Monday, September 21, 2020

PREIT Welcomes New Tenants Throughout its Portfolio

PREIT today highlighted new stores opening throughout its portfolio highlighted by an expanded, new prototype Apple store at Cherry Hill Mall. The store features Apple's latest store design elements, an outdoor seating area and exterior and interior accessibility. Cherry Hill Mall will also welcome new tenants, Jamba and Tempur-Pedic, in the fourth quarter.

Elsewhere, PREIT continues to welcome new brands across its portfolio and is looking forward to the upcoming additions of:

  • Sola Salon Studios, offering individual suites for full service salon offerings, opened at Plymouth Meeting Mall last week, joining Restore Cryotherapy and Red Rose Spa as part of its wellness cluster.
  • White House | Black Market and Windsor at Woodland Mall in the fourth quarter of 2020
  • Ardene opened its doors at Willow Grove Park this week, as its expansion across the region continues.
  • Blaze Pizza, a first-to-portfolio tenant, will open at Capital City Mall in the coming weeks.
  • Planet Fitness is set to open its 23,000 square foot facility at Moorestown Mall in the fourth quarter.
"As operations continue to re-build steam, PREIT is continuing to make strides in rent collections and building an even more diverse leasing pipeline," said Joseph F. Coradino, Chairman and CEO of PREIT. "We are thrilled to be welcoming new stores, that offer new experiences and create jobs, across our portfolio in time for the 2020 holiday season."

Real estate is seeing signs of a W-shaped recovery: National REIT Association Mid-Year Outlook (Video)

Friday, September 18, 2020

Velocity Venture Partners Adds Former Ford Motor Facility to Its 'Last-Mile' Portfolio

 By Charlie Dettbarn and Rachel Whaley CoStar Research

Velocity Venture Partners, a value-add industrial investment firm formed in 2016, has bolstered its Philadelphia-area portfolio with its latest purchase, a 677,000-square-foot distribution facility fronting I-476 in Eastern Montgomery County, Pennsylvania.

The real estate investment firm acquired 2750 Morris Road in Lansdale from a joint venture between Advance Realty Investors and The Davis Cos. The building sold for $33 million, or about $44 per square foot, according to CoStar data.

The Flynn Co. represented the buyer in the acquisition of the property and has been retained by Velocity to handle leasing and property management. Cushman & Wakefield represented the seller.

The distribution facility, which Velocity plans to renovate and rebrand as Velocity Park, was originally built in 1989 by Ford Motor Co. and housed the auto maker's electronics division until 2010. The building was about 60% leased at the time of the sale, providing a partially occupied property with leasing upside, according to Velocity. About 230,000 square feet of warehouse space and 50,000 square feet of office space is available.

Velocity's latest purchase continues its rapid growth throughout Pennsylvania and New Jersey, specifically Eastern Montgomery County. With its latest acquisition, Velocity's portfolio now totals about 3 million square feet.

Industrial remains as the Philadelphia region's healthiest commercial property type six months into the coronavirus pandemic, CoStar director of market analytics Adrian Ponsen notes in a recent market report. The industrial market still faces challenges but retailers' ongoing shift to e-commerce sales and faster delivery times has continued to drive industrial leasing as tenants store more of their inventory in local logistics centers as close to their customers as they can, Ponsen wrote.

Velocity said it has experienced "overwhelming success" with its last-mile industrial properties in Pennsylvania and New Jersey, and the company is confident that the property will "absorb tenants benefiting from the surge in e-commerce growth," Zach Moore, a founding partner at Velocity, said in a statement.

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Thursday, September 17, 2020

SL Green CEO on the Future of Office Space

Real Estate Developer Bill Rudin on Returning to Work Amid the Pandemic (Video)

Fed chair Jerome Powell: Support for commercial real estate might need further action from Congress (Video)

Nerd Street Gamers to Open World's First Esports Industry Campus in Philadelphia

 by Clarice King Costar

Nerd Street Gamers, a national esports infrastructure company, is planning to open what it's calling the world's first esports industry campus at the historic Terminal Commerce Building in Center City Philadelphia.

Called The Block, the campus will serve as Nerd Street Gamers' new corporate headquarters and is expected to include global broadcast studios, dedicated training centers for professional teams and schools, educational space for community partners and, subject to zoning approval, a Localhost facility capable of hosting community, scholastic, amateur and pro-level events and programming.

Nerd Street Gamers operates esports training facilities called Localhosts where guests can pay hourly rates and compete in amateur esports tournaments. Other Localhost locations include Denver and Austin, Texas, with Los Angeles and other locations across the country opening in the near future.

The Block will be located in a roughly 40,000-square-foot space within the 11-story, 1.3 million-square-foot building at 401 N. Broad St. that's owned by Netrality, the operator of strategic, fiber dense data centers that facilitate the interconnection between major fiber networks enabling regional connectivity. After acquiring the Terminal Commerce Building in 2014, Netrality invested over $50 million in renovations for the building, making it one of the most fiber-dense, network-neutral facilities along the East Coast. The building's internet capabilities support a near-zero lag time for competitive gamers.

"Not only are we creating one of the industry’s largest gaming landmarks with The Block, but we’re also building a home for every member of Philadelphia’s gaming community and contributing a vital element to the redevelopment of North Broad Street," John Fazio, founder and CEO of Nerd Street Gamers, said in a statement. "With this esports campus, we're supporting the growth of the industry as a whole by increasing access to opportunities for gamers, public organizations, educational institutions, and the community at large."

Nerd Street Gamers plans to open The Block this winter unless circumstances change given the COVID-19 pandemic.

The Block is the latest example of Philadelphia rapidly becoming an esports hub in the United States. Fusion Arena, the Comcast Spectacor and The Cordish Cos.' $50 million next-generation esports and entertainment venue, is slated to open in the heart of the Philadelphia Sports Complex. The Block will help solidify Philadelphia's role as a destination for industry professionals and fans by offering practice facilities, broadcast studios and exhibition opportunities for professional teams visiting the arena.

Nerd Street Gamers is also planing to provide low-cost access to high quality equipment and education to the Philadelhipa community. The company will also be partnering with local organizations and educational institutions for their respective esports programs, including Temple University, Comcast NBCUniversal LIFT Labs, Team Altemus, Aim Lab and TechGirlz.

The Block comes on the heels of Nerd Street Gamers' commitment to open an additional 100 venues across the United States in Five Below stores, stadiums and college campuses over the next five years.

Tuesday, September 15, 2020

Ensemble Expands Life Sciences Footprint in Philadelphia

 By Ingrid Tunberg

Ensemble Real Estate Investments has purchased three life sciences facilities, comprising 366,803 square feet of space in Philadelphia’s Navy Yard.

The properties, located at 4701 and 4751 League Island Blvd. and 400 Rouse Blvd., are each occupied by WuXi Advanced Therapies Inc.

“Ensemble is proud to partner with WuXi to support their important work in developing advanced and life-sustaining therapies in the years to come,” states Mark Seltzer, SVP of development for Ensemble. “The Navy Yard’s proximity to the highway network and airport, along with its unique ability to accommodate large-format, low-rise buildings in an urban environment has made it incredibly attractive to WuXi and many other Life Sciences companies, positioning it as a critical component of our regional economy.”

With the recent acquisitions, Ensemble Real Estate Investments now owns a total of five life sciences properties within Navy Yard, totaling 550,000 square feet and $155 million in investments. The company’s additional Navy Yard properties include Adaptive Therapeutics’ US headquarters and the Iovance Biotherapeutics facility, which is currently under construction.

Each of the company’s Navy Yard life sciences buildings offer manufacturing, laboratory, research and development and office space to support the clinical development and initial commercialization of novel engineered immunotherapies, including gene and cell therapy.

Along with the facility assets, the California-based company has additionally invested in office and hospitality properties within the area; bringing the firm’s Navy Yard portfolio to total more than 1.1 million square feet, including four pad-ready development sites.

The real estate company has appointed two former Liberty Property Trust professionals to its team. Within their new roles, Brian Cohen and Mark Seltzer will lead Ensemble’s East Coast operations.

“Ensemble’s decades-long track record of successfully executing development projects across all asset classes and their ability to effectively raise capital, creates a platform well positioned to achieve an aggressive growth strategy in Philadelphia and the region.” says  Cohen. “These attributes, coupled with the team’s vast experience envisioning and creating exceptional projects will serve to further attract leading-edge companies throughout our portfolio.”

WuXi’s most recent advanced therapies testing facility, 400 Rouse Boulevard, offers 140,000 square feet of state-of-the-art space. As one of the largest LEED Gold life sciences buildings in Philadelphia, the property more than doubles the company’s testing capacity for gene and cell therapies and increases the company’s Navy Yard footprint to more than 400,000 square feet of lab and GMP space.

As one of the first companies to move to the Navy Yard in 2004, AppTec opened a 75,000-square-foot contract testing and manufacturing facility, prior to being acquired by WuXi PharmaTech in 2008. Since then, WuXi has expanded its presence within the Navy Yard in order to serve the growing demand for cell therapies.

