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Monthly Archives: December 2019


Winter Weather Liabilities

Winter Weather LiabilitiesLet’s explore some winter weather liabilities. The winter months bring more than just cold weather and shorter days; they bring the possibility for winter weather and storms that may result in a snow and ice-covered landscape. While it may be a winter wonderland for some, as a property manager, snow and ice buildup means a hazard with the potential for costly liability.

If you deal with either commercial or residential property, you are responsible for the side effects of winter. In legal terms, snow and ice are the same as any other hazard presented on a property, and just like any other hazard, property managers can be held liable if they cause injury. To avoid litigation resulting from winter injuries, it is important that you are vigilant in your snow and ice removal efforts.

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RECOGNIZING AND PREVENTING HAZARDS

Winter brings a variety of hazards that you need to prepare for; slips and falls are by far the most common injury associated with winter weather conditions. Diligent snow and ice removal can go far in keeping walkways and parking lots safe. Remove snow quickly after snowfalls, and salt regularly to keep ice from building up.

Not all winter hazards are under foot, however, icicles, along with other accumulations of frozen or heavy snow above walkways and building entrances, can cause serious injury if they fall on those below. Remove icicles and other buildup as soon as possible. If it still appears to present a hazard, consider rerouting foot traffic around the area.

Performing preventative maintenance in the summer and fall can also keep you prepared for winter storms. Make sure eaves are properly installed, and check that downspouts are aimed away from walkways. If eaves leak or downspouts direct water onto walkways, snow that melts in the heat of the day has the potential to freeze and create a hazard with cooler nighttime temperatures.

TRANSFERRING RESPONSIBILITIES TO TENANTS

For smaller residential rentals, such as single family homes or duplexes, the responsibility for snow and ice removal is commonly accepted by the tenant. To make sure responsibility is clearly established in this situation, the lease should include a provision citing the tenants as responsible for any snow and ice removal. This section of the lease should also establish how long after a snowfall the tenant has to clear public areas such as sidewalks, as most municipalities have laws requiring prompt snow removal. It is important to be as specific as possible to avoid any unnecessary liability or disputes after heavy storms.

CONTRACTING SNOW REMOVAL

Based on the size and number of properties you manage and the average snowfall in your area, you may be inclined to contract out snow removal to an independent company. While this can save you the time and costs associated with managing snow removal yourself, it is important that you choose wisely to avoid complicating matters.

First, make sure the contractor has sufficient resources to meet your demands. It is important that they can be onsite quickly after, or even during, a snowfall to make sure walkways and parking areas are cleared. It is also important that they have the equipment and manpower to finish the task quickly to reduce any disruption to tenants’ lives or businesses.

Second, make sure the company you hire carries the proper insurance, covering both its operations and its employees. The last thing you want is to end up being liable for a worker’s injury when liability for injury is the very thing you were trying to avoid. Also, much like the lease agreement with a residential tenant, it is important to specify the conditions and time constraints for removal in writing. When contracting any type of service, it is essential to have a written contract that will guarantee you receive the services you pay for.

It should be noted that hiring a removal service does not absolve you of liability. If the company you hire provides poor service, or simple does not show up at all, you are still the party responsible for any injury resulting from a winter hazard. Make sure to pick a reputable company that you can trust to do a good job, and always have a plan of action for removal if they are unable to complete the work as quickly or effectively as you require.

For additional questions on your risks and exposures, or on appropriate coverages to protect you from liability or costly disputes, contact Hardenbergh Insurance Group today.

For more information, contact:

winter-weather-liabilitiesBrian Blaston
Commercial Lines – Manager
Hardenbergh Insurance Group
phone: 856.489.9100 x 139
fax: 856.673.5955
www.hig.net

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Philadelphia Adopts Building Energy Efficiency Tuneups Requirement

Philadelphia Adopts Building Energy Efficiency Tuneups RequirementPhiladelphia is recently adopted an energy efficiency tuneups requirement for buildings over 50,000 square feet. Beginning in 2021, under a new law adopted by City Council in November and signed by Mayor Jim Kenney on December 10, 2019, many commercial property owners in Philadelphia will be required to conduct energy efficiency tuneups in their buildings.

