Friday, January 19, 2018

Main Line Health Renews Space in Radnor

Main Line Health has renewed its lease for 100,462 square feet in the Keystone Executive Center office building at 240 Radnor Chester Rd. in Radnor, PA.

The tenant occupies the entire two-story building. It was built in 1955 on 7.2 acres in the Upper Main Line submarket of Delaware County, and was renovated in 2009.

Uline Buys 1.7M-SF BTS Sites from Liberty Property Trust

Distribution company Uline acquired two adjacent build-to-suit distribution buildings on Mill Creek Rd. in Wescosville, PA and a nearby land site on W. Grange Rd. in Allentown, PA for $249.05 million from Liberty Property Trust (LPT).

Totaling 1.67 million square feet, the two buildings had been a built-to-suit for Uline in LPT’s Liberty Business Center III, straddling Lower and Upper Muncungie that delivered in December 2016.

The transaction represents the largest industrial sale in Lehigh County for 2017, according to CoStar data, and was the result of Uline exercising an option within their lease with LPT. In August 2017, a representative for the company noted at the time that the pending deal demonstrated Uline’s commitment to the Lehigh Valley, where the Prairie View, WI-based company has had a presence for more than a decade.

MLP Ventures Acquires 14 Property Portfolio in King of Prussia from Liberty Property Trust

Continuing to reposition its portfolio, Malvern, PA-based Liberty Property Trust sold a portfolio of 14 office and flex buildings in the Renaissance Park Corporate Center in King of Prussia to MLP Ventures for $76.9 million, approximately $120.08 per square foot.

The portfolio consists of eight office properties totaling 357,705 square feet and six industrial/flex properties totaling 283,620 square feet located along Horizon Dr. and Renaissance Blvd. totaling approximately 641,000 square feet. The portfolio had an 87% occupancy rate at the time of sale.

The buyer, MLP Ventures, is a privately owned real estate development company previously named O’Neill Property Group. Founded in 1988 by J. Brian O’Neill, the firm is controlled by three Philadelphia-based real estate investors and focuses on acquiring and converting underutilized industrial facilities into functional commercial or multifamily space.

In addition to the King of Prussia portfolio sale, Liberty sold several other properties recently, including:

700 and 800 Uline Way, a pair of industrial properties totaling 1,683,876 square feet on 44 acres in Allentown, PA for $249.1 million.

2301 Renaissance Blvd., a 189,502-square-foot office building in King of Prussia for $47 million.

10720 W. Sam Houston Parkway in Houston, a 206,808-square-foot office building, for $30.5 million. The REIT said it recycled proceeds from those sales into several recent property purchases that closed during the fourth quarter, including:

1221 North Alder Ave., a 702,668-square-foot warehouse property in Rialto, CA for $94.2 million.

One Truman Dr. South, a fully leased, 369,313-square-foot industrial property in Edison, NJ for $48.9 million.
16325 South Avalon Blvd., a fully leased 210,710-square-foot industrial property in Gardena, CA for $46.4 million.

Real estate investing alternative to traditional funds (Video)

Sam Zell on the Economy, Tax reform & Real Estate (Video)

Billionaire real estate investor Sam Zell on the economy, tax reform and investing globally from CNBC.

Retail REIT Washington Prime Group Diversifying Tenant Base (Video)

Tuesday, January 16, 2018

Monthly Economic Outlook — January 2018 (Video)

Comcast's Commitment To Growing In Philadelphia Pays Credibility Dividends For City

by Steve Lubetkin,
A strong commitment to local expansion from one of the city’s marquee companies is cementing the credibility of Philadelphia as a realistic choice for businesses and other organizations considering relocation, according to the heavyweight panelists at last week’s CEO & Leadership Symposium hosted by the Jewish Federation of Philadelphia at the Ballroom at the Ben in Center City.

The Philadelphia real estate market has transformed over the past decade from one with stagnant property values, lackluster sales of condominiums, and slow growth in retail and offices.

“Things are booming in Philadelphia,” says Carl Dranoff, president of Dranoff Properties. “The rental market is good, there are new skyscrapers, millennials are graduating from our universities and staying, Comcast is adding thousands of jobs, office users are coming into Center City because it’s where the workers are, and we have baby boomers too, that are moving back to the city.”

Dranoff’s firm just completed leasing for One Riverside, 68 condominiums in a 22-story building adjacent to the Schulykill River.

