Monday, October 31, 2016

Influx of New Developments Motivating Landlords to Revamp Their Suburban Properties

By: Ken Knickerbocker, Montco.Today
Thanks to the influx of new developments in the suburbs, owners of Class B apartments are starting to invest heavily in renovating their properties in a preemptive move to stay competitive.

These older buildings in areas such as King of Prussia and Phoenixville are getting new granite countertops, revamped kitchens equipped with stainless steel appliances, swimming pools, clubhouses, and pet friendly monikers.

The move is in direct response to the close to 6,000 new apartment units being constructed or announced for development in suburban areas by 2020. Over a sixth of them have already been completed in the first half of this year, with another 1,296 currently under construction.

These new developments are shaking up the market and forcing existing apartment landlords to look at ways to make their properties more attractive in order to remain competitive.

“We’re trying to look hip, nice and clean,” commented Brian Paule, director of property management for Jenkintown’s Galman Group, which owns 40 communities totaling 8,000 apartments throughout the region.

Thursday, October 27, 2016

Big Bob’s Flooring Leases 25,000 SF in Gateway Square Shopping Center

Big Bob’s Flooring, a flooring retailer, has signed a lease for 25,395 square feet in the Gateway Square shopping center at 105-125 Gateway Dr. in Mechanicsburg, PA.

The Gateway Square shopping center totals 214,829 square feet and was developed in 1998. Other tenants there include T.J. Maxx and Sky Zone. Big Bob’s Flooring will take occupancy in early 2017.

Eastern Manufacturing Expands at Bucks County Business Park

Eastern Manufacturing, a global producer and distributor of catalytic converters and related components, has expanded its footprint in the Bucks COunty Business Park, leasing 102,350 square feet at 2201 Cabot Blvd. W in Langhorne, PA, adjacent to its current facility.

The expansion doubles the firm's capacity to meet the growing demand for CARB-compliant converters.

The 102,350-square-foot warehouse facility is heated and fenced, and features 12 loading docks with levelers and two drive-in bays. There is parking available for about 60 cars and the building is completely sprinklered.

Roseland Breaks Ground on 310 Conshohocken Apts Units

Roseland Property Company has broken ground on its $70 million multifamily development at 51 Washington St. in Conshohocken, PA.

The 250,000-square-foot multifamily property will have a total of 310 units, though the exact unit mix has not been determined.

The five-story asset, owned and developed by Roseland, is expected to deliver by year-end 2017 on 3.3 acres in Montgomery County.

Skanska Completes Terminal F Expansion For American Airlines In Philadelphia

by Steve Lubetkin,
Skanska USA has finished Philadelphia International Airport’s American Airlines Terminal F expansion project. The expansion earned a LEED Gold certification from the US Green Building Council.

“We are proud to add another LEED certified aviation project to our list of sustainable work and accomplishments,” says Ed Szwarc, Skanska USA executive vice president and general manager. “Working with The Sheward Partnership, we were able to recycle 75 percent of construction and demolition debris, utilize salvaged, refurbished and recycled materials in construction and regionally source building materials to not only help the environment but also support regional businesses.”

The new facility enables American Airlines to increase capacity and improve the passenger experience at one of its primary east coast hubs. With a design by The Sheward Partnership, Skanska built a new 40,500 square-foot state-of-the-art baggage claim facility as well as a 40,000 square-foot renovation of the existing Terminal F ticketing building and Terminal E-F connector. The inbound baggage claim process was transferred out of the existing Terminal F ticketing building.

The new building is now located across from the main Terminal F building and can be accessed by an indoor 400-foot pedestrian bridge, which connects the two buildings. The project included the erection of a 91,000-pound, 100-foot-long baggage handling conveyor bridge over the main airport departure road, which was prefabricated and lifted into place in one night with minimal disruption to the airport.

The expansion also included realignment of the commercial road to create pull-off lanes at the new Terminal F baggage claim for easier departure. This new process will enhance the flow of travelers and improve the safety of their route to the arrivals area and ground transportation.

The new renovations permit passengers to circulate between Terminal F and the other terminals without leaving the secure area, which was previously only accomplished by shuttle bus.

Skanska has extensive experience in the Pennsylvania and the Delaware Valley region building such projects as the Nicholas and Athena Karabots Pavilion Addition at the Franklin Institute, University of Delaware East Campus Residence Hall, SugarHouse Casino, Inspira Healthcare Network, Christiana Care Health Systems Women and Children’s Health Building, and the Nemours/A.I. duPont Hospital for Children.

Monday, October 24, 2016

Friday, October 21, 2016

Real estate is king for investors: Tiger 21 (Video)

Funiture & More Leases 20,000 SF at Dover Towne Center

Furniture & More Galleries signed a lease deal for 19,695 square feet in the Dover Towne Center at 1574 N. Dupont Hwy in Dover, DE.

The retail center totals 108,402 square feet in Kent County.

Wednesday, October 19, 2016

Philadelphia Market Isn't Slowing Down Anytime Soon

Matthew Rothstein, Bisnow

Although rents have been rising and more buildings are being built on spec than we’ve seen in years, optimism remains strong among some of the Philadelphia industrial market’s biggest names.

There is no more telling sign of the state of the industrial market today than the fact that manufacturing was not mentioned once at Bisnow's industrial event last week at Top of the Tower, the view from which is above. Rather, the industry on everyone’s lips is e-commerce, which means that far and away the biggest users of industrial space are warehouses and distribution centers.

E-commerce is growing at such an astounding rate that retailers are fighting to increase their capacity to meet demand—good news for developers, who are also having an easier time finding capital than ever before. “There’s so much appetite for industrial,” MRP Industrial’s Reid Townsend (below, center) said, “we can drive a better deal for each individual project.” “For every dollar of industrial that’s out there, there's about four dollars of capital chasing it,” added CBRE’s Mike Hines (below, left). “What’s more, this year it’s up to five dollars as opposed to four.” A big reason the market remains so bullish is that for all its impact on society, e-commerce still has room to grow within the economy. "For this year, e-commerce was 8% of total retail,” First Industrial Trust’s John Hanlon (at bottom, with microphone) said. “But that was a 4.5% growth in this quarter, and 15% from the year before...and total retail only increased about 2.3% [over that time frame].”

A big part of that growth is the increasing diversity of products commonly bought online. As e-commerce trades more in necessities, it becomes a more sustainable industry. “The warehouses had too many flat screen TVs in 2006,” said Liberty Property Trust’s Jim Mazzarelli (above, right), “But now if you look at our warehouses, they’re full of food and things that you can walk into a house and see five to ten of. “The consumer is pushing, not for the technology, but the needed products. And that’s what’s causing this trend to go consistently up,” Jim continued. “There’s another two-three years of runway for this, minimum.” This shift in the demands of e-commerce means that retailers are forced to constantly adjust to the logistics of fulfilling those demands. If they are used for more essential products, then shipping them quickly and efficiently becomes a need, not a want. Most of the industrial product that has been traded in the Philadelphia region has been outside of the city, in hot spots like the Lehigh Valley and South Jersey, for the standard reasons— it's easier to find space, cheaper to lease or buy the land (in general)—but the increasing demand for e-commerce to be faster and faster may soon change that.

