While there has been no shortage of market conjecture in recent weeks on where Amazon will decide to locate its new 'co-headquarters,' we decided to crunch the numbers using CoStar’s unparalleled database of commercial real estate information using the key criteria identified by Amazon in its Request for Proposal (RFP).
The rankings weighed the percent of a metro’s population holding a bachelor’s degree or higher, the total number of computer and mathematics jobs in the metro, the rate of tech-related job growth from 2013-2015, the total amount of proposed office space tracked by CoStar in the market, the average price/square foot of office properties in the metro based on CoStar sales data, and the affordability of the metro based on CoStar apartment rental data.
With this additional analysis of the specific commercial real estate availability by market, CoStar Market Analytics managers identified the San Francisco-Oakland-East Bay metro area as the top prospect in the new ranking of more than 50 major U.S. metros that fit Amazon’s requirements and preferences for locating a second national headquarters.
TOP CONTENDERS FOR AMAZON HQ2
Six of the nation’s 10 largest cities showed up in the top 10 markets, which are listed in order as follows based on the CoStar Market Analytics ranking:
San Francisco-East Bay
Atlanta
San Jose-South Bay
Washington, DC
Dallas/Fort Worth
New York-NNJ
Boston
Austin
Denver
Philadelphia
Primarily driving those results were the individual metro areas’ ability to meet Amazon’s need for office space.
To be clear, Amazon HQ2 is not a typical headquarters site selection opportunity. As stated in the online giant's RFP, the proposed investment by Amazon in its new HQ2 project is expected to generate billions of dollars in new investments in the area’s economy and tens of thousands of new jobs. Bidding metro areas must have 500,000 square feet of space available by 2019, and the capability or proximity with other potential HQ2 sites for collective capacity for up to 8 million square feet beyond 2027.
What put the San Francisco Bay region on top was that it scored in the top five in all three of the labor force categories: holding a bachelor’s degree or higher, the total number of computer and mathematics jobs in the metro, and the rate of tech-related job growth from 2013-2015.
Most prognosticators have overlooked the Bay Area as a potential landing site for Amazon’s HQ2 campus, citing the region’s high cost of living and office rents, and relatively close proximity to the Amazon's original headquarters in Seattle. Although valid, these cost concerns have not deterred the world’s largest technology companies (and Amazon competitors) such as Google, Apple and Facebook, from continual expansion in the region for good reason. Silicon Valley remains the mecca of global tech talent. High-skilled tech workers continue to flock to the South Bay, one of the few markets in the country where Amazon could immediately find a workforce with the skills needed in mass to establish a second headquarters.
Amazon has also shown a preference for the Bay Area in the past three years, signing leases for more than 366,000 square feet in that time in San Francisco-East Bay, according to CoStar data. Throw in Sunnyvale, CA, and the internet retailer has taken more than 770,000 square feet in that time.
Outside of Seattle, the only market where Amazon has leased more office space is New York. Last week, Amazon announced that it would be adding 2,000 new jobs in Manhattan at a new office at Brookfield's 5 Manhattan West in Hudson Yards, where it signed for 360,000 square feet of space. That brings its total office leasing in New York-NNJ to more than 978,000 square feet in the last three years.
Midsize Markets Offer Cost Advantage
Outside of offering more space or more educated tech workers, the mid-size markets have a clear advantage on cost of occupancy and housing. Only two of the top 10 ranked markets made it onto to the top half of most affordable occupancy costs: Atlanta at No. 16 and Philadelphia at 25.
Atlanta ranks second overall among the MSAs analyzed. Significant points were scored in affordability, with the average housing cost in Atlanta about 50% less than average of the other top 10 contenders. Office space was also 50% less than the average among the top 10 contenders, underlining the lower business costs associated with the metro
While Austin ranks eighth on the list, it and Dallas/Fort Worth are in one of the most business-friendly states in the country. Texas boasts no income tax, offers generous benefits for corporate relocations, which can help offset some of the higher real estate and housing costs.
Given that unemployment in Denver is close to 2% (by far the lowest of any large metro in the country), Amazon would have to rely heavily on net migration to fuel its growth. And in that regard, dozens of major firms have chosen Denver for major expansions or relocations this cycle, including a number of West Coast tech companies.
Philadelphia ranked squarely in 10th place. Philadelphia’s sheer size in terms of population and the large scope of office projects in planning helped push it into the top 10. But where it falls short is in its smaller pool of technology workers, where it ranked 41st.
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Thursday, September 28, 2017
Integrated Health Campus LP Secures $53M Financing
Integrated Health Campus LP has secured a $53 million first mortgage for its Integrated Health Campus at 240-250 Cetronia Dr. in Allentown, PA.