Wednesday, September 9, 2020

South Jersey Leads Philadelphia Region in Multifamily Market Resilience to COVID-19

It’s not often the Garden State’s commercial property market flexes its muscles on the national stage. Enter 2020, the year when the only thing to expect is the unexpected.

The once-in-a-lifetime effects of the coronavirus are not only upending long-held investor assumptions on which markets are safest, they’re also unveiling resiliency in markets and properties that arguably deserved more investor attention in the first place.

In July, we highlighted how Philadelphia’s apartment sector is proving to be one of America’s healthiest markets in the face of the coronavirus with the lowest concessions rates nationally and asking rents now well above their pre-pandemic peak.

Diving deeper into the data reveals that South Jersey is leading the Philadelphia region’s charge in asking rent growth. Apartment rents here are up more than 3.5% year over year.

"We have done really well," said Caroline Adillon, president of Viking Residential, which owns more than 1,900 units worth of workforce housing properties, which is housing geared toward middle-income households, throughout the Philadelphia metropolitan area, most in either South Jersey or Lower Bucks County.

"Our occupancies have stayed above 95% at all three of our South Jersey properties since the pandemic started," Adillon said. "People don’t want to move today if they can avoid it, so our turnover is way down. This has drastically reduced our expenses and helped us tighten qualifying guidelines on the few units that are opening up."

The region’s resilience partly ties back to its lower levels of new apartment development heading into the pandemic.

Most recent apartment construction in the Philadelphia suburbs has been focused in western suburbs such as King of Prussia and Exton, leaving South Jersey apartment owners with fewer new properties to compete with.

There’s also been a groundswell in development of distribution centers along Interstate 295, by e-commerce retailers seeking to speed up their home deliveries.

South Jersey is a natural fit for these operations given its location squarely in the middle of the western hemisphere’s largest center of purchasing power, minutes from Philadelphia, but also right between New York City and the Greater Baltimore/Washington Area.

Since 2015, more than 27 million square feet worth of distribution centers have started construction in the four South Jersey counties of the Philadelphia metropolitan area. Even after coronavirus-related cuts, transportation and warehousing employment in these counties is still up by more than 33%, or 9,000 new jobs over the past five years.

The federal government’s enhanced $600 per week unemployment benefits have also played a key role in supporting South Jersey’s economy and apartment market, signaling risks if stimulus is further scaled back. But these benefits were cut to $400 per week at the end of July, and South Jersey apartment rents only continued to increase.

Meanwhile, there’s no end in site to the boom in distribution employment that has underpinned South Jersey’s job market. Target, Amazon, Premier Technology and Burlington Coat Factory are all set to open new distribution centers larger than 200,000 square feet in late 2020 and early 2021.

Industrial Vacancy Rates Stable in Northeast Through Q2 2020

By Pearl Wu

Vacancy rates in the northeast remained steady in the second quarter at 6.6 percent despite the ongoing coronavirus pandemic.

Leasing in the industrial sector decreased at the start of 2020 in comparison to last year, though leasing regained momentum in the second quarter as a result of demand from retailers, logistics providers and e-commerce firms.

Average rents for Class A facilities remain at peak levels in the northeast, particularly in The Meadlowlands in New Jersey and Lehigh Valley in Pennsylvania. The Class A vacancy rate remains highest in Pennsylvania, which increased to 12 percent in the fourth quarter in 2019, dipped to just over 10 percent in the first quarter of 2020 and increased slightly in the second quarter of 2020. New Jersey has seen its vacancy rate in Class A facilities drop steadily since 2018.

New construction and development has regained momentum in the second quarter with almost 38 million square feet of new development under construction in the second quarter. Numbers for pre-leasing of new development remain strong. Retail properties have also been converted to industrial use in New Jersey and Pennsylvania. The conversion of retail space into industrial properties is an ongoing trend propelled by the coronavirus pandemic, as shoppers reject traditional retail properties by avoiding in-store shopping, instead opting for online shopping. This opens the need for logistics centers and warehouses. Industrial properties had returned about five percent at the end of June, despite still trending down, and total office vacancy increased to 13 percent in the second quarter and businesses and office workers shifted their focus online.

Tuesday, September 8, 2020

Lehigh Valley's Apartment Market Is Strengthening

The apartment market in Pennsylvania's Lehigh Valley is strengthening during the pandemic.

Multifamily vacancies are at record lows, and close to 97% of the Lehigh’s inventory is leased. This is good news for a small market with modest population growth that saw over 1,000 apartment units deliver since 2018. The recent supply is over 90% occupied, and few of these projects are advertising concessions.

The market’s workforce housing, or housing geared toward middle-income households, is also faring well. Lehigh's mid-tier two- and three-star properties are faring even better. They post average vacancies of just 2%, and occupancies have climbed over the past 12 months.

Even more interesting is the rent growth.

At a time of great uncertainty for the apartment market, Lehigh's apartment landlords are doing quite well. Year-over-year gains are over 3%, which makes the area one of the nation’s top performers. Gains here are surpassing those seen in nearby cities such as Philadelphia and New York, which are struggling with some outmigration issues caused by the coronavirus.

It is possible that Lehigh is benefiting from this. The market offers relatively quick access into both cities, particularly Philadelphia. The restructuring of office and the likelihood of companies adapting hybrid remote/office employment in the coming years could be a great benefit to a market like Lehigh Valley.

The region’s location could also make it a prime destination for workforce housing. Lehigh is ideally situated at the crossroads of Interstates 78 and 476 and has become a shipping node. Developers have been extraordinarily busy in the past 10 years, adding millions of square feet of logistics space. These warehouses are creating thousands of jobs, which could pull in even more blue-collar workers now that retail has been so thoroughly disrupted.

While sales have slowed because of the pandemic, third quarter figures have already surpassed what the market saw in the second quarter. Though only a handful of properties have traded in the past three months, there were a pair of notable deals that did close in July. Laub Realty had one of the larger deals: The New York firm spent $6.25 million on the three-star, 30-unit Taylor Apartments.

Out-of-state money, tightening vacancies and stronger than average rent growth all are good signs for the local apartment market and Lehigh at large.

Friday, September 4, 2020

PREIT Calls Off Plan to Sell Five Shopping Malls

Pennsylvania Real Estate Investment Trust has terminated an agreement to sell five of its malls — a deal it mentioned earlier this year as one of its efforts to raise needed cash.

PREIT owns and operates a portfolio of enclosed malls and shopping centers that has been hit hard by recent retailer bankruptcies and shutdown orders to curb the COVID-19 pandemic. It was one of the first real estate investment trusts to acknowledge its survival may be in doubt.

In its first-quarter securities filing, the Philadelphia-based company said there is “substantial doubt about our ability to continue as a going concern,” citing its current financial condition, liquidity sources and financial obligations coming due over the next 12 months.

Also in that filing, PREIT disclosed in February it entered into an agreement for the sale-leaseback of five mall properties. The transaction was subject to completion of due diligence.

The outbreak of COVID-19 the following month pushed back due diligence efforts and reduced the availability of financing to complete the deal, PREIT said in a Securities and Exchange Commission filing this week. As a result, PREIT elected not to extend the due diligence period any longer and terminated the agreement.

The sale was expected to gross proceeds of $153.6 million in cash. It was structured as a 99-year lease with an option to repurchase. The agreement also provided for release of outlying land parcels for multifamily development.

The deal was a key component of asset sales PREIT arranged this year expecting to raise $313 million.

Geyser Holdings, based in the Detroit area, was identified in a PREIT federal filing this month as the buyer under the sale-leaseback agreement. Geyser did not respond to a request for comment.

The malls identified as having been under contract for sale were: Moorestown Mall in Moorestown, New Jersey; Jacksonville Mall in Jacksonville, North Carolina; Magnolia Mall in Florence, South Carolina; Valley Mall in Hagerstown, Maryland; and Capital City Mall in Camp Hill, Pennsylvania.

Can commercial real estate rebound after the coronavirus pandemic (Video)

Thursday, August 27, 2020

Protecs Innovation Center in Blue Bell Lands Two Life Sciences Tenants

Protecs Innovation Center, a two-story lab and life sciences building in Blue Bell, Pennsylvania, has picked up two tenants.

KorGene, which develops targeted and molecular diagnostics, is leasing 8,259 square feet at the building, while ThirdLaw Technologies, which specializes in synthetic and computational chemistry, is taking 4,808 square feet at the 50,000-square-foot building at 512 Township Line Road.

Christopher R. DiPaolo, principal of 4 Valley Square Group, is also the president and founder of Protecs LLC, a national design/build firm and construction management firm focused on providing regulated high-tech industries with professional services for research and development and manufacturing operations.

"The suburban Philadelphia life sciences real estate market has remained very strong during the COVID-19 pandemic. These two tenants were attracted to the existing lab infrastructure and required quick occupancy of the space, a trend we are seeing more of during the pandemic."

The landlord is planning a capital improvement project for the Blue Bell building, which includes modernizing common areas and updating its facade and hardscaping. Renovations are set to be completed by the end of the quarter. It is also planning to building speculative lab space at the Protects Innovation Center in Blue Bell to accommodate fast-moving, turnkey requirements.

"The limited supply of lab space in the region, coupled with the increasing demand from life sciences occupiers bodes well for this asset going forward."

