“The industrial market is the hottest we have ever seen it,” said Colin Flynn, president of the SIOR Philadelphia Chapter and is with The Flynn Company, who does industrial and office brokerage and management in the Greater Philadelphia area.
Flynn spoke alongside Patrick Sentner, president of SIOR and executive vice president of the Advisory and Transaction Services division of CBRE, Inc.’s Occupier Services Group in Pittsburgh, and Chichi Ahia, secretary of the SIOR Philadelphia Chapter and the executive director, principal and broker of record of SVN|Ahia Commercial Real Estate in Eastern Pennsylvania and New Jersey, in a webinar with PAR President Christopher Beadling yesterday.
Flynn added that Covid-19 only accelerated the industrial market, noting that vacancy rates are the lowest he has ever seen. Additionally, rent growth year over year has been substantial, doubling or even tripling, he said. “I think it will continue but things are changing, that’s for sure,” added Flynn.
Sentner said there has been a “huge difference” between the office, industrial and retail markets since the pandemic.
“Every single central business district is nowhere close to where it had been before. Only 25 to 30% of employees are back to the office in downtown Pittsburgh. It’s like that in every downtown district across the country,” Sentner said.
He noted that many companies are being “proactive” in bringing employees back to the office. Generally, companies are reducing their office space and adding in amenities, essentially paying what they had been for less space, but better product.
Ahia said with so many offices leases being multiyear, we have not seen the full effects on the pandemic yet on the space, as some organizations fulfill their leases, will they continue to rent the same size space? Additionally, he noted there has been a greater demand for medical space, adding that most vacancies do not sit on the market long.
“Medical is focusing on retail,” said Sentner. “They are realizing they can renovate those buildings.”
Retail space is changing beyond renovations, said Flynn. “E-commerce shook things up. Everyone is trying to keep up with Amazon. Online demand is creating more warehouse demand.” However, some places are unable to convert empty retail space due to zoning.
Yet, with interest rates rising, it is impacting the commercial market. “It changes everything, what opportunities to look for, what risks to take,” said Ahia. He added that all-cash buyers have the most opportunities right now.
“We applaud PAR’s efforts to get 1031 like-kind exchanges get passed,” he said. “I don’t think most people realize how critical they are to the real estate market. It impacts what to sell, when to sell and what to buy.”
Of special note to commercial members, NAR’s C5 Summit will be held Aug. 15-17 at the Marriott Marquis in New York City, promising three days of networking, learning and deal-making.