Friday, April 30, 2021
J.G. Petrucci, Cabot Partner on Lehigh Valley Industrial Project in PA
By Linda Moss CoStar News
New Jersey-based developer J.G. Petrucci Co. and Boston private equity firm Cabot Properties are partnering on an industrial project planned for the Lehigh Valley in Pennsylvania.
The firms are developing a 318,440-square-foot facility at 600 Male Road in Wind Gap.
The logistics facility, slated to be completed later this year, will feature 36-foot clear heights, 39 dock-high loading positions, two drive-in doors, 54 trailer positions, LED lighting and employee parking.
In a recent report found that the eastern and central Pennsylvania industrial market has a total vacancy rate of only 5%, which comes after a record year of leasing, positive net absorption and rent growth in 2020. Despite 3.4 million square feet of speculative properties, those without any tenants signed up, being completed in the first quarter, direct-asking rents have increased.
The other two J.G. Petrucci and Cabot projects, both in Pennsylvania, are the development of a 225,000-square-foot distribution facility at 85 Ben Fairless Drive in the Bucks County community of Fairless Hills and a 148,960-square-foot, single-tenant industrial facility at 59 Fretz Road in the suburban Philadelphia community of Souderton.
Thursday, April 29, 2021
Mast Labs surgical training center coming to Philadelphia Navy Yard
John George Senior Reporter Philadelphia Business Journal
The Philadelphia Navy Yard is getting another health care tenant later this year when Mast Labs opens an independent surgical training center at the site.
The first Mast Labs was established in Bethesda, Maryland, two years ago by Dr. Scott Faucett and Terence Redmond to serve the Washington, D.C., region.
Jeff O'Donnell Jr., who was recently named president of Malvern-based Waypoint Orthopedics, joined the Mast Labs group as a general partner to bring the organization's first expansion site — with its own limited partnership of local surgeon investors — to Philadelphia.
"I've wanted to do something like this forever," said O'Donnell, a health care entrepreneur who has spent the past decade in the medical device industry working for companies such as DePuy Synthes, Intact Vascular and Trice Medical. "There is no independent place companies can use for training. I talked with Scott and Terry and said we need to do this in Philadelphia. … This is a growing med-tech hub. There is a market here for something like this."
O'Donnell said while large medical companies typically have cadaver labs at their headquarters where they can bring surgeons in for device demonstrations and training, smaller companies are left scrambling to rent space after hours at places such as ambulatory surgery centers or hospitals.
Such arrangements are not ideal, he said, because companies need to get in and out of such sites quickly, limiting their contact time for "relationship building" with the surgeons they hope become customers.
O'Donnell said they have raised just under $1 million to create and fund a 5,000-square-foot Mast Lab at One Crescent Drive in the Navy Yard.
Wednesday, April 28, 2021
Tuesday, April 27, 2021
Monday, April 26, 2021
Nike Leases 1M SF Bethlehem, PA
By Ben Atwood CoStar Analytics
One of the largest clothing companies on the planet is coming to the Lehigh Valley.
Nike has leased over 1 million square feet at 3633 Commerce Center Blvd. in the Majestic Bethlehem Center, an industrial park that was developed on top of an old Bethlehem Steel plant in Bethlehem, Pennsylvania.
The campus has become one of Lehigh’s most prominent shipping nodes, and the Fortune 100 company will soon be neighbors with QVC, Crayola and McKesson. Like Beaverton, Oregon-based Nike, these tenants were drawn to the Lehigh Valley market by its exceptional interstate access and direct routes into New York and Philadelphia.
The deal is excellent news for Lehigh, because in spite of the market’s strengths, it saw a curious downtick in industrial demand in 2020. Net absorption was below what was seen in the nearby Scranton and Berks County markets, which each saw multiple million-square-foot deals close in the past four quarters.
This cooling was especially surprising given the market’s prominence before the coronavirus pandemic and how the related shutdowns rapidly accelerated online shopping. One would anticipate this market doing extremely well, as over the past decade, Lehigh has easily been the North Atlantic Trade Corridor’s most in-demand market.