Built in 2007, the medical campus totals 301,000 square feet between two buildings and sits on 21 acres in the Lehigh Valley submarket. It has 350 parking spaces and features a fitness center, food service and pool. The medical facility is 84 percent leased.
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Built in 2007, the medical campus totals 301,000 square feet between two buildings and sits on 21 acres in the Lehigh Valley submarket. It has 350 parking spaces and features a fitness center, food service and pool. The medical facility is 84 percent leased.
www.omegare.com
Wednesday, September 27, 2017
Hartz Mountain Industries purchased of 35 Dauphin Drive in Mechanicsburg, PA
Hartz Mountain Industries purchased of 35 Dauphin Drive in Mechanicsburg, PA, for $24.8 million. Hartz Mountain’s purchase of 35 Dauphin Drive is the latest in the company’s current investment strategy of acquiring high quality, stable industrial assets in first tier markets across the United States. Currently 100-percent occupied, 35 Dauphin Drive is situated along US Route 11 (Carlisle Pike) in the Central Pennsylvania, which is characterized by its exceptional highway infrastructure, within a one-day truck drive to approximately 40 percent of the U.S. population and six of the top 10 US MSAs.
Separately, Sterling Place—a three-building, 350,000 square foot, class A, trophy office complex located at 200, 300 and 400 Sterling Parkway in Mechanicsburg, PA hits the market for lease. Sterling Place is owned by Harrisburg, Pennsylvania based developer Hoffer Properties. The property was developed in 2016 and is located in proximity to Interstate 81, the capital beltway, and amenities rich Carlisle Pike. The three buildings total 350,000 square feet of total new construction, with 400 Sterling Parkway offering a build-to-suit opportunity. Notable tenants include Deloitte Consulting and Church Mutual Insurance Company.
Separately, Sterling Place—a three-building, 350,000 square foot, class A, trophy office complex located at 200, 300 and 400 Sterling Parkway in Mechanicsburg, PA hits the market for lease. Sterling Place is owned by Harrisburg, Pennsylvania based developer Hoffer Properties. The property was developed in 2016 and is located in proximity to Interstate 81, the capital beltway, and amenities rich Carlisle Pike. The three buildings total 350,000 square feet of total new construction, with 400 Sterling Parkway offering a build-to-suit opportunity. Notable tenants include Deloitte Consulting and Church Mutual Insurance Company.
Eastridge Apartments Harrisburg trades for $6.9 million
Eastridge Apartments trades for $6.9 million. It's a 108-unit multifamily property located in Harrisburg, PA. The seller, a limited liability company was not identified. Over ten offers we received for the asset and ultimately procured an out-of-market buyer, a private partnership that participated in a 1031 exchange.
www.omegare.com
www.omegare.com
Monday, September 25, 2017
Thursday, September 21, 2017
Geodis Logistics, Penske Logistics Renew Full Bldg Lease in Chambersburg
Geodis Logistics LLC, a supply chain operator, has renewed its lease for 177,600 square feet in the industrial building at 1440 Sheffler Dr. in Chambersburg, PA.
In a separate transaction, Penske Logistics LLC, another supply chain management and logistics operator, has renewed its 177,600-square-foot lease for the other half of the building.
The distribution warehouse totals 355,200 square feet in the Chambers-5 Business Park. It was built in 1996 and is currently owned by Exeter Property Group. The asset remains fully leased to the two tenants.
www.omegare.com
In a separate transaction, Penske Logistics LLC, another supply chain management and logistics operator, has renewed its 177,600-square-foot lease for the other half of the building.
The distribution warehouse totals 355,200 square feet in the Chambers-5 Business Park. It was built in 1996 and is currently owned by Exeter Property Group. The asset remains fully leased to the two tenants.
www.omegare.com
Westover Companies Acquires Mt. Laurel Shopping Center
Westover Companies, a property management and ownership company, has purchased the fully-leased Towne Square Shopping Center at 860-892 Union Mill Rd. in Mount Laurel, NJ, from The Hampshire Cos.
The shopping center is anchored by a ShopRite super market and was built in 1996 and measures 88,265 square feet.
“Since acquiring the Towne Square Shopping Center in 2012, our strategy was to fully lease the property and secure a buyer within five years," said Igor Derbaremdiker, director of dispositions for The Hampshire Cos. “High demand for stabilized grocery-anchored retail product, the strong growth trajectory of the ShopRite grocery chain and Mt. Laurel’s favorable demographics made this the perfect time to sell and complete our investment strategy for the property.”
www.omegare.com
The shopping center is anchored by a ShopRite super market and was built in 1996 and measures 88,265 square feet.
