Friday, January 27, 2017

OMEGA Minute on the Commercial Real Estate Market

The Suburbs Office Take the Spotlight

Ian Anderson, Director of Research and Analysis

Many downtown office markets throughout the country continue to "run on all cylinders," with vacancies hovering near their lowest levels in years and healthy rental growth. Downtown Philadelphia is no exception.

But, after an earlier uptick in supply, most downtown markets have begun to stabilize. Without this early development - if any - the suburbs have enjoyed stronger occupancy gains over the last two years. Again, Philadelphia is no exception. 

Over the past year, the Suburban Philadelphia office vacancy rate dropped from 18.7% to 17.0%. In contrast, Downtown Philadelphia's vacancy rate increased from the low thus far in this cycle of 10.5% in Q4 2015 to 11.0% at the end of 2016 as FMC Tower was delivered. 

The strength in the suburbs has been broad, however, and not limited to the top-tier of space. In fact, even if you remove our inventory of Trophy Suburban office buildings from the statistical set, we still see vacancy declining at a similar pace as the entire inventory.

Any softness in the suburbs has been limited to a few submarkets that can't seem to gain traction, particularly, the office submarkets that straddle the Route 611 corridor (Horsham/Willow Grove, Lansdale/Montgomeryville, and Jenkintown). Excluding these submarkets, occupancy gains in the suburbs look positively robust. 

Nonetheless, the Suburban Trophy office market continues to do well. At the end of 2016, the vacancy rate reached the lowest point of this cycle, 5%. The asking rate for the 408,000 sq. ft. of vacant trophy space left averaged $34.61 per sq. ft. With trophy asking rates at such levels, and space already so tight, the spectre of lower vacancy in this segment in the future seems slight. 

The larger outlook for suburban office continues to be positive. Our reasoning is the same as it has been over the last couple of years: a fairly confident assumption of more jobs being created and no significant, new space being built, resulting in increasing occupancy. At the same time, the effects of office occupiers placing more employees in less space will continue to be a slight drag on occupancy gains.

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Chickie's & Pete's Will Occupy Vacant Champp's In Marlton, NJ

by Steve Lubetkin,
Chickie’s & Pete’s Crab House and Sports Bar, a Philadelphia original, will be bringing its signature CrabFries and other seafood entrees to a former Champps with prominent frontage on Route 73, a main north-south highway for travelers from Philadelphia to southern New Jersey shore resorts.

Township Mayor Randy Brown, a coach for the NFL’s Baltimore Ravens, made the announcement inside the defunct Champps restaurant, surrounded by developer and restaurant representatives, and several former Philadelphia Eagles players who live in the township and had been urging the mayor to bring Chickie’s & Pete’s to this Burlington County community.

Chickie’s & Pete’s has 12 locations in Philadelphia and New Jersey, and several installations in stadiums, airports, amusement parks and casinos. Champps filed for bankruptcy Aug. 10 and the facility closed at that time.

The 10,000 square-foot Evesham Township restaurant will undergo a $3 million buildout to convert it to the Chickie’s & Pete’s model, which features multiple large wall monitors displaying sporting event coverage, says Peter Ciarrocchi, co-founder of Chickie’s & Pete’s. Part of the renovation will reconfigure restaurant parking. The Champps design has a dead-end circular driveway at the front of the building, but no parking.  The restaurant front will have a complete driveway allowing traffic flow around the front of the facility.

“We will rebrand the interior of this restaurant,” says Ciarrocchi. “The A/V will be out of sight, there will be nothing like it in South Jersey.”

The restaurant will employ about 200 people when it reopens in Fall 2017, Ciarrochi says.

Mayor Brown says he’s been friends with Ciarrocchi for years, and had been urging the restaurateur to bring his sports-themed brand to the Marlton section of Evesham Township for some time, but they had been unable to find a suitable location.

“The mayor was calling me almost as soon as the grill was shut down,” says David Vender, senior vice president of leasing and redevelopment for Brixmor Property Group. Brixmoor owns the 332,664 square foot Marlton Crossing Shopping Center where the new Chickie’s & Pete’s is located, and will continue to be landlord for the restaurant. Other tenants in the center include DSW, Burlington Coat Factory, HomeGoods, TJ Maxx, and SaladWorks.

“We had tremendous interest in the property, as you can imagine,” says Vender. “They were lined up, and they were offering us record-breaking rents for this region.”

Prospective tenants vying for the property ranged among Mexican, family, and fine dining “with white tablecloths, it really ran the spectrum,” Vender tells “We acquired the liquor license on behalf of Pete, and worked with him for a couple of months, and we’re really excited to be able to sign this lease.”

Vender says Brixmor expects the new restaurant to be a “traffic generator” that will make leasing space in the rest of the shopping center easier. “We’ll be able to lease off of it,” he says. “We’ll be able to absorb a number of vacancies as they pop up, and drive rents and drive better users coming in, because activity begets activity.”

Negotiating the lease took about two weeks, Vender says.

Wednesday, January 25, 2017

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Five Tower Bridge Suburban Office Bldg Back on the Market

The joint venture between Hayden Real Estate Investments, Miller Investment Management and The Davis Companies have decided to market for sale its Five Tower Bridge office building at 300 Barr Harbor Dr. in West Conshohocken, PA.

The 11-story, 222,058-square-foot, class A office building was developed by Oliver Tyrone Pulver in 2001. It consists of eight floors of office space above a three-level parking garage, and sits on nine acres overlooking the Schuylkill River, just minutes from I-76, I-476 and Center City. Tenants in the building include the Oracle Corporation and Sage Financial Group.

KBS Real Estate Investment Trust, Inc. sold the asset in 2012 for $70 million, or about $315 per square foot, according to CoStar data, which was $3 million less than KBS paid for the asset in 2008.

Kodiak Properties Sells Newberry Commons Shopping Center

Kodiak Properties LLC sold the Newberry Commons mixed-use center at 10-310 Newberry Commons and 36-50 Robinhood Dr. in Etters, PA for $16.42 million, or approximately $68 per square foot, to Vastgood Properties LLC.

Built in 1987, the 241,977-square-foot commercial property is comprised of 130,768 square feet of office space and 105,959 square feet of retail space. The asset houses Rite Aid's operational headquarters and is home to Darrenkamp’s Market, Valley Green Beverage and the Red Land Community Library.

Atapco Sells Christina Exec Campus

DelleDonne & Associates, Inc. purchased the six-building Christiana Executive Campus at 111-131 and 200-240 Continental Dr. in Newark, DE for $55 million, or about $118 per square foot, from Atapco Properties, Inc.

Totaling 467,355 square feet, the office campus is situated on 42 acres in the South New Castle County submarket of Philadelphia, adjacent to Christiana Hospital Complex, a Hilton Hotel, Center Point Plaza, Christiana Mall and various retailers and dining options. Atapco built the complex between 1986 and 2000 and remained the sole owner and on-site property manager until its sale.

Delle Donne plans on relocating its corporate headquarters to the campus and is planning to develop an additional 200,000 square feet of space at the site. Newly signed leases and the 20,000 square feet that Delle Donne & Associates will occupy at their new headquarters bring the property’s vacancy rate to about 10 percent. The subject property was 76 percent leased at the time of sale.

Tuesday, January 24, 2017

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Suburban Markets Expected to Outperform Downtown Metros as Office Sector Softens

Champaign Williams, National Editor, Bisnow
Though the office sector outlook remains strong, experts forecast a mild slowdown this year. Coming out of 2016’s strong office environment, CBRE head of office research in the Americas Andrea Cross told Bisnow new supply coupled with a tightening labor market will lead to a moderate slowdown in the national office market. Below are four predictions for U.S. Real Estate Market Outlook 2017 report.

