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3 Reasons You Should Move Your Company To Philadelphia

3 Reasons You Should Move Your Company To Philadelphia

The city of Philadelphia is on the rise as its business sector booms with growth. With lower rents then its neighboring big cities of New York and D.C. yet still close by proximity, Philadelphia is quickly becoming a powerhouse player for businesses to call home. Call a Philadelphia Commercial Realtor or Tenant Rep to help you move your business to this bustling city.

3 Reasons why you should move your company to Philadelphia

Rent costs are cheaper

Sylvie Gallier Howard, the First Deputy Commerce Director for the Philadelphia Commerce Department, told NBC 10 Philadelphia News in August of 2018 that the same amount of space in New York City would likely cost three times what it would cost in Philadelphia. And with rent being one of the key fixed costs for a business, this is an extremely important factor to consider, especially for small businesses. Hiring a tenant rep can help you find the right location and negotiate the best commercial lease for your business.

The city is growing

Philadelphia has already begun to boom with the arrival of the tech industry and more and more college graduates deciding to stay, as Joshua Davidson explained in an article for StartupGrind. With less competition than other major cities, Philadelphia is attracting recent grads. Davidson wrote that in 2015, Philly Magazine reported a 41.2% growth in millennials during 2006-2014, many of whom are searching and ready for work. The city itself offers incentives for startups and entrepreneurs, as well. One such program is Jump Start Philly, exempting new businesses from certain taxes and fees. A licensed Philadelphia real estate agent who works with Corporate Tenants and Buyers of commercial real estate can help streamline this process and make your move to Philadelphia as smooth as possible.

Philadelphia is central to other locations

In addition to being home of Philly cheesesteaks and lots of U.S. history, this rich and diverse city is central to other major East Coast cities, allowing its denizens to arrive in New York City, Washington D.C. or Baltimore in less than two hours. With lower rents, Philadelphia in spite of its U&O tax, and its suburbs can be the perfect location for your business outside those major cities yet still within easy driving distance to each. A Philadelphia Commercial Realtor or Tenant Rep can help you pick a location within the city that is best for your company’s needs.

With lower rents, a business-friendly environment, entrepreneur/startup incentives and a central location, Philadelphia is the perfect city to move your business to.  There are also areas designated as Federal Opportunity Zones in the city and suburbs. Call a qualified commercial real estate professional today to begin to discuss the possibilities!

 

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3 Tips for Negotiating A Commercial Lease

3 Tips for Negotiating A Commercial Lease

After an entrepreneur and/or business owner finds the location that suits their business, negotiations for the commercial lease for the location will follow. Staying grounded, realistic and professional will help you make better decisions, as negotiations can be a long and laborious process. Hiring a Commercial Realtor or Tenant Rep will help ensure the process is streamlined and the result is beneficial to you and your business.

3 Tips for Negotiating A Commercial Lease

Prepare yourself with knowledge

Before you go into negotiations for a commercial lease, prepare yourself by doing a little research. Hiring a real estate professional is a great choice for handling the procedure but knowing a bit of information yourself will be beneficial as well. One thing would be to know the lingo that will be used, such as what the various types/categories of leases there are (full service, gross, net, triple net, or percentage).  Some types are associated with specific property types too. In the end it is the lease document that defines what is included – not always what is not included.

Know what length you need and want

How long with that location work?  Is it too much space or too little space for a three or five year period? Who will pay for the tenant improvements? Length of lease term can have benefits for both the tenant and the landlord.  Often a new business looks for a lease term of 2-3 years is ideal to allow for making sure it’s a good fit and the business is viable. Longer leases can bring in a better rate though, so make sure to talk to a qualified commercial realtor or tenant rep to help you figure out the best deal for your needs. Also, having the option to renew is important and will be explicitly stated in the lease, as will be the ability to sublease, so figure out what your needs are before you enter negotiations.

Read the details carefully

Everything is in the details. Examine the lease thoroughly, even though it could be upwards of 100 pages (and beyond!) While hiring a qualified commercial realtor or tenant rep and a good real estate attorney  to examine the document and negotiate for you is a smart choice, examining it carefully yourself will be a second set of eyes in making sure you’re getting exactly what you want. This will also help you communicate better with your realtor. Items such as a termination clause, competition clause, common area maintenance (CAM) fees are all important to know and may or may not be clearly defined. Understanding what you’re responsible for, such as maintenance, repairs and upgrades, is imperative as each can greatly affect your bottom line.