“Since acquiring the Towne Square Shopping Center in 2012, our strategy was to fully lease the property and secure a buyer within five years," said Igor Derbaremdiker, director of dispositions for The Hampshire Cos. “High demand for stabilized grocery-anchored retail product, the strong growth trajectory of the ShopRite grocery chain and Mt. Laurel’s favorable demographics made this the perfect time to sell and complete our investment strategy for the property.”
www.omegare.com
AJH Management Acquires 301-Unit Brandywine Hundred in Wilmington
AJH Management purchased the 301-unit Brandywine Hundred apartment building at 400-402 Foulk Rd. in Wilmington, DE for $52.4 million, or about $174,000 per unit, from a joint-venture partnership of Korman Residential Properties and CenterSquare Investment Management.
The six-story, 385,027-square-foot multifamily property delivered in 1959 in New Castle County.
www.omegare.com
The six-story, 385,027-square-foot multifamily property delivered in 1959 in New Castle County.
www.omegare.com
Wednesday, September 20, 2017
Monday, September 18, 2017
Philadelphia's Mid-Year Industrial Deliveries, Construction and Inventory
During the second quarter 2017, 14 buildings totaling 5,075,807 square feet were completed in the Philadelphia market area. This compares to 13 buildings totaling 2,848,399 square feet that were completed in the first quarter.
There were 15,226,755 square feet of Industrial space under construction at the end of the second quarter 2017.
Some of the notable 2017 deliveries include: 575 Old Forge Rd, a 1,002,000-square-foot facility that delivered in second quarter 2017 and is now 100% occupied, and Goodman Logistics Center Carlisle Building 2, a 938,828-square-foot building that delivered in second quarter 2017 and is now 0% occupied.
The largest projects underway at the end of second quarter 2017 were FedEx Regional Hub, a 1,200,000-square-foot building with 100% of its space pre-leased, and United Business Park - Lot 6, a 1,200,000-square-foot facility that is not pre-leased.
Total Industrial inventory in the Philadelphia market area amounted to 1,089,388,733 square feet in 21,490 buildings as of the end of the second quarter 2017. The Flex sector consisted of 87,184,348 square feet in 3,444 projects. Within the Industrial market there were 2,723 owner-occupied buildings accounting for 233,021,749 square feet of Industrial space.
This trend is compared to the U.S. National Industrial deliveries, which saw 537 buildings totaling 64.42 million square feet completed in the second quarter, with 272.4 million square feet of industrial space still under construction across the country. Total Industrial inventory in the U.S. market area amounted to almost 22.2 billion square feet across more than 643,700 buildings, including 92,000 flex projects and 72,000 owner-occupied buildings.
www.omegare.com
There were 15,226,755 square feet of Industrial space under construction at the end of the second quarter 2017.
Some of the notable 2017 deliveries include: 575 Old Forge Rd, a 1,002,000-square-foot facility that delivered in second quarter 2017 and is now 100% occupied, and Goodman Logistics Center Carlisle Building 2, a 938,828-square-foot building that delivered in second quarter 2017 and is now 0% occupied.
The largest projects underway at the end of second quarter 2017 were FedEx Regional Hub, a 1,200,000-square-foot building with 100% of its space pre-leased, and United Business Park - Lot 6, a 1,200,000-square-foot facility that is not pre-leased.
Total Industrial inventory in the Philadelphia market area amounted to 1,089,388,733 square feet in 21,490 buildings as of the end of the second quarter 2017. The Flex sector consisted of 87,184,348 square feet in 3,444 projects. Within the Industrial market there were 2,723 owner-occupied buildings accounting for 233,021,749 square feet of Industrial space.
This trend is compared to the U.S. National Industrial deliveries, which saw 537 buildings totaling 64.42 million square feet completed in the second quarter, with 272.4 million square feet of industrial space still under construction across the country. Total Industrial inventory in the U.S. market area amounted to almost 22.2 billion square feet across more than 643,700 buildings, including 92,000 flex projects and 72,000 owner-occupied buildings.
Thursday, September 14, 2017
Hanover Ridge Buildings Set to Deliver
NorthPoint Development will complete construction next month on two new industrial buildings within its Hanover Ridge Trade Center at 600 New Commerce Blvd. in Wilkes Barre, PA.