Housing follows jobs, Dranoff says. “Jobs create the economic wherewithal for Millennials, young graduates, even baby boomers,” he says. “Jobs create the disposable income which begets housing, which begets people shopping in our stores and eating in our outdoor cafes and restaurants. The knowledge workers are there because of the jobs, and we, the housing producers, follow.”

Philadelphia and other cities are still challenged to provide “workforce housing” for residents who can’t afford to live in market-rate luxury buildings, Dranoff says.

“That’s a complicated subject,” he says. “It hasn’t really been solved in any city across America so far.” Cities have tried direct subsidies, contributions from nonprofits and quasi-government agencies, “fix-up” programs in the neighborhoods including grants for repairs of older housing stock, he says.

“There has not been a highly successful model that I know of that we can say, ‘that’s the one I want to borrow,’” he says.

Brad Korman, co-CEO of Korman Communities, who moderated the program, says business travelers who make longer visits to cities like Philadelphia are looking for different kinds of lodging. In the “extended stay” sector of the hospitality sector, people prefer a condominium style apartment for two or three months, rather than a hotel room, he says.

Increased homelessness and streets that are too narrow for modern traffic are challenges the city faces in putting its best foot forward with visitors, says Meryl Levitz, president and CEO of VISIT Philadelphia.

The transformation of West Philadelphia, once regarded as an urban blight, into what is now called University City doesn’t surprise Dranoff.

“We couldn’t understand why people weren’t developing market-rate housing,” he says. “We brought the Left Bank to market in 2001, it was a hit from day one, 282 apartments. Other buildings have followed us, it’s because that’s where the knowledge workers are. It’s become like the Cambridge area near Boston. The demand was always there, there just wasn’t a guy like me to be the catalyst to get things started.”

As office space requirements and design needs continue to evolve to accommodate technology demands, Comcast Corporation expects to be delivering new options to its corporate clients, according to David Cohen, senior executive vice president with the cable and media giant.

Comcast is about to open its second skyscraper in Philadelphia, the Comcast Technology Center, and as Cohen says, “It’s a building that has 1.3 million square feet of office space and no offices. It is that ultimate open footprint with collaborative workspaces. It’s a vertical technology campus, and the way we designed it is we talked to our engineers, our software developers, our app developers, and asked ‘what do you want in a workspace?’” The building will be equipped with state-of-the-art multigigabit Internet access.

Comcast’s decision to expand in Philadelphia was important from a business legitimacy perspective, says VISIT Philadelphia’s Levitz.

“The jobs and opportunities that it provides are numerous and of the scope that we need here in Philly,” she says.  From a travel and tourism perspective, Levitz says the city’s “walkability” is a big plus for companies considering bringing employees here.

“What we talk about are the neighborhoods, which are so fascinating to people, and you can really cover so many of the cultural sites on foot,” she says, pointing to the robust dining industry. “And you can eat your way across the city every day of the year.”

Korman and Jacob Reiter, president and CEO of Verde Capital, a private equity investment firm, co-hosted the program under the auspices of Jewish Federation Real Estate, an affinity group for participants in the commercial real estate sector in the Philadelphia region.

“We wanted to bring the freshest minds that were leading and adapting to change, that were leading organizations that were visionary,” says Reiter.

“It’s a great thing when you put smart people together, says Korman. “It’s a great opportunity to branch outside the real estate realm and hear how other business leaders and change-thinkers are looking at the world and what they do, and how that impacts what they could be doing in their industries.”

The JFRE group also raises money for nonprofits dealing with hunger, physical and emotional disabilities, and at-risk families in the Delaware Valley and in Israel, says Reiter. About $3 million dollars has been raised and distributed in the past three years, he says.

Monday, January 15, 2018

UPenn Medicine Preleases 30,000 SF in Philadelphia

18-Story Tower Currently Under Construction
UPenn Medicine - Center for Healthcare Technology has signed a lease for 30,000 square feet in the in-development office building rising at 3600 Civic Center Blvd. in Philadelphia, PA.

The 18-story building is currently under construction and expected to deliver in January 2020. It will total 540,000 square feet and broke ground in May 2017. It is owned by the Trustees of University of Pennsylvania.

UPenn’s lease includes the first floor of the building.

