Monday, October 26, 2020

Philadelphia Refinery to be Repositioned as Massive Industrial Park

Hilco Redevelopment Partners said it plans to demolish and redevelop the East Coast’s oldest and largest oil refinery into what could be one of the largest additions of industrial real estate ever in Philadelphia, in a long-term project that could add space amounting to almost 3% of the city's existing inventory.

The company, the real estate development unit of financial services company Hilco Global, announced a multibillion-dollar plan to decommission, demolish and redevelop the 1,300-acre site that operated for roughly 150 years as an oil refinery until Philadelphia Energy Solutions closed it last year.

The developer said it plans to build a distribution and logistics hub that would bring between 13 million and 15 million square feet of logistics space to the city in phases over several years. In all, the project could add as much as 2.9% more industrial space to the market, which totals about 557 million square feet of industrial real estate now.

For context, developers completed about 15 million square feet of industrial projects across Philadelphia during all of 2016, 2017, and 2018.

The logistics park is expected to target major national and international companies looking to expand their distribution networks on the East Coast and would employ thousands of workers on-site when complete.

Hilco is undergoing an environmental clean-up of the site, which closed last year after a massive explosion at the facility led Philadelphia Energy Solutions, the operator of the refinery, to declare bankruptcy.

The explosion damaged a significant portion of the campus and led Philadelphia Energy Solutions to lay off more than 1,000 workers before it shut down.

Hilco bought the refinery in June for $225.5 million at bankruptcy court, according to a previous statement from the company. According to a city report last year, the site has the "most permissible industrial zoning category" and would allow for a wide range of industrial uses.

To accommodate a proposed development schedule, HRP said its plan is expected to be conducted in phases that allow portions of the site to be decommissioned and remediated as others are being redeveloped concurrently.

“Our plan is to transform the site into a commercial hub to be shared by dozens of world-class companies that will benefit from Philadelphia's diverse workforce and strategic location with an environmentally responsible infrastructure that will be great for all Philadelphians,” Hilco’s CEO, Roberto Perez, said in the earlier statement.

The site, known in Philadelphia as the PES refinery, is a storied one that largely defined Philadelphia’s port region for the nearly 150 years it was in operation. The site was first developed into a refinery by Atlantic Refining Co. in 1870, and would host the refineries of some of the nation’s oldest oil and gas companies, including Gulf Oil Corp. and Sunoco.

In terms of its total acreage, the refinery site is the largest such refinery on the Eastern Seaboard. At its peak, it processed roughly 355,000 barrels of crude oil per day.

Philadelphia has strong fundamentals as a logistics destination, though, and this development could provide a strong surge of momentum in making the city an East Coast distribution hub.

The city’s industrial sector is the only commercial real estate sector that has not experienced a leasing slowdown throughout the coronavirus pandemic. Philadelphia’s industrial vacancy rate is just 5.3%, which is a 25-year low for the city.

And perhaps most importantly, Philadelphia sits squarely between New York City and Washington, D.C., “right in the middle of the largest region of purchasing power in the western hemisphere.” 

In recent months, top e-commerce retailers including Target, Amazon, Houston-based Utopia Fulfillment and the produce delivery service Misfits Markets have expanded their distribution footprints in Philadelphia.

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Tuesday, October 20, 2020

Cap Rates are Still Dropping in Some Markets - Here's Why (Video)

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Sublease Availability Hits Record Level in US

 By Michael Roessle CoStar Analytics

While the U.S. office market had been resilient at the outset of the pandemic, cracks have emerged.

The amount of available sublet space on the market rose considerably midyear and further accelerated in the third quarter. Prior to the second and third quarters of this year, the supply of U.S. sublet space has been generally stable, varying between roughly 100 million square feet and 110 million square feet over the past decade. The 156 million square feet of available sublet space now on the market is a record high and represents an increase of 40 million square feet from the end of 2019.










The questions surrounding the future of the economic recovery and the course of the pandemic create uncertainty for many tenants regarding their own finances and future space needs. As office leases tend to be longer term, firms looking to cut real estate costs have relatively few options. One is to sublet either part, or all, of their current office space to recoup at least some of the cost — and office occupiers are increasingly attempting to do that.

Whether or not there will be many tenants interested in subleasing this space remains doubtful, as demand in the office sector during the third quarter plummeted to its lowest level since the dot-com bust following a weak midyear result. Demand forecasts for the fourth quarter don’t show a rebound, so this excess space may linger on the market for some time, even at a discounted rent.

Areas of the country that some felt were best able to weather a downturn with a temporary transition to working from home are the same areas seeing sharp increases in sublet space.