Construction started in 2016, and when completed, Bldg 2 will total 842,880 square feet while Bldg 3 will total 358,498 square feet. Together the properties will offer a total of 120 dock doors, six drive-ins and 119 trailer spaces. NorthPoint expects to break ground on the 311,600-square-foot Bldg 4 in early 2018.
www.omegare.com
Construction started in 2016, and when completed, Bldg 2 will total 842,880 square feet while Bldg 3 will total 358,498 square feet. Together the properties will offer a total of 120 dock doors, six drive-ins and 119 trailer spaces. NorthPoint expects to break ground on the 311,600-square-foot Bldg 4 in early 2018.
www.omegare.com
Ollies Bargain Outlet Coming to Mount Pocono
Ollies Bargain Outlet has signed a three-year lease for 29,679 square feet in the Mt. Pocono Plaza shopping center at 3236 Rte 940 in Mount Pocono, PA.
The shopping center totals 207,455 square feet and was built in 1990. It is currently owned by Heidenberg Properties. Other tenants include Weis Markets and Rent- A-Center.
www.omegare.com
The shopping center totals 207,455 square feet and was built in 1990. It is currently owned by Heidenberg Properties. Other tenants include Weis Markets and Rent- A-Center.
www.omegare.com
Tuesday, September 12, 2017
Altitude Trampoline Park Jumping Into Carlisle Commerce Center
Altitude Trampoline Park, a growing trampoline facility, has signed a two-year lease for 31,756 square feet in the Carlisle Commerce Center at 2140-2150 White St. in York, PA.
Carlisle Commerce Center is a retail strip totaling 242,720 square feet. It was built in 1988 and is owned and managed by WRDC. Anchor tenants include Big Lots and Planet Fitness.
www.omegare.com
Carlisle Commerce Center is a retail strip totaling 242,720 square feet. It was built in 1988 and is owned and managed by WRDC. Anchor tenants include Big Lots and Planet Fitness.
www.omegare.com
Monday, September 11, 2017
Executive Education Academy Purchases Allentown Facility
Executive Education Academy Charter School purchased the buildings at 555 Union Blvd. in Allentown, PA for $32.5 million, or about $110 per square foot, from a private investor.
Built in 1947, the five office buildings total 294,639 square feet. The Executive Education Academy was previously in the beginning years of a 12-year lease at the facility when they decided to purchase the building from the landlord.
www.omegare.com
Built in 1947, the five office buildings total 294,639 square feet. The Executive Education Academy was previously in the beginning years of a 12-year lease at the facility when they decided to purchase the building from the landlord.
PREIT sold the Logan Valley Mall in Altoona, PA
by Steve Lubetkin, Globest.com
PREIT sold the Logan Valley Mall in Altoona, PA for $33.2 million. Since January 2013, the Company has executed methodically on the sale of 17 lower productivity malls as well as other non-core properties, generating over $750 million in gross proceeds. Logan Valley Mall is anchored by Macy’s, JC Penney and Sears and generated sales of $324 per square foot compared to PREIT’s portfolio average (excluding this property) of $475 per square foot as of June 30, 2016. Separately, PREIT says three new retailers have opened at Viewmont Mall in Scranton, PA, where the company recast its anchor mix to further diversify and enhance the shopper experience. DICK’S Sporting Goods, Field & Stream and HomeGoods have recently opened within the space formerly occupied by Sears and proactively recaptured by PREIT. Within 14 months of Sears’ closing, the opening of these popular new retailers demonstrates PREIT’s proficiency in identifying and securing quality and high performing replacement anchors.
www.omegare.com
PREIT sold the Logan Valley Mall in Altoona, PA for $33.2 million. Since January 2013, the Company has executed methodically on the sale of 17 lower productivity malls as well as other non-core properties, generating over $750 million in gross proceeds. Logan Valley Mall is anchored by Macy’s, JC Penney and Sears and generated sales of $324 per square foot compared to PREIT’s portfolio average (excluding this property) of $475 per square foot as of June 30, 2016. Separately, PREIT says three new retailers have opened at Viewmont Mall in Scranton, PA, where the company recast its anchor mix to further diversify and enhance the shopper experience. DICK’S Sporting Goods, Field & Stream and HomeGoods have recently opened within the space formerly occupied by Sears and proactively recaptured by PREIT. Within 14 months of Sears’ closing, the opening of these popular new retailers demonstrates PREIT’s proficiency in identifying and securing quality and high performing replacement anchors.
www.omegare.com
Friday, September 8, 2017
Five-Building Naaman’s Creek Business Center Trades To SSH For $16M
by Steve Lubetkin, Globest.com
Philadelphia-based SSH Real Estate has acquired Naaman’s Creek Business Center for $16.22 million from a joint venture between Endurance Real Estate Group and Thackeray Partners. It is a 190,729 square-foot, five-building portfolio.