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The law, Bill No. 190600, requires owners of all nonresidential buildings of 50,000 square feet or larger to either conduct a tuneup to bring existing building energy systems up to a state of good repair or submit a certification of high energy performance to the city’s Office of Sustainability. Approved unanimously by City Council on November 21, 2019, the new law has a stated goal to help cut citywide carbon emissions by 80 percent from 2006 levels by 2050, as well as an interim goal to cut carbon emissions by 25 percent from 2006 levels by 2025. According to numerous studies, energy efficiency tuneups should also produce energy consumption cost savings for building owners and their occupants who may be paying for the energy the building uses. Owners are advised to consult with energy efficiency professionals and to budget for the costs of the assessments and building systems adjustments. Moreover, landlords should seriously consider a review of their lease language to ensure that all parties are aware of and clear on who pays for the energy efficiency upgrades, tuneups and energy consumption at their applicable buildings.

Energy Efficiency Tuneups Requirement Placed in Context

Philadelphia’s move follows on the heels of actions taken by other large U.S. cities to reduce carbon emissions from commercial buildings, a trend that has accelerated in the wake of the Trump administration’s decision to withdraw from the Paris Climate Agreement.

Some cities have established policies that require building upgrades and improvements to achieve specified energy code levels and efficiency standards. By way of example, in April 2019, the New York City Council adopted a building emissions reduction mandate as part of its Climate Mobilization Act, requiring most buildings over 25,000 square feet to achieve emissions reduction benchmarks that are projected to produce a 40 percent overall cut in building emissions by 2030. Moreover, in December 2018, the Washington, D.C., City Council adopted a Building Energy Performance Standard as part of its Clean Energy DC Omnibus Act, requiring owners of buildings over 50,000 square feet to achieve minimum levels of energy efficiency, or improve upon existing efficiency levels, by 2026.

By contrast, Philadelphia’s tuneup requirement is a more modest step forward that should not impose significant costs upon building owners or their tenants to make affirmative energy efficiency improvements.

Philadelphia’s requirement is similar to a policy adopted by the Seattle City Council in March 2016, which requires commercial buildings 50,000 square feet or larger to go through tuneups every five years.

Details of the Efficiency Tuneups Requirement

Nonresidential buildings in Philadelphia that are 200,000 square feet or larger must submit tuneup reports to the Office of Sustainability no later than September 30, 2021. For buildings of at least 100,000 square feet and less than 200,000 square feet, the deadline is September 30, 2022. For buildings of at least 70,000 square feet and less than 100,000 square feet, the deadline is September 30, 2023. And for buildings between 50,000 square feet and 70,000 square feet, the deadline is September 30, 2024. Going forward, regularly scheduled tuneups must be performed no longer than every five years after the prior scheduled tuneup date.

Exemptions apply for buildings that already achieve high levels of energy efficiency. If a building has received a Certified Energy Star score of at least 75 within a year prior to the deadline, no tuneup is required. Alternatively, buildings receiving alternate certifications within three years of the deadline, such as Leadership in Energy and Environmental Design (LEED) Gold (or better) certification or Net-Zero Energy Certification from the International Living Future Institute, are also exempt. Note that there are other exemptions that also apply.

In order to comply with the policy, a qualified engineer or certified energy manager must examine the base building systems of the property that use energy or impact energy consumption, including “building envelope, the HVAC (heating ventilating and air conditioning) systems, conveying systems, domestic hot water systems and electrical lighting systems.” The specialist must produce a written inspection report setting forth findings and recommendations for each inspection element. Following the inspection, each building owner must take corrective action pursuant to the recommendations in the report.

FAILURE TO COMPLY WITH THE REQUIREMENTS CAN SUBJECT A BUILDING OWNER TO FINES AND PENALTIES.

Implications for Building Owners

The bill gives some leeway to the Office of Sustainability to establish regulations that further implement the City Council’s direction, including the qualifications that each tuneup specialist must possess and additional clarity on exemptions from the tuneup requirement.