“The industrial sector in the city proper has lagged behind,” says PIDC’s Tom Dalfo (above, right). “We’re seeing inquiries for sites to do construction, and getting a lot more interest in product that exists in the city. Part of the issue is the speed of delivery, and if you’re going to deliver food, you can’t be 200 miles away. Getting close to a population center is becoming a bigger deal.” Of course, any conversation about e-commerce has one retailer in particular’s name just waiting to be uttered: Amazon. It remains ahead of the curve on delivery speed, pricing and diversity, and it also buys more warehouse space than any other retailer in the region. Amazon’s quest for increased efficiency has led them to eschew the use of the post office or FedEx in some areas, using Uber drivers to make as many as 40 deliveries just between the hours of 8:00am and noon, Reid says. It’s such a tight timeframe that it requires a “unique design to retrofit [industrial] buildings.” “There’s some angst about what the long-term commitment of Amazon is to this delivery model,” Reid says. Rendering buildings functionally obsolete on a quicker timeframe than normal, as Amazon threatens to do, is a cause for concern, but if they abandon a space, developers have not had a hard time filling the vacancies. “If you build a building and it’s 75% occupied,” says Mike. “Someone’s going to pay you for that occupancy. Sellers aren’t concerned about vacancy today in the big box space, because they’re getting paid for it.”

If there’s one major concern among industrial developers for the continued growth of the market, it’s the potential for the labor pool to dry up. Automation in warehouses isn’t developing as fast as the warehouses are being built, which means that fulfillment and distribution centers require lots of staffing—and not every town can provide it. “Labor will be the big consolidator in this market,” Jim said. A test case for this concern is Carlisle, a suburb of Harrisburg that borders the Pennsylvania Turnpike and I-81, making it perfect for distribution centers. The only problem is that it already has so many, Mattel was forced to find a different location because they didn’t believe they could staff the warehouses they wanted to buy there. Of course, one town in central PA does not a crisis make, and other developers in the room cited the Elizabeth area of New Jersey as being ripe with potential labor. And then there’s the City of Philadelphia, which would require a “tremendous amount of construction” for labor to become scarce, according to Tom. “Our depth of the labor pool in the city is very deep and wide,” Tom says. “We also have the infrastructure of transit that will get people to workplaces.” In areas with a high concentration of industrial spaces, competition for labor will be very stiff—especially now, as retailers staff up for the holiday rush. Multiple panel members noted increased wages could be used as a powerful recruiting tool, which would be a welcome development for blue-collar workers, but not for developers already looking at compressed cap rates. “At this time in the cycle,” Reid said, “it’s very difficult to find a project that has it all in terms of both labor and tax incentives.” Despite those concerns, the Philadelphia region remains uniquely well-positioned in the current industrial market, if only because of its proximity to nearly a quarter of the country’s population. “You have incredibly powerful consumer demands in this area,” Jim said, “so warehouses have to be there.”

Hillwood Bringing 620,000-SF Spec Distrib Ctr Online in Central PA

Hillwood Investment Properties is nearing completion of its Trade Center 44 distribution center building, developed on-spec at 1495 Dennison Cir. in Carlisle, PA and slated to wrap construction later this month.

Hillwood broke ground on 50.4 acres in the Harrisburg Area West Industrial project back in October 2015.

When it delivers, the property will total 620,000 square feet and offer 96 dock-height loading positions with levelators and two drive-in doors, 32-foot clear heights, 3,000-amp heavy power, 52-foot column spacing and fluorescent lighting.

The building is currently available for lease, offered for a single user or divisible down to 200,000 square feet.

Tuesday, October 18, 2016

'Franklintown' dream renewed north of Center City

by Jacob Adelman, Staff Writer Philadelphia Inquirer

When Kevin Flynn moved his business to a former taxi garage north of Center City's office district in 1983, his was one of just a few occupied buildings among blocks of vacant lots and abandoned warehouses.

That was fine with Flynn, a property broker, investor, and developer of Harrah's Philadelphia Casino & Racetrack in Chester, among other projects.

He had relocated what is now the Flynn Co. to the area northwest of Broad and Vine Streets - remembered by some as the site of the 1970s' mostly unrealized "Franklintown" development scheme - because its little-trafficked streets made it easy to hop onto nearby highways to visit suburban clients.

Now, Flynn is preparing to bid those open streets goodbye, as a wave of development promises to fulfill Franklintown planners' largely forgotten dream of a vibrant northern extension to Center City.

"You'll be bumper-to-bumper trying to get out of here," said Flynn. "The roads will be jam-packed."

On the vast parking lot that fronted Flynn's two-story building - an eccentric warren of cigar-shop Indians, mounted hunting trophies, and ephemera recalling the 76-year-old's stint as a Marine - now rises a 32-story apartment building.

The 277-unit tower, the Alexander, is being built by Property Reserve Inc., the development arm of the Mormon Church, which unveiled its soaring Philadelphia Pennsylvania Temple about a block away in August.

About two blocks to the east, on the southwest corner of Broad and Callowhill Streets, Philadelphia's Parkway Corp. and a partner are developing a 239-unit, six-story apartment building as the eastern wing of their Hanover North Broad project.

Community College of Philadelphia, meanwhile, plans an 11-story complex beside its Spring Garden Street complex, with 500 student and nonstudent apartments.

And this month, to the south, PMC Property group plans to begin removing the concrete facade of GlaxoSmithKline's former 24-story headquarters in a bid to convert the long-vacant building into a glass-skinned office-and-residential tower with 360 housing units, to be called One Franklin Tower.

Those cumulative 1,376 new units will nearly double the 1,500 dwellings tallied by the U.S. Census in 2010, the most recent year data are available for the area between Broad and 18th Streets, from Race to Spring Garden.

And even more housing could be on its way, with the Archdiocese of Philadelphia set to present conceptual plans to community members next week for a possible development that could include residential buildings.

The interest in the area comes as developers seek to capitalize on its location near core Center City - where there are ever-fewer spots left to build - and the museums and parks along Benjamin Franklin Parkway.

"Pushing a couple of blocks north of the main business district provides great walkability, not only to the offices and jobs, but also to all the great amenities that line the Parkway," PMC executive vice president Jonathan Stavin said.

The activity in the area largely picks up on the never-fully realized Franklintown development scheme of the 1970s, which aimed to stem the loss of population from Center City with a new district of office towers, residential buildings, and hotels.

With the city's backing, area landowners - including the predecessor companies to GlaxoSmithKline and Peco Energy Co. - pooled their properties and cleared them for development.

But while the plan saw construction of the Glaxo headquarters tower, a hotel (most recently a Sheraton), and other buildings on the site's western half, it largely fizzled as it approached Broad Street to the east.

Paul Levy, president of the Center City District business association, said today's turnaround comes after the construction of the Barnes Foundation museum on the Parkway and the Mormon Church's moves to develop a large swath of vacant land into its apartment tower and temple complex.

"The result is a very positive connection that is being forged between the [central business district] and adjacent neighborhoods," Levy said.

But at the center of all this development, broker and developer Flynn expects the peace he's long enjoyed in his neighborhood to be upended by the coming wave of new residents.

Gone already are the days when cheap land let him enlarge his offices into a compoundlike state that includes the full interior - wooden wall panels included - of a since-demolished Kensington tavern and a big parking lot that doubles as a basketball court for Thursday night staff games.

Still, the real estate entrepreneur plans to leave the property intact for now.