Tech hubs such as San Francisco and Austin, Texas, have seen the amount of sublet space on the market double since the end of last year. Retail and hospitality focused tech firms have felt the brunt of the shutdowns in those industries. Uber, Airbnb and Yelp have all laid off a significant number of employees in the San Francisco Bay Area. More than 68,000 square feet formerly occupied by KeepTruckin and Yelp has recently been offered for sublease at 55 Hawthorne St. in San Francisco.

Seattle and San Jose, California, have also seen 50% increases in sublet availability. Software firm SAP Concur put its 100,000-square-foot headquarters at Key Center on the market for sublease in Bellevue, an area that was arguably the hottest in the entire Seattle market.

Though Chicago is not a purely tech-centric market, Groupon plans to lay off more than 40% of its employees and is trying to sublease 150,000 square feet of its office space at 600 W. Chicago Ave. Additionally, restaurant software supplier Toast is looking to offload roughly half of its 50,000-square-foot space at 515 N. State St.

There is concern that these markets would suffer more than others should more office occupiers opt to permanently reduce footprints. All of the aforementioned areas of the country have a robust supply pipeline, totaling a combined 37 million square feet. About 42%, or 15 million square feet, remains available for lease in those projects. At the same time, these markets have seen the amount of available sublease rise by nearly 14 million square feet combined since the end of 2019, putting more stress on the availability rate.

Should more companies face financial distress or decide to shift part, or all, of their employees to a permanent remote-work situation, the recent flood of sublease space may be a harbinger for a tsunami that is gathering strength.

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Companies to Benefit in Commercial Real Estate Post-COV (Video)

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Monday, October 19, 2020

Reading Is the Industrial Market to Watch in Central Pennsylvania Amid Pandemic

 










The industrial market in Reading, Pennsylvania, finds itself in a precarious position entering the fourth quarter of 2020, and things could improve or deteriorate rapidly.

The market's vacancies are close to 13.5%, largely due to a surge of construction over the past five years. Developers have brought more than 7 million square feet online during that time, but demand hasn’t kept pace until very recently.

Incredibly, 2020 has been one of the strongest years of industrial demand in Reading's history. Since January, more than 2.1 million square feet has been absorbed, which is more demand than the market saw in the previous five years combined. A substantial chunk of this space was filled by Amazon, which filled more than 1 million square feet at the 78 Trade Center in the first quarter.

Amazon is a logistics demand generator by itself, but the real draw in Reading is Interstate 78, which is Pennsylvania's main trade artery. Recent development has been centered around access to it, and Reading lies midway between Harrisburg and Lehigh Valley, two of the commonwealth's most prominent distribution nodes.

But those markets offer something Reading does not: direct access to a north/south interstate. This appears to have had some limiting factor on local industrial demand. Pre-2020, Reading’s absorption levels were routinely dwarfed by its prominent neighbors, and many of the largest projects to deliver in the past five years still sit vacant.

This problem might prove negligible in the near future as we undergo a massive shift in consumer spending habits. The coronavirus has accelerated the growth of e-commerce tremendously, with census data showing that online shopping has nearly doubled in the past four quarters. CoStar's latest national data shows that industrial leasing activity has returned with a roar, with national absorption closing at some of the highest levels in years.

If consumers continue shopping online boosting demand for logistics hubs across the country, Reading’s pain could be very short-lived. The strong absorption seen this year could indicate that this is in the future.

But there’s several million square feet of speculative space underway in Lehigh Valley, which offers a superior location. There are also millions of square feet of space underway in the Philadelphia and northern New Jersey markets, which could siphon demand away from Berks County as well.

This market sits on a knife’s edge and for those in Central Pennsylvania interested in industrial properties, its progress or lack thereof, will be worth monitoring in the coming months.

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Friday, October 16, 2020

Acme Buying Kings, Balducci’s Stores Comes Amid Tougher Specialty Grocer Competition

by Linda Moss Costar

 Acme Markets plans to keep operating 27 Kings Food Market and Balducci's Food Lover's Market stores under their current retail banners after it acquires them for $96.4 million as specialty grocers struggle with added competition.

Acme, a Malvern, Pennsylvania-based division of retail food giant Albertsons Cos., said it was the successful bidder for the Kings and Balducci's regional chains in a bankruptcy auction. The deal, which needs approval of the Federal Trade Commission, is expected to close later this fiscal year.

Several specialty supermarket chains, including Fairway Market and Dean & DeLuca, sought bankruptcy protection this year after facing heightened competition from rivals such as Amazon's Whole Foods Market. They also had to grapple with a rise in online ordering in the coronavirus outbreak via outlets such as Amazon.com, big-box stores including Costco and Walmart, and international players like Aldi.