In addition to the Blue Bell location, Protecs has another Innovation Center in King of Prussia and two others in Plymouth Meeting that total 120,000 square feet and contain 16 technology and life sciences companies.

Canadian Joint Venture Pays $39 Million for South Jersey Industrial Site

 By Rachel Whaley CoStar Research

Toronto-based WPT Industrial Real Estate Investment Trust and Investment Management Corporation of Ontario purchased an industrial land parcel in Mansfield, New Jersey, for $39 million.

The 61-acre site is located off Route 206 and is about two miles from the New Jersey Turnpike and Interstate 295.

The joint venture plans to develop about 772,000 square feet of modern distribution and logistics space at the site. A timeline for the development project has not yet been disclosed.

Tuesday, August 25, 2020

ShipHero Subleases 150K SQFT Lehigh Valley Warehouse

 ShipHero has subleased a warehouse facility at 6736 Tilghman St. in Allentown, Pennsylvania.

The U.S. multinational e-commerce logistics company is taking the entire 150,0000-square-foot industrial building called Iron Run Distribution Center II. It is subleasing the space from True Value.

ShipHero will use the Lehigh Valley warehouse as a fulfillment center. It will be the company's ninth location in the country.

The 150,000-square-foot building was developed in 1975. Prologis acquired the property in January as part of the Black Creek Group portfolio deal.

Wednesday, August 19, 2020

Pandemic May Deliver Final Blow to Struggling Malls- Including Montgomery Mall North Wales, PA

 by Cheryl Miller

The impacts of COVID-19 stay-at-home orders and business restrictions may seal the fate of regional malls that were already struggling before the pandemic, a report by  DBRS Morningstar concluded.

The credit rating agency’s CMBS Weekly Chronicle notes that CBL Properties recently announced in its second-quarter financials that it is preparing to turn over to lenders three properties with secure commercial mortgage-backed securities loans: Burnsville Center in Burnsville, Minn.; Eastgate Mall in Cincinnati, Ohio; and Hickory Point Mall in Forsyth, Ill. 

Those developments are not surprising given historical performance trends for those malls, the report concluded.

“The effects of the pandemic have exacerbated the existing stresses for underperforming regional mall properties, further diminishing the prospects for a turnaround for weaker performers in CMBS,” the report said. “As such, the likelihood of default and losses to the respective trusts are generally higher, particularly for less well-capitalized owner/operators such as CBL, The Pyramid Companies (Pyramid), and Washington Prime Group (WPG).”

According to a DBRS platform, approximately 70 loans and loan pieces backed by approximately 50 regional malls have transferred to special servicing since the pandemic began.

“While some of those transfers appear to be performing loans in need of temporary relief, many are loans that showed significant performance declines before the onset of the pandemic,” the DBRS Morningstar report said.

The report highlighted a number of malls at risk of “respective borrowers turning over keys.”

The loan on Simon Property Group-owned Montgomery Mall in North Wales, Penn. transferred to special servicing in July, according to the report. The special servicer cited imminent default due to COVID-19 effects as the reason for the loan’s transfer.

Occupancy at the CBL Properties-operated Southpark Mall in Colonial Heights, Va. dropped to 64.1% in 2018 after the Sears store there closed. The loan on the property was transferred to special servicing in March and an application for pandemic-related relief was ultimately withdrawn, according to the report.

The loan on the Washington Prime Group-Operated Oak Court Mall in Memphis, Tenn. is coming due in April 2021. “Given the weaker financial position of the loan sponsor, WPG, and the performance declines from issuance, we believe it will be significant[ly] difficult to obtain a replacement loan,” the report said. The loan transferred to special servicing in May and was more than 90 days delinquent as of July. The leases for 34 tenants expire in either 2020 or 2021.

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Tuesday, August 18, 2020

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Modular Rentals in Philadelphia Draw Strong Interest

 by John Dougherty Costar

A pre-built modular apartment building in Philadelphia’s University City neighborhood has sold for $36 million.

The property at 4125 Chestnut St., known as LVL 4125, was acquired by a New York City-based family investment office. The seller was CRP Builders, also of New York.

The six-story, 141-unit building opened last year and is within walking distance of Drexel University, the University of Pennsylvania and that institution’s medical school and medical center. The fully leased complex was developed by Philadelphia-based Alterra Property Group in partnership with the Carlyle Group institutional investment firm.

Although it’s not dedicated student housing, the property is home to many graduate students, faculty and staff of the nearby schools.

Modular apartments — units that are prefabricated off site and then assembled at the new location — are a small segment of the overall multifamily market.

But they do provide some big advantages: The units assemble quickly, and developers do not have to rely on the vagaries of the local labor market during development.

Sellers conducted 40 tours despite the coronavirus pandemic and received 15 offers.

The property has central air-conditioning, granite countertops, washers and dryers in the units, a fitness center and a roof deck.

How the Pandemic has Hit Commercial Real Estate (Video)

Wednesday, August 12, 2020

Top Industrial Leases Recognized for Philadelphia Area

 Prominent industrial leases signed by Target, Geodis and FedEx negotiated by top dealmakers from Cushman & Wakefield of New Jersey, JLL and ProVenture are among the second quarter industrial leases recognized by CoStar.

As big ticket items involving sizable investments, commercial property transactions often have a wider impact within the community. 

TOP LEASE: 2858 US Route 322, Logan Township, NJ

Space Leased: 1,105,000 SF

Deal Type: New Lease

Sign Date: April 23, 2020

Size: 1,105,000 SF

Tenant: Target

Deal Commentary: Target signed the Philadelphia market's largest industrial deal of the second quarter when it agreed to lease a 1.1 million-square-foot distribution center currently underway in the new Logan North Industrial Park. Expected to create approximately 1,300 jobs, the facility will serve as a flow center to fulfill online orders and restock retail stores. Construction of the new warehouse is currently scheduled for completion in summer 2021.

TOP LEASE: 951 Willowbrook Road, Northampton, PA

Space Leased: 1,031,524 SF

Deal Type: New Lease

Sign Date: April 20, 2020

Size: 1,031,524 SF

Tenant: Geodis

Deal Commentary: Transport and logistics leader Geodis is slated to expand its U.S. footprint by taking just over 1 million square feet of distribution space at Rockefeller Group Logistics Park before the end of the year. The property, which offers immediate adjacency to the largest FedEx ground hub in the country and is less than two miles from Lehigh Valley International Airport, is owned by New York City-based firm Rockefeller Group.

TOP LEASE: 2400 South Weccacoe Ave., Philadelphia, PA

Space Leased: 283,500 SF

Deal Type: New Lease

Sign Date: June 8, 2020

Size: 283,500 SF

Tenant: Amazon

Deal Commentary: Amazon has leased the SoPhi Logistics Center and will begin to occupy the property in December of this year. The site will serve as a last-mile distribution center for the retail giant.

TOP LEASE: 180 Kost Road, Carlisle, PA

Space Leased: 487,080 SF

Deal Type: New Lease

Sign Date: April 4, 2020

Size: 487,080 SF

Tenant: Georgia Pacific

Deal Commentary: Georgia Pacific, maker of tissue, pulp, packaging, building products and related chemicals, expanded in the Philadelphia market with a lease to take all 487,080 square feet at a new warehouse owned by New York Life Real Estate Investors.

TOP LEASE: 2834 Schoeneck Road, Macungie, PA

Space Leased: 270,000 SF

Deal Type: New Lease

Sign Date: May 7, 2020

Size: 270,000 SF

Tenant: Silgan Plastics

Deal Commentary: The Lehigh Valley Crossings industrial park has a new tenant after Silgan Plastics, a packaging company serving the plastic bottling industry, leased the distribution center at 2834 Schoeneck Road in Macungie, Pennsylvania. The building has been empty since The Lehigh Group vacated in late 2018.

TOP LEASE: 2251 Newlins Mill Road, Easton, PA

Space Leased: 233,438 SF

Deal Type: Renewal

Sign Date: April 1, 2020

Size: 281,473 SF

Tenant: II-VI Advanced Materials

Deal Commentary: II-VI Advanced Materials, an engineered materials and optoelectronic components manufacturer, signed an expansion to occupy the remaining space at 2251 Newlins Mill Road in Easton, Pennsylvania. The space was previously home to Neovia Logistics.

TOP LEASE: 2525 Monroe Blvd., Norristown, PA
Space Leased: 172,649 SF

Deal Type: New Lease

Sign Date: May 6, 2020

Size: 211,000 SF

Tenant: Caesarstone USA

Deal Commentary: Caesarstone, a manufacturer of premium quartz surfaces used in both residential and commercial projects, signed a lease to occupy the entire 211,000-square-foot distribution center at 2525 Monroe Blvd. in Norristown, Pennsylvania. The company is expected to occupy its new space in November.

TOP LEASE: 280 Daniels Way, Burlington, NJ

Space Leased: 208,476 SF

Deal Type: New Lease

Sign Date: May 13, 2020

Size: 416,744 SF

Tenant: Burlington Stores

Deal Commentary: Burlington Stores, an off-price department store retailer formerly known as Burlington Coat Factory, signed a sublease for the remaining 208,476 square feet of space at 280 Daniels Way in the Haines Industrial Center. The Haines Center sits on more than 700 acres just off the New Jersey Turnpike.

