Citizens of Pennsylvania might be surprised to learn that the beginning of 2018 did not bode well for commercial real estate; nationwide prices dropped by 0.3 percent just last month alone. This drop was the latest in a series of consecutive drops that has lasted nine months so far. These declines have been interpreted by some as the real estate plateauing after having reached historic highs.
Pennsylvania residents may be impacted in a variety of ways by the GOP tax bill. Those who profit from commercial real estate holdings may benefit in a couple of different ways. First, it may be possible to create a pass-through entity and receive a 20 percent tax deduction on those earnings. This may be available to individuals who are making less than $157,500 or joint filers making less than $315,000.
Pennsylvania business owners that are looking for commercial real estate to lease and property owners with available space should expect to have to negotiate their leasing terms. Due to the condition of the commercial real estate market, business owners may have the upper hand. For example, someone who owns a business park that is sparsely occupied may allow generous concessions in order to obtain a commercial tenant. However, if the commercial real estate market is thriving, or the commercial space in question is a highly sought-after space, it may be the business that is attempting to lease the space that may have to allow significant concessions.
A business owner in Pennsylvania may eventually find that their current workplace no longer meets their needs. The reasons for this could include significant business growth, a need to downsize or other changes that make the current facility unsuitable. If the business is currently operating in a rented space and the lease is not about to terminate, the business owner may need to develop an exit strategy.
Most commercial real estate markets in Pennsylvania and around the country should continue to provide healthy returns for investors, according to a panel of industry experts. At a Nov. 3 meeting of the National Association of Realtor's Commercial Economic Issues & Trends Forum, leading economists and bankers talked about the opportunities and challenges real estate developers and investors may face in the year ahead. They also pointed out that the economic data does not always align with prevailing media narratives.
Pennsylvania commercial real estate owners and developers may find the potential benefits of drone technology to be very appealing. Drones may be used to survey properties, help to control autonomous heavy equipment and more. However, it is important for commercial real estate owners to consider potential issues that might arise before they start using drones.
Large malls in Pennsylvania and other areas of the country look forward to the Halloween season. It usually means more stores opening for a short time to fill a void left by larger companies until a permanent tenant is in place. It can take several months to complete the paperwork for a tenant to get into a mall, so pop-up stores like Spirit Halloween are a good way to bring customers to the mall. The popular Halloween store started in 1983 and is now known as one of the leading pop-up stores across the country.
Ensuring that short cuts are not taken during the due diligence process can save commercial real estate buyers in Pennsylvania and around the country both time and money. The inquiries performed during due diligence may raise questions about the condition of a building or its suitability for a particular purpose, and buyers sometimes back away from the table or demand more attractive terms when property inspectors or attorneys make discoveries that shed new light on pending deals. Accountants are also called upon during due diligence to study financial documents, bank records and projections for inconsistencies and irregularities.
Commercial real estate vacancy rates in Pennsylvania and around the country are expected to fall to below 12 percent by the end of 2017 as the nation's economy continues to grow and add jobs. Economic growth during the last quarter was a robust 3 percent, and the National Association of Realtors believes that even the beleaguered retail sector will benefit as a result. Retail vacancies are expected to drop by 0.4 percent by the end of 2017 while the amount of industrial space available is set to fall by 1.1 percent.
Previously, we looked briefly at ongoing efforts by the Wilkes-Barre school to secure a location for a new high school. As we noted, the school district has taken steps to obtain a plot of land owned by Pagnotti Enterprises, but the property presents environmental issues and has yet to be approved by the Department of Environment Protection. At this point, it remains to be seen what the outcome will be for the development project.