"I'm not interested in making money off real estate here. This is our office," he said. "Where else are we going to put our basketball court?"

Thursday, October 13, 2016

Interview with Workspace Property's Roger Thomas -The Bold Contrarian Play for Liberty's Suburban Office Portfolios

By Randyl Drummer Costar
Workspace Property Trust this week closed one of the largest suburban office portfolio acquisitions of the year, acquiring 108 office and flex buildings and 26.7 acres of land in five markets from Liberty Property Trust.

The $969 million purchase with partners Safanad, a Dubai-based global principal investment firm; and affiliates of diversified investment firm Square Mile Capital Management LLC is WPT's second major transaction with Liberty Property and expands Workspace's holdings to 149 properties totaling 10 million square feet.

In the last year, Workplace Property Trust, led by former Mack-Cali Realty executives Tom Rizk and Roger Thomas, have so far amassed more than $1.2 billion in assets as part of its strategic plan to build a pure-play portfolio of suburban office properties in what they consider strategic locations.

Most investors continue to funnel capital into urban core office submarkets following millennial workers flocking into urban areas offering a "live, work and play" environment. However, somewhat under tha radar, U.S. suburban office markets have improved occupancy and rent growth significantly in the later stages of the economic recovery.

WPT President and Chief Operating Officer Roger Thomas proudly touted the firm's contrarian investment philosophy in an interview with CoStar this week.

CoStar:Why are you bullish on suburban properties at a time when most other investors continue to shy away from the segment?

Thomas:We've heard all the predictions - that there’s been a demographic shift and that all millennials want to live in the urban core and all employers are going to chase them and therefore the suburbs are dead or dying. We've seen Wall Street and the analyst community push the big institutional players like Liberty and Brandywine Realty Trust to get out or pare down their suburban office holdings. But suburban office is simply too big and important a component of the office market to simply go away.

We believe that the prediction of the death of the suburbs is greatly exaggerated. The desire of millennials to live and work in urban cores is true, to a point. They're young and before they have kids, it’s very exciting to live in an urban environment. But it’s only true to a point. Not all millennials want to live in the urban core, and not all employers want to be there.

We see the trend of the millennials living downtown to be part of a cycle. It may be a little bit longer of a cycle, but we think they will go through it and return to the suburbs when they start families, just as generations of adults before them have done. When we saw the pressure on the large institutional owners like Liberty to shed their suburban holdings, with no one else coming into the space to pick up the slack, that’s when Tom and I saw the opportunity. We see the disconnect.

What types of suburban assets meet your acquisition criteria?

When the market recovered in the mid-1990s (in the previous cycle), it lifted all property types, including suburban office. Almost all the suburban markets did really well across the board. (However,) we don’t think that will be the case this time around. While we think there’s a bit of a demographic shift, there will be haves and have-not properties.

The type of product we’re looking for are well-located properties close-in to the city, in communities with a 24/7 lifestyle lots of food and retail options, and good public and highway transportation infrastructure.

What we’re not looking for are those one-off assets, the corporate headquarters white elephants that are far flung out in the middle of nowhere, where you have to drive 10 minutes just to find lunch.

Can you give us a little background on how the mega-transactions with Liberty Property played out?

The $245 million acquisition of Liberty’s Horsham, PA portfolio was our first deal out of the box, closing last December. Having been in the public sphere through Mack-Cali and others, we know most of the players. Liberty had been shopping the Horsham portfolio, but it was not widely circulated, and we connected with them. The portfolio fit what we were looking for. It has maintained occupancy of 85% or above, for the most part, over the last 10 years.

Soon after that deal closed, in the beginning of 2016, we started talking again with Liberty, which was still in the middle of its disposition program of $1 billion in assets. We were impressed with the properties (in the second portfolio), which were well-leased and did not have a ton of deferred maintenance.

While there were understandable challenges putting together and executing such a sizable portfolio in the most recent transaction, all of the main players, including JPMorgan, Safanad, Square Mile and Liberty, worked well and cooperatively together to get to the finish. We hope to build on those relationships and take full advantage of the disconnect in the capital markets and our contrarian philosophy before the market tide shifts. Which we think is imminent.

At what point did Safanad come into the deal? Did you court them earlier for the Horsham portfolio as well?

Yes. We're very friendly with Safanad, particularly Vin Pica, their managing partner for North America. But it was a contrarian play and our first deal out of the box. So I think they were a little skittish about that and took a pass.

Once we closed that first deal, we went back to them again with the most recent Liberty portfolio and they were more interested. After we had the transaction tied up and structured with Liberty, we started working with Safanad. We started discussions around April, shortly after signing a non-binding term sheet with Liberty at the end of March.

Do you expect to broaden your search for suburban assets to other states or regions? Any markets or regions you’re not immediately interested in shopping for assets?

Some suburban markets may be a little too far along in the evolution of their recovery. Cap rates are bid way down and prices are pretty high. There are so many opportunities in other good markets that we may not chase the more expensive deals. We want to broaden our footprint and we don’t believe we’re limited to any geographic area.

I think the slowest suburban markets to recover may be those around New York City like Westchester County and New Jersey. They might present new opportunities. I think a market like Denver is almost too far along in its recovery; the cap rates are so low there.

United Natural Foods Leased 134,000 SF in York

United Natural Foods, a leading national distributor of natural and organic and specialty foods, leased 134,250 square feet in the industrial building at 57 Grumbacher Rd. in York, PA.

UNF will share the building with Bell Sports, Inc., a manufacturing company.

The single-story building totals 278,582 square feet in the York County Industrial submarket. The property is owned by High Street Realty Company, and was constructed in 1985 with renovations completed in 2015

Central Logistics Park Phase I Breaks Ground with 832,000-SF Spec Industrial Bldg

The first phase of construction has begun in the Central Logistics Park, a planned 832,000-square-foot industrial building located along I-78 / SR-22 at Camp Swatara Rd. in Bethel, PA.

This single-story warehouse will include 226 trailer parking spots and 359 surface spots, as well as 179 dock-high loading positions, 36-foot clear heights, 7-inch floors and 3,000-amp heavy power. Being built on-spec, the property is expected to be complete in May 2017.

The second phase of construction will begin at a later date, and is expected to consist of up to four additional industrial buildings in the park.

Brasler Acquires 19 Acres In Berks County For Industrial Development

by Steve Lubetkin,
Berks61, a unit of Brasler Properties, which develops industrial and logistics properties, has purchased 19 acres at 4030 Pottsville Pike, Muhlenberg Township, Berks County, PA.  The rail served site has received land development approvals for development of a 278,000 square-foot building, which has been designed in anticipation of manufacturing and logistics uses. It has also been approved for Local Economic Revitalization Tax Assistance incentives.

The land development approval was granted by Muhlenberg Township at the Commissioners meeting last month, pending mutual agreement of a Developers Improvements Agreement.

“Land development approval and our acquisition of the property effectively pave the way for us to begin construction on the site,” says Chris Brasler, CEO of Brasler Properties and principal of Berks61.  Preliminary utility relocations have already begun.

“Berks County has been losing business opportunities because we do not have shovel ready sites in the most desirable locations in proximity to our great workforce,” says Pamela J. Shupp, AICP, CEcD, president and CEO of the Greater Reading Economic Partnership. “It’s one of the primary reasons we are excited to work with Brasler Properties who are bringing on line a great ready to go location that is ideal for manufacturing.”