Jefferson Apartment Group Breaking Ground on Multifamily Building

Jefferson Place Mt. Laurel to Bring in 490 Luxury Apts in 2019
Jefferson Apartment Group is breaking ground this month on Jefferson Place Mt. Laurel, a 490-unit multifamily building located on Union Mill Rd. in Mount Laurel, NJ.

When it delivers in early 2019, the apartment project will span 21 garden-style buildings in the Lower Burlington County Multifamily submarket. Amenities will include a clubhouse, swimming pool, fire pits, gym, cyber lounge and pub room.

Jefferson Apartment Group owns and is developing the property, and will manage the property as well.

KKR's Rosenberg Sees a Real Estate Opportunity in Housing (Video)

U.S. Office Sector Performance 2017, Outlook 2018 (Video)

Tuesday, January 9, 2018

Focus on urban innovation clusters key to commercial real estate success? (Video)

Companies now view real estate as motivational for workers (Video)

Companies now view real estate as motivational for workers: JLL from CNBC.

First Industrial Realty Trust Breaks Ground on Speculative First Logistics Center - Building A

New 739,000-SF Industrial Facility Coming to Jonestown in 2018
First Industrial Realty Trust has broken ground on the First Logistics Center - Bldg. A, a 738,720-square-foot industrial warehouse in the Lebanon Industrial submarket of Philadelphia.

The facility is located at 112 Bordnersville Rd. in Jonestown, PA and will have 135 loading docks and four drive-in bays. The property is expected to complete in the fourth quarter of 2018.

4Q Conshohocken Office & Industrial/Flex Vacancy Rates

Monday, January 8, 2018

NJ Industrial Leasing Surges In 4Q

by Steve Lubetkin,
A surge in fourth quarter activity pushed 2017 industrial leasing to 44.8 million square feet—the third consecutive year annual total leasing activity surpassed 40.0 million square feet.

Following a summer slowdown, industrial tenants leased 13.9 million square feet during the final three months of the year, representing a 52.8 percent jump quarter-over-quarter. A nearly 1.4 million-square-foot lease renewal by Williams Sonoma at 340 Middlesex Center Blvd. in South Brunswick led the pack, followed by a 725,400-square-foot pre-lease by Best Buy at 171 River Road in Piscataway and a 597,594-square-foot new lease by Amazon at 18 Applegate Drive in Robbinsville.

“2017 industrial leasing was up seven percent over the previous five-year average of 41.7 million square feet. Robust tenant demand continues to drive down the availability rate, even though new product is being brought to the market at a rapid pace. With just 6.1 percent industrial availability, developers have accelerated their construction schedules. During the fourth quarter, 10 projects totaling 4.5 million square feet broke ground, bringing the total construction pipeline to 45 properties totaling 17.1 million square feet.”

The average asking rent continues to rise as well, reaching a record high of $7.23 per square foot – up from $6.43 at year-end 2016.

Northern New Jersey maintained healthy industrial momentum, with 5.5 million square feet of leasing, its sixteenth quarter of positive absorption and an all-time low availability rate of seven percent. Central New Jersey recorded 8.4 million square feet of industrial leasing activity in the fourth quarter, bringing the region’s 2017 total to 27.1 million square feet – the second-highest annual total on record.

“In the northern counties, properties located near the ports and the New Jersey Turnpike continue to attract the most demand. Activity in Central New Jersey is being driven by the large number of users seeking new class A facilities, typically found along the New Jersey Turnpike and I-287. With extremely limited available space, users are expanding their search south of Exit 8A as well – a trend we expect will continue in 2018.”

On the office side of the market, a slowdown in North Jersey leasing activity during the fourth quarter, coupled with new availabilities, resulted in negative net absorption for the quarter. While the availability rate improved 40 basis points from the prior quarter, to 20.5 percent, this was a result of the ongoing adaptive reuse trend and not an increase in tenant occupancy. The lack of demand from larger office tenants in Central New Jersey pushed leasing activity down to levels not seen since 2014, and the availability rate remained unchanged, hovering around 19.0 percent for the third consecutive quarter.

“New Jersey office leasing in 2015 and 2016 saw its best two-year performance in more than a decade, so 2017’s lackluster performance came as a bit of a surprise. Still, a lack of new available space kept overall net absorption positive—totaling nearly 59,600 square feet—during the fourth quarter. The amount of available space fell even further this quarter as a result of the ongoing adaptive reuse trend, which helped lower the availability rate to 19.8 percent, dipping under 20 percent for the first time since 2009.”