Local industrial professionals remain confident that the market will rebound but point to the cheaper rates and availability of premium space outside the valley as factors that could be siphoning away demand. With millions of square feet of speculative development on the way, Lehigh Valley finds itself in a potentially troubling spot for the first time in years.
While the sheer amount of space set to deliver might make some waves in the coming quarters, Nike’s decision to set up shop within Lehigh is a good indication that 2020 was an anomaly, not a trend. This market remains supremely positioned on the supply chain, and the growth of online shopping caused by the coronavirus will likely keep demand elevated for years.
Brandywine Expects Return-to-Office Recovery To Take At Least Three Quarters
By Marissa Luck CoStar News
Brandywine Realty Trust is seeing a big comeback in leasing activity as more tenants contemplate returning to the office, but executives cautioned it could take several months until operations are back to normal.
More than a year into the pandemic, office landlords across the country are seeing more tenants start to return to their office space as the coronavirus vaccine rollout expands. However, as Brandywine’s portfolio shows, the return to office is likely to unfold in fits and starts over the coming months as companies evaluate their long-term real estate needs.
“We have to keep in mind that we are in the beginning phases of a transition in the return-to-work journey. … We believe it will take three quarters or so to fully play out,” said Jerry Sweeney, CEO of Philadelphia-based Brandywine, during an earnings call Thursday with investors.
Brandywine solely and jointly owns about 25 million square feet located mostly around Philadelphia and Washington, D.C., and is one of the largest office landlords in fast-growing Austin, Texas. It recently expanded into Maryland.
The office-focused real estate investment trust said physical tour activity from prospective tenants increased 40% in the first quarter and it had more than 1,500 virtual tours. The company’s overall pipeline of leasing activity jumped by 400,000 square feet in the first quarter, hitting about 1.2 million, with 165,000 square feet in advanced negotiations.
Most of the midsize to smaller tenants are leading the charge to get back to the office, Sweeney said. Many companies also are still determining how many employees may work from home permanently, he said.
“We are clearly seeing from the pipeline additions that the return-to-work movement will accelerate and the flight to higher quality office buildings is increasingly clear,” Sweeney said.
Among the tenants searching for space, there is a greater emphasis on health and safety. Tenants are increasingly favoring spaces with private offices, more air circulation, larger workstations and smaller gathering areas versus one large central space, Sweeney said. Some tenants in Philadelphia even took more square footage to allow for a more spacious layout, he said.
“Certainly more and more companies are seeing the value of having people together physically," Sweeney said. In conversations with larger companies, he said some employees are pushing back on the idea of being remote-only workers and want some flexibility to switch between remote work and being in an office at a dedicated workstation.
Few Workers Want Full-Time Return
While data varies, a January survey of office workers from Slack found that only 17% of office-based workers want to return to the office full time, 20% want to work remotely full time and 63% want the flexibility of a hybrid model.
Overall in the first quarter, Brandywine signed 493,251 square feet of new leases and renewals, according to its earnings results. Its profits were down about 14% year over year to $6.77 million, while revenue dipped 16% to $120 million, according to its first-quarter earnings results. However, about 99% of its office tenants are paying rent despite mostly not being back at the office. Brandywine is expecting some deferred rent later this year.
Although there is still uncertainty about timing of a full recovery, Brandywine is seeing noticeably more touring activity, with tenants in the Philadelphia market seeing the biggest jump and Austin ranking last in its portfolio for tour activity, Sweeney said.
In downtown Austin, Brandywine has substantially completed construction of the office tower at 405 Colorado St., Sweeney said. The 25-story tower has struggled with leasing in the pandemic, particularly after law firm DLA Piper abruptly dropped its lease commitment last year.
The 206,000-square-foot tower has remained about 18% leased since at least October, according to Brandywine’s previous earnings and first-quarter supplemental earnings results. However, Sweeney said the firm has a letter of intent for a full floor that it hopes to finalize in the next 30 days.
“Activity is definitely picking up. We’ve had four new tours in the last week alone," Sweeney said.