1. Tightening Labor Market And Slower Office Job Growth

A slowdown is expected to hit the office market this year as companies continue to scour the tight labor market for qualified workers, who are becoming increasingly harder to find with unemployment hovering around lows of 4.7% as of last month. The labor market is likely to add about 273,400 office-using jobs this year — down from the 2010-2016 average of 418,000 office-using jobs gained each year.

2. New Supply

Though supply isn’t expected to exceed the previous two cycles, there’s about 50M SF of office space completions set to hit this year — the most coming online since 2009. The high supply coupled with expectations of softening demand will further negatively impact market fundamentals, likely increasing vacancy rates 30 basis points to 13.3%. Office markets will also continue to see rent growth deceleration as prices rise 1.5% this year, down from the rent growth rate of 4% or 4.5% in the past two years. Cross told Bisnow nearly 45% of the oncoming supply is concentrated in five markets — Manhattan, San Jose, Seattle, Washington, DC, and Dallas Fort-Worth.

3. Changing Office Tenant Needs
Experts project some of this year's softening will stem from slowing tenant demand amidst changing office dynamics and tenant needs, such as the continued shift in favor of open office space and co-working offices, which often require less space per employee per square foot. The strongest office-using jobs will come out of the South and West, and since a lot of new supply is not expected to come online in those markets this year, they might make a smart bet for investors searching for yields.

 4. Downtown Versus Suburban Markets Suburban office markets are expected to beat downtown office performance this year, depending on the market’s live/work/play drivers. It is expected suburban market rent growth to surpass 2% while vacancies may increase by a mere 10 bps to 14.5%.

Q4 2016 King of Prussia Commercial Property Summary

By Eric Goldstein

In Q4 2016, vacancy rates in King of Prussia continued to drop for Class A commercial office space to 6.8% and nearly a full percentage point for all commercial office categories to a low of 12.1% for the year. This represents a 5% reduction in vacancy from Q4 2015.

Leasing activity for 2016 totaled 858,145 SF; well above the 5-year average of 574,596 SF per year.

This dramatic increase in demand represents more than companies just wanting a presence in King of Prussia.

We believe that the choice by HTH Worldwide, The Judge Group and Vertex, Inc. to make KOP home to their corporate headquarters is a testament to the long-term growth and redevelopment expectations in the area.

There was an interesting shift from Class B commercial office space, which experienced a slight increase in vacancy rates at the end of the year, while absorbtion in Class C space surged cutting the inventory vacancy by half since 2015 to just 8% vacancy.

Industrial/Flex space remains in high demand with a further drop in the overall vacancy rates and rising lease rates hitting historic highs.

Lease rates for all categories stayed close with the previous quarter, with Class A Office at $28.40/SF, Class B Office at $21.12/SF, Class C Office at $19.39/SF, Industrial at $8.94/nnn and Flex at $6.65/nnn.

We believe 2017 will extend the positive trend in King of Prussia for leasing demand in commercial office, industrial, flex and retail properties.

Chemours to Sell 400,000-SF DuPont Bldg in Wilmington

The Chemours Company (NYSE: CC) has entered a sale agreement to divest its historic DuPont Building at 1007 N. Market St. in Wilmington, DE to The Buccini/Pollin Group, Inc. (BPG).

BPG, a privately held, full-service real estate acquisition, development, and management company, is expected to renovate the building into a world-class headquarters building then lease back the property to Chemours, which will maintain its presence, and 700 employees, in downtown Wilmington.

Chemours was previously a division of DuPont Co., but spun off as its own independent company in 2015. It had occupied space in the building as DuPont prior to the split.

"We followed a disciplined process deciding where to locate our headquarters," said Mark Vergano, president and CEO of Chemours. "We evaluated a number of locations against a range of criteria, including convenience of our current employees, our future workforce needs, and the fiscal impact on the company. Ultimately, our decision to stay in our current building satisfied all of those considerations. And we are very excited to be working with BPG to create a modern office environment that will be a reflection of our corporate brand."

The deal is expected to close in the first quarter of 2017, subject to customary conditions, with renovations beginning shortly thereafter.

Monday, January 23, 2017

Kimco Signs Life Time to Anchor Suburban Square Redevelopment in Ardmore

by By Justin Sumner Costar Group

Kimco Realty Corporation (NYSE: KIM) has signed four new retail leases totaling 94,100 square feet at its Suburban Square lifestyle center in Ardmore, PA.

Life Time - The Healthy Way of Life Company will lease 78,636 square feet in the former Macy's space at 40 W. Montgomery Ave. in Ardmore, PA. The four-story building will house its upscale Diamond-level club featuring a premier healthy living, healthy aging and healthy entertainment destination scheduled to open in fall 2017. This will be Life Time's fourth location in the Philadelphia market. Filling the remaining 10,540-square-foot space in the building will be national upscale home furnishing and accessories store West Elm, marking the retailer's fifth area location when it opens in fall 2017.

Kimco has additionally signed new leases with Drybar and Anthony Vince' Nail Spa in the center, deals that come closely on the heels of new leases with SoulCycle, Sephora, Eaves and Kendra Scott as well as expansion spaces signed with Barbour and Trader Joe's.

The new leases will make way for the latest development in Kimco's $70 million repositioning and transformation of Suburban Square through its all-encompassing, multi-year redevelopment program. Plans call for new parking, beautification efforts and the addition of a diverse roster of dining, retail and health and beauty services options to create a modern retail shopping and lifestyle experience within the Main Line submarket of suburban Philadelphia's Montgomery County.

"We are pleased with the progress of the first phase of development, and strategically planned this next layer to bring an exciting new selection of amenities and tenants to the center, with all construction being complete before Suburban Square’s 90th anniversary next year," said Tom Simmons, president, Mid-Atlantic Region at Kimco Realty. "Our diverse retailer mix features a blend of retail, services, medical, and dining options, offering something for everyone."

Phase I of the redevelopment included the current construction of a 629-space parking garage at the Square's east lot. Opening in fall 2017, the garage will include 3,000 square feet of street-level retail space. Suburban Square will enter its third stage of the redevelopment in early 2018, with the planned redevelopment of the commuter lot on Coulter Ave. into a mixed-use building with 20,000 square feet of retail space beneath 17,000 square feet of office space, surrounding a new public plaza with outdoor dining for restaurants. Leading the in-house leasing efforts at the center is Nina Rogers, real estate director with Kimco.

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Saturday, January 21, 2017

The DePaul Group Refinances Blair Mill Village East

The DePaul Group has secured a $78.8 million refinance of its Blair Mill Village East apartments at 3855 Blair Mill Rd. in Horsham, PA.

Robert W. Raneri, senior vice president and managing director with NorthMarq Capital's Greater Westchester New York / Connecticut regional office arranged the financing on behalf of the borrower through NorthMarq's seller / servicer relationship with Freddie Mac. The loan is structured with a 10-year term on a 30-year amortization schedule.

"As this was an existing Freddie Mac loan, we were able to waive a portion of the prepayment penalty and provide an 80 percent loan-to-value cash-out option," explained Ranieri.

The 768-unit, 859,890-square-foot multifamily community was built in 1974 on 67.3 acres in the Horsham / Willow Grove Multifamily submarket of Montgomery County, directly off the PA Turnpike and Rte 611. It features new windows, laundry facilities, garden-style units with patio / balcony, swimming pool, updated fitness center, tot lot, and resident parking. The pet-friendly facility includes online rental payments and hot and cold water, trash and HVAC included.

Friday, January 20, 2017

GSA Leases 39,000 SF at Penn Center

The GSA signed a four-year lease for 38,644 square feet in the office building at 1601 Market St. in Philadelphia, PA.

