Friday, January 4, 2013

Office Space 2013

Natalie Kostelni

The region’s commercial real estate market entered the new year with more buoyancy than it had a year ago, giving many in the industry hope 2013 could be even more robust.
Architects, contractors, leasing brokers and landlords said they saw Center City and suburban commercial real estate fundamentals improve across the board last year and expect that to continue throughout the year, even gaining some steam during the latter half. However, they hesitate to say that everything looks promising.
“If we make a comparison to the last three to four years, the last year or so has been much more positive,” said Michael Armento, vice president of Torcon Inc., a construction company. While so-called eds-and-meds showed resiliency during the downturn, corporate real estate still remains weak, Armento said. However, encouraging signs indicate that could change this year.
“One of the trends we follow, and it comes from talking to architects, is there seems to be a long list of architectural firms back in a hiring mode and that is a good indicator for us and future projects,” Armento said.
That is the case at several architectural firms in the region including Stantec. The architectural and engineering firm is hiring across the board, said Anton Germishuizen, vice president at Stantec. All disciplines are busy at the firm and its backlog is growing not only in the firm’s Philadelphia office but across the country, Germishuizen said.
“I think 2013 is going to be a pretty strong year for us,” he said.
The company recently won an assignment from Temple University for the design of a new 300,000- to 350,000-square-foot library.
The office market in Center City continues to improve and brokers are seeing concessions down, rental rates moving up, a tightening in trophy and other classes of space as well as a scarcity of large blocks of contiguous space.
“I expect this to continue because business is getting better, we’re starting to see some organic growth from businesses and companies are starting to come in from out of state and the suburbs. Supply keeps shrinking and occupancy increasing. We could be on the verge of new construction.”
Liberty Property Trust is kicking around a new office building at 19th and Arch streets and Brandywine Realty Trust is close to lining up enough anchor tenants to kick off Cira South near 30th Street Station. With the University of Pennsylvania already secured to take up roughly 150,000 square feet of office space, Brandywine reportedly wants to snag one more tenant totaling roughly 40,000 to 50,000 square feet before breaking ground on the mixed-use development that would have a residential component.
For tenants, new construction is beginning to make some sense as rents begin to rise, space options dwindle and efficient space use can mean taking and paying for fewer square feet.

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