Commercial lease negotiations can become tedious, but hiring a professional commercial realtor or tenant rep to examine the details can make this process much smoother. Contact PG Commercial Real Estate today to speak with someone that can assist you and your business in securing the best deal for the right property at the right price. And remember, everything is negotiable.  Market information and knowing the standards that are being used in the area can save you time and money.

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Leasing vs Purchasing Office Space in the Philadelphia Region

Leasing vs Purchasing Office Space in the Philadelphia Region

Your business has to operate out of somewhere, and when it’s time to look for dedicated commercial space for your company, you’ll have a lot of decisions to make. And one of these decisions is whether to lease or purchase your office space.

Both options come with their own set of advantages and disadvantages, so you’d be well advised to do your due diligence and conduct a little research before deciding which option works best for your company.

So, the question remains: is it better to lease or purchase office space in Philadelphia?

Understanding the Pros and Cons of Leasing Commercial Office Space

Commercial real estate investors might assume that purchasing office space is the better way to go, but leasing office space comes with its own set of pros and cons, including the following.

Pros of Leasing Office Space

No down payment required.

As with any other types of real estate purchases, a down payment is required. However, a lease doesn’t require such a large capital investment up front. Rather, a security deposit will be required, which is typically substantially less than a conventional 20 – 25% down payment, maybe 10% with SBA loans. In Philadelphia, you frequently see landlords requesting a security deposit equal to about one or two months’ rent.  Or, it could be more and varies with credit worthiness of tenant and landlord’s investment in tenant improvements for tenant.

That means you’d have a lot more capital for your business, that would otherwise have been tied up in a down payment.

No maintenance or repair obligations.

Every building will require its own fair share of maintenance and repairs over time. It’s inevitable. But where these responsibilities lie depends on whether you’re leasing and your type of lease, or paying a mortgage.

If you’re the rightful owner, the obligation to maintain and repair the structure lies 100% on your shoulders. That means you’ll not only have to cover the financial cost of these repairs and maintenance costs, but you’ll also have to manage such efforts.

If you’re leasing, however, these obligations often lie with the landlord, not you. This can free up a lot of effort that you can otherwise dedicate to your business.  

Flexibility to expand/or contract.

If your company reaches a point where it’s time for expansion, a lease can provide you with the flexibility to grow, as opposed to being restricted by the size building that you’ve purchased. Among all the factors to consider when it comes to deciding between leasing and purchasing office space in Philadelphia, one of the more important ones is flexibility to expand.

A growing business will find that a lease can provide them with a much better way to accommodate expansion as opposed to buying. With the right commercial real estate agent in your corner when you negotiate the lease terms you may be able to obtain options to renew, an early termination clause or an option in the lease that can provide you with the “right of first refusal” to acquire space that might become available in the office building.

Purchasing office space, on the other hand, can limit your size flexibility.

Cons of Leasing Office Space

While leasing comes with a certain set of advantages, there are some drawbacks to consider.

Potential increase in rent.

Most office leases have annual rent increases. And on a lease renewal it’s always possible that your landlord will increase your lease price. If the cost is out of your budget, you could find yourself uprooting your business to find a place with a lease price that fits in better with your budget and profit margin.

Improvements made will stay with the building.

If you decide to make any changes or upgrades to the building to better accommodate your business operations, you can’t take them with you when you go. The only person to benefit from the time, effort, and money spent on making such improvements when you leave may benefit your landlord.

Understanding the Pros and Cons of Purchasing Commercial Office Space

Now that you’re familiar with why leasing office space in Philadelphia has its pros and cons, consider those of purchasing office space.

Pros of Purchasing Office Space

Build equity.

One of the biggest perks of buying property is the opportunity to build equity – and subsequently wealth – over time. Every mortgage payment made goes towards building equity. And over time , if you maintain, and keep your property up to date , you may see the value appreciation as well.

Payments less likely to fluctuate.

Unlike rent, which can change every time it’s time to renew your lease, you can be more comfortable knowing that your mortgage payments will stay the same – assuming you’ve chosen a fixed-rate mortgage.

