Friday, May 4, 2012

CertainTeed, Saint-Gobain are out looking for offices

by Natalie Kostelni
"CertainTeed Corp. and its parent company, Saint-Gobain, a French conglomerate that maintains its North American headquarters off Swedesford Road here, are exploring options to relocate out of its tired, old buildings into new space.
The combined companies, which make building materials and supplies, are seeking between 200,000 and 250,000 square feet to consolidate and expand.
This isn’t the first time they have searched for office space, making some brokers and other observers who track the market skeptical as to whether the companies are serious this time around.
The last time they looked was a year ago when CertainTeed and Saint-Gobain decided to stay put in four buildings they own totaling 175,000 square feet at 750 E. Swedesford Road.

The companies concede they routinely evaluate what opportunities might be available and this time is no different. “What we’ve been doing is periodically go out looking at our options,” said Carmen Ferrigno, spokesman for Saint-Gobain. “It’s what we do given where the market is and the ebb and flow of things.”

Real estate observers believe a decision to relocate is more likely this time given market conditions.
“This is the last legs of a tenant market before things turn the other way and they are smart to chase it now rather than wait until they are forced into a build-to-suit at higher rates.”

Some office submarkets are starting to see increased activity and a shortage of supply, particularly Class A space — a sign the market is on the cusp of shifting from a tenant having the upper hand to one in which the landlord is on top.
“It’s a good time for them to be out while rental rates are low because the market is starting to tighten up and rental rates will begin to rise over the next year. There are a limited number of options of existing inventory in that size range.”
What does help is the competition is limited since few other really big tenants are scouring the market for space.
A CertainTeed/Saint-Gobain deal would have implications for the office market. “If they take existing space, it’s a big chunk of absorption and would cure ills the market has,” he said.
“If they do a build-to-suit, they leave behind empty space, and they aren’t helping.”
A condition of any deal that is struck would be to sell the buildings to whichever landlord is able to snag CertainTeed and Saint-Gobain as tenants, according to people familiar with the situation. How much those properties are worth is difficult to say because they are at least 40 years old. They have their original exteriors, the interiors aren’t conducive to contemporary layouts and are functionally obsolete by contemporary standards. To buy the buildings would be more of a land play since the highly visible location is at the crossroads of major highways.
A range of options are available to CertainTeed and Saint-Gobain. Existing space not far from their current location that could accommodate tenants of this size include: Ellis Preserve in Newtown Square: the former Aegon property in Frazer; and 530 and 580 E. Swedesford Road, two buildings totaling 258,000 square feet down the road from the existing offices that could become available in the next few years. Some build-to-suit sites include the Village at Valley Forge, which is across the street, as well as Atwater, Swedesford Square or Worthington, all of which are in Malvern. A decision is expected within the year."
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