Checklist: what's needed in Pittsburgh neighborhood business districts

Business owners – this is like an open invitation to set up shop in one of Pittsburgh’s diverse neighborhoods. Take a look and see what residents in each neighborhood want the most.

Is a Thai restaurant the barometer of a hip neighborhood?  A greengrocer? Night life?  In the chess game that is business district management, some neighborhoods may appear to have all the pieces – but do they?  Pop City decided to survey various neighborhoods to see what's missing. Where there's a need, there's an opportunity. Calling all entrepreneurial types!

The Strip District “is only 12-25% retail,” says Becky Rodgers of Neighbors in the Strip.  “The rest is wholesale.  People thought they could just open in the [Pittsburgh Public] Market and make money.”  The reality is you need a good idea like Wigle Whiskey, a distiller recently opened on Smallman Street.  With stalwarts such as Penzey’s for spices and Labad’s for Middle Eastern, the Strip is set, right?  Not quite.

“We really want Indian food!” exclaims Rodgers.  “We get lots of national and international visitors as a first- or second-day destination in the region.”  The growing number of residents (Lot 24, a 97-unit rental development on Railroad Street, will soon break ground and plans call for new residential along the riverfront behind the produce terminal) means amenities including a dry cleaners and pharmacy are also needed.

In Lawrenceville, “our strength is a nice mix of convenience and destination businesses,” says Maya Henry of the Lawrenceville Corp.  Butler Street from 34^th to 55^th is a designated Main Street District and while the 30s tend toward trendy restaurants and apparel, the 40s are populated by convenience businesses including a cobbler, a pharmacist and French baker La Gourmandine. The 50s are still finding their raison d’etre.

A food gulch may develop in the latter now that Cure has opened across the street from Thai restaurant Pusadee’s Garden and close by where greengrocer Wild Purveyors will reside.  “We love to see clusters of apparel and restaurants,” says Henry.  “If one restaurant is busy, there’s another.  We also want people to make a Saturday of shopping our retail.”  What’s missing?  A grocery and hardware store.

East Carson Street on the South Side is the longest extant Victorian commercial district in the U.S. and a National Historic District.  “You can run every errand by foot – and it’s flat,” notes Aaron Sukenik of the South Side Local Development Co. “We have a dual economy, day and night.  There are thousands of employees in the district so we encourage retailers to stay open late.  Our nighttime activity is regional and national so when people visit Pittsburgh for games, they know to come here afterward.”

With the neighborhood’s demographic shifting from older adults to under 35, Sukenik wants an Indian restaurant along with more healthy/organic lunch options and a re-imagined butcher shop where people could order online and pick up later. A marina near the Hofbrauhaus in the permitting phase and will add even more caché.

In the 1940s and 50s, East Liberty was the third largest retail district in Pennsylvania (behind Philadelphia and Pittsburgh) thanks to the buying power of East Enders. The mall-ification of the 60s changed that and the neighborhood has been re-imagining itself since. “We’re striving toward mixed-income residential development,” says Skip Schwab of East Liberty Development Inc., “and we need amenities to do that.”  Wish fulfillment is coming in the way of the Ace Hotel, a 40-room boutique property in the old YMCA, and a digital theatre in the former PNC Bank building.  An REI store in Bakery Square would be icing on the cake.

The Penn-Garfield corridor is “the least expensive commercial district in the East End,” according to Rick Swartz of the Bloomfield-Garfield Corp. with buildings priced under $100,000. Now that the onetime working-class district is an emerging artist colony, the key is “a concerted effort to get kids to stay in the city.”

While the Pittsburgh Glass Center and Mr. Roboto Project pair nicely with graphics studios Ion Tank and Image Box, Swartz needs to see more housing for artists (“we need extended stays and youth hostels”) and a small grocery store “like a Bottom Dollar, and a breakfast spot or deli on Friendship Avenue.” Next door in Bloomfield, Swartz says the equation is simple:  “Rents need to come down.  Landlords have to be more bottom-line driven [to attract emerging retailers].”

Ever-traditional Squirrel Hill manages to have hip cred thanks to two Thai restaurants, an art-house theatre, Jerry’s Records and the quirky Gluuteny.  Game over?  Not quite.  “If there were more going on, people would be here,” says Jes Bogdan of Squirrel Hill Magazine.  “Rents are too high.  The Barnes & Noble location is still empty.  With more students living here, building owners need to listen to newer residents. We need night life, not sports or college bars but performance venues like in East Liberty and Lawrenceville.”

The Northside “has always been a diverse community but it’s becoming increasing middle class,” says Mark Fatla of the Northside Leadership Conference.  That means a need for convenience businesses but the neighborhood business district, E. Ohio Street, has an uphill fight against McKnight Road a mere ten minutes away. “The Northside has a uniqueness and character so we’re well positioned,” continues Fatla.  “We could use a dog groomer, a fitness center, a storefront real estate agent and a mid-range restaurant.  It’s our turn.” 
While the North Hills is rich in both convenience businesses and big-box stores, fine dining has been missing but that’s changing with the opening of a second Tamari in Warrendale that suits the area’s young, affluent demographic.  A BRGR location in Cranberry ups the ante as will Winghart’s, opening in Warrendale later this year.

