COMMERCIAL REAL ESTATE
Area's office space grows and tends to lease quickly
Thursday, April 27, 2006
BY DAN MILLER
Of The Patriot-News
Demand is slowly catching up to supply when it comes to leased office space in the Harrisburg area.
The first three months of 2006 saw a net increase of 81,363 square feet of office space being leased throughout the area, said Thomas T. Posavec, a vice president at Landmark Commercial Realty Inc. in Wormleysburg.
That means the leasing market is off to a good start. In a typical year, central Pennsylvania ends up with a positive leasing rate of about 200,000 square feet.
If that's hard to visualize, try this: The 18-story Fulton Bank building at Third and Locust streets in Harrisburg has 96,000 square feet of office space. Double the size of the Fulton building and that's a standard year for increased leasing activity in the area, Posavec said.
Posavec monitors 847 office buildings in the area to track activity.
In addition to Harrisburg, he charts activity east to Hershey and west to include Silver Spring Twp.
Linglestown Road to the north and the Pennsylvania Turnpike to the south also are included in his survey area.
Here are some highlights of the quarterly survey:
- In the first quarter, Harrisburg saw a net loss of 1,800 square feet of leased space. But the city maintained 98 percent occupancy for premium office space, which commands the highest rents, Posavec said.
- A relatively low occupancy of 89 percent for premium office space east of the city can be attributed to two new and large buildings. One is a 75,000-square-foot building on Crums Mill Road in Lower Paxton Twp., and the other is a 41,000-square-foot building at 4507 N. Front St. in Susquehanna Twp.
Take out those two buildings and the occupancy rate for Class A space on the East Shore is 95 percent, Posavec said.
"We have a temporary oversupply, which is very normal when new properties are constructed. That oversupply will be corrected and is being corrected over the next two to three quarters" as both buildings get leased up, Posavec predicted.
A similar situation is found on the West Shore, where occupancy for premium Class A space is 82 percent. In this case, leasing numbers are affected by two large vacant properties.
About 130,000 square feet is available in the former PHICO headquarters building at Route 11 and Hogestown Road in Silver Spring Twp.
Posavec expects that, when renovations are completed, the PHICO space will be among the best in the area. The building is versatile enough to meet the demands of a 60,000-square-foot tenant or one that only needs 3,000 square feet, and easy access to the property from Interstate 81 is a plus, he said.
The West Shore market has an additional 75,000 square feet to absorb in the former IBM building at 300 Corporate Center Drive in East Pennsboro Twp.
Jim Helsel, a partner at RSR Realtors, said 2005 was a good year for the Harrisburg-area office market. He expects 2006 to be even better.
"The leasing rates have begun to show that the market is strengthening. I don't see that slowing down," Helsel said.
Posavec said there is a lack of supply for office buildings that are 8,000 to 30,000 square feet .
He added that construction costs have increased greatly over the last four years. As a result, when an existing property becomes available, on average it sells within two weeks to a month or less compared to up to six months before.