TOP LEASE: 2070 Center Square Road, Logan Township, NJ

Space Leased: 126,117 SF

Deal Type: New Lease

Sign Date: May 13, 2020

Size: 126,117 SF

Tenant: Astral Diagnostics

Deal Commentary: Astral Diagnostics, a manufacturer of high-quality diagnostic stains and laboratory reagents, will occupy the newly built warehouse at 2070 Center Square Road in Logan Township. Exeter Property Group completed the project in December 2019.

TOP LEASE: 6923 Schantz Road, Allentown, PA

Space Leased: 100,000 SF

Deal Type: Renewal

Sign Date: May 21, 2020

Size: 100,000 SF

Tenant: BMS Logistics

Deal Commentary: BMS Logistics renewed its 100,000-square-foot lease at 6923 Schantz Road in Allentown. The contract packaging solutions provider agreed to a five-year extension.

Boston Company Buys Southern New Jersey Warehouse for $23.2 Million

 by Linda Moss Costar

Boston-based High Street Logistics Properties has purchased a 432,000-square-foot industrial facility in Southern New Jersey for $23.2 million.

Vineland Construction sold the property at 3100 N. Mill Road in Vineland.

Built in 1989 and expanded in 1997, the warehouse is currently 100% occupied by Ardagh Glass, a provider of sustainable packing products. The tenant’s customers include Coca-Cola, Heineken, Nestlé and Bacardi, among others. Earlier this year, Ardagh Glass committed to a 10-year lease extension through early 2030.

The building has clear ceiling heights of 28 to 34.5 feet, a cross-docked configuration, 40-by-50 column spacing, 24 dock doors, 18 trailer parking spots and 54 car parking spaces.

The warehouse is part of the Vineland Industrial Park, which includes 43 buildings totaling over 2.7 million square feet. The industrial park is located directly off Route 55.

“Although Vineland is a relatively small industrial market, it continues to be a strong submarket with minimal availabilities, great labor, low direct vacancy, good build-to-suit activity and Class A rents north of $5 per square foot."

Large Office Portfolio Trades in Lehigh Valley

By Ben Atwood Costar Market Analysts

Lehigh Valley’s office investment market starts the third quarter surprisingly strong thanks to a single purchase in late July.

The deal contained nearly half a million square feet in 13 offices, and included assets in neighboring Pittston and Phillipsburg.

Hammes Properties spent just over $137 million on the deal. The firm specializes in healthcare related real estate and owns properties across the country.

The assets were acquired from the former CEO of Coordinated Health, Emil DiIorio. Coordinated Health was acquired by the Lehigh Valley Health Network in late 2019, and they have taken over much of the space that Coordinated Health had leased within these properties. A mixture of other tenants in the medical field take up the remaining space in the properties, which are largely fully occupied and range in size from 10,000 to 100,000 square feet.

The financial issues of Coordinated Health do somewhat obscure the insight this sale can offer, but even as a distressed sale, it is interesting to dissect. The coronavirus has upended the commercial real estate world and investors are, for the large part, holding on to their cash. The office sector has been profoundly impacted by the virus and the general consensus is that total office demand will be reduced in the near future as remote working becomes more and more viable.

The properties sold for close to $300 per square foot, well above the market average. But Lehigh office is a relatively slow investment market. That average can be somewhat skewed by a lack of deals and this is one of the larger sales in recent years. Out-of-state money coming into the market is not unheard of, but it is uncommon.

That the properties catered to medical tenants was almost certainly a draw and many of the properties were well-positioned. The largest cluster of properties was off North Cedar Crest Boulevard, just outside the city of Allentown and well-positioned near large retail and residential areas.

But even healthcare tenants are subject to virus disruption and it could also be that Lehigh Valley itself is a draw. The market is one of the fastest growing in Pennsylvania and is well-positioned to endure the coronavirus and perhaps come out on top.

Don Cunningham, president and CEO of the Lehigh Valley Economic Development group, believes the deal is a source of optimism for the market.

"We are fortunate that even during these challenging times commercial and industrial properties in the Lehigh Valley do not stay dormant for too long, particularly in the health care sector," Cunningham said. "The Hammes purchase of the Coordinated Health properties is an indicator of the strong health care and medical office space market in the region."

Tuesday, August 11, 2020

Top Philadelphia Commercial Real Estate Leases and Sales

 Top Property Sales Recognized for Philadelphia

TOP SALE: 1901 Market St., Philadelphia, PA

Sale Price: $360,000,000

Sale Date: June 25, 2020

Size: 801,000 SF

Buyer: Independence Health Group, Philadelphia, PA

Seller: Piedmont Office Realty Trust, Atlanta, GA

Deal Commentary: Piedmont Office Realty Trust exited the Philadelphia market with the $360 million sale of 1901 Market St. as the company looks to focus on the Sun Belt region. Independence Health Group seized the opportunity to reacquire the 45-story tower that houses the headquarters of its Philadelphia-based subsidiary, Independence Blue Cross.

4200 Braden Blvd. E, Easton, PA

Sale Price: $62,500,000

Sale Date: June 4, 2020

Size: 475,800 SF

Buyer: Black Creek Group, Denver, CO

Seller: Dermody Properties, Reno, NV, and PCCP, Los Angeles, CA

Deal Commentary: Black Creek Group finalized a deal in early June to acquire the Easton warehouse of e-commerce services provider, Radial. Dermody Properties developed the 475,800-square-foot property, named LogistiCenter at 33, in 2016, and sold the complex along with its partner, real estate finance and investment management firm PCCP, for $62.5 million. Radial has fully leased the property since late 2019.

TOP SALE: Portfolio of 7 Properties

Sale Price: $42,925,000*

Sale Date: April 10, 2020

Size: 107,168 SF

Buyer: Endurance Real Estate Group, Radnor, PA, and PCCP, Los Angeles, CA

Seller: Novaya Real Estate Ventures, Boston, MA

Deal Commentary: The Southern New Jersey Core Infill Portfolio attracted its new owner because of its desirable location with historically high occupancy and its rapid rent growth. The portfolio is also consistent with the venture's investment strategy. *Part of a portfolio sale

TOP SALE: Portfolio of 3 Properties

Sale Price: $27,025,000

Sale Date: April 24, 2020

Size: 380,274 SF

Buyer: Brennan Investment Group, Rosemont, IL

Seller: The Magellan Group, Los Angeles, CA, and Drake Real Estate Partners, New York, NY

Deal Commentary: Betting on the continued resilience of the industrial sector and strength of the Lehigh Valley industrial market, new owner Brennan Investment Group acquired a three-building, fully leased portfolio in Lehigh Valley Industrial Park II to increase its Northeast holdings to nearly five million square feet.

TOP SALE: 405 North King St., Wilmington, DE

Sale Price: Not disclosed

Sale Date: May 8, 2020

Size: 155,000 SF

Buyer: Amtrak, Philadelphia, PA

Seller: The Commonwealth Group, Wilmington, DE

Deal Commentary: Amtrak reached a deal in May to acquire the Renaissance Centre in Wilmington, Delaware, where the railroad service had occupied space as a tenant. With its lease set to expire, Amtrak elected to buy the building outright and expand its footprint to 79,465 square feet. This was a strategic move by Amtrak to reduce costs by having employees work out of owned property.

TOP SALE: 518 Township Line Road, Blue Bell, PA

Sale Price: $24,850,000

Sale Date: April 2, 2020

Size: 123,087 SF

Buyer: AFA Real Estate Partners, Yardley, PA

Seller: Kairos Real Estate Partners, Blue Bell, PA, and Artemis Real Estate Partners, Chevy Chase, MD

Deal Commentary: AFA Real Estate Partners added Blue Bell Plaza to its portfolio. This investment was attractive due to the updated building amenities and quality of tenants including accounting firm RSM, developer Skanska USA and Blue Bell Surgery Center.

TOP SALE: 1240 McKee Road, Dover, DE

Sale Price: $21,347,000

Sale Date: June 3, 2020

Size: 42,140 SF

Buyer: Anchor Health Properties, Charlottesville, VA, and Harrison Street Capital, Chicago, IL

Seller: MedCore Partners, Dallas, TX.

Deal Commentary: MedCore Partners sold the newly completed and fully leased Post Acute Medical Rehabilitation Center in Dover, Delaware, to a joint venture between Anchor Health Properties and Harrison Street Capital.

TOP SALE: 824 North Market St., Wilmington, DE

Sale Price: $16,550,000

Sale Date: April 8, 2020

Size: 207,005 SF

Buyer: Chopp Holdings, Lakewood, NJ

Seller: Ellington Management Group, Old Greenwich, CT

Deal Commentary: Chopp Holdings scored a value-add investment with its $16.55 million purchase of 824 N. Market St. in downtown Wilmington. The 10-story property is 67% leased with the U.S. Bankruptcy Court occupying more than 65,000 square feet.

