy in Camden County maintained its dramatic improvement, standing at 10.8 percent for the quarter, down from 13.3 percent at the beginning of the year.
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 first quarter in Pennsylvania include:
- The Philadelphia industrial market continues its hot streak, and the outlook is positive. Vacancy rates for flex and industrial properties in Philadelphia are well below the regional and national averages, and this is expected to continue.
- Philadelphia’s office market continues to gain strength across the board, with far lower vacancy rates than regional and national averages for both Class A and Class B properties in the Central Business District and the suburbs. We see increasing employment and new construction, both of which bode well for continued strength.
- The Philadelphia retail sector is the one area that is not performing well. It has been affected by the same challenges facing retail businesses everywhere. Namely, the massive shift to online retailing and away from brick-and-mortar. Still, there were some positive signs amid the announced store closings and bankruptcies. Community shopping centers remain an area of strength in the market, with vacancy rates nearly half the national average.
WCRE also reports on the Southern New Jersey and Philadelphia retail market, noting slight declines in consumer confidence and related metrics as the third quarter wound down. Overall retail sales were 3.2 percent higher this year compared to 2016, and were likely impacted by the major hurricanes affecting Texas and Florida in late August and early September. Highlights from the retail section of the report include:
- Retail vacancy in Camden County stood at 9.5 percent, with average rents in the range of $12.47/sf NNN.
- Retail vacancy in Burlington County stood at 10.7 percent, with average rents in the range of $13.38/sf NNN.
- Retail vacancy in Gloucester County stood at 7.9 percent, with average rents in the range of $14.10/sf NNN.
The full report is available upon request.
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 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.
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Let’s explore some cost effective tips for furnishing a new office. Working conditions play a significant role in the output of one’s work. There is no secret that your mood and overall productivity are impacted by your surroundings. Whenever you either walk into work or relocate to a new facility, you’ll want an office space that keeps your employees/staff happy, engaged, and focused. Here are some ways to furnish your new office that won’t break the bank:
When Furnishing a New Office: BUY PRE-OWNED:
Generally, the highest cost associated in designing an office comes from the office furniture itself. If you are on a tight budget, we highly recommend that you consider pre-owned or certified preowned. That’s where we come in. At Boomerang, we specialize in pre-owned and new office furniture for businesses. We take unwanted or gently used office furniture and add our creative refurbishing techniques to make your furniture seem new.
When Furnishing a New Office: DETAILS ARE EVERYTHING:
The first step to consider before buying office furniture is to get a better understanding of what your space is and what your space is not. Setting a proper budget includes designing a layout and location of each office and cubicle that is conducive to your work environment. This will help to avoid any unforeseen circumstances which may occur in the future. Furnishing ultimately depends on your budget and the industry you operate in, that’s why we recommend hiring professionals to design your space.
When Furnishing a New Office: BRING THE OUTSIDE…IN:
Indoor plants and flowers are known to improve productivity and the general mood amongst employees. You can use a variety of plants which survive year round with little to no maintenance. If indoor plants sound bothersome to you, then you can always try to make the best use of your windows. Using the ledges can make your working place feel more at home and can even lower anxiety. Furniture that uses untreated wood or live edge wood tables can also help in creating an outdoor feel in the office. The idea is to stay close to nature.
When Furnishing a New Office: ADD A SPLASH OF COLOR:
Sometimes small upgrades tend to have much more impact than a huge renovation. A splash of bright colors will do wonders. Putting beautiful colors on the white walls of your office will make your office vibrant creating a positive and productive atmosphere.
When Furnishing a New Office: END WITH A CREATIVE FLAIR:
You should use modern technologies and “fun” items to give the finishing touch to your office space. Add fun creative items like pictures, a creative wall, drawings, murals, or even millennial items into your office. Pending on the type of business you have, it’s important to make your working environment fun! Adding items that work well for millennials such as ping pong tables, pool tables, and other recreational pieces. We hope you consider each tip when you furnish your next office.
FOR MORE INFORMATION CONTACT:
Josh Smargiassi: Principal
6950 Sherman Lane
Pennsauken, NJ 08110