Wednesday, October 29, 2014

Kahns Sells Montgomeryville Retail, Land for $3.5M

Chick-Fil-A, Inc. acquired the retail building and adjacent lot at 794-798 Bethlehem Pike in Montgomeryville, PA from Kahns, Inc. for $3.5 million.

Included in the sale was a 22,050-square-foot, freestanding retail building on 1.9 acres in the Ft Washington / Spring House submarket of Montgomery County, and the adjacent 0.64-acre vacant lot - a pad site for the Route 309 Mall.

Retail mogul: Tech converging with brick & mortar (Video)

Newly Renovated Auburn Station Sold for $10.6M

Moshe Weiss acquired the 85-unit Auburn Station at 375 Auburn St. in Allentown, PA from Auburn Realty Corp. for $10.55 million. Included in the sale was additional land that could hold an additional 49 units.

The 90,330-square-foot, loft-style, multifamily property was originally built in the early 1900's. When originally built the property only offered 40 units. Prior to selling the property was fully gutted and renovated. The renovation was completed in June of this year and more than doubled the available units. At the time of sale the property was 95 percent occupied.

Predictions for Center City office market: Dark clouds for landlords

Philadelphia Business Journal

For any tenant looking to lease Class A office space in Center City Philadelphia today, they are encountering something they haven't seen in quite some time: a landlord's market. While there are still some buildings experiencing softness, many of the higher end towers are at near record occupancy levels and, therefore, commanding much higher rents than we saw in 2008-2010. The good news for tenants? Over the next three years, several scenarios are playing out which could very likely throw the Center City market into a tailspin.

Here are 10 scenarios which, individually and in the aggregate, could put significant downward pressure on Center City rents by 2017:

1. In mid 2016, FMC Tower at Cira Centre South will open with about 200,000sf of speculative office space. Unless this space is leased by new tenants in the market or new demand from growing tenants in the city, this space will likely create net vacancy in the Center City market.

2. Comcast's new Innovation and Technology Center is slated to open in 2017. Until then, Comcast has been accommodating its growth by leasing up short term space around the city. Comcast will soon have close to 500,000sf of office space in the city outside of Comcast Center. If a good portion of this Comcast space consolidates into the new tower in 2017, it will create significant vacancy in the city's Class A market.

3. FMC (200,000sf), Sunoco (200,000sf) and Bank of New York/Mellon (180,000sf) have all announced that they are either vacating Mellon Bank Center (FMC and Sunoco) or significantly downsizing (BNY Mellon). With close to 500,000sf of vacancy in Mellon Bank Center by 2017, this will create downward pressure on rents.

4. Cigna recently announced that it is downsizing its Center City presence by close to 150,000-200,000sf and may decide to vacate Two Liberty all together. In addition, the Two Liberty owners recently changed their mind about converting the top of the tower into a hotel (the planned condos haven't been selling well). If the owners decide to convert this space back to its original office use, this increase in inventory will drive down rents in other trophy towers and Class A buildings.

5. One Franklin Plaza, which was vacated by GlaxoSmithKline last year, has still not come back onto the market. Unless all of this building is repurposed for university, health care system, apartments and/or hotel, it could provide another option for office tenants. To date, Center City landlords have been spared any negative impact from Glaxo's move to the Navy Yard. When the company moved, it freed up over 800,000sf of office space in the CBD which many landlords feared would put significant downward pressure on rents. However, Three Franklin Plaza (200,000sf) was quickly purchased by a new performing arts charter school and One Franklin Plaza (600,000sf+) remains in limbo while the owner, Commonwealth REIT, figures out what to do with it. If One Franklin Plaza comes back into the office building inventory, especially if it is renovated and upgraded, it could change the landscape for office rents.

6. 1900 Market Street will soon have close to 300,000sf of vacancy when Cozen O'Connor vacates in 2015. The owner, Brandywine Realty Trust, will deal with this vacancy carefully as it could negatively impact the value (and rental rates) of its remaining and substantial Center City portfolio. As the largest property owner in the city, no one is more aware of the pending threats to the office market than they are.

7. The trends in corporate space utilization continue to go in the wrong direction for landlords. Companies are consuming less and less square feet per employee and corporate America hasn't even truly embraced hoteling or telecommuting in a big way yet. These emerging trends could transform office demand across the globe. Glaxo went from close to 300sf/employee to less than 150sf/employee when it moved to the Navy Yard. And virtually every large law firm in the city has given back one or two floors of space as their leases have expired over the past three years. As general demand continues to shrink, rents should drop.