The 36-story building totals 685,852 square feet in Penn Center. The building was constructed in 1968 and most recently renovated in 1988. The building is located in the Market Street West submarket of Philadelphia. GSA leased the entire 11th and 12th floors there.

Thursday, January 19, 2017

Philadelphia’s Office Vacancy Decreases to 8.9%

by Costar Research Department

The Philadelphia Office market ended the fourth quarter 2016 with a vacancy rate of 8.9%. The vacancy rate was down over the previous quarter, with net absorption totaling positive 998,728 square feet in the fourth quarter. Vacant sublease space decreased in the quarter, ending the quarter at 864,423 square feet. Rental rates ended the fourth quarter at $22.33, an increase over the previous quarter. A total of seven buildings delivered to the market in the quarter totaling 469,277 square feet, with 4,491,509 square feet still under construction at the end of the quarter.

Net absorption for the overall Philadelphia office market was positive 998,728 square feet in the fourth quarter 2016. That compares to positive 1,449,583 square feet in the third quarter 2016, positive 1,883,898 square feet in the second quarter 2016, and negative (164,999) square feet in the first quarter 2016.

Tenants moving out of large blocks of space in 2016 include: DuPont moving out of 379,228 square feet at The DuPont Bldg; Merck & Co, Inc. moving out of 344,280 square feet at The Pinnacle; and FMC Corporation moving out of 200,501 square feet at 1735 Market St. Tenants moving into large blocks of space in 2016 include: Guardian Life Insurance moving into 274,152 square feet at Guardian Life Insurance; St. Luke’s Health System moving into 247,008 square feet at Founders Building; and Nationwide Mutual Insurance Company moving into 220,230 square feet at 355 Maple Ave. The Class-A office market recorded net absorption of positive 192,578 square feet in the fourth quarter 2016, compared to positive 815,760 square feet in the third quarter 2016, positive 794,844 in the second quarter 2016, and positive 279,383 in the first quarter 2016. The Class-B office market recorded net absorption of positive 602,497 square feet in the fourth quarter 2016, compared to positive 281,859 square feet in the third quarter 2016, positive 834,863 in the second quarter 2016, and negative (360,072) in the first quarter 2016. The Class-C office market recorded net absorption of positive 203,653 square feet in the fourth quarter 2016 compared to positive 351,964 square feet in the third quarter 2016, positive 254,191 in the second quarter 2016, and negative (84,310) in the first quarter 2016. Net absorption for Philadelphia’s central business district was positive 336,935 square feet in the fourth quarter 2016. That compares to positive 242,382 square feet in the third quarter 2016, positive 60,917 in the second quarter 2016, and negative (189,885) in the first quarter 2016. Net absorption for the suburban markets was positive 661,793 square feet in the fourth quarter 2016. That compares to positive 1,207,201 square feet in third quarter 2016, positive 1,822,981 in the second quarter 2016, and positive 24,886 in the first quarter 2016.

The office vacancy rate in the Philadelphia market area decreased to 8.9% at the end of the fourth quarter 2016. The vacancy rate was 9.0% at the end of the third quarter 2016, 9.2% at the end of the second quarter 2016, and 9.5% at the end of the first quarter 2016. Class-A projects reported a vacancy rate of 10.4% at the end of the fourth quarter 2016, 10.4% at the end of the third quarter 2016, 10.5% at the end of the second quarter 2016, and 10.8% at the end of the first quarter 2016. Class-B projects reported a vacancy rate of 9.2% at the end of the fourth quarter 2016, 9.5% at the end of the third quarter 2016, 9.6% at the end of the second quarter 2016, and 10.0% at the end of the first quarter 2016. Class-C projects reported a vacancy rate of 6.4% at the end of the fourth quarter 2016, 6.6% at the end of third quarter 2016, 6.9% at the end of the second quarter 2016, and 7.1% at the end of the first quarter 2016. The overall vacancy rate in Philadelphia’s central business district at the end of the fourth quarter 2016 decreased to 9.3%. The vacancy rate was 9.8% at the end of the third quarter 2016, 9.3% at the end of the second quarter 2016, and 9.4% at the end of the first quarter 2016. The vacancy rate in the suburban markets decreased to 8.8% in the fourth quarter 2016. The vacancy rate was 8.9% at the end of the third quarter 2016, 9.1% at the end of the second quarter 2016, and 9.5% at the end of the first quarter 2016.

Largest Lease Signings 
The largest lease signings occurring in 2016 included: the 320,367-square-foot lease signed by CIGNA Health Management, Inc. at Two Liberty Place in the Philadelphia CBD market; the 168,000-square-foot deal signed by Vertex Inc. at 2301 Renaissance Blvd in the Suburban Philadelphia market; and the 153,600-square-foot lease signed by Five Below at The Lits Building in the Philadelphia CBD market.

Sublease Vacancy
 The amount of vacant sublease space in the Philadelphia market decreased to 864,423 square feet by the end of the fourth quarter 2016, from 913,077 square feet at the end of the third quarter 2016. There was 901,415 square feet vacant at the end of the second quarter 2016 and 833,972 square feet at the end of the first quarter 2016. Philadelphia’s Class-A projects reported vacant sublease space of 560,541 square feet at the end of fourth quarter 2016, down from the 584,485 square feet reported at the end of the third quarter 2016. There were 560,109 square feet of sublease space vacant at the end of the second quarter 2016, and 533,650 square feet at the end of the first quarter 2016. Class-B projects reported vacant sublease space of 280,114 square feet at the end of the fourth quarter 2016, down from the 286,701 square feet reported at the end of the third quarter 2016. At the end of the second quarter 2016 there were 309,139 square feet, and at the end of the first quarter 2016 there were 249,561 square feet vacant. Class-C projects reported decreased vacant sublease space from the third quarter 2016 to the fourth quarter 2016. Sublease vacancy went from 41,891 square feet to 23,768 square feet during that time. There was 32,167 square feet at the end of the second quarter 2016, and 50,761 square feet at the end of the first quarter 2016. Sublease vacancy in Philadelphia’s central business district stood at 172,838 square feet at the end of the fourth quarter 2016. It was 248,847 square feet at the end of the third quarter 2016, 197,890 square feet at the end of the second quarter 2016, and 182,859 square feet at the end of the first quarter 2016. Sublease vacancy in the suburban markets ended the fourth quarter 2016 at 691,585 square feet. At the end of the third quarter 2016 sublease vacancy was 664,230 square feet, was 703,525 square feet at the end of the second quarter 2016, and was 651,113 square feet at the end of the first quarter 2016.

Rental Rates 
The average quoted asking rental rate for available office space, all classes, was $22.33 per square foot per year at the end of the fourth quarter 2016 in the Philadelphia market area. This represented basically no increase in quoted rental rates from the end of the third quarter 2016, when rents were reported at $22.32 per square foot. The average quoted rate within the Class-A sector was $26.92 at the end of the fourth quarter 2016, while Class-B rates stood at $20.27, and Class-C rates at $17.85. At the end of the third quarter 2016, Class-A rates were $27.08 per square foot, Class-B rates were $20.20, and Class-C rates were $17.76. The average quoted asking rental rate in Philadelphia’s CBD was $28.13 at the end of the fourth quarter 2016, and $21.40 in the suburban markets. In the third quarter 2016, quoted rates were $28.52 in the CBD and $21.36 in the suburbs.