TOP SALE: Portfolio of 3 Properties

Sale Price: Not disclosed

Sale Date: June 12, 2020

Size: 78,194 SF

Buyer: The Leser Group, Brooklyn, NY

Seller: Rockland Capital, Philadelphia, PA

Deal Commentary: Rockland Capital sold a portfolio of office and retail properties in Philadephia, totaling 78,194 square feet, to Brooklyn-based investor The Leser Group in June. The new owner has real estate development and property management experience and focuses on commercial and industrial properties.

TOP SALE: 1 Storm St., Stroudsburg, PA

Sale Price: $15,180,000

Sale Date: June 26, 2020

Size: 37,976 SF

Buyer: IRA Capital, Irvine, CA

Seller: Doctors Investment Group, Stroudsburg, PA

Deal Commentary: IRA Capital bought the Pocono Ambulatory Surgical Center in Stroudsburg because it fits the company's investment criteria, which is primarily focused on healthcare real estate. This acquisition further expands the equity firm's national footprint, which currently spans across 25 states and exceeds 6 million square feet of property.

Top Retail Leases Recognized for Philadelphia

TOP LEASE: 104-108 Bartlett Ave., Exton, PA

Space Leased: 37,275 SF

Deal Type: New Lease

Sign Date: April 22, 2020

Size: 79,601 SF

Tenant: Lidl

Deal Commentary: German discount supermarket chain Lidl is continuing its U.S. expansion spree with the signing of a 37,275-square-foot deal in Exton, Pennsylvania. The grocer is filling a void at Main Street at Exton that was previously left when Toys R Us went bankrupt a few years prior.

TOP LEASE: 871 East Lancaster Ave., Downingtown, PA

Space Leased: 37,126 SF

Deal Type: New Lease

Sign Date: June 2, 2020

Size: 140,858 SF

Tenant: The Edge Fitness Clubs

Deal Commentary: Continuing its East Coast and Midwest expansion plan, The Edge Fitness Clubs has signed its sixth deal in Pennsylvania with a 37,126-square-foot deal at Ashbridge Square.

TOP LEASE: 1301-1325 Churchmans Road, Newark, DE

Space Leased: 22,000 SF

Deal Type: New Lease

Sign Date: June 15, 2020

Size: 256,119 SF

Tenant: Ross Dress for Less

Deal Commentary: Opening its third location near Christiana Hospital, Ross Dress for Less signed a deal to take over space previously left dark by Babies R Us in late 2018. Ross will join center anchor Home Depot and other stores and restaurants.

TOP LEASE: 770 State Road, Lehighton, PA

Space Leased: 25,700 SF

Deal Type: New Lease

Sign Date: June 10, 2020

Size: 42,502 SF

Tenant: Harley-Davidson

Deal Commentary: Harley-Davidson leased back space at 770 State Road until its new location at 2800 Eberhart Road in Whitehall Township opens in fall 2020.

TOP LEASE: 180 Susquehanna Blvd., Hazleton, PA

Space Leased: 24,072 SF

Deal Type: New Lease

Sign Date: June 12, 2020

Size: 32,968 SF

Tenant: Geisinger Health Systems

Deal Commentary: Geisinger Health Systems is expanding its 65 Forward program with a new health center located in a former Staples store in Hazleton. Forward 65 is a holistic approach to senior primary care created exclusively for people 65 and older. Geisinger is also building a new 65 Forward center in downtown Wilkes-Barre.

TOP LEASE: 832-880 Plaza Blvd., Lancaster, PA

Space Leased: 14,400 SF

Deal Type: New Lease

Sign Date: April 15, 2020

Size: 143,275 SF

Tenant: Just Furniture

Deal Commentary: Just Furniture is opening a new 14,400-square-foot location at Parkview Plaza where the retailer will offer affordable home furnishings to residents in the Lancaster area.

TOP LEASE: 3285 Black Gap Road, Chambersburg, PA

Space Leased: 31,080 SF

Deal Type: New Lease

Sign Date: April 4, 2020

Size: 31,080 SF

Tenant: Sportsman's Warehouse

Deal Commentary: Sportsman’s Warehouse took over the 31,080-square-foot building at 3285 Black Gap Road. The property had been vacant since late 2019 when Gander Mountain moved out.

TOP LEASE: 7700-7780 Crittenden St., Philadelphia, PA

Space Leased: 6,510 SF

Deal Type: New Lease

Sign Date: June 11, 2020

Size: 47,739 SF

Tenant: Anytime Fitness

Deal Commentary: Anytime Fitness renewed its lease at Market Square in Chestnut Hill. The fitness chain, with over 3,000 locations, has occupied space at this center since 2014.

TOP LEASE: 125-131 Shoemaker Road, Pottstown, PA

Space Leased: 12,280 SF

Deal Type: New Lease

Sign Date: June 26, 2020

Size: 48,239 SF

Tenant: Harbor Freight

Deal Commentary: Harbor Freight, a provider of quality tools for over 40 years, will join Ollie’s Bargain Outlet at West Pottstown Shopping Plaza after signing a 12,280-square-foot lease. With the lease, the retailer adds another location to its existing 1,000-plus stores.

TOP LEASE: 4321-4403 Swamp Road, Doylestown, PA

Space Leased: 7,200 SF

Deal Type: New Lease

Sign Date: June 29, 2020

Size: 152,468 SF

Tenant: FiveBelow

Deal Commentary: Five Below signed a lease for 7,200 square feet to open a new location at Cross Keys Place. The value-driven retailer, known for offering a variety of products at a cost of $5 or less, will add another location to its existing 950-plus stores across 38 states.

Wednesday, August 5, 2020

Will Downtown Office Towers Continue to Command Top Rents?

By Paul Leonard CoStar Advisory Services
For those living in one of America’s largest cities and working downtown, the daily commute not too long ago probably involved crowding onto trains that were over capacity during peak hours and often operated with outdated ventilation systems. Commuters then flowed into enclosed transit stations before exiting and facing the last gauntlet of the commute, riding a crowded elevator up to the final floor.

This typical journey to work for millions of Americans was mildly unpleasant before the pandemic, but is now shaping up to be borderline unbearable when commuting to the office eventually resumes. The logistical nightmare of getting workers safely from their homes to the office is keeping a lot of mayors, governors, CEOs and office landlords and managers up at night. Fear of crowding in subways, office lobbies and other public gathering spots threatens to upend the three-decade trend towards the reurbanization of America’s cities.

When we eventually resume life as we knew it, larger cities with longer commutes and a dependency on public transit will face unique challenges that smaller, more car-dependent cities will largely avoid. Compounding this threat is the fact that the metropolitan areas that are most reliant on transit and that have the longest commutes also have the highest office rents in the U.S. This raises an important question of whether these larger cities will continue to see such disparity in rent premiums after the pandemic.
Top-tier markets such as New York, D.C., Boston, Chicago, Los Angeles, San Francisco and Seattle are the most challenged by this trend. Companies located in these markets are likely to face the most pressure from employees to continue to work from home or have more flexible schedules in the future.

But while top-tier markets collectively face enormous challenges, New York City stands out as being far and away the most acutely impacted by transit concerns associated with virus transmission risks. According to the U.S. Census Bureau, 31% of New York's metropolitan workers commute via mass transit to work, and this number is far higher for commuters whose destination is Manhattan. San Francisco is in a distant second place at 17%, and only four other markets are above 10% — all of them top-tier markets.

This past April, when New York City was the epicenter of the COVID-19 pandemic, ridership on New York’s subways dropped an unprecedented 92% compared to April 2019. But in the months since, ridership has only recovered to a 77% deficit compared to last year.
In addition to having long, transit-dependent commutes, these top-tier markets also have the greatest share of office space located in mid- and high-rise buildings necessitating an elevator ride. Nearly half of all office inventory in tier-one markets is above the fourth floor. That compares to a little more than one-third of the office space located in tier-two markets and only about a quarter of the office inventory in tier-three markets. In addition to mass-transit concerns, these high-rise cities face another hurdle in the logistics of getting workers from the ground to their floor without crowding in the lobby and the elevators.
If we focus within these markets, we find that 75% of the four- and five-star office space in central business districts nationally is located above the fourth floor versus just 31% of office inventory outside of the central business districts. New York is not alone in facing challenges presented by elevator queues and crowding. There are 28 cities in the U.S. with central business districts where 70% or more of the four- and five-star office space is located above the fourth floor.

In addition to longer, transit-dependent commutes and the prevalence of high-rise towers, nearly all central business districts command a rent premium compared with their surrounding markets. Once again, this premium is highly correlated to the market tier. Among the tier-one markets, there is a 72% rent premium, led by New York’s 125% rent premium for downtown office space compared to its suburbs.

The average rent premium falls to just 30% in tier-two markets and to just 15% in tier-three markets. The question remains, will office buildings in central business districts be able to maintain the same rent premiums after the pandemic?
Commuting activity may return toward previous levels once a vaccine for the new virus is developed and immunity levels eventually increase. This has historically been the case after other health scares or shocks, such as 9/11, that also prompted employers to reconsider downtown locations. In the past, initial concerns subsided over time once the general public perceived the threat had passed or had been addressed.