Opportunity to make extra income.

If you own your property, and it has extra space for the growth of your company you have the freedom to lease out a portion of it to generate extra income. Versus sub-leasing your excess leased office space which is more complicated. In the lease the Landlord may control the rate for the sublease and who you can lease to.  And, who would spend the money on Tenant Improvements? In a sub lease most likely you and you can not leverage the Asset.

Make improvements to add value.

If you choose to improve your property, you can maintain and sometimes add value to it as you build equity.

Take advantage of tax benefits.

When it comes time to file your taxes, you’ll have the opportunity to deduct certain things such as property taxes, improvements, mortgage interest, and so forth.

Cons of Purchasing Office Space

Upfront cost is higher.

Buying comes with much more significant upfront capital invested costs compared to leasing. And typically you should purchase a building that is larger than your business require to accommodate future growth. This is precisely why many businesses choose to lease. In addition to the actual mortgage payments and down payment, there are several other closing costs and Due Diligence costs associated with buying property that you wouldn’t be faced with had you chosen to lease instead.

You’re responsible for maintenance and repairs.

This can just be added to the list of costs associated with owning property. When you’re the owner, the onus to maintain and repair the property is 100% on you.

At PG Commercial Real Estate, we strive to ensure that our clients know as much as they can about both sides of the coin in order to ensure that they make a sound decision that’s best for their business. Whether you decide to lease, or purchase your office space in Philadelphia, we’ll be with you every step of the way in order to ensure you enter into a solid agreement.

 

 

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Neighbors: An Important Factor When Selecting Your Business Location

Neighbors: An Important Factor When Selecting Your Business Location

Neighbors: An Important Factor When Selecting Your Business Location

When choosing a location for your business you need to keep a lot of things in mind.

In addition to the location and quality of the building and Lease, or Sale, terms you may want to consider are who your neighbors are. Just like when buying a house or renting an apartment you want to find a place that is in a good neighborhood that you feel safe in, and that has people who are like minded to you.

To take it a step further when you are looking for an office space you should think about what types of businesses will be around you.  For instance, if you are an orthodontist, is there a dentist in the same office complex or down the street that can send you referrals?  If you are a specialty cake shop is there a coffee house nearby that you can partner with to display your cakes?  Or if you are a high-end clothing retailer is there a dry cleaner in the area that you can refer people to make sure they take care of the clothes they purchase in the proper way?  These types of neighborly relations may be more important to retail and healthcare businesses.  But even general office users may care about neighbors when it comes to employees.

Not only do you want to identify these potential partnerships or referral sources but you want to “be a good neighbor” to them and build a relationship with them so that they not only know who you are, but they like and trust you enough to refer their clients, friends, and family to you. Also there can be a downside to having neighbors that are in similar, or competing businesses. You may have concerns about competition for employees, or concerns about trade secrets.

If you find an office that is in a strip mall, a mixed-use building, or one of the new and popular shared office space locations make sure you are being a good neighbor at all times.  What does that mean?  Well it’s pretty simple, it’s the golden rule you probably learned in kindergarten.  Treat others the way you wish to be treated. Don’t steal their parking space, don’t be overly loud as a neighbor, don’t leave trash or other smelly items in your workspace/office that could bother others.  Be friendly, cordial, and respectful and build a genuine relationship and friendship.

So not only do you want to select a location that has good neighbors but you want to be a good neighbor to them and focus on building relationship because you never know where your next referrals may come from.

 

 

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Tips to Consider When Searching for an Independent Retail Space

Tips to Consider When Searching for an Independent Retail Space

As a Commercial Real Estate Tenant Representative, I work with a variety of business each with their own needs for commercial real estate space. The ability to work with an independent retailer is often unique because the checklist of requirements is drastically different than a commercial office building.  Finding a space that fits the products being sold, target audience (convenience and visibility with customers is critical), and potential foot traffic is a fun and rewarding challenge. Outlined below are a few options to consider for independent retailers when considering commercial space.