Deliveries and Construction 
During the fourth quarter 2016, seven buildings totaling 469,277 square feet were completed in the Philadelphia market area. This compares to six buildings totaling 878,890 square feet that were completed in the third quarter 2016, nine buildings totaling 601,047 square feet completed in the second quarter 2016, and 61,949 square feet in seven buildings completed in the first quarter 2016. There were 4,491,509 square feet of office space under construction at the end of the fourth quarter 2016. Some of the notable 2016 deliveries include: FMC Tower at Cira Centre South, a 622,000-square-foot facility that delivered in third quarter 2016 and is now 80% occupied, and Guardian Life Insurance, a 290,265-square-foot building that delivered in second quarter 2016 and is now 100% occupied. The largest projects underway at the end of fourth quarter 2016 were Comcast Technology Center, a 1,336,682- square-foot building with 100% of its space pre-leased, and CHOP Research Tower, a 466,000-square-foot facility that is 100% pre-leased.

Total office inventory in the Philadelphia market area amounted to 418,139,590 square feet in 23,286 buildings as of the end of the fourth quarter 2016. The Class-A office sector consisted of 131,604,997 square feet in 973 projects. There were 8,163 Class-B buildings totaling 177,738,357 square feet, and the Class-C sector consisted of 108,796,236 square feet in 14,150 buildings. Within the Office market there were 1,013 owner-occupied buildings accounting for 37,766,365 square feet of office space.

Sales Activity
Tallying office building sales of 15,000 square feet or larger, Philadelphia office sales figures rose during the third quarter 2016 in terms of dollar volume compared to the second quarter of 2016. In the third quarter, 45 office transactions closed with a total volume of $525,485,732. The 45 buildings totaled 3,364,794 square feet and the average price per square foot equated to $156.17 per square foot. That compares to 43 transactions totaling $487,549,856 in the second quarter 2016. The total square footage in the second quarter was 4,407,921 square feet for an average price per square foot of $110.61. Total office building sales activity in 2016 was up compared to 2015. In the first nine months of 2016, the market saw 120 office sales transactions with a total volume of $1,941,701,521. The price per square foot averaged $166.53. In the same first nine months of 2015, the market posted 123 transactions with a total volume of $1,612,759,798. The price per square foot averaged $132.37. Cap rates have been lower in 2016, averaging 7.55% compared to the same period in 2015 when they averaged 8.13%. One of the largest transactions that has occurred within the last four quarters in the Philadelphia market is the sale of Cira Square in Philadelphia. This 870,262-square-foot office building sold for $354,000,000, or $406.77 per square foot. The property sold on 2/8/2016, at a 5.80% cap rate.”

Ridgeline Wrapping Construction on Crossroads Logistics Center

Ridgeline Property Group LLC will complete construction this month on the Crossroads Logistics Center at 50 MSC Dr. in Jonestown, PA.

Ridgeline broke ground on-spec on the 398,250-square-foot industrial building in April 2016. Situated on 35 acres in the Harrisburg Area East Industrial submarket of Lebanon County, the single-story, 5-Star warehouse features 85 loading docks with levelators, four drive-in doors, 116 trailer parking spaces, 36-foot clear heights and 56-foot column spacing.

Hyatt Hotels Acquires Chancellor Garage for Hotel Redevelopment

Hyatt Hotels Corporation has acquired the Chancellor Garage at 1612-1634 Chancellor St. in Philadelphia, PA for $25 million, or about $833 per square foot, from Haverford Hotel Partners LP and Patriot Parking, Inc.

The 0.35-acre site is currently improved with 30,000-square-foot, three-level parking garage with 300 stalls.

Hyatt plans to redevelop the site with a new 309-room, 13-story, 235,000-square-foot, Hyatt Centric Hotel. The redevelopment project is set to have retail and restaurant space on both the first and second floors in addition to more than 30,000 square feet of subterranean parking.

Radial Renews 103,000-SF Office Lease in King of Prussia

Radial, Inc., an e-commerce company, signed a 15-year lease renewal for the 103,334-square-foot office building at 935 1st Ave. in King of Prussia, PA.

The four-story office building was built in 2001 on nine-tenths of an acre within the First Avenue Corporate Center.

Gladstone Commercial Corporation last month closed on its $26 million acquisition of the asset, with plans to complete a $4 million renovation of the building without disrupting Radial's continued sole occupancy of the building.

Kimco Realty Buys Property to Expand Suburban Square Shopping Center

Kimco Realty has bought up a number of properties surrounding its Ardmore shopping center, Suburban Square. The company published an announcement of plans for an expansion of the mall, with the first phase being a larger Trader Joe's and a new parking garage in place of a ground-level lot. The second phase, to be called Station Row, will be street-level retail and dining, with an outdoor plaza. To that end, Kimco, a public REIT, has announced the purchases 119 Coulter Ave for $3.75M and 127 Coulter for $3M. Previously, it had purchased 125 Coulter in 2015 for $1.95M, according to the Philadelphia Business Journal. Station Row will be positioned to extend to the stairs leading to the platform of Ardmore's regional rail station, and is planned to add office space on the second level of its ground-floor retail buildings.
Full article:

$27 Million Luxury Apartment Building Opens in Norristown

By Justin Heinze ( Staff)

After four years of construction costing more than $27 million, the Luxor Lifestyle Apartments will officially open Wednesday in Norristown.

Luxor was built by the Westrum Development Company. It includes 157 luxury units.

"From municipal, county and school district officials to engineers, construction firms, lenders it was truly a group effort," Rosemary Rhodes, Director, Corporate Communications, said in a statement.

An additional 38 luxury rental units will be built at the adjacent Vista Ridge, a long vacant property. Construction there is slated to begin Feb. 1.

Developers are optimistic about Luxor.

"Residents of Luxor and Vista Ridge will be the catalysts that drive and accelerate the continued revitalization process on Main Street and throughout this county seat," Rhodes said.

Rent starts at $1,155 for a studio, $1,245 for a one bedroom apartment, and $1,690 for a two bedroom.

Wednesday, January 18, 2017

Endurance Signs 101,935 SF Lease at Jessup, PA Site

An affiliate of Endurance Real Estate Group, LLC (“Endurance”) is pleased to announce a new 101,935 SF lease with LBP Manufacturing, a national food packaging manufacturer, at 7 Alberigi Drive in Lackawanna County, PA, part of Endurance’s three (3) building I-81/NEPA Bulk-Industrial Portfolio. After the departure of the prior occupant at the end of 2016, Endurance quickly re-tenanted this space.

Apart from its favorable location, labor profile, and modern bulk warehouse specifications, 7 Alberigi Drive provides the significant electrical capacity that the new tenant requires for their operations. LBP has committed to hire 74 people over the next three years, and will be spending in excess of $6MM on infrastructure and equipment for their operations. In addition to the tenant’s improvements, Endurance will be upgrading and installing additional loading docks to their space, as well as completing various other base building improvements to accommodate the tenant’s operations and production machinery.

Endurance’s I-81/NEPA Bulk-Industrial Portfolio includes 7 and 15 Alberigi Drive in Jessup Borough, consisting of 166,794 SF and 129,540 SF, respectively, and a 248,640 SF building at 32 Earth Conservancy Drive (formerly 32 S. Preston Drive) in Wilkes-Barre. The portfolio is situated in the Northeast PA submarket of the I-81/I-78 Distribution Corridor, offering users immediate proximity to I-81 and close proximity to I-476 (PA Turnpike), I-80, I-84 and I-380. In addition to this new occupant at 7 Alberigi Drive, the Portfolio includes tenants such as Rehrig Penn Logistics and Kiewit Power Constructors.

The Portfolio was constructed in the late 2000’s and features Class A warehouse/distribution specifications including 30’ clear ceiling heights, ESFR sprinkler systems, and ample (and expandable)  loading capacity with full dock packages. 7 Alberigi Drive has 64,859 SF of remaining space available with existing office and shipping facilities, while the adjacent 15 Alberigi Drive building currently offers 83,566 SF with multiple storefront entrances to efficiently accommodate tenant suites down to 27,000 SF. 32 Earth Conservancy Drive in Wilkes-Barre offers a 124,080 SF contiguous block of available space (divisible down to approximately 40,000 SF units) with 1,800 SF of newly constructed office space.