But that, of course, will take time. For investors concerned by the short-term implications posed by interrupted commuting patterns, there are a few office markets that have less dependency on mass transit. In addition to suburban markets generally, Sun Belt areas such as Phoenix, Arizona; Austin, Texas; Orlando and Tampa, Florida; and San Diego, California, are the least impacted by this trend, as they are far more dependent on cars with a relatively low share of high-rise office inventory.

Tuesday, August 4, 2020

More Renters Are 'Ghosting' Landlords, Apartment REIT Complains

By Marissa Luck CoStar News
Apartment renters in California are proving to be something of a frustration when it comes to paying rent, according to a national apartment landlord.

Its tenants in California, where the unemployment rate is 14.9%, are more likely to struggle to pay rent, with many "ghosting" their landlords by cutting off all contact, executives at real estate investment trust Camden Property Trust told investors. California has regulations in place to prevent tenant evictions, a move that the apartment industry says has the unintended effect of providing a disincentive for some to pay who otherwise would.

“If you’re a resident in California and you listen to the mayor of L.A. or the governor, their messaging is, ‘don’t worry, you don’t have to pay,’ and the limitation of late fees, the limitation of [not] being able to evict somebody creates what we call ghosting, which is they just don’t show up,” Camden's CEO Ric Campo said in discussing the company's second-quarter earnings.

He added that some renters “know they don’t have any negative recourse; you’re not charging them interest or late fees and they know they can’t be evicted and so you just have this ghosting scenario that happens out there.”

The deferred rents, higher expenses and lack of payment reduced profits for Camden in the second quarter, which saw its net earnings fall almost 60 percent to $17 million from $43 million in the same quarter last year. Camden's challenges provide one look at the national apartment market as federal aid programs begin to run out and unemployment remains high.

The Houston-based developer and owner has a portfolio of 56,112 apartment units across 164 properties, offering a glimpse into multifamily markets in a variety of cities. The difficult quarter came after Camden launched a $10.4 million cash-grant renter relief program for struggling tenants and after Camden saw its lowest renter turnover rate in its history in the first quarter, with tenants not moving out.

Delinquency rates among Camden's renters in California are hovering at about 3.6%, said Alex Jessett, Camden’s chief financial officer, during the call. The national apartment REIT said it has about 4,200 apartment units across 12 properties in the Golden State.

Across its portfolio, Camden saw its delinquency rates hit about 1.2% in the second quarter, on par with the 1.4% seen during the same time last year. However, about 1.1% of tenants deferred rent or made some rental payment plan, while virtually no tenants deferred rent the same time last year.

Orange County in California had the lowest collection rates for rents, with Camden able to collect about 92% of its rental income in the second quarter, said CEO Ric Campo on the earnings call. Other cities nationally had rent collection rates between 95% to 98%..

There's a debate between the apartment industry, which says the tenant protections in California don't provide enough monthly revenue protections for landlords to collect enough money to be able to pay their own costs such as mortgages, and lawmakers, who say there's a societal need to prevent large numbers of evictions as they point to rent collection rates above 90% to argue that landlords are still collecting the majority of rent revenue.

Sun Belt Payments

Residents in Sun Belt states where unemployment is comparatively lower seemed to be better at paying rent on time, he said. Before the pandemic, California had been a bright spot for Camden’s growth, and company officials said they still think it’s a good long-term investment.

“I think California will always be a market that people want to be in. It’s one of the biggest economies in the world,” said Jessett. “To me, I know that there’s a lot of people piling on to California, New York and Seattle and some of these other markets. They’re not going away, there will be good, long-term markets and hopefully the pandemic moves through fast and we’ll get back to good growth.”

Even in the Sun Belt, some areas showed weakness in the apartment market, particularly in economically harder-hit areas such as Houston and southern Florida, Camden officials said.

Houston’s apartment market is facing challenges on multiple fronts. Beyond the double-whammy of the coronavirus pandemic and the oil industry downturn, Houston also is seeing a big wave of newly built apartment units hitting the market.

“Houston continues to be one of our weaker markets,” Campo said, adding that the downtown and midtown areas have some of the biggest challenges with too much supply.

Renters in southeast Florida also are struggling more than other markets, Camden officials said. After Orange County, the market that saw the lowest rental collection rates was Southern Florida, where rent collections were about 94%, said Keith Oden, executive chairman at Camden, in the earnings call. Florida’s unemployment rate has hit 13.7% as the hospitality industry took a major hit from the pandemic. Renters in this market seem slower to jump onto Camden’s virtual leasing and tours platform, Oden said.

Across its portfolio, Camden saw its renewal rates stay essentially flat in the second quarter compared to growing 5.7% in the same quarter last year. Its new lease rates dropped by 2.8% compared to growing 4% in the second quarter last year.

Overall, Camden saw expenses from the coronavirus pandemic sink its profits by 59% to $17 million last quarter, compared to $43 million during the same time last year. Its profits were dragged down by about $14.4 million in one-time coronavirus-related expenses, including the company’s contribution to its renter relief fund and employee assistance fund and one-time employee bonuses.

It also saw its property-related expenses rise by roughly 9% year-over-year. And property revenues dropped roughly 2% to $250.6 million in the second quarter, compared to about $255 million the same time last year.

On the development side, Camden has about $1.9 billion of new apartments representing 1,939 units in the construction pipeline. In Houston, it has started leasing up Camden Downtown I, a 271-unit, $132 million apartment project that is now about 24% leased, according to its earnings report.

It also recently started leasing up Camden Cypress Creek II, a 234-unit, $32 million apartment project it developed in a joint venture in the north Houston suburb. In the second quarter, Camden also recently completed construction a 441-unit, $98 million apartment project in Phoenix called Camden North End I, which is now about 89% leased.

Campo said he was optimistic about the prospects for America’s multifamily market, as demand for apartments is still strong despite the 11.1% national unemployment rate. Camden still has a relatively strong occupancy rate of 95% and its turnover rate is down somewhat from last year.

“Camden’s geographic and product diversification has continued to lower the volatility of our rents and occupancy. Camden’s Sun Belt market have fewer job losses than close to markets in the U.S. overall,” Campo told investors. “Our product mix that offers varying price points in urban and suburban locations continues to work for us."

How The Coronavirus has PERMANENTLY Impacted Commercial Real Estate 2020 (Video)

Monday, August 3, 2020

Trends in commercial and residential real estate markets (Video)

Apartment Construction Starts Slowed Nationwide, but Some Southern Cities Bucked the Trend

By David Kahn and Sam Tenenbaum
CoStar Analytics

The onset of the coronavirus pandemic caused multifamily owners, lenders and developers to take a pause in the second quarter of 2020 as uncertainty led to firms taking stock of their own portfolios rather than looking to add to them with either new construction or acquisitions.

It’s been well documented that sales volume, both in multifamily and the other commercial property types, fell off a cliff in the second quarter of this year. But investment through sales only tells part of the story. Analyzing the trends in construction starts throughout the country can help paint a fuller picture because development often poses greater risk than acquiring an existing asset.

Perhaps most important, construction starts indicate sentiment about the future – investors won’t break ground on a new project if they don’t feel that demand will be sufficient in the six to eight quarters following the groundbreaking, when the project is completed and begins to lease up. Therefore, looking at which cities saw the largest and smallest drop-offs in apartment groundbreakings in the second quarter may serve as an early signal for how confident multifamily owners, lenders and developers are in a given city, relative to the nation as a whole.

CoStar Market Analytics looked at which cities saw the largest and smallest drop-offs in groundbreakings compared to its prior five-year trailing quarterly average. Using a five-year quarterly average is advantageous for one key reason: Quarter-over-quarter or even year-over-year groundbreaking figures are exceptionally volatile, even on a metro level. Additionally, the analysis included only markets that broke ground on at least 2,000 units in 2019. This data set shows that apartment construction was down almost 50% from its five-year average nationally.

Plenty of cities saw no properties break ground in the second quarter, including Las Vegas, Nevada; Palm Beach, Florida; and Charleston, South Carolina. Those cities all rely heavily on tourism, a factor that may have temporarily spooked investors and dissuaded developers during the height of the pandemic last quarter.

In terms of markets that did see units break ground, the biggest drop off from the five-year trailing average was Fort Lauderdale, Florida. This makes sense, considering the city’s tourism-dependent economy and typically robust multifamily construction pipeline. Furthermore, Fort Lauderdale delivered nearly 3,000 units in the second quarter alone, representing more than 2% of its existing inventory opening in a single quarter.

Other large drop-offs were seen in New York and Los Angeles, the two largest metropolitan areas in the country and two locales typically viewed as safer from an institutional capital perspective. Other slower-growth, legacy cities including Philadelphia, Chicago and Boston saw drastic drop-offs in construction starts last quarter.

Austin, Texas, with its typically robust construction pipeline, saw groundbreaking activity slow in the second quarter as well. That’s largely the result of a high historical average, rather than a drop in the market, as roughly 750 units still broke ground, compared to a more than 2,500-unit historical average for the market.
Only a handful of metropolitan areas saw an uptick in groundbreakings in the second quarter compared to their five-year trailing quarterly average. Three of the fastest-growing Sun Belt markets saw an increase in new construction starts in the second quarter of 2020. Raleigh, North Carolina; San Antonio, Texas; and Nashville, Tennessee, all saw more groundbreakings than respective five-year quarterly averages, with Raleigh nearly doubling its typical quarterly figure.