Mall, Strip Mall, or Standalone Building

Location, location, location.  Making sure you pick a store front in the right location is critical to the success of your business, and a lot of it depends on what kind of business you have.  If you are a hip clothing store whose demographic is Millennials you might want to select a location in Center City or Manayunk with high foot traffic and visibility to your target demographic.  If you are a high-end clothing boutique who caters to a demographic in their 40-60s you might want to consider a standalone building or part of an outdoor town center like Suburban Square or Lancaster Avenue in Wayne.

Renting, Leasing, or Buying

To buy, or not to buy? Another factor you need to take into account is whether you want to rent or buy your retail location. There are pros and cons with each option and it will depend on what kind of capital you have available starting or relocating your business.  Another key is how long you will use the location and how much capital you need to invest in it.  A bank or healthcare provider may want to put down stakes to serve the community for the long term.  They also may have to invest a lot to finish the space for their use.  Therefore buying can make sense.  A merchandiser may need the flexibility provided by a lease.

Leasing is the most common option among retailers. Leasing is less Capital intensive and usually, requires less property management depending on the lease and the landlord.  This allows a retailer one less thing to worry about so they can focus on their business. When it comes to building maintenance, upkeep, landscaping and more it can become another full-time job.   If you choose to lease be sure your Tenant Representative explains the specifics of the lease agreement so you understand your liability as an occupant. This can be a huge weight off your shoulders compared to owning and maintaining the building and property.

Tenant Improvements – The Potential of the Space

When it comes to your retail space be sure that you are versed with your needs to create the space you want. The manner in which a Retailer displays its products/merchandise or services is unique. Therefore, you may need to spend some dollars finishing a “vanilla box” to suit your business. Some landlords are positioned to financing Tenant Improvements, other are not.  An experienced commercial real estate tenant representative will know the right questions to ask and help to ensure you will get what you need to make the space your own.

For a retail space, the flow of the store and the functionality of the different areas can be critical to its success so make sure you take those factors into account when searching for your location.

As you can see there are many factors that go into deciding which location is best for your retail location.  These 3 considerations are the tip of the iceberg for a great start to success.

Looking for a qualified tenant representative to get your commercial real estate search started?  I am happy to provide a free consultation to review your needs as it relates to the Greater Philadelphia commercial real estate market. 215.793.0406

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Philadelphia’s Changing Skyline

A city is defined by it’s skyline.

The image of a city’s skyline goes on everything from t-shirts to coffee cups to paintings.  It helps establish the identity of a city and it’s people.  But skylines are always changing, especially here in Philadelphia.

I’m sure when you think of the Philly skyline a few major images come to mind, the distinct silhouette of William Penn on the top of City Hall, the massive boxy outline of the Comcast Center, the matching points of One and Two Liberty Place.

Later this year the Comcast Technology Center will open and the skyline will once again change forever.  It will be the tallest building in the city at 1,121 feet tall, the other Comcast Center was previously the tallest since 2008.

City Hall was actually the tallest building all the way up until 1987 when Liberty Place was built.  And so the Curse of Billy Penn began and no Philadelphia sports team was able to win a championship for decades.  The curse only ended in 2008 when a small figurine of William Penn was placed at the top of the new Comcast Center.  I wonder if Comcast has any plans to put a new figurine on top of the upcoming Technology Center upon completion.

Skylines just like cities are always changing and I’m interested to see how the Philadelphia skyline develops and grows in the coming decades.

www.phillybydrone.com  takes incredible photos of the Philly skyscrapers through the use of a drone.  The drone allows them to capture a variety of angles that most people wouldn’t have the chance to see otherwise.  Below are a few of my favorite shots he has gotten so far.

 

 

 

This post was created in honor of June being National Skyscraper Month and the inspiring history of the Philadelphia skyline.

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Philadelphia Inquirer Article

Jacob Adelman of the Philadelphia Inquirer recently published an article detailing how the Philadelphia City Council has approved a real estate transfer tax law that will close existing loopholes, and could have a huge impact on future transactions.

I found it very informative and wanted to share with anyone else that was interested in the Commercial Real Estate industry.

Click this link to view the article!

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The Cities are Hot, The Suburbs are Not

The Cities are Hot, The Suburbs are Not

The Cities are Hot,   The Suburbs are Not

The world of commercial office space is changing.  The questionsis not only how it’s changing but where?