This new lease follows on the heels of a 45,974 SF lease to Kiewit Power Constructors at 15 Alberigi Drive and is indicative of the strong industrial leasing activity throughout Northeastern Pennsylvania.
In addition to this three (3) building portfolio, Endurance also has an entitled land site in nearby Pittston, PA at the confluence of Interstates 81 and 476 which can accommodate up to 1,506,200 SF. For more information on this site please visit

About Endurance Real Estate Group
Endurance Real Estate Group, LLC (, founded in 2002, is a Bala Cynwyd, Pennsylvania-based real estate owner/developer focused on income and value creation opportunities in the industrial and office sectors, located in the Mid-Atlantic region.  Since its formation, the company has acquired almost $450 million of assets totaling about 8.5 MSF and currently owns and operates a portfolio totaling 3.1 MSF.

Affiliates of EREG have closed on eight separate transactions in the last two years totaling over 2.3 MSF of office, warehouse, distribution and flex space, including the recent acquisition of 2000 Bishops Gate Blvd, a 305,250 SF Class A, institutional-quality building in Mt. Laurel, NJ, located immediately next to Exit 40 on I-295, which is fully available for lease.

Thursday, January 12, 2017

Endurance Acquires of 2000 Bishops Gate Blvd, Mt. Laurel, NJ

by Benjamin Sternberg, Endurance Real Estate

An affiliate of Endurance Real Estate Group, LLC (“Endurance”) and Thackeray Partners are pleased to announce the acquisition of 2000 Bishops Gate Boulevard, a Class A 305,205 SF warehouse/distribution building located in Mount Laurel, Burlington County, New Jersey (“Property”). Endurance acquired the property from a corporate user for an undisclosed price.

The Property is a Class A industrial facility and features precast concrete construction, T-5 motion sensor lighting, a 30’ clear height, 55’ x 50’ column spacing, 25 dock-high loading doors, an ESFR sprinkler system,  6” reinforced concrete floor, 3,200 amp, 3-phase electric service, and Comcast fiber service. The building features an entryway that includes a full-length glass curtain wall and a covered walkway, ideal for companies seeking a high-end corporate image.

The Property is one of several institutional quality properties located within the prestigious, master-planned Bishops Gate Corporate Center, with corporate neighbors including Comcast, NFL Films (corporate HQ), PHH Mortgage (corporate HQ), and Title Resource Group.  The 1.45 million square foot campus has a history of institutional ownership including Brandywine Realty Trust, iStar Financial, VEREIT, and Liberty Property Trust.

The Property is located in the affluent “3M” area of Marlton, Mount Laurel, and Moorestown, immediately off of Exit 40 of I-295 and is strategically located between Exits 4 and 5 of the NJ Turnpike. In addition, Center City Philadelphia is only 20 minutes away. There is bus service to Bishops Gate from Philadelphia via New Jersey Transit and the Property also has a strong amenity base within a half-mile, including Wegmans, Starbucks, Chipotle, Panera Bread, Costco, FedEx Office, and LA Fitness, and a Marriott hotel is within walking distance.

“We are excited to acquire such an exceptionally well located and maintained Class A facility that is positioned to meet the rapidly expanding distribution needs of tenants in the Southern New Jersey market,”  stated Albert J. Corr, Senior Vice President of Endurance. “This purchase, along with our recent purchase of 550 Glen Avenue and 600 Glen Court in Moorestown, is consistent with our strategy of acquiring highly functional industrial assets in superior locations. Our attractive going-in basis and the functionality of the building will allow us to stabilize this asset during a period of historically low vacancy rates for Class A bulk/distribution space in Southern New Jersey. We have 200,000 SF of space available today.”  The acquisition of 2000 Bishops Gate increases the size of the Endurance/Thackeray footprint in metro Philadelphia to almost 500,000 square feet as they jointly own the Naaman’s Creek Business Center, a five (5) building, 190,000 square foot industrial/flex portfolio in Boothwyn, Pennsylvania

Wednesday, January 11, 2017

Global Medical REIT Inc. Acquires Three HealthSouth Hospitals

Global Medical REIT, Inc. (NYSE: GMRE) has acquired a portfolio of three HealthSouth rehabilitation hospitals in Pennsylvania and Arizona from Healthcare Realty Trust Inc. for $68.1 million, or $377.81 per square foot.

The facilities are East Valley Rehabilitation Hospital in Mesa, AZ; HealthSouth Rehabilitation in Mechanicsburg, PA; and HealthSouth Rehabilitation Hospital in Altoona, PA.

The three properties, each of which was leased to HealthSouth Corp. under long-term triple net leases, comprise 215 beds.

Bethesda, MD-based Global Medical REIT, one of the newer investors in the medical office space, closed last fall on the purchase of nine MOBs in three separate portfolio transactions in South Dakota, northern Ohio and East Orange, NJ, with three more buildings scheduled to close in December, for an aggregate $30.9 million.

Tuesday, January 10, 2017

Real estate most under-owned sector (Video)

OMEGA CRE & Dempsey Dev Sell 3113-3117 Ridge Pike Eagleville, PA

OMEGA Commercial Real Estate, Inc. and Dempsey Development & Brokerage represented the seller, W. Perry Funk, in the sale of 3113-3117 Ridge Pike Eagleville, PA 19403. The site is 4.75 acres on multiple parcels that fronts on Ridge Pike in Montgomery County. This site has a 14,000 sf industrial building that is currently the location of Culligan Water Conditioning of Greater Philadelphia. The property also has multiple residential rental units. The buyer was Providence Land Holdings, LLC. The property was financed through Harleysville Savings Bank. This site will serve as the future operations center and warehouse for Salter’s Fireplace, Patio & Grill. The sale price was not disclosed.

About the brokers:
Dempsey Development & Brokerage provides leasing, tenant representation, development, investment and redevelopment services to local, regional, and national clients offering them paramount customer service and a no holds barred approach to commercial real estate.
OMEGA Commercial Real Estate, Inc. is a full service real estate company specializing in corporate tenant/buyer representation, landlord/seller representation, project leasing and investment sales for Montgomery, Chester Counties and surrounding Philadelphia areas.

Joe O’Donnell, President
OMEGA Commercial Real Estate, Inc.
The Historic King of Prussia Inn
101 Bill Smith Boulevard,
King of Prussia, PA 19406
Phone: (610) 616-4604
Cell: (484) 354-2162

Austin Wolfington
Dempsey Development & Brokerage
967 E. Swedesford Road, Suite 400
Exton, PA 19341
Office: (610) 722-9000 X2
Cell: (610) 304-9347

Monday, January 9, 2017

Trevena Leases 40,000 SF at Chesterbrook

Trevena, Inc., a biopharmaceutical company, leased 40,412 square feet in the Chesterbrook Corp. Center building at 955 Chesterbrook Blvd. in Chesterbrook, PA.

The three-story building totals 122,118 square feet in the King of Prussia / Wayne submarket of Philadelphia. Pitcairn Properties developed the building in 1986. Chesterbrook is a class-A office building on 10.1 acres.

Hogan Lovells Leases 35,000 SF in Philadelphia

Hogan Lovells, a multinational law firm co-headquartered in London and Washington DC, has leased 34,752 square feet at 1735 Market St. in Philadelphia, PA. The tenant will take occupancy of the entire 23rd and a portion of the 22nd floors in the tower.

The 54-story, 1.33 million-square-foot, 5-Star office building was constructed in 1990 on 1 acre in the Market Street West submarket. It is home to a prestigious tenant roster that includes Ballard Spahr, Public Financial Management, UBS, Aberdeen Asset Management and Montgomery McCracken.