The Route 61 corridor of the Berks County industrial market hasn’t seen a new class A building project for more than 10 years, and vacancy rates for existing stock in Berks County sit below one percent as a result. Conditions throughout the Lehigh Valley are also tight, with overall vacancy at 1.6 percent.

“Berks61 is a rare and exciting project. It’s unusual to have the opportunity to promote an infill project that simultaneously offers public transportation, available labor, manufacturing-capable infrastructure, rail service, and modern site design with ample parking and great on-site circulation. The strength of this location and fast-track delivery capability is attracting interest across the spectrum of regional and national users.”

Wednesday, October 12, 2016

Commercial Real Estate Plays It Safe

Rani Molla a Bloomberg Gadfly columnist 

U.S. commercial real estate prices have reached new highs, but the sector is a much safer place today than it was before the 2008 financial crisis.
Moving On Up
Commercial property prices have surpassed pre-recession levels, but that doesn't mean a crash is inevitable

Low capitalization rates -- the net operating income a property generates relative to its price -- might normally keep investors away, but low borrowing costs have made potential returns from commercial real estate attractive.Lenders, for their part, are avoiding many of the risky practices that contributed to the last real estate crash. Thanks to pressure from the Federal Reserve and government regulators, banks have been tightening their commercial real estate lending standards.

Raising Expectations
Share of senior loan officers who reported tightening standards on loans at their banks. Banks have picked up the lending slack caused by a less robust market for commercial mortgage-backed securities. But bank lending largely involves mortgages for existing properties rather than riskier loans for new construction. Banks’ conservatism has made it more difficult for developers to fund new construction, which in turn has prevented many markets from being overbuilt. 

Under Construction
Bank construction and development loans are still 53 percent lower than their 2008 high. Mortgages themselves are more conservative as well, with banks lending against a smaller portion of a property’s value. 

Less Risky Business
Commercial loans as a share of property value are smaller than they were before the recession. Lenders are also requiring borrowers to keep more cash on hand to pay off debts, improving banks' odds of getting repaid.

Owning Up
Lenders are requiring higher debt service coverage ratios -- net operating income to debt services -- than before the crash, meaning borrowers will be more likely to be able to pay what they owe

None of this means there won’t be pain if real estate prices suddenly crash. No amount of structural padding can insulate lenders from a nasty downturn.There are also lots of players in the market who have looser lending standards and may face even more pain than banks should a downturn come. As my Bloomberg colleagues Sarah Mulholland and Heather Perlberg have pointed out, shadow lenders, including private equity firms like Blackstone and Starwood, as well as online crowd-funding sites, are all taking on loans that banks have decided to forego.

Tuesday, October 11, 2016

Philadelphia Middle-Market Digest For October

by Steve Lubetkin,


WHITEHALL, PA—PH Retail, an affiliate of leading-edge real estate company Post Brothers, sold 2610 MacArthur Road, a 4,815-square-foot retail property in Whitehall, PA. The freestanding building, situated on an outparcel of MacArthur Towne Center — home to national retailers Walmart, Sam’s Club, Dick’s Sporting Goods and Lowe’s – is now occupied by Chick-Fil-A in a triple-net lease. PH Retail originally acquired the property in February 2015 after it had fallen into disrepair following the departure of a prior restaurant. Recognizing the site’s prime location nearby major thoroughfares and retail centers, the company quickly secured Chick-Fil-A as its new tenant following the acquisition. PH Retail led the subsequent demolition of the existing structure, in addition to securing approvals for the development of the new freestanding Chick-Fil-A structure.

HARRISBURG, PA—Wild Tomato Group purchased the restaurant The Wild Tomato Pizzeria from SD Food Management.  The 1,500 square-foot business is located at 4315 Jonestown Road in Harrisburg.


HARRISBURG, PA—Calderon Textile has relocated and leased a 57,600 square-foot distribution warehouse located at 7253 Grayson Road in Harrisburg from Liberty Property.

Monday, October 10, 2016

WuXi AppTec Opens Third Lab At Philadelphia’s Navy Yard

by Steve Lubetkin,
WuXi AppTec,  a global pharmaceuticals, biopharmaceuticals, and medical devices firm, has opened its third facility at the redeveloped Philadelphia Navy Yard, a 150,000 square foot facility that will house an additional 200 high-tech manufacturing and support jobs focused on cell and gene therapy manufacturing.

The new building adds to the rapidly growing life sciences community at the Navy Yard, which, with a total of 750,000 square feet, is now home to the highest concentration of privately leased life sciences space in the City of Philadelphia.

“Over the last decade, the Navy Yard has become the epicenter for life science companies in Philadelphia,” says Brian Cohen, vice president and city manager for Liberty Property Trust, which redeveloped the property. “WuXi AppTec has been at the forefront of this movement, leading this segment of the thriving business community which continues to attract top companies and talent from around the world.”

In 2004, Liberty developed a 75,626-square-foot office and lab facility for WuXi AppTec, one of the first life sciences companies to locate to the Navy Yard.  In 2014, WuXi AppTec expanded into 55,000 square feet of flexible space at another Liberty property in the Navy Yard Commerce Center. With the new facility, WuXi AppTec expands its Navy Yard footprint to more than 280,000 square feet of space, which will employ more than 400 people by the end of 2016.

Designed by Environetics Design, now known as NORR, WuXi AppTec’s newest building incorporates similar materials to its adjacent building at 4751 League Island Boulevard, including the extensive use of cast stone with fields of warm brick and a 30’ tall curtainwall.  In addition, the building features a minimum 37’ clear height and vast loading capabilities. The building is designed to achieve LEED Gold certification from the US Green Building Council.

“This facility is one of the largest facilities in the world for the GMP manufacturing of vectors and new cell- and gene-based medicines, such as CAR-T cell therapies for the treatment of cancer and other devastating diseases,” says Felix Hsu, senior vice president of WuXi AppTec’s US business unit.  “We are very proud to build upon our relationship with Liberty and to continue to create an important center for the manufacturing of cell and gene therapies here in Philadelphia at the Navy Yard.”

Philadelphia’s life sciences industry has grown to one of the strongest in the country due to the strength of its academic and research institutions, a robust talent pipeline from recent college graduates to senior executives and scientists, the central location on the East Coast, and proximity to international customers via air, rail, and sea. At the Navy Yard, life sciences companies benefit from the flexibility to build a completely custom facility, and the campus-like atmosphere, with more than 20 acres of world-class parks and open spaces, fostering a creative and collaborative environment. The campus has the remaining land capacity to create the largest urban life sciences cluster in the United States.

“Philadelphia has one of the most dynamic life sciences and healthcare industry clusters in the nation.  The Navy Yard offers a unique campus environment to attract top talent and support the growth of this important sector of our economy,” says John Grady, president of the Philadelphia Industrial Development Corporation, a quasi-public entity that, as master developer, oversees much of public-private development at the Navy Yard. “As one of the first tenants within the Navy Yard’s growing community of R&D enterprises, WuXi AppTec has long been at the forefront of innovation in Philadelphia and we are thrilled to celebrate their continued expansion and growth.”

The life sciences industry at the Navy Yard includes large corporate North American headquarters (Glaxo Smith Kline), established and emerging companies (Wuxi AppTec, Iroko Pharmaceuticals, Adaptimmune), educational institutions (University of Pennsylvania, Vincera Institute, Thomas Jefferson University Hospitals), and related capital ventures (Phoenix IP Ventures and Ben Franklin Technology Partners), among others.