All three of those cities have seen explosive demographic growth over the past decade, and many developers and owners feel confident that those long-term trends will outweigh any near-term coronavirus concerns.

Other Sun Belt cities saw slowdowns in groundbreakings last quarter, but not quite to the extent as the rest of the country. Construction starts in Atlanta, Houston, Phoenix, Dallas-Fort Worth and Charlotte all held up relatively well compared to recent history. In fact, Dallas-Fort Worth led the country in terms of the nominal number of units breaking ground in the second quarter, with about 4,500. And even tourism-dependent Orlando, a city with an already robust pipeline and falling rents, saw a shallower drop-off in groundbreakings compared to the national benchmark.

Aside from tourism-dependent Orlando, these Sun Belt locales have all performed better than the nation in terms of job losses since the onset of the pandemic. And long-term demographic growth throughout the region continues to boost developer confidence in many traditionally fast-growing southern cities. However, with cases rising throughout the country, and especially in the south, future construction activity will likely be tied to the relative economic recoveries of these cities over the next few months.

Many of the projects that began construction in the second quarter will deliver in the second half of 2021 or the first half of 2022. If the economy does not return to pre-COVID employment levels by then, those projects could face a more difficult leasing environment.

$103M Construction Loan Secured for NJ Industrial Park

By Ingrid Tunberg
$103.5 million in construction financing was secured for two industrial buildings in Logan Township, NJ, as the exclusive adviser to Advance Realty Investors and Greek Development.

The loans, provided by Wells Fargo and Provident Bank, are designated for buildings H and E within the planned 3.2-million-square-foot, class A industrial site, Logan North Industrial Park.
Building H will serve as Logan North Industrial Park’s first asset to be developed out of ten total planned sites. The property is 100% pre-leased to Target, which will utilize the building as a flow center to fulfill online orders and restock retail centers. The facility, 60% of which will service retail stores and 40% will service for e-commerce needs, is estimated to create 1,300 jobs. Wells Fargo provided a $69 million construction loan for the development of building H.

Building E’s construction will commence immediately after building H’s development. The built-to-suit cold storage facility is pre-leased to the cold storage operator, Lineage Logistics, and will be operated by Lineage Logistics’ subsidiary, Preferred Freezer Services. The 189,889-rentable-square-foot site will offer 103 parking spaces, 44 trailer spaces and 20 dock doors. The property received $34.5 million construction loan from Provident Bank.

“With these two assets pre-leased, encompassing the first 1.3 million square feet of Logan North, our partnership is currently constructing Phase II of the development to meet continued demand in Southern New Jersey,” states David Greek, Greek Development’s director of acquisitions.

Cushman & Wakefield’s equity, debt and structured finance team, comprising John Alascio, Sri Vankayala, Chuck Kohaut, TJ Sullivan and Maya Steinberger, represented the borrower.

“It is a true testament to Wells Fargo and Provident Bank in understanding the vision and value proposition of Logan North in our uncertain economic environment,” states Alexander Cocoziello, Advance Realty Investors’ managing director of capital markets. “Our team could not be more pleased with the execution of Cushman & Wakefield and the broader sponsor team in these two deals.”

Thursday, July 30, 2020

Philly chooses developers for big Navy Yard expansion that includes housing

by Jacob Adelman Philadelphia Inquirer
Ensemble Real Estate Investments of Long Beach, Calif., and Philadelphia-based Mosaic Development Partners have been selected to lead a major redevelopment push at the South Philadelphia Navy Yard that will include millions more square feet of labs and offices, and — for the first time — an around-the-clock residential population at the former military base.

The Philadelphia Industrial Development Corp., which manages the Navy Yard on the city’s behalf, said in a release Wednesday that Ensemble and Mosaic were chosen for the 109-acre redevelopment project because they “demonstrated an understanding of PIDC’s mission and shared a strategic vision for the Navy Yard to drive business growth and job creation for Philadelphia.”

The project is expected to draw $2.6 billion in new private investment, PIDC said.

Ensemble developed the Navy Yard’s Marriott hotel and later acquired several other buildings there from the tract’s previous main developer, Liberty Property Trust, making it the largest private property owner at the former base. Mosaic’s projects have included the Eastern Lofts apartments in Brewerytown.

The team was selected from a shortlist that included developers such as Houston-based Hines, Washington’s Hoffman & Associates, and Trammell Crow Co., a subsidiary of Dallas-based commercial real estate company CBRE. Gilbane Development Co., the Rhode Island-based developer that was recently picked by Amtrak to help revamp 30th Street Station, also had been under consideration.

“The Navy Yard has fulfilled its initial promise of becoming a thriving center for business, innovation, investment, talent, and jobs,” Mayor Jim Kenney said in the statement. “The exciting new partnership with Ensemble/Mosaic will not only build on this track record but will also bring new ideas and energy to the Navy Yard while ensuring that equity and inclusion are at the forefront.”

Wednesday, July 29, 2020

Nestlé Purina PetCare Expands Operations in Mechanicsburg, Adding 94 Jobs

Nestlé Purina PetCare will expand its operations in Cumberland County, hiring 94 employees and adding new processing and packaging lines to its Hampden Township location.

“Purina has had a significant presence in Pennsylvania for more than 20 years, making pet food known worldwide."

Purina, which currently employs 320 people in Mechanicsburg, also has pet food operations in Allentown and employs nearly 800 people in Pennsylvania.

“Pet owners have trusted Purina for more than 90 years, and demand for our pet food is strong and continues to grow,” said John Bear, Purina vice president of Manufacturing. “Purina is proud to make high-quality foods for dogs and cats at our Mechanicsburg factory with a continued commitment to safety and environmental sustainability. This expansion reflects an investment in our local operations, and we look forward to continuing to deliver innovative and highly nutritious foods for pets.”

Purina has committed to investing more than $167 million into the project and creating 94 new jobs within the next three years. The company received a proposal from the Department of Community and Economic Development (DCED) for $282,000 in Job Creation Tax Credits (JCTC), to be distributed upon the creation of the new jobs, and $188,000 in funding for workforce development training. The project was coordinated by the Governor’s Action Team, an experienced group of economic development professionals who report directly to the governor and work with businesses that are considering locating or expanding in Pennsylvania.

Purina is the largest dry dog and cat food maker in the United States. The Mechanicsburg factory produces many of the company’s flagship brands, including Purina ONE, Purina Pro Plan, Fancy Feast, Dog Chow and Cat Chow.

“For nearly 25 years, Purina has provided premium jobs for residents of Mechanicsburg and surrounding communities,” said Mike O’Brien, Purina Mechanicsburg factory manager. “We’re proud to be making great foods that pets love while expanding the operations and providing even more jobs for the region.”

“Purina has had a long history in Cumberland County as a valued employer, and the Cumberland Area Economic Development Corporation is proud to partner with them on this project as they continue to provide vital jobs to our local community through this expansion,” said Laura Potthoff, CAEDC director of Business and Workforce Development.

Facebook Says Added Office Space Reflects Tight LA Market

Facebook has signed a lease for more space at a 4-year-old office complex in Los Angeles' Playa Vista neighborhood, a sign that technology companies are still scooping up real estate in competitive areas even as the pandemic prompts businesses to let more employees work from home permanently.

The Menlo Park, California-based social media company is boosting its space by about 23%. It's taking an additional 85,000 square feet at developer Tishman Speyer's The Brickyard, a luxury, two-building complex spanning more than 425,000 square feet in the heart of an area dubbed Silicon Beach because of its concentration of tech and media firms such as search engine provider Google and software maker Microsoft.

It comes as most of Facebook's employees are working remotely because of the coronavirus pandemic, including those who normally are in the office at The Brickyard. In May, Facebook CEO Mark Zuckerberg said that roughly half of its 48,000-strong workforce would transition to a work-from-home model on a permanent basis over the next five to 10 years.

The new lease was signed as other tech giants let staff work off site: On Monday, for instance, Google said it would allow workers to stay home through summer 2021 after announcing it would be pulling back on plans to grow its real estate and data center footprint.

The Facebook move is a sign that companies with a large office workforce won't stop signing office leases even if they are establishing permanent work-from-home policies. Many office space agreements run for multiple years that can easily transcend a one- or two-year disruption as a result of the pandemic, and growing companies need to plan for space based on potential workforce expansion.

Facebook was the sole tenant at the property's six-story, 122,000-square-foot structure at 12126 W. Waterfront Drive, according to CoStar data. Up to now, it also was the dominant tenant at its twin, a 297,000-square-foot building at 12105 W. Waterfront Drive where it leased about 140,000 square feet, that data shows. The new lease allows it to expand at the 12105 building. The company now accounts for about 83% of the total area at the property.

In an email to CoStar News, Facebook spokesman Tracy Clayton said the new lease was a hedge of sorts.

"Given the competitive real estate market in the region we are always on the lookout for opportunities to accommodate our growth," Clayton wrote. "The recent Brickyard lease was a natural expansion at an address we already call home."

