Monday, December 22, 2014

Top real estate stories of 2014: From Comcast tower to East Market

by Natalie Kostelni staff writer for the Philadelphia Business Journal

Each year when I look back at the top real estate stories and try to narrow them down to 10, I struggle. This year, I'm nearly paralyzed with indecision.

It's a good thing.

So many significant things took place in Philadelphia's suburban and Center City real estate scenes over the past year that I came up with 10 big stories with no problem. I had to stop myself at 25 because it was just getting ridiculous. I smiled, though. Philadelphia is achieving so much these days when it comes to real estate. Outside investors are taking a shine to it, cranes jut out of the sky, billion-dollar deals are still rare but are happening, and there's a sense of excitement about the city's future.

The suburbs are holding their own, too, and changing along with demographic and other forces demanding dense, walkable, amenity-filled communities or at the least buildings and campuses.

Three of its prime markets — Conshohocken, Pa., Bala Cynwyd, Pa., and Radnor, Pa. — are seeing rents rise and new construction around the corner. King of Prussia, Pa., is having its own building boom and suburban landlords are readily redefining office space to meet the needs of tenants looking to attract and retain top employees and appease Millennials crowding into the workforce.

Where to begin?

The year started with a bang and, though I didn't know it at the time, it was just a harbinger of what lied ahead.

It was mid-January when Liberty Property Trust and Comcast Corp. announced they would joint venture on a $1.2 billion new skyscraper called the Comcast Center for Innovation and Technology that would be designed by world-renowned architect Lord Norman Foster.

The University of Pennsylvania unveiled plans for the Pennovation Center on 23 acres at the old Marshall Labs site on the Schuylkill River now called South Bank. That, in conjunction with Drexel's Innovation Neighborhood, has the potential to create an innovation cluster that could be an incredible economic engine for the region.

Keystone Property Group bought Mack-Cali Realty Corp.'s suburban Philadelphia office portfolio for $230 million. While that was a big deal and made Keystone a bigger suburban office player, it also underscored a bigger underlying transition in the commercial real estate world: Companies are shedding their pasts and evolving into something new and redefining themselves. Mack-Cali is now focused on multifamily development.  Brandwyine Realty Trust is now an owner of Class A office buildings in urban centers and ventured into transportation-oriented mixed-use development, which veers from its genesis as a suburban office landlord. Liberty Property Trust is putting the finishing touches on transforming itself into an industrial real estate investment trust by selling non-core suburban office buildings.

Lubert-Adler was an investor involved in a $9 billion transaction to buy Safeway Inc. Always looking for the real estate play, Lubert-Adler has done these sort of deals before where it buys a company for the underlying properties it may own. Safeway owns much of its real estate from which it operates its stores and in areas with high-barriers of entry.

Crosspoint at Valley Forge at 530 and 580 Swedesford Road in Wayne, Pa., isn't a huge building at 272,000 square feet but its quick lease up — going from fully vacant to fully leased in a year — spoke volumes about the direction of suburban office buildings. Tenants will gravitate to well-designed, totally renovated office buildings packed with amenities and cool spaces.
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