In this vein, it would behoove commercial property owners in Philadelphia to begin to plan for these requirements now. If an energy efficiency specialist has not already examined the building, owners are advised to consider the retention of a specialist in 2020 and to begin the process of budgeting for the costs of conducting the tuneup and implementing the recommendations. This process will necessarily involve up-front costs. It is possible, and even likely in many cases, that the tuneup will produce savings in utilities expenditures that eventually repay the cost of the tuneup. However, because this process must be repeated every five years, owners should plan now for the possibility that future tuneups may not always pay for themselves and consider what impact their leases have on themselves and their occupants and on who pays for the energy and the upgrades.

For Further Information

If you have any questions about this Alert, please contact Brad A. Molotsky, David Amerikaner, any of the attorneys in the Real Estate Practice Group, attorneys in the Energy Industry Group, attorneys in the Project Development and P3 Group or the attorney in the firm with whom you are regularly in contact.

About Duane Morris

The attorneys at Duane Morris will continue to track this mandate in Philadelphia and related sustainability initiatives around the country that affect owners, tenants and investors in commercial real estate.

Disclaimer: This Alert has been prepared and published for informational purposes only and is not offered, nor should be construed, as legal advice. For more information, please see the firm’s full disclaimer.

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Mixed Messages Cloud the View Toward Clarity in Economic Policy

Analysts had hoped to get some clarity in the past week on both monetary policy and fiscal policy fronts. Instead, with all the recent announcements, reversals, and delays related to trade deals, there were many moving parts with which to contend.

On the monetary policy side, the Fed formalized its intent to keep interest rates in the U.S. economy – along with national and Philadelphia commercial real estate markets – steady for the foreseeable future. This was largely expected, though some comments by Federal Reserve Chairman Jerome Powell suggested an interesting shift in the committee’s mindset over the previous year.

In his most recent press conference, Powell said “even though we’re at 3.5 percent unemployment, there’s actually more slack out there.” And then later, “I like to say the labor market is strong. I don’t really want to say that it’s tight.”

This CoStar Realty Information Inc. report from Robert Calhoun and Matt Powers involving economic issues as they relate to 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 suggestion by a Fed chairman that 3.5 percent unemployment affecting, among other segments of the economy, the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – doesn’t represent maximum employment would have seemed crazy even just three or four years ago and would have been met with incredulity.

We know that to be true because in June of 2016, then-Fed Governor Jerome Powell said, “The unemployment rate has fallen from 10 percent to 5 percent, close to the level that many observers associate with full employment.”

We should congratulate the Fed for being humble about its ability to estimate something unobservable like full employment. You can’t see full employment, but you will know it by its fruits. Those fruits are rising wages and rising inflation.

November’s consumer price index showed little risk of an undue rise in inflation any time soon. While the monthly increase in the core consumer price index (excluding food and energy) was double that of October, the year-over-year increase remained at 2.3.

The Fed bases its inflation target on a measure known as personal consumption expenditure, which tends to run lower than the index due to differing weights. As the core index was most recently 73 basis points above core expenditure, this week’s inflation data suggests that the Fed should continue struggling to meet its inflation target and its resultant effects on U.S. and Philadelphia commercial real estate listings.

As for future wage growth, that depends on continued hiring. Earlier in the week, we got more information on the health of the labor market in the form of the National Federation of Independent Business’s survey. Widespread small business sentiment – as well as the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – appears to have rebounded from uncertainty-driven declines over the last few months.

Plans to increase both capital spending and hiring rebounded strongly, reversing declines that were looking worrisome. The reason for the improvement appears to be better November sales, with more firms reporting an increase in sales than a decline.

Firms were already seeing improvements even before this week’s improved clarity on the outlook. The survey questions about labor tightness and wage growth involving national and Philadelphia commercial real estate properties showed meaningful upticks as well. Given such low recent levels in sentiment across the board, we have been expecting a slowing in growth. While this is still likely, as seen in Friday’s weaker retail sales figure, the most recent small business report says maybe we’ve found a floor.