Friday, October 7, 2016

Spaulding & Slye Invest in King of Prussia Office Bldg

Hayden Real Estate Investments and Miller Investment Management have sold the office building at 150 S. Warner Rd. in King of Prussia, PA to Spaulding & Slye Investments for $28.15 million, or about $187 per square foot.

The four-story, 150,922-square-foot office building delivered in 1986 on 5.8 acres in the King of Prussia / Wayne submarket of Montgomery County.

Sprint Renews Office Lease at Glenhardie II

Sprint, a leading international telecommunications company, has renewed its 15,424-square-foot lease at the Glenhardie II office building at 1285 Drummers Ln. in Wayne, PA.

The three-story, 62,862-square-foot office building was constructed in 1983 on five acres in the King of Prussia / Wayne submarket of Chester County.

Thursday, October 6, 2016

Open vs Private Office: Is the Pendulum Off Its Axis

by Julia Bunch, Bisnow Dallas/Fort Worth
This morning, 77 million Americans got up and went to work in an office. Increasingly, Americans log their 40-plus hours in spaces with an open concept design, unassigned seating, exposed ceilings and maybe a ping pong table. But are choices and creative office really solving a problem?

Too Much Of A Good Thing
During the rise of the creative office in the late 2000s, the New York Times reinvigorated discussion of an important concept: decision fatigue. The concept states that having too many choices can have an adverse effect on one's ability to make good decisions.   Gensler principal Paul Manno says creating good workplaces has always been about offering choice, but this push for collaboration and flexibility hasn't necessarily being thoughtful and has gone too far. Architects and designers can't fill a space with some lounge chairs and sofas and call it choice; they must get smarter, Paul says.

HKS associate principal Kate Davis tells us it's easy to take these trends as drivers and miss the point. Kate thinks if designers keep offering choice in the workplace without first considering what solutions a client needs, a tipping point could be in the future...or may even have begun. Gensler's 2016 workplace study found that while creative workplaces are twice as likely to offer choice to employees in how and where they work compared to traditional offices, workers actually reported less choice overall than in 2013. But making a laundry list of choices often leads back to a discussion about flexibility.

M Moser Associates strategic planning associate Elfreda Chan (above, center) thinks flexibility for flexibility’s sake is a non-answer, and every choice offered needs an intuitive purpose. The Rise Of The Creative Office Dot-com companies in the early '90s struck gold when they put all their employees in a single room (or more often, garage). Since, the open concept plan has widely replaced office-lined perimeters for execs and a bullpen center for support staff, as furniture vendors continued to develop solutions that aligned with those times. And while some industries (tech, creative, communications) adapted more willingly than others (legal, financial), the design world embraced the idea that humans as social animals needed areas to congregate, collaborate and socialize.

And from the open office came the creative office. You know the usually has a slide (like HCSS's Sugar Land office above), or a gourmet coffee bar with lounge area made from reclaimed wood. Elfreda says open office and creative office are similar, but the creative office is definitely an evolution of the former. The slides, tents, nap pods, hammocks and beanbag chairs now synonymous with Google's many offices have come at a price to the rest of the professional world. HKS director of interiors and VP Silva Zeitlian has worked on tons of creative offices, including Google, and she'll be the first to tell you that not everyone can or should work like the tech giant, but that hasn't stopped many from trying. Elfreda has learned that this pendulum swing from private to open (or now creative) office is influenced largely by the shift in how people work, especially with the introduction of better tools and more complex challenges. The adoption of new workplace ideas is driven by business needs to continue innovating, which sometimes means a shift in business culture. Those industries with serious corner office pressure have struggled to adapt all along, but businesses that need to grow in a certain way have embraced a new workplace, Elfreda tells us.

Millennials becoming a larger portion of the employment pool accelerated the trend, morphing creative office and open office. But Elfreda thinks the story goes deeper than a generational change. Gensler principal Christopher Goggin (above) thinks Millennials unfairly get a bad reputation for demanding something every generation wants: a place to do meaningful work. And when Baby Boomer decision-makers try to design for Millennials, the workplace and the purpose of the workplace become disconnected.  Solving For The Future With SF per employee shrinking and cost of materials increasing, designers already feel pressure to make offices as efficient as possible with the least available money. But HKS associate principal Greg Verabian says he also feels a new pressure to incorporate wellness into every project. Greg, Silva and others find themselves making spaces shallower and pushing back or eliminating columns so nearly every desk has a view and access to daylight.

Designers’ point of contact clearly illustrates this shift toward wellness. Kate (above) says when she first started her career in the late ‘90s, her clients were usually facilities employees and those in charge of the budget. These days, her clients are directors of HR and employees more invested in human capital. The original idea of an open office does prioritize employee wellness, but doesn’t often account for pitfalls such as poor acoustics, distractions and lack of ownership over one desk or office. We went too far without thinking about the two things that exhaust us most during the workday: acoustics and synthetic light, Greg tells us. Wellness, on the other hand, takes these factors—plus connectivity, spaces for introverts and extroverts, air quality and health—into consideration. And if workplace experts agree that flexibility isn't necessarily an office solution, maybe it's time to re-evaluate office problems.

Five Trends Affecting Commercial Real Estate: Looking Ahead to 2017

by David J. Lynn, Ph.D. and Peter Burley
The U.S. property market landscape in 2017 will be characterized by continued strong fundamentals, increased investor flows and high transaction volume. As for the economic landscape, the U.S. continues to grow moderately and add jobs. The U.S. employment gains continue to be strong, with unemployment dropping below 5.0 percent earlier this year, and adding to demand for housing in a variety of forms, for office space, for the retail sector and for industrial/distribution facilities. While many fear the end of the current economic cycle, the fact that the recovery was so protracted leads me to believe that we may have another two years left in the current growth cycle.

The U.S. Federal Reserve made it clear last December that the central bank sees U.S. growth as relatively stable, notching the federal funds rate higher by a quarter point. Nevertheless, underlying inflation is extremely tame in the U.S. and in major emerging markets (with worries of deflation in some sectors and countries), providing no impetus for significantly higher rates. Lending rates and fixed-income rates of return will still be very low by historical standards, inducing continued levered purchases of real estate assets.

The following five trends will play a significant role in commercial real estate in 2017.

Global economic and political uncertainties. The Brexit vote in the U.K. has added new uncertainties that will not be fully understood, much less resolved, in the near term. The IMF has downgraded global growth twice since January as uncertainties blur the outlook. For U.S. markets—real estate in particular—the impact is likely to be largely positive as U.S. assets become more attractive and valuable to global investors. We can probably expect enhanced inbound foreign investment in U.S. real estate as the U.S. becomes even more of a safe haven. The IMF predicts higher economic growth in the world as emerging markets find their footing and commodities continue their recovery. Stronger global growth is likely to provide more real estate inflows into the U.S. market as the U.S. remains one of the most attractive commercial real estate markets.