Elsewhere in Austin, at Brandywine's proposed Broadmoor campus in north Austin across from The Domain, IBM has declined to renew its lease at Building 905, and Brandywine expects to demolish the structure as part of its redevelopment of the area into a 66-acre mixed-use development.
Brandywine plans to advance Block A and the first phase of Block F at the project, encompassing $360 million of development. That includes 613 apartments, with about 341 units to start at a cost of about $119 million by the third quarter, Sweeney said. Brandywine also wants to kick off Broadmoor with 350,000 square feet of office but plans to wait until a significant portion is preleased prior to starting construction. Brandywine is looking for a joint-venture partner to help develop the first phase of Broadmoor and expects to select one within the week, Sweeney said.
Philadelphia Life Science Space
In Philadelphia, Brandywine and its joint-venture partner started construction on the $287 million Schuylkill Yards West in March at 3025 JFK Blvd. That project is expected to include 326 apartment units, 100,000 square feet of life science space and 100,000 square feet of office and street retail.
Brandywine struck a deal last month with the Pennsylvania Biotechnology Center to create B.Labs, a life science incubator at Cira Centre directly adjacent to the Schuylkill Yards neighborhood in the University City section of Philadelphia.
The initial 50,000-square-foot lab and research space is expected to open in the fourth quarter. Sweeney said Brandywine has a pipeline of leasing activity for 35% of the space in that project.
Last quarter, Brandywine expanded outside of its core markets into Maryland after it was selected by Terrapin Development Co. and the University of Maryland as the exclusive developer of a 5-acre mixed-use neighborhood within the University of Maryland's Discovery District.
Plans for the development include 550,000 square feet of research and life science space and about 200 to 250 multifamily units in several phases. Permitting and planning is underway with a target groundbreaking in the second half of 2022.
Discovery District is a $2 billion, 150-acre research-focused campus located in College Park, Maryland.
Friday, April 23, 2021
Wednesday, April 21, 2021
Tuesday, April 20, 2021
Freshly Continues Expansion With Lease for Second New Jersey Facility
By Linda Moss CoStar News
Meal-delivery service Freshly is expanding again, with plans to open a second distribution center in New Jersey and relocate its New York City headquarters, which will more than quadruple its footprint in Manhattan.
Freshly, a leading provider of fresh prepared meals, said Monday it had signed a lease for an assembly and logistics hub at 450 Swedesboro Ave. in the Mickleton section of East Greenwich in Gloucester County, New Jersey. At 234,000 square feet, the site will be Freshly's largest distribution center, equipped to assemble and ship 1.6 million meals a week at peak capacity.
The company, which was acquired by Nestlé USA in October, is also moving and expanding its New York headquarters. It will leave its current office at 115 E. 23rd St., where it occupies about 20,000 square feet, after signing a lease for 92,306 square feet at 28 E. 28th St., according to a Freshly spokeswoman. The company will move when a full build-out of its new space is completed, she said.
Freshly, a weekly subscription service delivering chef-cooked meals directly to customers' doors, has been on a growth spree. Food delivery has become an increasingly important option for consumers during the pandemic, when indoor dining was temporarily banned at restaurants and some people feared leaving their homes because of COVID-19. Freshly is one of the top players in the sector, with competitors that include Blue Apron, EveryPlate, Gobble and Hello Fresh.
In the past few months, Freshly opened new facilities at 4000 Noakes St. in Commerce, California, and 7895 Third Flag Parkway in Austell, Georgia, to increase production and order-fulfillment capacity. Freshly leases 111,260 square feet in the new California facility and 134,164 square feet at the new Georgia site.
Currently, Freshly ships more than 1 million meals a week to customers in 48 states.
Growing Customer Demand
The South Jersey distribution facility is slated to be operational by February next year and "will help Freshly meet growing customer demand, reduce the order-to-delivery cycle time to consumers, and ultimately create 340 incremental jobs in the area," the company said in its statement.
Freshly will continue to operate its facility at 1501 W. Blancke St. in Linden, New Jersey, where it employs 70 people.
"With Freshly's corporate headquarters located in New York City, we're excited to expand our footprint in the region and continue our growth in the Garden State," Freshly founder and CEO Mike Wystrach said in a statement.