In the 1940’s and 1950’s, returning GI’s left the cities to buy their dream homes in the suburbs.  The developers were more than happy to accommodate and thus began the suburban sprawl.  Office buildings were built to accommodate companies that wanted offices near their owners, employees, and customers.  For over 50 years, this cycle repeated itself throughout the country and suburban office markets boomed.

This changed in the first decade of the new millennium.  The millennials, raised on digital social connectivity, wanted social connection in real life and a lifestyle incorporating working, living, and playing, in the same proximity.  They moved to cities, both large and small, that could accommodate their lifestyle: New York City, Los Angeles, San Francisco, Chicago, Boston, Denver, Salt Lake City, Nashville, Austin, Portland, and Phoenix.  Technology and other industries followed, driven by their need for millennial talent.  As a result, the millennial population and businesses grew exponentially in the cities while declining dramatically in the suburbs.

The question is how long will this new paradigm last?  It has been predicted that once the millennials reach forty years old they will start families, want houses, and move to the suburbs.  Since the millennials are defined as the demographic born between 1980 and 2000, the first 40-year-old millennials won’t reach us until 2020.  All we can do is wait; time will tell.

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Low Ceiling with Gray Skies, or Blue Skies caused by FASB Rule Changes?

low_ceilingimg_87581 blue_skiesimg_86911

 

 

 

 

 

 

 

 

In the Spring 2016 Issue of National Association of Realtors magazine, Commercial Connections, in an Advocacy Article titled “A Look at Several of The Issues Important to your Business” under “Lease Accounting” there is information on the new FASB Standards that were released in February 2016. This is a reference to the Financial Accounting Standards Board, FASB Accounting Standards Update No. 2016-2 February 2016, Leases (Topic 842).

This is the first big change in something like 40 years to the standards for Lease Accounting.  It does apply to all leases, not just commercial real estate leases.  For companies that use GAAP accounting it goes into effect December 15, 2018.  Most private companies have until 2019 for fiscal years beginning December 15, 2019 to transition to the new rules. There is a lot to digest. And I suspect companies that use GAAP accounting are working now to get their arms around this.  And they may need either more accountants and/or real estate brokers to  assist with gathering and organizing the data and formulating a strategy for office, industrial, and retail leases.

From NAR’s article under Lease Accounting they ask “What does this mean for my business? The new standards could harm businesses of all sizes, especially lessees and lessors of commercial real estate.  With more bloated balance sheets, some companies may see their debt to equity ratios increase and find it more difficult to obtain credit, especially those with heavy debt loads or still recovering from the recession. The new standard could also complicate compliance with debt covenants or agreements between the bank and borrower, which usually prohibit companies from borrowing more than they are worth.  By capitlalizing new and/or existing leases, some businesses could show more debt than allowed in their agreement with the lender, and therefore be in default of their loan.  This could force some firms to put up more capital for existing loans or even have their credit lines revoked. “

“Additionally, the elimination of off-balance-sheet financing could be detrimental to commercial property owners. More frugal lessees will want less space and shorter-term leases without renewal options or contingent rents, which will decrease cash flow for property owners.  Short-term rents will likely reduce the borrowing capacity of many commercial real estate lessors, who rely on lessees and the value of the property as collateral in order to obtain financing.  Ultimately, property owners would be forced to increase rent rates due to market uncertainty and reduce tenant improvements due to shorter recovery periods.  Conversely, this change could encourage some firms to consider buying instead of leasing commercial real estate.”  We shall see what kind of weather this causes for CRE.

 

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Montgomery County Office Trends 2016

 

Let’s look at trends in the office markets in Montgomery County mid year to the Fall 2016.

Vacancy in the overall market is just under 12%. The average gross rent is $24.00 psf per year, BUT quality matters. Looking at vacancy and rental rate trends in Class A Office Space in Montgomery County PA you now see a vacancy in 7.3% and rates average $28.00 psf, please see the graphs below.

Office Montgomery County PA

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Vacancy & Rental Rates

Just shy of $24.00


 

Class A Office Space in Montgomery County PA

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Within Montgomery County vacancy and rates vary by location within the county. It is broken down into towns and A, B, C class office space.


 

Office Market Mid-Year 2016

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                                   CLICK TO ENLARGE

Montgomery County

Class A, B, C

 

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