Though Playa Vista's vacancy rate for office space is relatively high, according to CoStar analytics, top-shelf property there is still highly sought after and rents continue to be among the highest in the Los Angeles region.

Facebook also has about 49,000 square feet at another nearby property, an office complex at 12777 W. Jefferson Blvd. That, combined with its enhanced presence at The Brickyard, would bring its total office footprint in the Los Angeles area to just under 400,000 square feet in all from roughly 325,000 square feet, according to CoStar data.

"Facebook clearly thinks it will still need a sizable footprint in L.A. post pandemic despite publicly saying workers will be able to work remotely in perpetuity," said Ryan Patap, CoStar's director of market analytics for the Los Angeles region. "Facebook must think they will need the extra space over the long term, and some workers will want to return to offices. Working from home isn’t for everybody."

In May, Zuckerberg clarified in an interview with The Verge that his statement was more of a prediction than a hard and fast policy, and that it would largely be driven by existing employees' own preferences and Facebook's desire to untether its recruiting and hiring efforts from the areas where it currently has the largest presence: the San Francisco Bay, Silicon Valley, Seattle, New York and other regions where the cost of living is high.

"We ran these surveys and asked people what they want to do. Twenty percent of our existing employees said that they were extremely or very interested in working remotely full time," Zuckerberg said in May. "And another 20 percent on top of that said that they were somewhat interested. So I think what’s basically going to happen is that, because it’s going to take a while to get everyone back into the office, you have like 40 percent of employees already who were fairly willing to work remotely."

In any case, it will be some time before Facebook's full staff returns, physically, to its L.A. locations. Clayton said the company's employees will be working from home for the remainder of the year.

The landlord, New York City-based real estate firm Tishman Speyer, did not respond to a request from CoStar for a comment.

Why Commercial Real Estate is Set to Get Slammed (Video)

Monday, July 27, 2020

College Turns to Atlantic City Hotel for Student Housing in Pandemic

by Linda Moss Costar News
To get a sense of how the pandemic is changing student housing, look no further than Atlantic City, New Jersey, America's second-biggest gambling hot spot. 

Stockton University is planning to house some of its students in a hotel in the biggest U.S. gaming center outside Las Vegas this fall to comply with social-distancing mandates stemming from the coronavirus pandemic.

The move is an example of how property owners nationwide are seeing their prospects improve amid higher demand from universities for more housing.

The school, based in Galloway, New Jersey, said it's finalizing an agreement with the Showboat Atlantic City at 801 Boardwalk to use up to 400 rooms at the hospitality property for students during the coming fall and spring 2021 semesters. The university at one time owned the hotel when it first attempted to open a campus at the seaside gaming mecca.

“Stockton promises to provide housing to all students who request it,” the school's executive director of residential life, Steven Radwanski, said in a statement. “This agreement ensures that we will have sufficient housing based on current demand.”

The deal with Showboat will allow Stockton, which now operates a satellite campus in Atlantic City, to have additional housing available as the university implements state COVID-19 guidelines, which reduce the number of students permitted in existing on-campus student housing.

Stockton is the former owner of the 23-story Showboat. The university purchased the hotel for $18 million from Caesars in December 2014 with plans to develop it into a residential campus. But land-use restrictions placed on the property at different times by owners derailed those efforts, leading Stockton to sell the 1.73 million-square-foot facility, which includes two hotel towers, parking lots and garage, for $23 million in June 2016.

The influx of students will be a boost for the Showboat amid the COVID-19 outbreak. Hotels across the United States have taken a revenue hit because of the pandemic, with temporary closings and people not traveling. In the case of Atlantic City, its casinos only recently began to reopen with social-distancing measures in place.

Under the deal, Showboat will provide up to 300 single rooms and 100 double rooms for Stockton students. In addition, the hotel will also provide at least 250 dedicated parking spaces and students will get complimentary memberships to the fitness facility on site, as well as access to an entertainment lounge with billiards and pingpong tables, the rooftop pool deck and a business-study lounge. Students will also have access to meals on site, and rooms will have a microwave and minifridge.

The rooms will be located on floors that will be occupied only by students, and students will also have exclusive use of one full elevator bank to secure access to the floors, according to Stockton. The school will have staff living on site, and Showboat will provide space at its front desk for university personnel.

The per-semester rates for the rooms will be $4,500 for a single and $3,800 for a double, which is competitive with similar on-campus housing, according to the university.

“Students can now room at the Showboat and enjoy all the amenities of the hotel and its boardwalk location, while living at a treasured icon of local history," Brandon Dixon, president of Tower Investments, which owns the Showboat, said in a statement. "Having the students here will also bring a new exciting energy to the north side of the boardwalk.”

Stockton requested proposals for off-campus housing in Atlantic City based on the number of students who have applied to live in campus housing, according to Radwanski. Freshmen will be housed only in on-campus housing. Typically, about a third of Stockton’s almost 10,000 undergraduate students live in campus housing in Galloway and Atlantic City.

After its plans for the Showboat facility fell though, the university developed and opened an Atlantic City campus on another part of the boardwalk in fall 2018 with an academic building, a 543-bed residential complex and a parking garage.

Commercial Real Estate Takes a Hit During Covid-19 (Video)

Thursday, July 23, 2020

Penn Logistics Portfolio Sells in Fairless Hills, Pennsylvania

Penn Logistics, a four building, 240,358 SF, industrial portfolio traded in Fairless Hills, Pennsylvania (“Property”) for $18.0 million.

The buildings were constructed between 1968 and 1970. They feature 24’ clear ceiling heights, ample loading capacity with full dock packages for the 42 dock positions. The Property is strategically located along US Routes 1 and 13 with close proximity to I-295 and I-95, the principal North/South highways in eastern Pennsylvania and New Jersey.  The Property was 100% leased to four tenants at closing.
“We are extremely pleased we were able to execute this transaction given the current environment.  The pricing achieved supports the strength of the overall industrial market, specifically in Lower Bucks as Tenant demand has not decreased in this submarket, especially for functional and well located last mile assets."

Pennsylvania’s Budget Issues Loom Large Over Commercial Real Estate

Pennsylvania’s economic woes might just be getting started according to an ominous report filed by its Independent Fiscal Office in early July.

June's tax revenue collections were just $2.67 billion, $545 million short of what the office estimated a year ago. That’s not at all surprising given the shutdown, and the auditing agency projects the coronavirus will probably cost Pennsylvania anywhere from $2.7 billion to $3.9 billion in taxable revenue.

This could affect commercial real estate in myriad ways, the most immediate of which may be a near-term tax increase to fund essential services such as education.

The school system soaks up more than 30% of the state’s budget, and a substantial chunk of the funding comes from property taxes. Elected officials across the state have been open about a property tax increase and recent actions make it clear they were not playing around. Earlier this week, Scranton’s school system recommended a 16% hike to fund local schools through 2021, and multiple school districts in Berks County, Erie and Allentown have also proposed tax increases as well.

Higher property taxes will probably reduce property values and could limit both investment and development. Save for logistics spaces, there’s already minimal development, investment, leasing, or rent growth in markets like Scranton, Reading, York and Harrisburg; and even less in smaller towns like Johnstown, Schuylkill, Beaver City and Carbondale.

Increased taxes could also discourage businesses and individuals from relocating into a market while providing incentive for them to look elsewhere. Residents moving away is a serious problem throughout Pennsylvania, and the latest census data shows that 42 of the state’s 67 counties have lost residents since 2010.

A declining population has an enormous impact on nearly every facet of commercial real estate, and financial distress would probably amplify the problem. The state’s secondary markets are particularly exposed to this risk. A recently released study from the University of Pittsburgh’s Center for Metropolitan Studies indicates that in the southwestern Pennsylvania region alone, 20% of municipalities could become insolvent in 2021.

Tax increases are never popular, but many residents believe these cities have been mismanaged for decades. A 16% tax hike in Scranton to fund schools will probably prove deeply unpopular, as its very public corruption issues appear directly tied into the school system. Its last mayor, Bill Courtright, is awaiting sentencing on federal charges and while in prison he can trade stories with the former mayors of Allentown, Reading and Bloomsburg.

There’s already ample evidence that a large swath of the business community is losing faith in the state’s handling of the shutdown, and local politics are becoming increasingly contentious. Though Democratic Governor Tom Wolf’s approval rating with the public at large remains relatively high, he faced an open rebellion in mid-May, when Republican officials from six counties made it public that they would be ending their lockdown with or without his approval.

Wolf condemned these upstart county officials and business owners as "cowards," and last week, announced that the state would be withholding federal relief funding from Lebanon County. Republicans, who dominate the state legislature, passed a resolution in second quarter directing Wolf to end his emergency declaration, which would reduce the restrictions placed on many businesses. Wolf declined, and an amendment to the state's constitution stripping the governor of his powers as well as a motion to impeach him was introduced shortly afterwards.

There is little chance Wolf will be removed from office, but none of this discord bodes well for the future because the unprecedented financial challenges the coronavirus created will require extraordinary cooperation across the political spectrum to resolve.

Whatever solution the state reaches will have major effects on the Pennsylvania commercial real estate market for some time.