Last week also provided needed clarity from the fiscal side after weeks of conflicting reports. On Tuesday, the Democrats and Republicans came to an agreement on revamped language for a U.S.-Mexico-Canada trade deal. On Thursday, the U.S. and China reportedly finally agreed to terms on “Phase One” of their trade deal, two months after it was initially reported to be agreed on.

Later is better than never, with the deal reported to call off the planned Dec. 15 tariffs and cut the Sept. 1 tariffs in half. While some details are still lacking and there is no guarantee of further progress, the worst case has been averted. Much like with the Fed, there appears a reduced chance of this issue forcing the U.S. into recession and influencing national and Philadelphia commercial real estate listings. construction. (Robert Calhoun is a managing director and senior economist and Matt Powers is associate director of market analytics for CoStar Market Analytics in New York City.)

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 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.

A Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, Wolf Commercial Real Estate 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.

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People-Centric Change Management

People-Centric Change ManagementPeople don’t change for policies or procedures, and they don’t change because they read a brochure. Rather, people change for other people—for each other or for themselves. This key insight is now shaping successful change management efforts, a concerted push toward a more people-centric inclusive model of change—a democratization of what has previously been conceived as primarily a top-down process.

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This is a welcome evolution. In the past, change management projects in workplaces may have had a tendency to put the needs of leadership above those of the occupants themselves. These efforts could essentially be boiled
down to, “Convince people that what we’re doing is a good idea.” But that is not really a change management effort—it is an advertising campaign. It treats as a foregone conclusion that people actually want and need the proposed transformation to happen, and that the plan as presented is already as good as it can get. Broadly speaking, neither of those things tend to be true.

Effective change management is neither solely top-down nor bottom-up. Everyone in an organization has a contribution to make in co-creating workplace transformation, even if that role is just to convince the person sitting next to them. Leaders help steer the ship. Individual team members can play a role in advocating for the kinds of change they want to see. Managers stand in the middle, and serve the interests of those both above and below, hopefully both accurately and positively.

BUILD TRUST THROUGH ENGAGEMENT

Even if a transformation such as a move to Activity-Based Working is likely to improve the experience of employees, they may still resist. The problem is not that employees are stodgy sticks-in-the-mud who are unwilling to change. The problem is psychology. Most people exhibit some degree of loss aversion bias; they are generally more worried about losing what they have than they are excited about getting something new that may be even better.

People do have some reason to be skeptical of change. After all, a years-long downward trend in job security and people-centric investments such as training and benefits has already eroded some of the trust that once existed between employers and employees. When commenters accidentally (or wryly) refer to a “war on talent”, they
may not be wrong. Establishing trust is a prerequisite.

The starting point of any change effort must be empathy; it is the responsibility of those advocating for change to work to understand the source of resistance and address it, if possible. People also may have what Robert Kegan and Lisa Lahey call competing commitments. Those who are resisting change usually have some good reason for doing so, even if their rationale remains hidden from view. As the team at Unwritten Labs often points out, the culture of an organization is full of unwritten rules and codes of behavior, and violating those expectations can cause people to get upset. Simply arguing more forcefully will not make them suddenly decide to go along with the plan. They may, in fact, dig in.

For example, think of a tech-enabled flexible work environment—perhaps even an unassigned environment using something like hot–desking. Before adopting this way of working, an occupant of a traditional desk can only think about what they’re giving up: a place of their own with their name on it. Attached to this furniture may be their sense of privacy or feelings of status within the organization. When someone tries to take it away, their very identity can feel threatened. On the other hand, with the current setup, they have learned to ignore the fact that they might have a filing cabinet on either side of them, or that they cannot see a window, or that they are surrounded by cube dividers that are only a few feet wider than their elbows.

Reminding people of the many ways they have adapted to a non-optimal situation helps to create what change management expert John Kotter calls the “burning platform”—it motivates those who are reticent to make the leap. This is necessary because people differ in the propensity to accept change. An adjustment that seems insignificant to one person may be upsetting or even alienating to someone else. Though it’s often invoked in discussion of technology adoption, Roger’s diffusion of innovations curve applies to workplace change as well. A relatively small number of early adopters will naturally be interested in trying something new, but the majority will wait until they can clearly see the benefits of doing so.