SSH Real Estate, a privately held company, is known to have 11 assets worth about $458 million, according to proprietary research database Real Capital Analytics. The company was formed by Jeff Seligsohn, Peter Soens, and Robert Hess, and has been associated with $170 million in acquisitions in the past decade, Real Capital Analytics says.
“We are seeing strong demand for flex properties in good in-fill locations. Naaman’s Creek Business Center is the perfect example of this. In just two years occupancy increased nearly 60 percent, yielding a dramatic rise in value. Functional and flexible assets, such as these play well in good, suburban locations surrounding by strong populations.”
“We are thrilled with the highly successful execution of this deal,” says Albert J. Corr, senior vice president of Endurance who handled the disposition on behalf of the seller. “The portfolio’s attractive setting and strong location enabled us to quickly stabilize it via multiple long-term leases to major tenants including a national furniture distribution company and multiple life sciences firms. This portfolio is consistent with Endurance’s acquisition strategy of acquiring functional buildings in strong in-fill locations.”
Endurance and Thackeray acquired the asset in February 2015 and executed a successful leasing strategy that increased occupancy from 30 percent to 89 percent. New tenants at the park include Zenith Freight Lines, the logistical arm of Bassett Furniture Industries, which took the entire 25,000 square-foot building at 25 Creek Circle, and Pentec Health, which leases the entire 35,000 square-foot building at 9 Creek Parkway.
The buildings, which range in size from 25,000 square feet to 60,000 square feet, are in a 125-acre business park, Naaman’s Creek Center. The buildings were constructed from the late 1990s through the early 2000s and feature all-masonry facades, 19-foot clear ceiling heights, and multiple configurations to accommodate a diversity of tenant requirements. The portfolio fronts Route 322, providing easy access to Interstate 95 and the Philadelphia International Airport to the east (a 15-minute drive), as well as Interstate 476, which presents a direct connection from Interstate 95 to the Pennsylvania Turnpike.
www.omegare.com
Philadelphia-based SSH Real Estate has acquired Naaman’s Creek Business Center for $16.22 million from a joint venture between Endurance Real Estate Group and Thackeray Partners. It is a 190,729 square-foot, five-building portfolio.
SSH Real Estate, a privately held company, is known to have 11 assets worth about $458 million, according to proprietary research database Real Capital Analytics. The company was formed by Jeff Seligsohn, Peter Soens, and Robert Hess, and has been associated with $170 million in acquisitions in the past decade, Real Capital Analytics says.
“We are seeing strong demand for flex properties in good in-fill locations. Naaman’s Creek Business Center is the perfect example of this. In just two years occupancy increased nearly 60 percent, yielding a dramatic rise in value. Functional and flexible assets, such as these play well in good, suburban locations surrounding by strong populations.”
“We are thrilled with the highly successful execution of this deal,” says Albert J. Corr, senior vice president of Endurance who handled the disposition on behalf of the seller. “The portfolio’s attractive setting and strong location enabled us to quickly stabilize it via multiple long-term leases to major tenants including a national furniture distribution company and multiple life sciences firms. This portfolio is consistent with Endurance’s acquisition strategy of acquiring functional buildings in strong in-fill locations.”
Endurance and Thackeray acquired the asset in February 2015 and executed a successful leasing strategy that increased occupancy from 30 percent to 89 percent. New tenants at the park include Zenith Freight Lines, the logistical arm of Bassett Furniture Industries, which took the entire 25,000 square-foot building at 25 Creek Circle, and Pentec Health, which leases the entire 35,000 square-foot building at 9 Creek Parkway.
The buildings, which range in size from 25,000 square feet to 60,000 square feet, are in a 125-acre business park, Naaman’s Creek Center. The buildings were constructed from the late 1990s through the early 2000s and feature all-masonry facades, 19-foot clear ceiling heights, and multiple configurations to accommodate a diversity of tenant requirements. The portfolio fronts Route 322, providing easy access to Interstate 95 and the Philadelphia International Airport to the east (a 15-minute drive), as well as Interstate 476, which presents a direct connection from Interstate 95 to the Pennsylvania Turnpike.
www.omegare.com
Wednesday, September 6, 2017
Is Philly's Office Downturn Fast Approaching?
by Matthew Rothstein, Bisnow Philadelphia
Philadelphia’s office market is nearing the end of its cycle. Sale prices are down, most properties likely to change hands already have and some under-construction buildings look to have been mistimed.
Although FMC Tower is all but fully leased and stands as a success story, 2400 Market St. right across the Schuylkill River has yet to land an office tenant besides its anchor, Aramark. Developers Lubert-Adler and PMC Property Group are rumored to be nearing an announcement on that front, but until then, over 200K SF of office space is available as construction continues.
