07/10/08 -
Minimum Wage
Increase, Will It Affect Your Business? -
By:
Benjamin M. Chiaro
The retail sector
can be affected by a number of different external factors, including the
federal wage and hour laws. Most recently, the decision by Congress to
raise the national minimum wage for the first time in ten years has drawn
attention. Increasing by 70 cents from $5.15 to $5.85 per hour, the boost
sparked mixed reactions from retailers at the local, regional, and
national levels.
The 13 percent raise
is phase one of a three-year plan. Each of the next three years will
include an increase in the minimum wage, finally leveling off at $7.25 in
2009. That’s a total increase of 40% over the three year, three-phase
period. The question is, who will it affect, and more importantly,
how?
Large national
retailers will most likely experience the least impact, given their
ability to reduce “small-staff” payroll expenses during peak hours and
seasons, according to Curt Hazlett of the International Council of
Shopping Centers’ SCT Magazine (Sept. 2007), “The increase will most
likely hit retailers the hardest who derive their primary workforce from
teenage part-timers.” Hazlett goes on to explain that according to a
study conducted by The Heritage Foundation, the majority of minimum wage
earner’s are not the working poor. In fact, 52 percent of them are young
part-timers between the ages of 16 and 24. This includes many of today’s
apparel retailers, such as the Gap, Abercrombie & Fitch, and Hot Topic,
where many of today’s teens begin their working lives during summer
vacation and on weekends.
Discount retailers
such as Wal-Mart and Dollar General actually welcome the increase. They
view the increase as a benefit, giving their primary customer higher
paychecks and ultimately, more spending power.
In July when the
first phase of the wage increases was implemented, 30 states had applied
minimum wages at the state level that were above the new national level.
However, by the time the final phase is implemented in 2009, approximately
35 states will have to make adjustments at the state level to comply with
the new federal rate.
So how do the wage
increases affect retailers? Let’s look at a hypothetical example. Take a
small-shop retailer leasing 1,000 square feet in a neighborhood shopping
center for $12.00 per square foot. Let’s say the staff includes three
part-time employees, each earning the minimum wage. The three employees
work a combined average of 75 hours per week. Under the old minimum wage,
that would translate to $386.25 per week, or $20,085 annually. Under the
new minimum wage, the wages jump to $438.74 per week, and $22,815
annually. That’s an increase of $2,730 annually, which equates to paying
an additional two and one-half month’s rent during the same twelve month
period.
Ultimately, how will
this affect the retail real estate market? Some retailers may have to cut
their budget for lease payments to offset the increased minimum wage.
Other’s may tighten their site selection models to no longer include
questionable “B” or “C” sites that may not be top producers. Small
specialty retailers may have to reduce the number of employees, and the
number of hours, to offset the costs. On the flip side, discount
retailers may actually expand growth strategies due to the added consumer
expenditure by this income class. Only time will tell.
03/13/08
-
Central Pennsylvania Demand For Professional Service Buildings Rise
- By Russell J. Bardolf
The law of supply
and demand is paramount to the value of most commercial real estate. This
holds true for York County commercial real estate as it relates to office
space.
The York County
population is growing at levels that rank with the highest in Pennsylvania
which creates the need for more professional services. Population
increased in York County from 381,751 in 2000 to 401,613 in 2004. As
population increases so does the demand for professional and medical
office space. The need for more space is also created by professional
businesses moving from Maryland as we transition into less of a
manufacturing economy and more of a service providing economy.
For building owners,
this is an opportunity to improve real estate value by raising rents as
leases expire or space becomes available. Increased rent with little
change to expenses equals a higher market value for the property. For
tenants, the opposite is true, but if they can side step rent increases by
exercising options at below market rates, they actually build lease
equity.
Even though the Rock
team leased slightly more than 170,000 square feet of office space so far
in 2007, we feel more businesses could have been placed in new locations,
had there been a greater supply of space available. Tenants that cannot
find the proper space must wait to make decisions until additional options
are available.
Motivation spawns
for developers and investors, understanding that supply and demand are not
in balance and that owners of existing buildings are raising rents, to
consider office buildings and office parks as viable products for the York
County market.
Rock clients
understand the market and are taking advantage of these opportunities.
Investors in office buildings in downtown York are scheduling upgrading
and repositioning to fill a need for nice affordable space in the central
business district. These projects are fine examples of urban renewal
efforts that will hold a good position in downtown York for years to
come.
S. R. Campbell
Associates
is planning the construction of a multi-story office building just off
Leader Heights Road, on Course Road, near the S. Queen St. intersection.
This building fills the need for space and added convenience because it is
located in a suburban location.
Regardless of market
conditions, there are numerous ways to increase value and make good real
estate investments. Seeking assistance from a real estate broker, who
understands the market and has the experience and education to provide the
proper advice, owners and investors will be able to profit as supply and
demand affects market changes.