LA Fitness Leases 28,000 SF in Bear

LA Fitness signed a 27,786-square-foot lease in the Eden Square Shopping Center at 800 Eden Circle in Bear, DE.

The 230,676-square-foot shopping center sits on 36 acres in the South New Castle County submarket, directly off Routes 1 and 40.

Thursday, January 5, 2017

RETAIL OUTLOOK: Shopping Center Owners Brace for More Downsizing as Space Rationalization Still in Early Stages

Even as holiday shoppers were hunting for bargains and exchanging gifts, news began leaking on the latest expected big store closures.

Sears Holding was quietly closing another 50 or so stores, and The Limited was closing several stores or letting inventory dwindle so much that store employees worried they were next in line to close. More store closings and downsizings no doubt are still to come in 2017.

Having recently analyzed the oversupply of retail stores and the growing market share of e-commerce sales, Costar’s Portfolio Strategy group is making a bold call going into the new year: Retailers need to rationalize nearly 1 billion square feet of U.S. store space in order to reverse the trend in declining sales per square foot. This could take the form of store closures, converting unused retail space to other uses, or rent roll downs.

"Simply put," said Suzanne Mulvee, director of US research, retail for CoStar Portfolio Strategy, "it all comes down to productivity. Retailers on average are generating fewer sales per square foot than they did during the decade leading up to the recession."

Mulvee said there are a variety of reasons for the lower sales productivity among retailers. But at the bottom line it means that fewer stores are economically viable -- the sales generated by the stores don't justify the costs of operation. Therefore, more retaiilers are closing locations or seeking rent relief, Mulvee notes.

Historically, retail sales were far higher on a per square foot basis at the beginning of the last decade. A basket of publicly traded retailers produced retail sales of more than $350/square foot, CoStar Portfolio Strategy analysts reported. Today, the same retailers are generating sales of less than $330/square foot.

The decline in average sales per square foot from 2000 to 2008 among retailers coincided with an aggressive expansion in store space. During that same timeframe, annual totals of new retail space averaged 160 million square feet per year.

The recession finally put an end to the retail construction boom, and annual retail space completions bottomed out at 35 million square feet in 2011. New retail construction has only gradually crept up during the current recovery.

Last year, developers completed approximately 60 million square feet of new retail space, still 100 million square feet below the peak of the cycle.

However, the reduced construction levels may not be enough to address weaker store productivity, Mulvee said. The share of spending by consumers on online shopping continues to grow by about 15% annually. Therefore, pressure on retailers' sales productivity in their stores may continue.

"To counter these pressures and return store productivity to a band more in line with historical averages, more than 10% of retail space, or nearly a billion square feet, needs to be rationalized,” Mulvee said. "We expect store closures to increase in 2017 and rent roll downs to remain commonplace for the bottom 50% of centers.”

While store rationalization will no doubt be painful for shopping center owners and will likely result in higher loan defaults, especially in the CMBS arena, Mulvee said it's a necessary process to bring retail sales in balance with retailers' operating costs.

Searching for a Silver Lining

While painful, the store rationalization process, will likely have different impacts on different shopping centers, with “higher-quality” centers continuing to attract top retailers, achieving rent growth and accelerating productivity. At the same time, the process should expedite the sale of underperforming centers to new investors capable of converting the properties to more profitable uses.

Retail REITs are expected to continue shedding more of their secondary and tertiary assets in 2017 while holding onto core grocery-anchored and urban retail properties, according to Cushman & Wakefield. Perhaps sensing an investment opportunity, C&W also reports there is still no shortage of investors with plenty of capital chasing retail real estate heading into 2017.

"We are still seeing a lot of interest in the retail sector, but investors are having trouble finding quality product in the market,” noted Brian Whitmer, retail practice lead of Cushman & Wakefield’s Metropolitan Area Capital Markets Group. “They have been increasingly more selective, targeting core markets, urban street retail and grocery-anchored shopping centers with strong credit.”

In a bit of a disconnect, most of the product coming online is located in secondary or tertiary assets, or non-core locations. Still there are investors going after that product at slightly higher cap rates.

Meanwhile, retailers are likely to target store growth rates in the mid-single-digit range, providing support in 2017 for sustained high occupancies and solid same store-NOI growth, along with selective upside from value-added redevelopments for REITs, said Paul Morgan, a REIT analyst with Canaccord Genuity Inc.

Among the successful retailers that are driving net shopping center demand area the TJX concepts (TJ Maxx, Marshall’s, HomeGoods), ULTA Cosmetics, Ross, Costco, and certain food/coffee chains such as Shake Shack, Potbelly, BJ’s Roadhouse, Jamba Juice, Panera Bread and Starbucks, Morgan noted.

Meanwhile, Morgan said, some retailers that had previously been struggling now appear to have stabilized.

“We find increasing stability among retail concept leaders such as Best Buy, Bed, Bath & Beyond, Barnes & Noble and Dick’s Sporting Goods, who have benefitted from their competitors’ demise in recent years,” he added.

Dollar stores are again expected to be among the top-performers in 2017, as cash-strapped consumers look to save money on multiple fronts, according to Mickey Chadha, a Moody's vice president -- senior credit officer. Home improvement stores such as Home Depot and Lowe's will also benefit from the continuing recovery of the housing market.

Apparel and footwear sellers, on the other hand, will be squeezed as consumers continue to spend more on health care, rent, home-related products, electronics and cars, Chadha added.

And then there are the beleagured department stores, which again are expected to face weak traffic trends and competitive pressure on their operating performance.

INDUSTRIAL OUTLOOK: Despite Trade Uncertainty, E-Commerce Growth Expected to Further Boost Distribution Property Growth in 2017

Industrial real estate's unprecedented bull run is expected to continue well into 2017 as both importers and exporters continue to seek warehouse and distribution centers close to major seaports and inland hubs, while increasingly venturing out to secondary markets.

Fitch Rating expects booming e-commerce sales to support the current industrial property upcycle, with growing demand from e-tailers willing to pay a premium for efficient, well located fulfillment space versus the less efficient racking requirements of traditional warehouses and distribution centers.

With demand for industrial space continuing to exceed supply, retailers and other cargo interests should anticipate tight space, rising rents and fewer options in primary locations near seaports and inland hubs. Space is especially tight for the highest-quality Class A properties in those markets, forcing some shippers to consider class B locations. Alternatively, they will have to go farther out into adjacent markets to find the quality sites and structures they need.

While president-elect Trump’s trade and financial policies are anything but clear at this point, what is known has mixed implications for the industrial real estate sector. Trump’s potential plans to rebuild infrastructure, increase defense spending, deregulate the energy sector and encourage domestic manufacturing could benefit industrial tenants.

While fears over global trade wars may be overblown, reduced trade flows and any ensuing economic slowdown could hurt the broader industrial sector, especially port-oriented warehouse and distribution markets. However, the continued shift to e-commerce and the overhaul of the U.S. logistics network promises to outweigh all the other factors.

Meanwhile, still-low interest rates, healthy consumer spending and strong e-commerce are forming perfect conditions for industrial and logistics real estate growth in 2017. Potential investment in infrastructure and continued company expansion are also expected to fuel demand for warehouses and distribution centers despite global economic uncertainty.

"We are leaving 2016 on a record high, with industrial real estate demand reaching new heights, with leasing in excess of 250 million square feet. Many companies continue to expand while others adapt and perfect their supply chains to be closer to urban cores and their customers, driving record low vacancy rates even further and increasing leasing rates in response.

"With new construction still trailing demand, not only will we see ground up development across major markets, but we will see creative and adaptive re-use of assets, a rise of infill development and the introduction of multistory construction in or near urban locations," he added.