2. Low interest and cap rate environment. While it seems fairly certain that the Fed will seek another rate hike before the year is out, it should be minor. The funds rate could be boosted by perhaps 0.25 percent to 0.50 percent in 2016 and the same in 2017, but both inflation and employment appear to be coming in under the Fed’s expectations. With global economic growth lower than expected earlier in the year, the Fed will more likely maintain a ‘wait-and-see’ position in the short term. We still believe that the Fed is more than likely to weigh the effects of each move it makes before adding any additional friction to current (if unspectacular) economic growth trends. Ten-year Treasury yields have been in flux as early concerns about the effects of Brexit have begun to smooth out. Yields, which had fallen to as low as 1.24 percent in the immediate aftermath of the Brexit vote, have risen back to more than 1.5 percent in recent weeks. As concerns about global economic developments ease, we should expect those yields to push back toward a more normalized 1.75 percent to 2.0 percent range by early 2017. The squeeze on cap-rate spreads remains of some concern for real estate investments should rates rise more rapidly than expected, especially with the “frothiness” we have seen in certain gateway, class-A markets. At present, little indication exists that a rate increase will push cap rates dramatically higher. Nonetheless, there are indications that yields may begin to drift upward. And, as pricing in first tier markets stalls and yields hover in the sub–4 percent range in some of the major gateway markets—which are, in some cases, already in peak pricing territory—we should probably expect investors to move more aggressively into secondary and tertiary markets—and to opportunities beyond core assets to core-plus and value-add properties, as well as some of the higher-yielding niche property sectors, such as medical real estate.

3. Foreign investment in the United States. Global economic and political uncertainty continues to drive capital to the United States. International capital flows into U.S. real estate assets will continue—and increase. The U.S. property market is the most stable and transparent in the world, with higher relative yields and price appreciation potential, making it an easy investment choice. And, while slowing growth in China and much of Europe may dampen currencies and incomes over there, there is still abundant non-U.S. capital looking for placement and very strong demand for U.S. assets, as 2015 proved with record inflows. In 2015, foreign purchases of U.S. real estate assets rose to more than $87 billion over the 12 months ending in December, according to the Association of Foreign Investors in Real Estate (AFIRE), with China, Canada, Norway and Singapore all riding the wave. That volume is up from just $4.7 billion in 2009, according to research firm Real Capital Analytics. Among members of AFIRE, a substantial percentage expect to increase investment in the U.S. in 2017. Changes in the 1980 Foreign Investment in Real Property Tax Act (FIRPTA), which now allow foreign investors to be treated in a fashion similar to their U.S counterparts, will likely lead to an increase in foreign investment in the U.S. real estate market as well.

4. Slowing new supply. Additions to supply will remain limited across the board, with only modest supply growth in a few sectors—multifamily (now slowing for the remainder of 2016), student and seniors housing (creeping up) and single-tenant industrial (regional distribution centers)—and repurposing in others (suburban malls). Lending sources were extremely skeptical about funding new construction (particularly hotel and hospitality) coming out of the last recession, and the current lending environment is showing signs of reticence as bank reserve requirements from Basel III and CMBS risk retention requirements from Dodd-Frank are due to kick in by late 2016. Market volatility has sharply reduced CMBS offerings as well. Insurance companies are stepping in to fill some of the gaps, and private debt funds are emerging as an alternative space. Of all the property sectors, only multifamily can be said to be near long-term new supply highs, although office is seeing some marginal supply additions in a few markets for the first time in years. Medical office supply remains at a fraction of its long-term levels.

5. Volatile Energy Markets. Energy market volatility has already affected certain regional economies (Houston, North Dakota) and producer nations (Saudi Arabia, Venezuela). Last year saw a dramatic drop in oil prices, and the drop continued into early 2016, followed by substantial volatility through mid-year. Increased production and reduced demand due to slowing global growth led to the decline which saw oil prices fall from $110 per barrel to a 13-year low $27 per barrel in early 2016, with recovery to just $43/bbl in July. The world is oversupplied, and major oil-producing countries have barely reduced production. This has had a profound economic impact and carries with it implications for property market fundamentals and commercial real estate pricing.

The impacts vary considerably by region and sector. Negative effects are largely concentrated in a few metropolitan areas with high economic exposure to the energy industry (including Houston, Texas and the oil shale region in North Dakota). For most metro areas and property types, lower oil prices have been a net positive. Spending less on gasoline encourages consumers to spend more on other items, which helps retail and hotel market fundamentals. Lower oil and energy costs will also reduce certain construction, manufacturing and logistics costs. This aids business investment and expansion, which, in turn, increases demand for industrial and manufacturing space. Property markets will see a short-term lift due to a combination of improving tenant fundamentals and lower operating costs. However, for major energy-producing metro areas, the short-term benefits of low prices will be discounted by the negative impacts on energy-related firms. The long-term health of the property markets in these metro areas will greatly depend on the speed with which oil prices rebound to sustainable levels for U.S. producers. The national economy overall is better off in the near term. The U.S. is still a net importer of oil at about $190 billion per year, and the decline in prices positively influences the nation’s trade balance. Lower prices directly translate into an increase in household disposable income. Americans could see $50 billion to $75 billion ($400 to $650 per household) in gasoline savings this year alone. David Lynn, Ph.D., is the founder and CEO of Everest Medical Core Properties and Medical Core REIT I. He is the author of five books and more than 70 articles on commercial real estate and a frequent speaker in the industry. His recent book, The Investor’s Guide to Commercial Real Estate, offers expert advice for institutional real estate investors.

Philadelphia Industrial CRE Markets are Catching Up to Other Sectors

by Matthew Rothstein, Bisnow
If there’s one thing that differentiates industrial from the other forms of commercial real estate, it’s the way it interacts with the land around it. Office, residential and retail increasingly want to share the same spaces and create live/work/play environments. Most industrial spaces are still better served by largely keeping to themselves so trucks can move with ease and freedom.

Transportation has always been crucial to industrial spaces, but now it might be the most crucial factor. That’s because e-commerce has begun to dominate the retail economy, placing a premium on shipping and requiring more distribution centers. E-retailers generally require more facilities with a smaller footprint, easy access to more employees, and closer proximity to consumers than manufacturing plants, the industrial sector's classic use. “For projects that are a complicated product mix—things like supplying major retailers—[distribution] isn’t easily automated and requires a lot of employees to work it,” says PIDC’s Tom Dalfo. For Philadelphia, that's good news. “It’s not an easy thing to recruit a thousand people to work in a warehouse, but we have a very deep labor pool for that,” Tom says. What’s more, Philadelphia already has clearly defined industrial zones, which has empowered PIDC to facilitate land sales, development and financing. Industrial uses for land can often cause a conflict with NIMBYs (what doesn't these days?), who don’t want to be anywhere near the truck traffic that comes with an industrial building. “If there’s pre-existing residential, office or mixed-use in place, you tend to get significant resistance from townships during the entitlement process."

“In Philadelphia, that’s not really a challenge,” Tom says. “The properties that would be interesting to developers have been zoned as industrial for quite some time, and I think the neighboring residential populations and the city support that.” Even though industrial zones are kept separate, their presence in a city means they aren’t exactly isolated—a crucial point when trying to recruit a workforce. “The pattern of development is so tight in Philadelphia that [retail] doesn’t necessarily need to be integrated into the industrial district,” Tom says. Philly also benefits from its position among the Northeast’s cities, positioned to be a distribution base to both Washington, DC, and New York, with a better situation for industrial development than either. With all those factors in its favor, it’s no surprise that the industrial market in Philadelphia is trending upward. "The drivers of demand for industrial activity are very different than the drivers for residential and retail and commercial," Tom says. "That said, I think a rising tide lifts all boats, and investors who are active in the city now, and were not active five or 10 years ago, operate in many different areas. The extent that they’re in this market means they can deploy their investments a little more broadly than before.”