PRACTICE PARTICIPATORY DESIGN

Things often go wrong at the very beginning of change a project—perhaps even before what most people would consider to be the beginning—with unvalidated assumptions about what people want. Success requires that one start by asking the simple questions that are too often given short shrift: Is this actually good for our people? Would they also think so? Has anyone asked what they think?

For an example from outside the world of workplace, look to a recent story from Boston. To save money and reduce travel time for public school students, administrators enlisted experts from MIT to design an algorithm that would optimize the routes of school buses. They incorporated a huge set of parameters, even accounting for the need of
teenagers to get more sleep and start school later. Though it succeeded in lowering projected costs and would have made life easier for the kids, the solution was ultimately rejected by the community.

What went wrong? The team’s solution was, by many measures, a brilliant one. The critical misstep was that they did not have buy-in from some of the people who would be most impacted: parents. The good news is that they caught this oversight before actually implementing the plan, and have a chance to incorporate that constraint going forward.

START SMART, GET EVEN BETTER

START SMART, GET EVEN BETTER

START SMART, GET EVEN BETTER

In most cases of change, the optimal solution is probably an option that isn’t visible from the starting point. The way to find it is to get into a collaborative exchange, and to take feedback from stakeholders seriously. While leaders may think or even say that they are already doing this, many employees feel otherwise. A recent survey from Quantum Workforce found that almost a third of employees don’t even know why changes are happening; their ability to engage with the change is therefore fairly limited. Whether or not a project is adjusting in response to feedback is one of the clearest ways to see if a change management effort is actually helping people. If the plan doesn’t evolve at least a little during implementation, it’s likely that it isn’t so much managing change as demanding it.

A pilot program can make all the difference, giving people an opportunity to practice the new way of doing this before they are expected to embrace it. This is not the same as a model or mockup. A drawing is better than nothing at all, but actually spending time in a space is essential. As people try the new environment, researchers can gather data under conditions that are fairly close to the proposed future state. There’s no reason that the pilot needs to be limited to one idea, either.

Whether through providing multiple protoypes in a portion of the company’s existing space or by harnessing the flexibility of coworking, piloting provides people with an opportunity to try out different work settings before they commit.

There are a couple of big caveats when it comes to piloting. It is critical that people be given the freedom to explore the new environment independently and by choice—otherwise it’s just another obligation. It is also important that a researcher is either physically present to observe or is otherwise actively soliciting feedback. Tram members often have trouble articulating what they do or do not like about a new environment.

EMPOWER CHANGE LEADERS

EMPOWER CHANGE LEADERSWhen contemplating a major workplace shift, organizations often suffer from a breakdown in productive communication. Leaders may hesitate to share plans with staff before the idea is fully baked. People on the front lines might have concerns or feedback, but lack an established forum in which to voice them. Managers may feel pulled toward either toeing the leadership line or speaking up in solidarity with their reports. The result is that people often end up feeling confused or anxious and filling the information gaps with rumors or speculation. Much of this can be mitigated with the right approach.

One of the most important things leaders can do is to practice transparency from the beginning of a change project. Even if there are still many unknowns, it is important to communicate clearly using all of the organization’s communication channels; newsletters, meetings, webinars, and informal conversations all can and should be leveraged.

Employees at every level should be educated in both the business case for the change and on how it will affect them personally. Once they know what the plan is, people usually have something to say about it. Embrace this feedback from day one. In our 12-point guide to change management effort, we highlight the need to create change leaders within an organization. Savvy managers can usually spot these people and help make them part of what Kotter calls a “guiding coalition”.

Whether or not they are empowered by the formal hierarchy, there are employees who would like to actively participate in shaping the change. Make sure they have a seat at the table. This group can support the change in two important ways. The first is that they show others how to make the change successfully. The second is that they provide constructive criticism that will challenge and ultimately improve the proposal.