8. Two important trends have saved Center City landlords over the past five years: (1) office buildings have been converted into apartments at a dizzying pace thereby reducing total office supply and (2) health care systems and universities have been leasing up center city office space to free up "on campus" space for core business uses. These two trends may both be coming to an end. Recent reports show that apartment rent growth is slowing in the region with a large number of new units still in the pipeline. If the multi-family bubble bursts and conversions are no longer economically viable, the office inventory will stabilize. Drexel is planning an Innovation neighborhood in University City. When development proceeds, Drexel may bring their folks back near campus freeing up office space in the CBD. If Innovation Neighborhood takes off, it could draw other Center City tenants West of the Schuylkill.

Full story:

Tuesday, October 28, 2014

Clarion and MRP To Develop 1.5 Million Square Foot Gateway Logistics Park

by Steve Lubetkin

Real estate investment manager Clarion Partners and MRP Industrial, the industrial real estate affiliate of MRP Realty, have acquired the former I-81/I-78 Logistics Park, a planned 129-acre, two-building, 1,502,000 square foot class A industrial center in Union Township, Lebanon County, PA. The development, which will now be named Gateway Logistics Park, includes pad-in-place development parcels for both a 1,002,000 square foot and 500,000 square foot distribution center.

"Clarion is very excited to be partnered with MRP Industrial on the acquisition and development of this project in Central Pennsylvania. With the market’s supply constraints we feel we are well positioned to capture build-to-suit opportunities or build spec inventory,” says Andy Sitzer, senior vice president with Clarion Partners. “This will be the third project the two companies have joined forces; the others are Fulling Mill Road in Harrisburg and Burlington Industrial Park in Burlington, NJ.”

“This acquisition addresses the surging demand for modern, bulk distribution centers with the ability to service the entire Northeast region from a single facility,” says D. Reid Townsend, principal with Baltimore-based MRP Industrial. “Over the past 12 months, the Central Pennsylvania market has experienced nearly eight million square feet of new absorption, with a steady pipeline of new tenants entering the market. The park’s visibility, access and amenities will be an attractive option for a wide range of future distribution requirements.”

Gateway Logistics Park is located at the intersection of Interstate 81 and Interstate 78. The development will provide prominent interstate visibility and convenient access to the region’s major metropolitan areas of New York, Philadelphia, Baltimore and Washington DC, all located within 150 miles. The property is also located within 30 miles of FedEx Ground, FedEx Freight and UPS distribution hubs, responding to the growing trend of direct-to-consumer fulfillment requirements for the retail market. MRP Industrial, in partnership with Clarion Partners, has completed building design and is evaluating both build-to-suit and speculative development opportunities.

In early 2014, the property was approved into the Commonwealth’s Local Economic Revitalization Tax Assistance (LERTA) program, providing future tenants with partial real estate tax relief during the initial ten years of occupancy. When fully developed, Gateway Logistics Park is projected to support over 1,000 new, full time jobs in Lebanon County and provide an immediate boost to support the Union Township, Lebanon County and Northern Lebanon School District operating budgets.

Brandywine, LCOR Team Up For Center City High-Rise

A 29-story, 455,000-square-foot residential glass tower will serve as the centerpiece for a mixed-up development in central Philadelphia under a newly announced joint venture of Brandywine Realty Trust (NYSE: BDN) and LCOR, which is partnering with the California State Teachers Retirement System (CalSTRS).

Construction will begin immediately with an expected spring 2016 delivery.

The 50/50 joint venture at 1919 Market Street will include residential, retail and parking, with 321 luxury units and 24,000 square feet of commercial space that is 90% pre-leased to Independence Blue Cross and CVS, plus a 215-car structured parking facility.

Brandywine contributed the land and will manage the retail and parking. LCOR will oversee construction of the project and will be responsible for the marketing, leasing, and management of the apartments.

Barton Partners is the architect for the project and Hunter Roberts Construction Group is the construction manager.

"Brandywine has a significant investment in the Philadelphia CBD and is committed to the resurgence of the Market Street West submarket," said Brandywine President and CEO Gerard H. Sweeney, noting that the development "adds tremendous neighborhood value to our 7 million square feet of office space."