“From a pre-leasing standpoint, they did a great job [at 2400 Market], but the momentum hasn’t been maintained." 1100 Ludlow, one of two towers rising as part of the East Market development, has signed MOM’s Organic Market as a retail tenant and Bohlin Cywinsky Jackson and the Design Center as office tenants, but has not signed any new leases for months.
One Franklin Tower, also developed by PMC Property Group, was once the home of GlaxoSmithKline before the pharmaceutical firm moved to the Navy Yard, and its redevelopment to a residential/office mixed-use has yet to land an office tenant.
Older Class-A buildings in the central business district, like Liberty Place and 1735 Market — and even FMC Tower’s sister building, Cira Centre in University City — have large blocks of space available, giving prospective office tenants looking for top-of-the-line space options beyond the newest product. “The cost of construction was something that drove them to consider a previously existing building in the trophy market." As for those prospective tenants, that is a problem in itself. Most are out-of-town or suburban-based businesses looking to establish smaller, satellite office spaces in the city rather than establishing large headquarters. Buoyed by the Gateway Philly incentive program, that pool has become a “great class” of office users.
While it may seem like the issues slowing down leasing at under-construction projects translate to a glut of office space, the type of tenants that they and competitors like Liberty Place are targeting for large blocks have virtually no options beyond the ones mentioned, meaning Class-A office is still in a space crunch with low vacancy rates overall. “There’s always space available, and the trophy market is tight, but that doesn’t mean there aren’t options for tenants to leverage competition to get good deals in the marketplace."
Even with few options, there do not seem to be enough large tenants shopping around to fill what vacancies there are. If a large company were shopping for space, it would not necessarily be common knowledge, but job growth projections and historical factors do not seem to be in Philly’s favor to add a substantial employer. The slowdown in leasing activity could be the result of a series of upcoming lease expirations, with tenants and landlords waiting to see just how the market shakes out in 2018 and 2019.
Most potential tenants are kept under wraps due to competition among brokers, but multiple sources confirmed that law firm Morgan, Lewis & Bockius’ lease at 1701 Market St. is expiring soon, and it is weighing a renewal against a potential move. In a few years, more space will potentially be available, and not just due to expirations. Once Comcast’s Technology Center is complete, the cable giant will exit certain blocks in nearby buildings to consolidate. That being said, we predict further expansion from the company to offset such exits, and perhaps even increase its overall footprint in Philly. “At some point, Comcast will grow, and they may restack and refurnish their headquarters in 2018. And you would think that would allow for [temporary moves] while the phasing takes place.” Alternatives to Center City could also provide more options for large tenants, further muddying the waters for Class-A landlords. The Navy Yard has copious space, tax incentives and extensive ability to build-to-suit, which is what drew GlaxoSmithKline out of Center City and could potentially do more of the same in the coming years. Camden’s under-construction waterfront project is also meant to entice potential office tenants away from Philly.
“[Camden]’s a little bit more of an outlier, but it’s able to do large projects as a function of the sites and tax incentives available,” Gilchrist said. “Whether it can pull from Center City remains to be seen.” Further into the future, projects like Schuylkill Yards and uCity Square are undoubtedly looking for pre-lease tenants for what promises to be the next wave of flagship and high-tech office buildings in Philly, closer to the talent base that Drexel and the University of Pennsylvania provide. By then, the next cycle will likely have begun. Until then, office sales are telling a similar story about Center City as a softening market. Velocity and average price have both declined sharply this year relative to 2016’s historic highs, but the CBD is losing ground to the suburbs.
Three office properties, two in Malvern and one in Conshohocken, have sold for well over $200 per SF this year, while not one in Center City has cracked the $200 barrier. The gap in price per SF between the city and the suburbs shrank from $41 in 2016 to $26 so far this year, and is projected to narrow further in the next 18 months. Part of the decrease in price can be attributed to a spike in business property taxes, anywhere from 35% to 155% for landlords to take effect next year.
Many could appeal the new assessment handed down by the city (the deadline is in October), but if the tax bill on a property is higher, “it’s going to have a huge impact on pricing. We haven’t seen anything really trade since this assessment went into effect, but it could definitely make investors cautious." If prices are dropping, some might think it would make investors more excited to jump in before they rise again, but the opposite is happening: The market has cooled down after the heat wave of trading in 2015 and 2016. “When you look at this cycle, you begin to realize that a lot of what was available to trade has traded by now. Whoever has wanted to jump in, pretty much has. There’s not much left to buy in the CBD, and subsequent to that, we’ve seen a lot of expensive trades in the suburbs.”
www.omegare.com
Philadelphia’s office market is nearing the end of its cycle. Sale prices are down, most properties likely to change hands already have and some under-construction buildings look to have been mistimed.