There is another connection, beyond proximity, between Philadelphia’s strong residential and commercial markets—there are more people and jobs here than there have been in years, and, if nothing else, that means more consumers need products shipped to them here. That demand has to be met by someone. In the surrounding area, industrial developments have more space to work with, and often house the larger distribution centers that service wider regions. There, just as in Philly proper, indicators for the market are positive. “Regionally, we're in the fifth year of steady institutional investor demand, significant tenant activity and rising rental rates, an active speculative market that risks outpacing near-term demand in certain locations.” With all these good signs for demand in the industrial market, many developers are building industrial sites on spec, which always presents a danger of overbuilding. In urban Philadelphia, building costs are too high to do so, but the greater region doesn’t always possess the same natural barrier to entry. “Some [investors] have chosen to develop in secondary locations while underwriting core market rental rates in order to establish a presence in this region. They’re taking risks beyond what MRP Industrial is comfortable promoting to our capital partners.” Their enthusiasm is understandable, but also risks creating something Philadelphia rarely has to deal with—a bubble. Still, there is little cause for anything but enthusiasm, especially with respect to Philadelphia’s urban market. It’s simply too well-positioned for the changing climate of industrial real estate for any other sentiment.

TreeTop Development Sells 496-Unit Charter Court at East Falls

GoldOller Real Estate Investments has acquired the 498-unit Charter Court at East Falls apartments located at 5450 Wissahickon Ave. in Philadelphia, PA from TreeTop Development LLC for $56 million, or about $113,000 per unit.

TreeTop paid Resource Real Estate and Contrarian Capital Management $47.25 million ($95,000 /unit) for the asset in March 2014, according to CoStar data.
See CoStar COMPS #2972021.
Formerly known as School Lane House Apartments, the historic multifamily building was built in 1951. The 11-story, 454,585-square-foot connected high-rise towers are comprised of 85 studios, 87 juniors, 159 one-bedroom, 153 two-bedroom and 12 three-bedroom units ranging between 375 and 1,700 square feet.

"We are very bullish on Charter Court and the historic East Falls section of Philadelphia. Our plan is to implement renovations and service enhancements while maintaining a price advantage over our local competition in East Falls and at a significant discount to comparable Center City properties," said Jake Hollinger, partner and COO of GoldOller. "From GoldOller's inception, we have consistently produced excellent returns for our investors by employing this value enhancement strategy and we are confident that our success will continue with Charter Court."

The buyer reported it intends to complete a major renovation that will "address virtually every aspect of the iconic 50's vintage building, restoring it to the grandeur of the past," including a new fitness palace, on-site spa and dry-cleaner, high-efficiency HVAC systems, new windows, upgraded hallways, a dog park and cyber cafe, and complete interior renovations to feature new kitchens and bathrooms.

"This is our first apartment acquisition in the Philadelphia area in years and for me this is walk down memory lane. As a kid who grew up in Philadelphia, I have great memories visiting relatives who lived there, swimming at the apartment pool which was like a country club experience. I loved the view of the City from the apartment and I always remember feeling important when I was greeted by door staff who always remembered my name, I intend to bring back that feeling for all residents," reminisced Richard Oller, chairman of GoldOller.

Three New Tenants Lease Space at Chester County Light Industrial Facility

by Steve Lubetkin,
Three new tenants, including scooter, car, trampoline and toy maker Berg USA, have signed leases at Exton Partners’ 608 Jeffers Circle in Exton, PA, a 42,700 square-foot industrial building on 6.8 acres. Berg USA will use 15,183 square feet at the location as its new North American headquarters.

The other tenants are Freedom Medical, a medical equipment supplier, leasing 15,000 square feet, and Advanced Office Environments, which is taking 7,500 square feet.

The building provides flexibility to accommodate light assembly and warehousing, with ancillary offices. The facility offers tailgate and drive-in loading and on-site parking.

Conshohocken Brewing Expands to Bridgeport with New Brewpub

By Shannon Maria Jones

Conshohocken Brewing opened its Bridgeport brewpub in the late summer, and it continues to grow in popularity amongst both locals and travelers. The bi-level space has seating for 180 and offers different beers on its 12-tap system from those on draught at the original Conshohocken Brewery, located just five miles away.

Only two years after its official debut, Conshohocken Brewing felt the expansion was warranted based on popularity.

“This was a chance for us to do a full-service restaurant where you can enjoy our beer with handcrafted food,” said Kevin Love, ‎Head of Operations at the new brewpub. “Everything is fresh here. Our beer is in a lot of our menu items too.”

For example, you’ll be able to enjoy IPA-infused mustard with Bavarian soft pretzels, ESB BBQ sauce on a pork belly burger, or a chocolate cake crafted with Burn Everything Rye Porter.

The brewery brought in chef Justin Henning, from nearby Taphouse 23, to run its culinary program. Henning, is experienced in opening restaurants and developing beer-focused pub fare.
On the new menu, you’ll find all your brewpub favorites, as well as some adventurous and delectable options like fried pickles, truffle fries, pork belly Brussel sprouts, and beer-fried cheese curds.

In addition to its downstairs bar, the new location allows for additional upstairs space that’s perfect for holiday and private parties.

The Bridgeport brewpub itself has a small, three-barrel brewing system with seven fermenters on the premises, where head brewer Andrew Horne will focus on experimentation and producing “crazy beers.”

“If a beer goes over well in the brewpub, we’ll consider taking it over to our big system in Conshohocken, and producing it on a large scale,”  he said.

But the new brewpub won’t be all unique one-offs. You’ll find the Conshohocken classics regularly on tap, including the 2016 World Beer Cup silver-medal winner, Puddlers Row ESB.

The new Bridgeport brewpub is located at 3 DeKalb Street.

Wednesday, October 5, 2016

Eastern PA One Of The Fastest-Growing Industrial Markets In US

by Steve Lubetkin,
The Eastern Pennsylvania Big-Box/Logistics Market posted strong gains across most submarkets so far this year.

Led by the Lehigh Valley/I-78 Submarket, where overall growth topped 8 percent year to date, the performance contributed significantly to overall market growth of more than three percent. This level of growth would rank the Eastern PA Region as one of the most-rapidly growing markets in the US.

The report is for influencing factors in six major North American distribution markets for industrial properties 300,000 square feet or larger. Supply chain modernization—which is still in its infancy—and positive e-commerce sector growth continue to bolster the US industrial real estate market, particularly big-box, which is experiencing a record number of tenants in the market.

Among the key findings in the research regarding Eastern PA:

Record construction deliveries - new deliveries topped 6.7 million square feet and are on track to total over 15 million square feet by year end.

Strong occupier activity – by mid-year there were more than six million square feet of new occupier transactions. The top five occupier transactions, included Starbucks (1.2 million square feet) in Manchester PA; An undisclosed user in Easton (1.1 million square feet); Hudson Bay (617,000 square feet) in Pottsville; Cal Cartage (538,650 square feet) in Bethlehem and Samsung (750,000 square feet) in Bethel.

Substantial rent growth – especially in the Lehigh Valley, where achievable market rents now top $5 per square foot.