In order for this to work, people need leadership support and some grounding in the basics of workplace transformation.  We developed materials to support a train-the-trainer approach to change management efforts in our work with the U.S. General Services Administration (GSA), the agency that manages the federal government’s real estate portfolio. This was a unique project, since the GSA is involved in some capacity with the change efforts of many other agencies throughout the federal government, one of the largest and most complex organizations in the world. It would be impractical to design a change program that accommodated the needs of so many unique stakeholders. Instead, we worked with architect Marble Fairbanks and the agency leadership to package this information in an easily distributable form, with the goal of democratizing the change process. By identifying key roadblocks common to many change efforts, as well as peoplecentric ways to address each one, the project aimed to empower change makers at every level of the agency.

CHANGE IS ABOUT PEOPLE

We often define an organization’s culture as the sum of all of its people, their values, and moment-by-moment actions taken on those values. The way the organization practices change management is included in that definition. A well conducted change effort offers an opportunity to act out some of the parts of culture that are often preached but less often practiced—things like transparency, collaboration, honesty, and empathy. The key to a successful change process to engage with people as often and as genuinely as possible. They must be given an opportunity to have a real impact on what is going to happen to them and, when possible, to take a leadership role in the transformation. Practitioners who take the time to do this right will be rewarded when their team emerges more resilient, capable, and trusting than they were at the beginning.

FOR MORE INFORMATION:

PLASTARC is a social science-based workplace consultancy. Blending qualitative and quantitative research with design expertise, PLASTARC is dedicated to shifting the metrics associated with workplace from “square feet and inches” to “occupant satisfaction and performance.” Through a holistic approach that incorporates workplace anthropology, analytics, and change management advisory, they recommend evidence-based interventions that make the built environment more people-centric and responsive, promoting both individual wellness and business success.

 

Melissa Marsh, Founder & Executive Director
melissa@plastarc.com

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Are Retailers’ Earnings Reports Telling Us Something?

 “After seven consecutive quarters of comparable sales growth, we experienced a deceleration in our third-quarter sales,” – Macy’s CEO Jeff Gennette in a statement accompanying the retailer’s most recent earning release.

Retail has been the big story these past few weeks as many publicly traded companies reported earnings for the third quarter. The tone was … not positive.

Macy’s stock fell 11 percent during the week after reporting the first decline in sales in nearly two years. Home Depot dropped 8 percent after a sales miss. Kohl’s fell by 19 percent, missing significantly while also lowering its outlook. Urban Outfitters fell by 19 percent. Nordstrom fell 10 percent. Only the Target and the TJX Companies – owner of discounters TJ Maxx, Marshalls and HomeGoods – saw their shares rise after each reported a strong quarter.

It is well established by now that the U.S. economy – along with national and Philadelphia commercial real estate markets – are heavily dependent on the consumer, so how worried should we be about the red flags waving in these retail earnings reports? Is this what a strong consumer looks like? The story feels like it is about more than just shoppers shifting to online spending.

This CoStar Realty Information Inc. report from Robert Calhoun and Matt Powers 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.

Consumer spending in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – is ultimately built on the foundation of a strong labor market. While we continue to see job growth and low unemployment nationwide, cracks could be starting to show. We have seen job openings decline in recent weeks, and now it seems employers could also be actively laying off more workers. Weekly claims for unemployment insurance rose to 226,000 last week. While still very low from a historical standpoint, claims are up 15,000 in just two weeks.

Weakness in employment appears to be regional, focused largely on the Midwest and some scattered Northeast and Western states. However, the South remains the healthiest region. Every single state in what the U.S. Census Bureau defines as the South – except Maryland and Oklahoma – continues to see jobless claims fall. The economy in Oklahoma is much more heavily dependent on oil than other states (8 percent of employment versus only about 0.5 percent nationwide), so it has seen jobless claims rise as oil prices have declined from 2018 highs. And Maryland really isn’t even in the South, right?

This regional divergence in jobless claims seems largely driven by prolonged weakness in the manufacturing sector, on which Great Lake states are reliant. Manufacturing accounts for roughly 17 percent of that region’s gross domestic product compared to 11 percent in the U.S., including U.S. and Philadelphia commercial real estate listings.