Five Factors Driving Demand in 2017

"The only safe prediction for 2017 is that many things are going to change. There are numerous factors that could impact the freight movement industry next year and beyond, ranging from changes in trade policies and regulations to specific issues that affect how goods are transported. However, the need for infrastructure investment and the continued proliferation of e-commerce will keep industrial real estate booming."

They identified five factors that will impact the sector in 2017, led by the potential for long-delayed investment to revive America’s infrastructure. The urbanization of U.S. cities cannot continue with functionally obsolete roads, bridges and other infrastructure; and as upgrades are planned, raw materials will be needed and warehouses to store them.".

"Investing in the Rust Belt's infrastructure would mean reviving dozens of Mississippi waterway terminals that served a dated American manufacturing-based economy. Already zoned for industrial use, these ports are being repurposed to transport materials needed to build infrastructure for new industries driving the U.S. economy.".

Secondly, online shopping and consumer demand for rapid delivery this year is expected to continue to compress the national industrial market vacancy rate, which reached a 16-year low of below 6% in the second half of 2016, as industrial tenants expand their presence in new markets.

Institutional capital still views industrial real estate as a lucrative investment opportunity, with year-end 2016 industrial investment sale volumes potentially reaching upwards of $45 billion, the second-largest annual tally since 2008.

Finally, unprecedented industrial real estate demand and the push to improve last-mile delivery services may influence development throughout the country. Smaller urban core warehouses and fulfillment centers, reconverted assets and multistory warehouses could become last-mile solutions for many companies in 2017

OFFICE OUTLOOK: Slowing Absorption, New Supply Raise Caution as Momentum Seen Shifting from CBDs to Suburban, Second-Tier Metros

Analysts are seeing the first hint of caution in the U.S. office market after ending the year with slowing absorption ahead of increasing new supply. 

Meanwhile, the nascent recovery of suburban and second-tier office markets that began to take hold in 2016 is expected to accelerate in 2017, outperforming CBDs and richly priced U.S. gateway office markets in terms of leasing and absorption in 2017. 

Major brokerage firms have different takes on the U.S. office market outlook. CBRE Group's forecast sees a moderate slowdown in 2017 with a slight decline in total net absorption and an uptick in the national vacancy rate. Jones Lang LaSalle notes a combination of decelerating leasing velocity at year-end marked by a low level of "mega leases" resulted in just 6.5 million square feet of net absorption during the fourth quarter. Near-full employment and a shortage of skilled talent suppressed leasing activity in several major tech hubs, according to JLL. 

Cushman & Wakefield on the other hand sees a modest increase in net absorption in 2017, with the vacancy rate holding steady through the year. 

CBRE expects approximately 50 million square feet of new office space will be completed in 2017. While still low compared with previous cycles, that would comprise the largest amount of new office supply since 2009. 

Office rents are expected to slow their growth from 4% to 4.5% seen in 2014-2015, down to an average 1.5% in 2017, CBRE said in the report overseen by Americas Head of Research Spencer Levy, Chief Economist Jeffrey Havsy and Senior Managing Economist Timothy Savage. 

Road to Recovery Continues for Suburbs?

In its annual list of predictions for CRE markets during the coming year, CoStar Portfolio Strategy forecasts that projected returns of 6% on suburban properties will exceed returns of 4.9% from fully valued CBD and other urban assets. 

CoStar analysts also see second-tier markets generating the lion's share of rent growth in 2017. Average U.S. rents, which have grown 16.8% in an uneven expansion since bottoming in 2010, will continue to see growth branch out as markets cool in tech hubs such as the San Francisco Bay Area, Boston, Denver and Austin. Office rents in such secondary markets as Philadelphia, Minneapolis, San Diego and Tampa are projected to grow by a collective 3.3% in 2017, surpassing the national average of 2.8% for the first time during the recovery, according to CoStar managing consultant Paul Leonard. 

"We’re now in the seventh year of the expansion, and the early-recovery markets are finally starting to show signs of cooling," Leonard said. "As developers have responded with new supply, job growth has slowed and office absorption rates have decelerated. The best rent growth over the next year should be in second-tier markets which have limited new supply under way." 

Technology sector growth, which has accounted for nearly one-fifth of major office leasing since 2014, will be critical for continued gains in office-using employment and office demand, CBRE noted in its outlook. 

Tech employment growth slowed to 4% in 2016, well below the five-year average of 7.3%. Finding skilled labor in an increasingly competitive environment "will be critically important" for continued expansion and office demand in established hubs like the San Francisco Bay Area as well as emerging tech sectors in lower cost markets such as Phoenix, Atlanta and Portland, CBRE said. 

With solid office job growth expected throughout 2017 and 2018, Cushman & Wakefield forecasters said there is still runway for the office market. Even before the election, U.S. economic fundamentals were showing signs of heating up, noted Kevin Thorpe, Cushman & Wakefield’s global chief economist. 

"We observed a big GDP number in the third quarter, accelerating wage growth, surging consumer confidence: a string of really robust trends were already forming," Thorpe said. "Now, when you layer in the expected tax cuts and spending multipliers from the new [Trump] administration, it creates an even stronger economic backdrop for the property markets heading into 2017." 

John Chang, first vice president, research services for Marcus & Millichap, agreed that office markets in the west and south will in general see the strongest office-using job growth this year, including many slower recovery markets with little office construction under way such as the Florida metros. Tenants interested in the most desirable submarkets and the highest quality buildings currently have limited options in these metros, giving landlords greater leverage until rents increase to the point that justifies new development. 

Fitch Ratings said it also expects healthy and above-average U.S. office sector fundamentals in 2017, with office space demand growth of 1.1% outpacing 0.9% growth in new supply. However, the ongoing densification trend of companies allocating fewer office square feet per employee will temper demand growth, particularly from legal, financial and business service tenants that are downsizing their footprints when leases expire.

Wednesday, January 4, 2017

Ferguson Plumbing and Lighting Preleases 15,000 SF in Doylestown

Ferguson Plumbing and Lighting has signed a new prelease for 15,000 square feet in the proposed Pavilion at Furlong shopping center on York Rd. and Swamp Rd. in Doylestown, PA.

The proposed retail center will total approximately 36,998 square feet. It is set to begin construction in September 2017 with completion slated for September 2018. Ferguson Plumbing and Lighting will take occupancy once the property is complete. There are still spaces available for lease at the proposed center.

Tuesday, January 3, 2017

FreedomPay Leases 25,000 SF at Cira Centre South

FreedomPay, Inc., a payment and commerce technology company, has leased 24,813 square feet in the FMC Tower at Cira Centre South office building at 2929 Walnut St. in Philadelphia, PA.

The 27-story building totals 598,900 square feet in the Market Street West submarket. It broke ground in 2014 and delivered in September 2016.

Industrial REITs Selective About Development (Video)

Collegeville Welcomes Largest Kimberton Whole Foods Store Yet

By: Joe Zlomek, Limerick Post
 Kimberton Whole Foods, which grew from its 1980s start as a dairy farm stand in Chester County into a regional natural foods retailer, announced plans Monday (Dec. 5, 2016) to open a 12,800-square-foot grocery store in the Collegeville Shopping Center, 222 E. Main St.

A Fall 2017 opening is anticipated. The company said the new store would be its largest to date; others are located in Phoenixville, Douglassville, Downingtown, Malvern, and Ottsville.

The store will include “an extensive bulk foods department, expanded food service offerings, and ample indoor and outdoor seating,” company owner Terry Brett said. The independent natural grocer focuses on providing customers with natural, organic and non-GMO (genetically modified organism) groceries, prepared foods and supplements. It works with more than 150 local producers to bring fresh, natural and organic products to its shelves.