The S. Braddock Avenue business district in Regent Square may be compact but it packs a punch:  fine dining, the quintessential beer store and a Square Cafe on the same block.  What’s missing?  “We could really use a fresh market with breads, produce and prepared foods and a pizzeria for eat-in or delivered,” says Sherree Goldstein, owner of Square Cafe.

Mt. Lebanon, due south, still sees “tremendous interest” in its Uptown business district along Route 19, according to Eric Milliron, the municipality’s Business Districts Manager.  With over 1,000 employees in the center of town and 20,000 vehicles driving through daily, it’s easy to see why.  High on Milliron’s list are a “third place gathering scene, a co-working space for consultants and entrepreneurs and an ethnic restaurant, maybe Thai or Korean” as part of a vibrant restaurant row alongside perpetually-packed Il Pizzaiolo and Bistro 19.

New Girl In Town Elaine Labalme wants a fabulous shoe store in Mt. Lebanon while Pop City editor Tracy Certo pines for a Thai restaurant. (Hear that, Nicky's Thai Kitchen?) What would you like to see in your neighborhood? Email us here.

Source: http://popcitymedia.com/features/businessdistricts021512.aspx

Office & Retail Delinquencies Hit New Highs; Could Go Higher

Many leases signed during the height of the market are coming due. Perfect time to have a market analysis done and see if your current rates need renegotiated.

Delinquencies for office and retail loans have hit their highest-ever levels while overall U.S. CMBS delinquencies fell for the sixth straight month, according to the latest index results from Fitch Ratings.

CMBS late-pays declined five basis points (bps) in January to 8.32% from 8.37% a month earlier. The improvement was driven by multifamily loans, which saw a 165-bp plunge in its rate month-over-month to 12.77%. The delinquency rates for office and retail rose to all-time highs of 7.30% and 7.21%, respectively.

January marked the first time post-recession that the office delinquency rate surpassed that of retail. Office is the only major property type that Fitch Ratings has a negative outlook on for 2012. Office delinquencies are expected to continue rising as leases made at the height of the real estate boom roll to market, impacting income available to cover debt service.

New delinquencies were led by 5-year, interest-only loans from the 2007 vintage that failed to pay off at maturity and have subsequently stopped paying interest. Notably, no new loans of more than $100 million were added to the index in January. In part, this was due to Fitch Ratings excluding from the index several large loans (over $500 million in total) that were reported as non-performing matured balloons for the first time in January, but which remained current on interest despite not satisfying their scheduled balloon payments.

The downturn in office and retail performance comes as multifamily and hotel loans have shown the best performance rebound during the past 24 months.

In fact, the multifamily delinquency rate has fallen 4.63 percentage points from one year ago to 12.77% from 17.40%. Month-over-month, the decline was led by the $375 million loan on The Belnord, a luxury apartment building on Manhattan's Upper West Side, dropping out of the index. Previously, the loan was more than 90 days delinquent, but the borrower was able to use reserve funds to bring the loan current. Based on the remaining reserve balance and in-place cash flow, Fitch Ratings expects the loan to remain current for roughly four more months, with the loan likely to re-enter the index sometime over the summer unless cash flow improves.

Current and prior month delinquency rates for the major property types are as follows:

Multifamily: 12.77% (from 14.42% in December),
Hotel: 12.21% (from 12.02%),
Industrial: 10.40% (from 10.25%),
Office: 7.30% (from 6.84%), and
Retail: 7.21% (from 6.89%).

Read more: http://www.costar.com/News/Article/Office-Retail-Delinquencies-Hit-New-Highs;-Could-Go-Higher/135851

7 Office Space Traps to Avoid

You can head off a lot of these issues by having professional representation in the leasing process.

You just closed a small financing round, hired some new team members, and are looking to move into a new office space.  After finding the perfect spot and locking down a two-page letter of intent, the landlord sends over the lease agreement—and it's 70 pages long. How do you get through this massive document without delaying the move-in process? What should you focus on? Here are seven things to look out for when signing up for your new digs.

Fuzzy Math.

The first few sections of almost every lease agreement contain the basic lease terms—rent, start and end dates, square-footage, etc. It is definitely not OK to be sloppy or loose here. These numbers drive your move-in scheduling, monthly payment obligations, and operating expense responsibility. It is completely standard and within your rights to expect these basic terms to be explicitly and accurately nailed down in the lease agreement.

Long Term Commitments.

Long-term leases simply do not make sense for start-ups. Whether you're knocking it out of the park or navigating troubled waters, it is unlikely that any space will be suitable for your business for the next seven years. Even for the next three or four years. I often advise clients to keep the lease term to just a few years or less. You'd like to preserve as much flexibility as possible—and don't want to be overburdened with a ton of extra space, or stuck in a cramped office environment. You might pay a little more in rent for the privilege of a shorter lease, but any experienced entrepreneur will tell you that the added flexibility is worth every penny.