"The addition of a new facility of this size will bring hundreds of new jobs to East Greenwich and allow us to significantly scale our meal production to move us closer to the goal of being in every household in America," he said. "We are thankful for our partnership with Gov. Murphy and his team for their leadership in assisting us with this significant expansion of our company."
Freshly also has operations in Phoenix, Arizona, and Savage, Maryland.
"South Jersey is the perfect place for a leading provider of fresh, healthy prepared meals to open another facility," Murphy said in a statement. "We have seen how important food-delivery services have become during the COVID-19 pandemic, and we look forward to working with Freshly to support its growth, as well as bring new jobs to the region."
Monday, April 19, 2021
Friday, April 16, 2021
Thursday, April 15, 2021
Keystone Property Group Lands Trio of Life Sciences Expansions at The Curtis
By Adrian Ponsen CoStar Analytics
Home to the country's first medical library and surgical amphitheater, Philadelphia has a long history of advances in healthcare research. But with some of the highest construction costs in the U.S., the city has also long been known as a challenging market for commercial development. Fast forward to 2021, and the combination of these forces has meant that the supply of modern lab facilities to accommodate the city’s growing life sciences industry has been falling short of tenant demand for years.
But the days of Philadelphia's lab space shortage could be numbered. The pandemic has dealt a serious blow to demand for traditional office space, as white-collar employers across a range of industries adapt to working from home. Meanwhile, recent leasing by a range of life sciences firms from Amicus to Zoetis has remained strong. Together, these trends have catalyzed a wave of conversions of traditional office buildings into lab facilities that can accommodate Philadelphia's growing roster of life science firms.
Across Center City and University City, at least 10 large office properties are planning conversions like these, with some of the largest renovations planned for The Curtis, 401 N. Broad St. and the Wanamaker Building. All eyes are on just how quickly these projects will lease and which will fill-up first.
Located less than five blocks from Thomas Jefferson University's fast-growing main healthcare campus and from Pennsylvania Hospital, one of the earliest established public hospitals in the U.S., Keystone Property Group's Curtis Center has scored some early wins.
At the beginning of the second quarter, Keystone announced three leases totaling 28,000 square feet with Imvax, Vivodyne and Applied Genetic Technologies.
The largest of these deals came from Imvax, which is pioneering treatments for brain cancer. The firm increased its existing space within the property from 15,699 to 21,066 square feet.
Vivodyne, which creates lab-grown replicas of human organs used for testing new drugs, took 6,230 square feet and will move from a smaller lab at the University of Pennsylvania. Florida-based Applied Genetic Technologies Corp. also opened its first Philadelphia office to be close to research happening at Wills Eye Hospital and took 1,000 square feet.
All of these leases were signed for spaces on three floors, where Keystone will also be opening INQ Labs in October 2021. At 23,362 square feet, INQ Labs will offer furnished suites with combinations of office and lab space for tenants from 3,500 to 6,000 square feet, allowing life science firms to occupy space quickly, with minimal upfront out-of-pocket expenses.
The Independence Hall area, where The Curtis is located, has been less of a magnet for traditional office users in recent years. But modern adaptations to older office buildings like these have potential to bolster the neighborhood’s economy significantly in the years ahead, especially as they tap into its long history of healthcare innovation, which dates back as far back as 1751 when Pennsylvania Hospital was founded.
Wednesday, April 14, 2021
Tuesday, April 13, 2021
Biotech Company Secures 44,000-SF Lease in Philadelphia
By Ingrid Tunberg Globest.com
The life science company, Biomeme has signed a 44,000-square-foot lease at Netrality Data Centers’ multi-use facility, located at 401 N. Broad St. in Philadelphia, PA.
Netrality Data Centers originally acquired the 11-story, 1.3-million-square-foot building in 2014, and has since invested more than $50 million in capital improvements at the property in effort to position and enhance the space for life science users.
As a manufacturer of portable, real-time polymerase chain reaction testing solutions, Biomeme will utilize the leased space as its new corporate headquarters and will occupy the space with lab, manufacturing and office operations.
