Saturday, March 24, 2012

Firms start increasing their space

by Natalie Kostelni
"Office tenants have finally started to grow after retrenching or holding steady during the recession.

Tenants from a range of sectors across the region are expanding and adding space in what many take as a sign the office market is on track to strengthen this year if the economic recovery continues to gain momentum.

Some of the growth is pent-up demand and some is being driven by an increase in business activity. In some cases, it is related to new hiring.

“We are seeing our clients looking closer at expansion plans more today than in the past three to four years.”

Several law firms, including Conrad O’Brien, Greising Law and Stradley Ronon, have grown recently and are taking more square feet.

“It’s not insignificant either,” he said.

Greising is doubling from 5,000 square feet to 10,000 square feet at Three Logan, Conrad O’Brien is growing by 40 percent and Stradley Ronon committed to grow its space by 10 percent in Philadelphia and 40 percent in Washington, D.C.

Sonepar Management USA signed a 10-year lease on 20,481 square feet for its North American headquarters at Penn Mutual Towers. It had been in 13,589 square feet in the building. In the other deal, Landmark Legal Solutions plans to relocate from 3,024 square feet at Suburban Station into 4,556 square feet at 10 Penn Center.

“Smaller businesses are starting to grow a little bit."

10 tenants in South Jersey are expanding. For example: Lyons Doughty, a law firm, was in 11,000 square feet and took another 4,000; GrayHair Software is taking an additional 4,000 square feet on top of the 8,000 square feet it is currently in; Actelion Pharmaceuticals is growing to 40,000 square feet from 35,000; a home nursing company is growing by 60 percent as it takes 8,000 square feet on top of its existing 12,000; and a senior care firm is doubling to 10,000 square feet.

“What I like is it is a lot of different industries, which I think shows a healthier trend.” .

Another client, a business equipment leasing company is looking for more space. It experienced a dip as business pulled back during the last three years but has already seen incredible growth during the past year. At first, that growth was back filling and now it has gone even further. The company is projecting it will need even more space in the next two years.

During the recession, many office tenants either shrank or made do with the office space they had as they figured out the direction of the economy. In the past few months that has changed.

“I don’t think it’s a coincidence that so many feel comfortable to expand and I’m thrilled that this is happening in an election year and six to nine months before an election. In the past, we have seen them sit around and wait.”

One area that is showing consistent growth is health care and this is despite any push back against health-care reform.

“One very bright spot has been medical,” said vice president at Liberty Property Trust who oversees the real estate investment trust’s South Jersey portfolio. “Hopefully, medical will absorb a significant amount of vacancy.”

Of Liberty’s 4.5 million square feet in New Jersey, 19 percent is now occupied by medical or medical-related tenants.

One of the biggest changes in the market is future outlook. Tenants are finally feeling more optimistic after an extended period of uncertainty. Companies had been worried whether they were going to survive and once they realized they were going to make it, they held steady until business picked up.

“Now it’s not the return of 2005, but it’s certainly better and some see modest growth.”
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