It has been noted earlier that increased uncertainty causes a decline in business activity in the U.S. commercial real estate market – including Philly office space, Philly retail space and Philly industrial space – as well as a decrease in hiring. It also typically signals a slowdown in firing, as decision-makers wait to see how events such as the trade war situation play out. Is this dynamic beginning to change in a worrisome way?

That is hard to say, but if it was, you would see it first in the areas of the country that are most at risk from the trade war, and it appears as if that could be happening.

Fortunately for the economy, the consumer isn’t the only game in town. Housing continues to buck the otherwise weakening trend in most areas of the U.S. economy, with more strong data out this past week, especially involving national and Philadelphia commercial real estate properties.

The National Association of Home Builders’ Housing Market Index posted one of its best figures since the last recession in its November report. The portions of the survey that asks homebuilders their thoughts on current sales, sales over the coming six months, and foot traffic of prospective buyers all have substantially improved in 2019.

Housing starts and permits also reported a leap in the Census Bureau’s October report. By “back-of-the-envelope” math, the rise in homebuilder sentiment and issuance pace of new permits is roughly equivalent to nearly a 1 percent boost to real GDP growth among national and Philadelphia commercial real estate listings. With no trade deal signed yet and wavering hiring indicators, that 1 percent becomes essential.

Meaningful regional divergence also can be seen in homebuilding activity: The Midwest is seeing declines in new building permits while the South leads the way on new construction. (Robert Calhoun is a managing director and senior economist and Matt Powers is associate director of market analytics for CoStar Market Analytics in New York City.)

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 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.

A Philadelphia commercial real estate broker with expertise in Philadelphia commercial real estate listings, Wolf Commercial Real Estate 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.

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Landlord Issues from Tenant Bankruptcies

Landlord Issues for Tenant BankruptciesTenant bankruptcies are creating headaches for landlords. RadioShack. Brookstone. Toys R’ Us. Sears. With fifteen major retail bankruptcies filed last year in 2018, the toppled retail behemoth has almost become a cliché, and brands once courted by commercial landlords have become major sources of risk. With no sign of a slow-down, this article provides a refresher on your rights, as a commercial landlord, in commercial tenant bankruptcies.

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Commercial Tenant Bankruptcies 101: THE BASICS

• Ipso facto clauses in a lease, which trigger default or acceleration upon the filing of a bankruptcy case, are generally unenforceable under the Bankruptcy Code. Thus, you cannot terminate a lease or stop performing your obligations under the lease on account of the bankruptcy filing.

• The filing of a bankruptcy case triggers the automatic stay, which requires all actions to enforce the lease, evict the tenant or collect a debt (including unpaid rent) to cease. Unless you have a judgment to possess the subject premises, or the lease has otherwise expired by its terms, you must not continue to pursue collection or enforcement activities.

• A commercial debtor may assume a lease and assign it to a third party, in most circumstances without your consent, even if the lease requires the consent of the landlord to assignment.

• A commercial debtor may reject a lease based on its business judgment, and you have very few (virtually no) grounds on which to object to a lease rejection.

Commercial Tenant Bankruptcies 201: WHEN WILL I GET PAID AND HOW MUCH?

The Bankruptcy Code requires bankrupt tenants to continue paying rent under the lease during the pendency of the case (post-petition rent). If a debtor does not assume a lease within 210 days of the commencement of the bankruptcy case, the lease is deemed rejected.

Depending on whether the lease is assumed or rejected and the financial health of the bankruptcy estate, rent that was unpaid as of the date of the filing (pre-petition rent) may be paid in full, in part or not at all. Tenants under assumed leases must cure all breaches under the lease, including to pay in full all unpaid pre-petition and post-petition rent and any damages incurred as a result of the breach of the lease. The cure amounts must be paid at the time the lease is assumed by the debtor or its assignee.