Although FMC Tower is all but fully leased and stands as a success story, 2400 Market St. right across the Schuylkill River has yet to land an office tenant besides its anchor, Aramark. Developers Lubert-Adler and PMC Property Group are rumored to be nearing an announcement on that front, but until then, over 200K SF of office space is available as construction continues.
“From a pre-leasing standpoint, they did a great job [at 2400 Market], but the momentum hasn’t been maintained." 1100 Ludlow, one of two towers rising as part of the East Market development, has signed MOM’s Organic Market as a retail tenant and Bohlin Cywinsky Jackson and the Design Center as office tenants, but has not signed any new leases for months.
One Franklin Tower, also developed by PMC Property Group, was once the home of GlaxoSmithKline before the pharmaceutical firm moved to the Navy Yard, and its redevelopment to a residential/office mixed-use has yet to land an office tenant.
Older Class-A buildings in the central business district, like Liberty Place and 1735 Market — and even FMC Tower’s sister building, Cira Centre in University City — have large blocks of space available, giving prospective office tenants looking for top-of-the-line space options beyond the newest product. “The cost of construction was something that drove them to consider a previously existing building in the trophy market." As for those prospective tenants, that is a problem in itself. Most are out-of-town or suburban-based businesses looking to establish smaller, satellite office spaces in the city rather than establishing large headquarters. Buoyed by the Gateway Philly incentive program, that pool has become a “great class” of office users.
While it may seem like the issues slowing down leasing at under-construction projects translate to a glut of office space, the type of tenants that they and competitors like Liberty Place are targeting for large blocks have virtually no options beyond the ones mentioned, meaning Class-A office is still in a space crunch with low vacancy rates overall. “There’s always space available, and the trophy market is tight, but that doesn’t mean there aren’t options for tenants to leverage competition to get good deals in the marketplace."
Even with few options, there do not seem to be enough large tenants shopping around to fill what vacancies there are. If a large company were shopping for space, it would not necessarily be common knowledge, but job growth projections and historical factors do not seem to be in Philly’s favor to add a substantial employer. The slowdown in leasing activity could be the result of a series of upcoming lease expirations, with tenants and landlords waiting to see just how the market shakes out in 2018 and 2019.
Most potential tenants are kept under wraps due to competition among brokers, but multiple sources confirmed that law firm Morgan, Lewis & Bockius’ lease at 1701 Market St. is expiring soon, and it is weighing a renewal against a potential move. In a few years, more space will potentially be available, and not just due to expirations. Once Comcast’s Technology Center is complete, the cable giant will exit certain blocks in nearby buildings to consolidate. That being said, we predict further expansion from the company to offset such exits, and perhaps even increase its overall footprint in Philly. “At some point, Comcast will grow, and they may restack and refurnish their headquarters in 2018. And you would think that would allow for [temporary moves] while the phasing takes place.” Alternatives to Center City could also provide more options for large tenants, further muddying the waters for Class-A landlords. The Navy Yard has copious space, tax incentives and extensive ability to build-to-suit, which is what drew GlaxoSmithKline out of Center City and could potentially do more of the same in the coming years. Camden’s under-construction waterfront project is also meant to entice potential office tenants away from Philly.
“[Camden]’s a little bit more of an outlier, but it’s able to do large projects as a function of the sites and tax incentives available,” Gilchrist said. “Whether it can pull from Center City remains to be seen.” Further into the future, projects like Schuylkill Yards and uCity Square are undoubtedly looking for pre-lease tenants for what promises to be the next wave of flagship and high-tech office buildings in Philly, closer to the talent base that Drexel and the University of Pennsylvania provide. By then, the next cycle will likely have begun. Until then, office sales are telling a similar story about Center City as a softening market. Velocity and average price have both declined sharply this year relative to 2016’s historic highs, but the CBD is losing ground to the suburbs.
Three office properties, two in Malvern and one in Conshohocken, have sold for well over $200 per SF this year, while not one in Center City has cracked the $200 barrier. The gap in price per SF between the city and the suburbs shrank from $41 in 2016 to $26 so far this year, and is projected to narrow further in the next 18 months. Part of the decrease in price can be attributed to a spike in business property taxes, anywhere from 35% to 155% for landlords to take effect next year.
Many could appeal the new assessment handed down by the city (the deadline is in October), but if the tax bill on a property is higher, “it’s going to have a huge impact on pricing. We haven’t seen anything really trade since this assessment went into effect, but it could definitely make investors cautious." If prices are dropping, some might think it would make investors more excited to jump in before they rise again, but the opposite is happening: The market has cooled down after the heat wave of trading in 2015 and 2016. “When you look at this cycle, you begin to realize that a lot of what was available to trade has traded by now. Whoever has wanted to jump in, pretty much has. There’s not much left to buy in the CBD, and subsequent to that, we’ve seen a lot of expensive trades in the suburbs.”