Significant office tenant commitments offered bright spots, including Societe Generale’s 108,574-square-foot lease at 480 Washington Blvd. in Jersey City, and Movado Group’s 90,050-square-foot lease at 650 From Road in Paramus. Altice USA made two notable commitments – 64,125 square feet at 30 Knightsbridge Road in Piscataway and 60,994 square feet at 40 Potash Road in Oakland. “Additionally, several large transactions are anticipated to close during the first quarter of 2018, which will help the new year get off to a strong start."

Hospitality Sector Outlook 2018 (Video)

Kimco, CPPIB Sell 267,000-SF Shopping Center in Quakertown

Katz Properties, a real estate investment, development and management company, acquired the Richland Marketplace shopping center at 600-690 N. West End Blvd. in Quakertown, PA for $47.2 million, or about $177 per square foot, from Kimco Realty Corporation and Canada Pension Plan Investment Board (CPPIB).

The 266,565-square-foot retail center delivered in 2008. Tenants include Best Buy, Petsmart, Five Below and more.

HomeSense Leases Space in Exton

HomeSense, a home d├ęcor retailer, has signed a lease for 22,710 square feet in the Fairfield Place shopping center at 123 Swedesford Rd. in Exton, PA.

The shopping center totals 335,864 square feet and was built in 1990. It was developed by the Eisenberg Company and is currently owned by R.J. Waters & Associates, Inc. Other tenants there include Giant, Ross, Staples, T.J Maxx and Toys R Us.

Joe Waters of R.J. Waters handled the direct lease negotiations in-house.

Wednesday, January 3, 2018

Boston Properties CEO Says Tenants Driving Demand for Mixed-Use Development (Video)

Blatstein sells portion of waterfront property

By Natalie Kostelni  –  Reporter, Philadelphia Business Journal
Bart Blatstein’s Tower Investments has sold half of a parcel that the real estate company owns fronting the Delaware River at 1401 S. Columbus Blvd. in Philadelphia to a local residential developer.

U.S. Construction Inc. bought eight acres of the 16-acre property with plans to develop the residential portion of a proposed mixed-use project. The sale was north of $20 million. A representative from U.S. Construction, which is based in Philadelphia, couldn’t immediately be reached for comment.

Blatstein has been working for the last couple of years on a plan for the site, which is where Foxwoods Resort Casino had once hoped to build a project though those plans never materialized. In 2014, Blatstein bought the parcel that is bound by Reed and Tasker streets, South Columbus Boulevard and the Delaware River.
Full story:

Tuesday, January 2, 2018

Year In Review: Biggest CRE News Stories of 2017

#1 Amazon Outgrows Seattle: Kicks Off Search for Second HQ City in North America
In dangling the prospect of investing billions of dollars in the community and adding tens of thousands of high-paying jobs, online retail giant Amazon kicked off a mad scramble among jurisdictions in September after the firm issued an RFP for a new co-headquarters. Debates over which locations best suited the online retailer's mega-office requirement consumed the CRE industry, and will likely continue to do so ahead of Amazon's site selection, which is expected sometime this year.

#2 BGC Successfully Spins-Off Newly Rebranded Newmark Knight Frank as Separate Publicly Traded Company
More than a year in the works, Newmark Group, Inc. (Nasdaq: NMRK) completed its initial public offering of 20 million shares of common stock, the first IPO for a real estate services firm in many years. Howard Lutnick, chairman and chief executive of Newmark Knight Frank parent company BGC Partners, Inc., (Nasdaq: BGCP), made good on his plans to spin-off Newmark as a separate publicly traded company in the fourth quarter. The move added to market speculation that Cushman & Wakefield may follow with an IPO of its own in 2018.

#3 Florida, Texas CRE Begin Long Recovery Effort from Back-to-Back Storms
Much of the nation was fixated in August on the impact of a pair of hurricanes that ravaged much of Florida and the Texas-Louisiana region. And while the extent of the devastation wasn't as great as first feared, initial combined damage estimates foresaw $29 Billion in commercial property losses with $150 billion to $200 billion in economic impact attributed to the back-to-back natural disasters.