Biomeme plans to relocate from its current space at 1015 Chestnut St. in the fall of 2021.
The new lease triples the size of Biomeme’s current space, and allows for expanded production of the company’s devices and products.
“Netrality is proud to bring Biomeme into our robust ecosystem of life science, digital health and tech-enable companies that are uncovering cutting edge solutions,” says Gerald M. Marshall, CEO of Netrality Data Centers. “As the epicenter of connectivity in Philadelphia, Netrality provides the foundational elements for life sciences and biotech companies, like Biomeme, to access mission critical infrastructure and continuous uptime as they continue advancing healthcare technology including the fight against COVID-19.”
“Biomeme’s decision to move to 401 North Broad is a game changer for the building as we move aggressively into the life sciences arena,” states Dyer. “Their commitment to the building, along with our recent signing of the Nerd Street Gamers headquarters and LocalHost facility, solidify 401 North Broad’s position as the Philadelphia’s hub for creativity, innovation and technology.”
Monday, April 12, 2021
Crow Holdings Plans Large 1.2M SF Industrial Park in Carteret, NJ
By Linda Moss CoStar News
Looking to meet the demand created by the e-commerce boom, Crow Holdings Industrial plans to build a three-building, 1.2 million-square-foot logistics development in Carteret, New Jersey.
The Dallas-based industrial arm of Crow Holdings in a statement said it purchased a 126-acre site from Glen Rock, New Jersey-based Rahway Arch Properties for the redevelopment project, which is slated to break ground this summer. The property at 300 Salt Meadow Road is located just off of Exit 12 of the New Jersey Turnpike.
Crow acquired the site in November for $86 million, according to public documents.
Crow is building the industrial complex, to be called Crow Holdings at Carteret, on a speculative basis, with no tenants lined up yet for the buildings. A number of developers have taken that strategy in New Jersey, where the demand for distribution spaces has outstripped the supply as e-commerce shopping has taken off, especially amid the pandemic.
During most of the 20th century, the site was an industrial location for several manufacturing companies. The property was owned for years by American Cyanamid, which used it as a waste disposal site. Over the past decade, the property underwent environmental remediation through the leadership of Rahway Arch, ultimately receiving full approvals from New Jersey’s Department of Environmental Protection.
“The redevelopment of this site is good for the town as a tax ratable and because it brings more jobs,” Rinaldo D’Argenio, Rahway Arch’s managing member, said in a statement.
Crow expects to have the first building completed in the first half of next year. The three properties will range in size from 335,000 to 480,000 square feet. Each one will feature 40-foot clear ceiling heights and in aggregate will include 140 trailer parking spots, 174 dock doors and six drive-in ramps.
Friday, April 9, 2021
Thursday, April 8, 2021
Wednesday, April 7, 2021
Tuesday, April 6, 2021
Williams-Sonoma, FedEx Strike New Jersey Industrial Leases for 2.6 Million Square Feet
By Linda Moss CoStar News
Retailer Williams-Sonoma and package-delivery giant FedEx preleased 2.6 million square feet of distribution space in New Jersey in the first quarter, with the industrial sector continuing to soar in the Garden State in the new year.
New Jersey's industrial market saw 15.7 million square feet of leasing in the first quarter, the highest level since the first quarter of 2016, when it topped out at 17.7 million square feet, John Obeid, senior director of research for real estate firm Colliers International, told CoStar News.
Williams-Sonoma and FedEx's activities have been huge drivers of logistics so far this year, according to Obeid's New Jersey market report, which was released Thursday. In what Obeid described as the "most notable transaction," Williams-Sonoma agreed to lease 1.2 million square feet at 3 Sigle Lane in Dayton, New Jersey. That site is owned by Heller Industrial.
FedEx, in turn, preleased 873,743 square feet at 173-268 Doremus Ave. in Newark, followed by 513,240 square feet at 39 Edgeboro Road in East Brunswick, for a total of about 1.4 million square feet, according to Obeid's report.
