Friday, August 10, 2012

Phila.-area commercial real estate: Sun shining brighter

by Natalie Kostelni
The suburban office market in the western suburbs got quiet and stayed quiet last year at this time.
In contrast, leasing activity has held steady this summer, and tenants of all sizes are in play and expected to strike deals later this year.

“The name of the game is consistent activity. It’s not over the top, but we’re experiencing steady, consistent activity.”

At 1000 Continental in King of Prussia, Mack has completed a 12,000-square-foot lease for FT Services and is close to completing another deal at 8,000 square feet that will bring the 202,678-square-foot building finally above 85 percent leased for the first time since it was completed in the third quarter of 2007.

Though a range of industries have wrapped up deals, pharmaceutical, bio, and medical-related companies are increasingly experiencing slow growth that has helped propel the market, Mack said. Others were finding that the primary demand drivers were “classic sectors – financial activities and professional and business services. This is a good sign.”

It’s a positive signal because most leasing activity during the recession had been educational and medical tenants, which help sustain the market but is “far from capable of sustaining a recovery for traditional office space.

Some of the leases that have been sealed up during the first half the year include: Frontage Laboratories leased 60,000 square feet in Exton; Accolade took 89,900 square feet in Plymouth Meeting; Airgas Inc. (NYSE:ARG) renewed 60,000 square feet in Radnor; NextDocs signed a lease for 30,000 square feet at Six Tower Bridge in Conshohocken; and Theorem Clinical Research signed on for 29,000-square-feet in King of Prussia and Delaware Valley Financial Group leased 49,000 square feet of space also in King of Prussia. An anomaly in the market but not short on heft, Dow Chemical signed a long-term lease on 800,000 square feet at Pfizer’s Collegeville campus.

The data can be a mixed bag depending on how it’s calculated. The vacancy in the suburbs dropped to 15.3 percent from 15.9 percent. But for King of Prussia, all of the submarkets saw positive absorption. Another report found vacancy declining by nearly 1 percent to nearly 13.5 percent during the first half of the year and is expected to continue to drop. We saw the overall vacancy rate decline in the suburbs to 18.6 percent.

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