Landlords under rejected leases, on the other hand, are entitled to a claim against the bankruptcy estate, which, depending on the financial health of the debtor, may be paid in full, in part or not at all. While unpaid postpetition rent constitutes an administrative (or dollar-for-dollar) claim against the estate, all other pre petition rent and damages caused by the rejection of the lease constitute unsecured (often, cents-on-the-dollar) claims, and will be paid pro rata with other unsecured creditors. Further, while rejection damages include the amount of rent remaining in the life of its lease, damages are statutorily capped at the greater of one year of rent or the rent for 15% of the remaining term of the lease, not to exceed three (3) years. Landlords who successfully mitigate their damages and re-let the premises may not be entitled to any claim if the rent received under the new lease is greater than or equal to the rent under the existing lease. Payments on unsecured claims are typically paid, if at all, after the debtor has confirmed a plan of reorganization.

Commercial Tenant Bankruptcies 301: DO I HAVE TO ACCEPT A RENT REDUCTION?

Bankruptcy affords the debtor tenant a unique opportunity to re-negotiate its leases. On one hand, the Bankruptcy Code prohibits the debtor from cherry picking which provisions of a lease it wants to assume and which provisions it would like to reject; instead, the Code requires the debtor to assume or reject the lease in its entirety. On the other hand, many debtor tenants leverage the specter of potential rejection to obtain significant rent concessions from landlords. Rent reduction negotiations often begin in the pre-bankruptcy period and continue in the early days of the case, with landlords being told that failure to negotiate will result in certain rejection.

You do not have to negotiate with the debtor tenant or accept a rent reduction, though doing so may increase the possibility of the assumption of your lease. Debtor tenants are more likely to reject leases:

• Not essential to the continued operation of the business,
• With above-market rent,
• In areas saturated with other debtor locations, or
• With low-performing stores.

If your lease falls outside of these categories, then the debtor may assume the lease even without obtaining a rent (or other) concession.

Commercial Tenant Bankruptcies THE BIG PICTURE

As soon as a tenant shows signs of financial weakness, consider actively pursuing remedies under the lease, including termination or eviction proceedings. If the lease has expired or you have already obtained a judgment for possession when your tenant has filed for bankruptcy, tear up this article! (after confirming with your attorney that the lease is, in fact, properly terminated).

If the lease has not expired or terminated at the time of filing, be sure to engage bankruptcy counsel to review the proceedings and protect your interests in the case. Bankruptcy counsel will object to any insufficient cure amount, file a proof of claim for your damages and review any plan of reorganization to advise you of your
anticipated recoveries. Even though retail bankruptcies have become commonplace, sound counsel will ensure
that your rights are protected and help you get paid.

Finally, engage competent real estate professionals, who can provide an accurate assessment of current market
rent and assist in finding a replacement tenant to satisfy and requirement that you mitigate your damages
after rejection/termination of the lease.

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.

 

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WCRE ADDS FORMER DALLAS COWBOY TO TEAM

Phil Costa to Serve Philadelphia & Southern NJ Markets

Phil CostaWolf Commercial Real Estate (WCRE) is pleased to announce the hiring of sales associate Phil Costa. Costa comes to WCRE from the sales and customer service field at Abbott, where he worked after a four-year NFL football career. 

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Costa will focus and specialize in commercial and multifamily assets in the Southern New Jersey and Philadelphia regions. Phil has developed a wide network of business and corporate relationships throughout the area and will focus to help landlords, investors and users develop strategies to achieve their commercial real estate goals. 

Costa, a Holy Cross Preparatory Academy and University of Maryland alumni, recently finished his MBA at Columbia University. His areas of expertise include multi-family, investments and relationship development.   

“Costa will be responsible for advising and supporting a diverse client base throughout their various commercial real estate transactions and needs.  His hiring brings WCRE, which is approaching their 8-year anniversary, to a team of 26 outstanding commercial real estate service providers”,

said Jason Wolf, founder and principal of WCRE. 

“Our people have always been our biggest asset and differentiator in the marketplace.”

Said Chris Henderson, Vice president and principal of WCRE.  

Phil was a Team Captain and two-time Academic ACC student at the University of Maryland and spent four years with the Dallas Cowboys as an Offensive Lineman. Most recently, Phil co-authored the book, “The Transition Playbook for Athletes”. He lives in Philadelphia, PA.

Costa is a licensed salesperson in New Jersey and Pennsylvania license candidate. 

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 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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