#4 Too Much Apartment Construction, or Not Enough?
In a midyear multifamily update, we examined recent market analysis that found U.S. housing supply remains well below long-term market averages even as developers continue to pursue new downtown apt. projects and single-family homebuilding finally ramps up.

#5 Amazon/Whole Foods $13.7 Billion Pairing a Game Changer but Not Deal Breaker for Shopping Center Landlords
The news that Amazon was buying Whole Foods caught many retail observers by surprise and rattled already jittery shopping center owners. But the deal catapulting the world's biggest e-tailer into the leading ranks of the U.S. grocery industry was quickly reappraised as proof of the ongoing integration of online and physical retail stores, and that well-located retail property will continue to have value as e-commerce continues its rapid growth.

#6 The Future of Autonomous Driving is Coming Down the Road Fast with Major Implications for Real Estate
Fast-developing driving technologies are expected to usher in a $7 Trillion 'Passenger Economy' by 2050 according to some futurists. The expected wide-ranging impact on real estate expected to affect everything from recapturing parking space, to amenities to zoning, and is already beginning to have an impact on the market.

#7 Europe's Biggest Mall Owner Buying Westfield, Consolidation Move May Trigger More Deals
In a surprising move, Paris-based Unibail Rodamco agreed to acquire shopping mall owner Westfield Corp. for almost $16 billion. The decision by Unibail, which gives it entry into the U.S. market, followed news that General Growth Properties Inc. (GGP) had recently rejected a takeover bid from Brookfield Property Partners, which has a large minority stake in the company. Given Unibail's deal, we may not have heard the end of a GGP-Brookfield tie-up.

#8 Exclusive: NGKF Ramping Up National Valuation/Appraisal Practice With Key Hires, Expansion Plans
CoStar News was one of the first to report on plans by national CRE services firm NKF to beef-up its valuation and appraisal business lines ahead of its expected IPO later in the year. NKF wasn't alone in its quest to expand its valuation platform.

#9 Greystar-Led Fund Taking Monogram Residential REIT Private in $3 Billion Transaction
In a sign of the continued strong appeal of multifamily property for investors, apartment REIT Monogram Residential Trust, Inc. (NYSE: MORE) accepted a buyout offer from a newly formed perpetual life fund, Greystar Growth and Income Fund, led by Greystar Real Estate Partners in a transaction valued at $3 billion, including debt. In another sign of the sector attracting 'big money,' Starwood struck a deal to buy out Milestone Apartments REIT for $2.85 billion, adding 24,000 apt. units to Starwood Capital's portfolio.

#10 Chinese Govt. Moves to Stem Flow of Funds to Overseas CRE Investments
In August, CoStar News reported that the State Council of the People's Republic of China officially announced measures to curb outbound investment - a move Chinese officials had been hinting at all year. The clampdown was expected to impact deal pricing for major assets in the largest gateway markets, which had become a favorite target for Chinese investors. However, market analysts see plenty of other investors--both foreign and domestic--available to fill the gap. The clampdown on Chinese overseas investment followed news earlier in the year that some members of Congress had become concerned over the national security risk associated with the growing Chinese ownership of U.S. assets.

#11 Dollar Stores Remain Retail Success Story, Continue to Defy Online Disruption
Dollar stores remained a retail success story in 2017, continuing to defy online disruption by expanding into untapped, low-density areas to minimize the online threat and drive sales growth.

#12 CVS-Aetna Combination Signals Coming Convergence of Health Care and Retail Real Estate
The blockbuster deal of CVS Health (NYSE: CVS) agreeing to acquire Aetna Inc. (NYSE: AET) for $77 billion has the potential not only to fundamentally alter the health plan market but also radically reshape the retail and health care real estate markets.

#13 Institutional Investors Coming Around to Student Housing, Sector Seen as Recession-Resistant Alternative to Apts.
Once an overlooked niche, the student housing sector is attracting increased attention from major investors, who see the sector as offering less rental growth volatility and a recession-resistant hedge to conventional apartments.

#14 ‘Amazon Effect’ has Bankers Re-Examining Their Loan Portfolios, Tightening Underwriting
In a midyear change from focusing on exposure to construction and development and multifamily lending, bank executives and analysts refocused on a new topic this past quarter: addressing perceptions of retail weakness in their real estate lending. The shift in focus followed a drop in CRE lending growth by banks in the first quarter to its slowest level in two years.