The shopping center was once the location of an Acme supermarket. It closed several years ago and remained vacant. Located off of Route 29, the 110,000-square-foot neighborhood center also includes Pep Boys, Rascals Fitness, Stagliano Barber Shop, and Philly’s Pretzel Factory. The center is owned and operated by Brixmor Property Group.

“Adding high-quality retailers like Kimberton Whole Foods to our center allows us to better meet the needs of the Collegeville community we serve,” said David Vender, north region president for Brixmor.

Monday, January 2, 2017

2016 Another Banner Year for Commercial Real Estate

For all its ups and downs, U.S. commercial real estate enjoyed another banner year in 2016, thanks in large part to the unprecedented run in multifamily rents and property values and the fact that the U.S. continues to be viewed as a 'safe haven' by global property investors.

But it was also marked by continued distress in the retail property sector as the 'creative destruction' forces unleashed by Amazon and other internet retailers continued their inexorable impact on traditional bricks-and-mortar stores.

Here is the news reported by CoStar that you, our readers, considered to be the most interesting and newsworthy in 2016:

2. Macy’s To Close 100 Full-Line Stores
The news that Macy's plans to close another 100 stores caught many by surprise. The move raised a red flag among already-jittery mall investors and signalled a much-more aggressive stance by Macy's CEO Terry J. Lundgren to pursue strategies to unlock more value from the department store chain's real estate. These related stories also attracted strong reader interest:
Macy's Gives Brookfield First Crack at Redevelopment Plans for 50 Stores

Disparity in Mall Values Driven by Powerful Combination of Forces

Taubman, Kimco Start Off 2016 With ‘De-Malling’ Plans for Pair of Retail Centers

3. 'Dual Agency' Transactions Under Scrutiny in California Court Case
CoStar's real estate audience was also very interested in the intrigue over a California court case involving the legal implications of 'dual agency' representation in that state. In a decision with potentially far-reaching impact on how commercial and residential real estate brokerages do business, the California Supreme Court upheld a lower court ruling that a listing broker had a fiduciary responsibility to both the buyer and the seller in a "dual agency" transaction.

4. Economists, CRE Industry Begin to Take Stock of Trump's Election Upset on Property Markets
The surprise election win of real estate developer and reality television star Donald Trump as the next U.S. president set off a bit of a scramble among business leaders grappling with the unexpected economic and regulatory impact of an upcoming Trump presidency. However, the shock of the unexpected election results were quickly replaced by the realization that the same party now controls Congress and the executive branch. The industry is poised to monitor the election's impact in the year ahead with significant changes expected to the tax code as well as U.S. trade policy and rollbacks in the nation’s financial and business regulatory framework.

5. Hines Exploring Potential Sale of Nearly $5 Billion in Holdings
The news of Hines' decision to cash out two of its sponsored REITs and lock-in returns at current property valuations was seen by many as a sign that commercial property markets may be approaching their peak. Hines later went on to strike several major deals with other investors to sell of its holdings. Hines was joined by KBS and NorthStar Realty in putting large portfolios on the block even as a large number of publicly traded REITs including Liberty Property Trust, Kimco and others wound down their aggressive property disposition strategies.

6. US Banks Ratchet Up CRE Lending Standards
Throughout 2016, there was a pitched battle between bank regulators calling for stricter underwriting standards for CRE loans, and lenders competing for business in an increasingly competitive real estate lending environment. Despite federal banking regulators putting banks on notice that they were going to be taking a closer look at CRE loan concentrations, banks continued to pump up their CRE lending, buoyed by continued strong property fundamentals, much to the chagrin of regulators. Stay tuned for CoStar's continued coverage of this important topic in 2017.

7. Open Season on Appraisal Firms as JLL Snaps Up Three More Integra Realty Offices
JLL's plan to add a robust valuation and advisory services business line to match its competitors emerged as the top real estate M&A story line in 2016, with more dominoes expected to fall in this sector in 2017. Insiders widely expect other IRR affiliates to be acquired by larger companies in coming weeks or months. Other M&A news capturing a lot of interest in 2017 included Cushman & Wakefield's acquisitions of Taylor & Mathis in Florida and Atlanta-based Multi Housing Advisors to expand its market share in fast-growing southeastern markets, and Newmark Grubb Knight Frank's bid to add top talent in key markets.

8. Blackstone Seeking to Revive Non-Traded REIT Industry
In a surprising move that could radically reshape the beleagured non-traded REIT industry, the $100 billion behemoth that is Blackstone Real Estate announced plans to launch its first-ever non-traded REIT, seeking to introduce new fee structures and lend its considerable heft to the once-mighty real-estate capital-raising sector.

9. Internet Commerce Drives Strongest Surge in Demand for US Industrial Space Since 2001
Typically outshone by the multifamily and office sectors, warehouse and distribution property saw a lot of the investment and leasing action in 2016. Among the many blockbuster deals, Global Logistic Properties Ltd. agreed to buy a 15-million-square-foot logistics portfolio from Hillwood Development Co. to solidify the Singapore-based company's position as the second-largest owner of industrial property real estate in the U.S. That was followed one week later by Blackstone Group was jumping back into the industrial property space with an agreement to buy 46 logistics properties totaling over 26 million square feet from LBA Realty for a reported $1.5 billion.

"All in all, the last six months have been the best in our company’s history," said Hamid Moghadam, chairman and CEO of San Francisco-based Prologis (NYSE:PLD). "E-commerce and supply chain reconfiguration continue as big drivers of demand for our product. The Class A market is where the action is."

10. WeWork, Other Shared-Office Providers Aiming to Reinvent How Office Leasing Works
CoStar readers were intrigued by the remarkable success of WeWork and other popular shared-office providers, with their ongoing expansions greeted by both confidence and skepticism in the long-term prospects for the concept.

BONUS. Gold Rush: Swelling Numbers of CRE Brokers Making for Tougher Competition in the Ranks
Another interesting if unexpected trend in 2016 was the impact of swelling ranks of commercial real estate brokers, attracted by the recent run in sales and leasing activity. The number of commercial members with less than two years of experience nearly doubled to 9% in 2016. CoStar News shared the perspective of several experienced managers on the impact of the broker boom.

Chinese investors active in US property (Video)

Real estate stocks too attractive to ignore (Video)

Middle Market Digest For The Northeast

by Steve Lubetkin,

Here is a roundup of Middle Market activity in the Northeast for Friday, December 30, 2016.


A quiet holiday week wrapped up the year in the Northeast, with a few owners and developers taking advantage of continued low interest rates to reposition financing packages on several properties. Eastman Companies refinanced its Eisenhower Corporate Campus in Livingston, NJ for the second time in less than 10 years; and the Brooklyn Navy Yard Development Corporation refinanced outstanding EB-5 debt with two conventional loans totaling $62 million. As the new administration prepares to take office in less than a month, most observers are betting on continued low interest rates and tax relief.

Thanks to a brisk holiday season for retailers, both online and in bricks-and-mortar stores, capital continues to chase industrial properties in the New York-New Jersey metroplex as fast as ground can be broken, and many legacy multifamily properties are getting record sale prices as second and third-generation owners transition those assets to developers anxious to add amenities and attract a new cohort of millennial tenants.
MIDDLETOWN, PA—Madison Hawk Partners will conduct a sealed bid auction for a 167-acre development site in the Woodland Hills planned residential community in Middletown Borough, Dauphin County, PA. The offering includes a 12.5-acre site fully approved for the construction of 150 rental units in five separate buildings.  The remaining acreage has preliminary approval for the development of 290 for-sale, single-family homes.  Bids can be placed on the entire development or either parcel individually. The sealed bid deadline is Thursday, January 19, 2017.