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Tuesday, September 5, 2017
BridgeView at Manayunk trades for $4.9 million
BridgeView at Manayunk trades for $4.9 million. It's a 22-unit, class-A apartment building located at 171 Grape Street in the Manayunk section of Philadelphia, PA. Erected in 1918, the 22,000 square-foot, four-story elevator building was renovated in 2010. The building is fully sprinklered and includes 16 one-bedroom and 6 two-bedroom apartments with 27 onsite parking spaces.
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The Harman Group to Design The Aloft Philadelphia Downtown
The Harman Group, a firm specializing in structural engineering and parking planning and design, designed The Aloft Philadelphia Downtown, a 179-room hotel coming to North Broad Street. The hotel, which is part of the Starwood Hotels and Resorts group, is an adaptive-reuse project occupying the historic Liberty Title and Trust building just one block from City Hall. Nearly 90 years old, The Liberty Title and Trust building, designed by the Philadelphia architectural firm Savery & Scheetz, was originally a bank headquarters before its final tenure as an office building for the Philadelphia Water Department. Outside of retail space on the first floor, the building has been vacant for over 20 years.
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Friday, September 1, 2017
Duke Realty Signs 3PL Tenant to 628,000-SF 33 Logistics Park Warehouse Delivered Last Month
Duke Realty Corporation has leased its recently-completed, 628,475-square-foot bulk warehouse in the 33 Logistics Park at 1611 Van Buren Rd. in Easton, PA to a leading third-party logistics company. Having leased up its second building in the park, Duke will now begin construction of a 1.02 million-square-foot speculative industrial building next door at 1620 Van Buren Rd.
33 Logistics Park is located on the east side of the Lehigh Valley, just off Route 33 at the new four-way diamond interchange with Main Street. 33 Logistics Park 1611 delivered in early July, and 33 Logistics Park 1620 will rise between 1611 and an adjacent 1.1 million-square-foot, fully-leased bulk warehouse the company delivered in 2016.
"We are pleased to welcome our new tenant to 33 Logistics Park 1611 and excited to start another building in this dynamic distribution park," said Jeff Palmquist, senior vice president of Duke Realty’s Northeast Region. "With the quick lease-up of both of our bulk warehouses in 33 Logistics Park and ongoing demand for distribution space in the Lehigh Valley, we wanted to be sure that we are well-positioned to offer move-in ready, first-class space to companies with immediate space needs."
33 Logistics Park 1620 is expected to deliver in April 2018. In addition to 36-foot clear heights, the cross-dock building will feature LED lights, 120 fully equipped dock doors, four drive-in doors and parking for 245 trailers and 472 automobiles.
"The Lehigh Valley continues to be one of the nation’s most in-demand distribution hubs because of its unrivaled access to the highly populated New York City metropolitan area," continued Palmquist. "The location of 33 Logistics Park 1620 will provide companies ready access to I-78, I-81 and I-80 and is within a day’s drive of more than 40 percent of the population of the United States and Canada."
www.omegare.com
33 Logistics Park is located on the east side of the Lehigh Valley, just off Route 33 at the new four-way diamond interchange with Main Street. 33 Logistics Park 1611 delivered in early July, and 33 Logistics Park 1620 will rise between 1611 and an adjacent 1.1 million-square-foot, fully-leased bulk warehouse the company delivered in 2016.
"We are pleased to welcome our new tenant to 33 Logistics Park 1611 and excited to start another building in this dynamic distribution park," said Jeff Palmquist, senior vice president of Duke Realty’s Northeast Region. "With the quick lease-up of both of our bulk warehouses in 33 Logistics Park and ongoing demand for distribution space in the Lehigh Valley, we wanted to be sure that we are well-positioned to offer move-in ready, first-class space to companies with immediate space needs."
33 Logistics Park 1620 is expected to deliver in April 2018. In addition to 36-foot clear heights, the cross-dock building will feature LED lights, 120 fully equipped dock doors, four drive-in doors and parking for 245 trailers and 472 automobiles.
"The Lehigh Valley continues to be one of the nation’s most in-demand distribution hubs because of its unrivaled access to the highly populated New York City metropolitan area," continued Palmquist. "The location of 33 Logistics Park 1620 will provide companies ready access to I-78, I-81 and I-80 and is within a day’s drive of more than 40 percent of the population of the United States and Canada."
www.omegare.com
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