No Sublease Outs.                

Even if you can negotiate a shorter lease term, it is really important to make sure that you have the ability to sublease your space in the event of a sudden downturn. You should expect that your landlord's consent will be required in order to sublease your space. However, the lease should specify that the landlord's consent should not be "unreasonably withheld, conditioned or delayed." Further, the procedures around subleasing should be clear and easy to follow.

Onerous Repair Obligations.

Obviously, you are on the hook if you trash your space. The repair obligations to look out for relate to things that are out of your control. Unless the damage is caused by your actions (or the actions of people whom you invite into the office), you should not be on the hook for structural repairs to the building (building walls, plumbing, HVAC systems) or repairs to the shared common areas. You also want to avoid any obligations to comply with local building codes and federal laws—unless the landlord is making rock-solid representations about pre-existing compliance, or your duties are triggered only in connection with your actions (such as your renovation of the space).

Relocation Clauses.

This is something that landlords will often sneak into the lease. It is a provision that allows the landlord to move you to a "comparable space" within the building. Strike this immediately if you can. The landlord will typically agree to cover the expenses associated with the relocation—but that's not the point. Moving is a huge distraction for your start-up. Signing a lease is supposed to provide some level of comfort that you have established a "home" for the short term. You do not need the extra headaches from an unexpected move.

Ignoring Difficult Building Rules.

Most lease agreements will come with an attached set of building rules and regulations. The vast majority of these will be standard, with variances driven by the location, size and type of office building. The landlord will also have a unilateral right to change these rules. So why do I even raise this point? Well, it is primarily a matter of managing the landlord's expectations, particularly if your start-up has some unusual aspects to its operation that might inadvertently trip the building rules. For instance, I worked with a start-up that would host on-site training in its offices. The building had rules around third party visitors that would affect the company's ability to hold these sessions. By discussing our concerns with the landlord up front, we were not able to revise the rules, but we did get assurances that the landlord would be very supportive of our client's training activities.

Thinking You Don't Need a Lawyer.

Of course, because I am an attorney, you probably knew this one was coming. In all fairness, I actually do believe that lease agreements are frequently "over-lawyered" by counsel. That being said, even the most "standard" leases contain clauses that are confusing and potentially harmful to your company. It is also probably true that my list of lease traps does not address all of your start-up's unique concerns. You need a lawyer who not only has experience in reviewing and negotiating leases, but who also understands your start-up, your risk tolerance and how your specific business issues come into play.

Read more http://www.inc.com/andre-gharakhanian/office-space-traps-to-avoid.html 

Back in Business: CRE Sales Volumes Make Strong Comeback

Good news for the market. This falls in line with earlier predictions that multi-family sales were the strongest sector.

The dollar volume of commercial real estate sales vaulted back to long-term historical levels in 2011. CoStar Group has confirmed $291.6 billion in CRE sales in 2011, a 32% increase over the sales volume in 2010.

Last year's volume bested the 12-year average volume of $254.2 billion. However, the 2011 dollar volume is still overshadowed by credit-bubble level of $560.5 billion in 2007.

Sales of office property led all other types in dollar volume totaling almost $74 billion. That volume was 39% higher than 2010, but it was only one-third the volume of office sales in 2007.

Nine New York City office building sales that traded for more than $500 million each accounted for $6 billion of the total office sales volume in 2011 or 8%. The largest sale in any category last year was RXR Realty's $920 million purchase of the the Starrett-Lehigh Building at 601 W 26th St. in New York, a 2.7 million-square-foot property.

While office sales led the way, perhaps the big winner in 2011 was multi-family sales. Apartment sales jumped 46% to $62.1 billion, about two-thirds of the 2007 volume.

Retail sales also had a strong year, jumping 43% from 2010 levels to $58.7 billion. That volume, however, was only one-fourth the sales volume for retail property in 2007.

Industrial property sales were up 8% from 2010 and totaled $35.9 billion. That volume was a little more than half the level of 2007.

Hospitality property sales were up 32% from 2010 to $20.9 billion and were about half of what they were in 2007.

Land sales of $19.6 billion were the disappointment of 2011. After increasing in 2010 from 2009 levels, land sales decreased 14% in 2011 from 2010 levels. Land sales peaked in 2005 at $62.2 billion and had fallen every year until 2010.

Interest in health care related real estate helped boost the catch all category of 'Other property types,' which jumped 76% from 2010 activity. The $20.5 billion of sales in this category include sales of specialty, health care and sports & entertainment related venues. Health care related property sales made up roughly one-fourth of the volume. Total sales in this category nearly matched their volume of 2007 - falling just $500 million short.

Read more http://www.costar.com/News/Article/Back-in-Business-CRE-Sales-Volumes-Make-Strong-Comeback/135493