Increased supply – primarily weighted by Central Pennsylvania/I-81 South, overall supply increased slightly, leading to a 38 basis point increase in vacancy rate from year end 2015.
Growing activity pipeline – new occupier activity and anticipated deals should result in a higher volume of transactions during the second half of 2016. With lower vacancies, higher effective rents and strong absorption, demand will continue to outpace supply in core markets.

In the extended New Jersey/Lehigh Valley/Eastern Pennsylvania market, demand from logistics and e-commerce users continues to make the region one of the most robust in the country. Big-box leasing activity has more than doubled between Q2 2015 and Q2 2016. During the first half of 2016, a total of 18.4 million square feet was leased, the most for a core North American market.

Tuesday, October 4, 2016

Liberty Property Trust Completes Sale of 108 Properties for $969 Million

by Natalie Kostelni, Staff writer the Philadelphia Business Journal
Liberty Property Trust has completed a nearly $1 billion sale of 108 properties in five markets to Workspace Property Trust.

The deal had been in the works since the beginning of the year and was expected to close late in the third quarter.

All of the properties Liberty is selling are in the suburbs of Philadelphia, as well as in Arizona, Florida and Minnesota. The assets total 7.6 million square feet. The transaction makes inroads on the company's strategy to exit suburban office markets and concentrate on industrial warehouse and distribution centers as well as urban centers such as Philadelphia and Washington D.C.

With this transaction final, Liberty has sold $1.2 billion in real estate so far this year.

Thirty of the properties, which total a tad more than 2 million square feet, are in Pennsylvania. The bulk of that space, or 1.2 million square feet, consists of office space.

Workspace Property, based in Horsham, Pennsylvania, bought the properties in a partnership with Safanad Ltd., a global investment firm. The portfolio included 26.7 acres of land and the buildings involved were 88.1 percent leased at the time of the sale.

Liberty will continue to own buildings it leases to Vanguard Group in the Great Valley Corporate Center as well as several redevelopment sites in the office park. The real estate investment trust will also hold onto its King of Prussia properties but will jettison buildings in the Chesterbrook Corporate Center.

Rate Hike Good for Overall Real Estate Business (Video)

Germany’s Union Investment Makes First Acquisitions in U.S. Retail Properties

Union Investment is further diversifying its international real estate portfolio by making its first investments in U.S. urban retail. Union is acquiring a 49% stake in four high street properties with a total area of 113,500 square feet for its open-ended real estate fund Unimmo: Global.

The buy will be done via a joint venture with TH Real Estate (a division of TIAA Global Asset Management). London-based TH Real Estate last month unveiled its U.S. Cities Fund series, a re-launch of the $2 billion TIAA-CREF Core Property Fund LP that plans to invest in retail, office, industrial and multifamily properties in major urban markets in the U.S. The four assets are owned by this fund, which originally paid $150 million for them.

TH Real Estate will act as the managing member and will continue to hold a 51% stake in the portfolio.

The four properties are located in prime shopping locations in New York, San Francisco and Philadelphia. The purchase price is not disclosed.

Two of the properties that make up the urban retail portfolio are in New York and together represent around 70% of the total value. Located in the Upper East Side of New York, 1511 Third Ave., which comprises approximately 43,300 square feet, is occupied by fashion retailer GAP and a fitness studio. TIAA-CREF acquired the property in December 2012 for $60 million.

In 636 Sixth Ave., 18,300 square feet of ground floor space belongs to the portfolio and is let to CVS Pharmacy on a long lease. TIAA bought the first floor condo in December 2014 for $42 million.

The remaining 30% of the portfolio is split between 856 Market St. in San Francisco and 1608 Chestnut St. in Philadelphia. The tenant of the approximately 9,100 square feet of space close to Union Square in San Francisco is sportswear manufacturer New Balance. TIAA acquired the property in October 2014 for $23.5 million.

The property in Philadelphia is located in the City Center, the historic and cultural heart of the city. The entire 42,800 square feet three-story building, which is let to Japanese fashion retailer Uniqlo, belongs to the portfolio. TIAA paid $24.5 million for the building in December 2014.

This deal marks Union Investment’s first step in building a retail portfolio in the U.S. The company’s investment strategy targets the full spectrum of the retail property universe, from urban retail to grocery anchored shopping centers and malls.

“Diversification and internationalization are two strategic goals for our retail portfolio that go hand in hand. Four properties in major cities with global reputations are an excellent start in the US market, with our ambition being to significantly increase our retail exposure,” said Henrike Waldburg, head of retail investment management at Union Investment Real Estate GmbH.

Cornwells Station Apartments In Bensalem Trade For Nearly $8.6 Million

by Steve Lubetkin,
Primavera Properties, a private developer in Sharon Hill, PA, acquired Cornwells Station Apartments, a 119-unit apartment complex in Bensalem, Bucks County, PA, from the complex’s private owners for $8.55 million.

Cornwells Station Apartments was built in 1968 and, before Kislak’s engagement, had never been on the market. The property offers one-bedroom and two-bedroom units, all with spacious floor plans, eat-in kitchens, and large walk-in closets. Before the sale, select units were upgraded with new kitchens and bathrooms.

“The marketing of Cornwells Station Apartments provided investors with an opportunity to acquire a highly desirable property in Bucks County. Due to continued investor demand for multifamily properties, along with a large value-add component, we were able to achieve a very aggressive price for property.”

“The purchaser saw potential in the property to upgrade it further since it was owned by original developer. The purchaser intends to invest a significant amount of capital into the property while bringing rents to market on turnovers.”

Cornwells Station Apartments is located directly across the street from the Cornwells Station rail station. The station is served by SEPTA’s Trenton Line, which provides access between Center City Philadelphia and Trenton, NJ. The property also offers easy access to Interstate 95, Pennsylvania Turnpike and Route 1.

Monday, October 3, 2016

Coretrust to Acquire Office Condo in Philadelphia

Coretrust Capital Partners has put 940,000 square feet under contract at 50 S. 16th St. in Philadelphia, PA for approximately $200 milion, or roughly $213 per square foot.

The seller of the lower 36 floors of Two Liberty Place is Parkway Properties. It is located between Market and Chestnut Streets in Philadelphia's CBD.

Constructed in 1990 in the Market West submarket as part of the Murphy/Helmut Jahn-designed Liberty Place development, the building offers close proximity to hotels, retail and restaurant options. Access to public transportation with the 30th Street Station is within walking distance of the property. Major tenants include Cigna, which recently signed a new 12-year lease for 322,000 square feet, Unisys Corporation, Buchanan Ingersoll, Republic Bank, Eckert Seamans.

The acquisition will be Coretrust's first acquisition in Philadelphia when it closes, subject to customary conditions. Coretrust will likely update the lobby, common areas and amenities. Most of the vacant space in the building is located on a three-floor contiguouse block, making it one of the largest blocks of available office space in the Market West submarket.

Dranoff Properties Secures $116M for One Theater Square Development

Dranoff Properties secured $116 million in construction financing for its proposed One Theater Square residential condominium development set to rise at 2 Center St. in Newark, NJ.

Prudential Financial Corp. and Fifth Third Bank provided the financing along with public funding from the city and state.

BLT Architects is set to begin work on the 22-story, 259,000-square-foot multifamily project by year-end, with an anticipated delivery date of the 245 units in mid-2018.