In a statement to CoStar News, FedEx, headquartered in Memphis, Tennessee, said it is "exploring opportunities to optimize our network in response to ongoing volume growth and is engaged in discussions with local officials for the potential leasing of package distribution centers in Newark and East Brunswick." The company, headquartered in Memphis, Tennessee, "does not disclose specifics of a project until all aspects have been finalized."
Williams-Sonoma is also likely trying to accommodate the rising tide of online orders by consumers. The company, based in San Francisco, didn't immediately respond to an email seeking comment.
The U.S. industrial real estate market had been skyrocketing because of the rise of e-commerce, and that trend was exacerbated by the pandemic last year, with individuals homebound and shopping on the internet. In New Jersey, the logistics sector last year was largely driven by e-commerce giant Amazon leasing a lot of large distribution sites, 7.5 million square feet, but it was not a player in the first quarter this year, according to Obeid.
Amazon has essentially taken a "pause" in leasing huge distribution hubs in New Jersey because its priority now is establishing smaller so-called last-mile delivery stations, Obeid said.
United Parcel Service was a player in the first quarter, by preleasing 880,000 square feet at 42 Military Ocean Terminal in Bayonne, New Jersey, a transaction previously reported by CoStar News.
In its most recent report on the Garden State's industrial market, CoStar wrote, "Demand has rebounded in Northern New Jersey, after recording a lackluster 250,000 [square feet] of net absorption in the first half of 2020."
As evidenced by Williams-Sonoma's and FedEx's actions, industrial preleasing has been a big factor so far this year in New Jersey. In total, users preleased 4.1 million square feet in development projects during the first quarter, according to Obeid.
"This dynamic has accelerated construction activity, driven by the lack of available space and tenant preference for Class A product," he wrote in his report.
Monday, April 5, 2021
Friday, April 2, 2021
Net Lease Cap Rates Hit Historic Lows
By Les Shaver Globest.com
In the first quarter, the single-tenant net lease sector reached historic lows for the retail and industrial sectors, according to new research from The Boulder Group.
In Q1, single-tenant retail cap rates compressed by nine basis points to 5.91%. Industrial cap rates fell four basis points to 6.71%, while office cap rates rose five basis points to 6.95%
For retail and industrial, the story of Q1 was strong demand with limited quality supply. “There is still this flight to safety,” Randy Blankstein, president of The Boulder Group, tells GlobeSt.com. “The stock market is all over the place, as is the bond market. One minute everyone thinks interest rates are going up substantially, and the next moment they pull back. With all this uncertainty, there’s still a flight to safety, and everyone is trying to grab a safe yield.”
While there was an overall 9% increase in properties on the market, Blankstein says a lack of high-quality assets with long-term leases in the net lease market remains. Many passive investors shifted their focus to essential business-related tenants.
“Some of the essential business tenants commanded the most attention from investors and warranted the lowest cap rates in the sector,” says John Feeney, senior vice president, The Boulder Group. “In the first quarter of 2021, 7-Eleven, CVS and McDonald’s cap rates were 4.90%, 5.00% and 4.00% respectively for assets that were recently constructed.”
While The Boulder Group didn’t have a final number on Q1 transaction volume, Blankstein thinks sales volumes will be lower year-over-year.
“It will be down slightly again because the stuff that is trading is all the good stuff—the Chick-fil-A’s, CVS’s and Starbucks,” he says.
Blankstein expects transaction volume to remain active as vaccinations continue and the economy continues to recover from Covid-19. Both 1031 investors and private capital investors will chase properties with long-term leases, strong tenants and top metro locations. This should keep cap rates at a low level.
Investors will continue to wait for non-essential retail, like fitness centers and movie theaters, to come back. “It’s a wait-and-see on what numbers they post in the second and third quarter,” Blankstein says. “If they’re good, people will be happy to get back in. But, it’s really hard to tell how many people have come back to the gym. Is it 95%? Is it 80%? There is a huge difference in profit margins between those two? Movie theaters have the same concerns.”
In the first quarter, Blankstein said that 1031 investors continued to be active bidders. “The 1031 market is starting to come back from a very quiet Q2 and Q3 last year,” he says.