In August, KB US Holdings, which owns Kings and Balducci's, filed for Chapter 11 bankruptcy protection. At that time, Parsippany, New Jersey-based KB said it had a $75 million stalking-horse offer from TLI Bedrock for 30 of Kings' and Balducci's 35 brick-and-mortar locations, which are in New York, New Jersey, Connecticut, Maryland and Virginia. But Acme ended up with the winning bid, with TBI Bedrock's offer now a backup.

When it completes its acquisition of Kings and Balducci's, the just over two dozen stores it's buying will become part of Albertsons' mid-Atlantic division, which operates Acme and Safeway stores on the East Coast. Acme has roughly 160 stores in Pennsylvania, New Jersey, Delaware, New York, Connecticut and Maryland.

"Our company has a history of managing small, differentiated chains that offer an elevated experience, like Andronicos and Haggens in the western U.S.," Jim Perkins, mid-Atlantic division president, said in a statement. "When we leverage their team's expertise and continue to deliver what their customers want, these stores can thrive."

Albertsons, based in Boise, Idaho, is a publicly traded U.S. food and drug retailer that operates about 2,300 stores. It has brick-and-mortar locations across 34 states and the District of Columbia under the names Albertsons, Safeway, Vons, Jewel-Osco, Shaw's, Acme, Tom Thumb, Randalls, United Supermarkets, Pavilions, Star Market, Haggen and Carrs.

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Wednesday, October 14, 2020

DLL puts its longtime Wayne HQ building up for sale as remote work continues

 Natalie Kostelni Reporter Philadelphia Business Journal

De Lage Landen Financial Services Inc. has put up for sale its North American headquarters off Swedesford Road in Wayne.

The Netherlands company, which goes by the name DLL, paid $20 million in 2000 for the 207,000-square-foot building at 1111 Old Eagle School Road and moved 600 employees into it. Since mid-March, the building has been empty as the company has operated fully on a remote basis.

It’s a set up that has been working for DLL, according to a statement it made in late August on its results for the first six months of the year.

“Over the past months, we have clearly demonstrated the ability to operate our business on a 100% remote basis in more than 30 countries, while managing the well-being of our employees and supporting our customers during their time of need,” the company said in a statement announcing its results for the first half of this year. “Despite the impact of the pandemic on our risk costs, the underlying performance of our business model remained both positive and strong.”

The Dutch company intends to lease back a fraction of the building as part of its evaluation of its real estate needs. Its plan is to lease around 85,000 square feet and vacate the remainder of the space. However, if a tenant came along and wanted to lease the entire building or a buyer wanted it vacant, DLL would be in a position to consider that as well, according to sources familiar with the company’s outlook.

Full story: https://tinyurl.com/y344h327

Monday, October 12, 2020

CoreOne Purchases Six Industrial Properties for $28 Million

In several deals, CoreOne Industrial has acquired six single-tenant industrial properties in New Jersey, Pennsylvania and Connecticut for a total of $28 million.

The anchor of the buildings purchased by CoreOne, which is based in Norwalk, Connecticut, is a 200,000-square- foot distribution center at 2145 Center Square Road in Swedesboro, New Jersey.

The 370,000-square-foot portfolio also includes: 2631 Industrial Way in Vineland, New Jersey; 1300 John Tipton Blvd. in Pennsauken, New Jersey; 516 E. Township Line Road in Blue Bell, Pennsylvania; 490 St. John Church Road in Camp Hill, Pennsylvania; and 1010 Woodend Road in Stratford, Connecticut.

The properties are all fully leased.

"Each of these assets are in historically strong industrial markets and the buildings have exact functionality we seek in our portfolio," CoreOne President Joe Burton said in a statement. "The majority of the properties were acquired from owner/users and have been impeccably maintained. We were very fortunate to acquire these assets at a great cost basis in these future growth markets."

In September, CoreOne announced it had sold 1 Fitzgerald Ave. in Monroe Township, New Jersey, for $10.7 million.

"The New Jersey market has become one of our core competencies over the past five years," Burton said in a statement then. "The sale of our Monroe Township [property] will afford us the ability to immediately reinvest back into the greater New Jersey market as we continue to uncover value and drive return for our investors.”

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Kinetic Ceramics Relocating HQ to Spring House Innovation Park in Suburban Philadelphia

 Kinetic Ceramics is relocating its headquarters from Philadelphia's Navy Yard to the Spring House Innovation Park in Montgomery County.

The developer and manufacturer of piezoelectricity-driven systems inked a 10-year lease within the suburban Philadelphia multi-tenant business and research campus developed by MRA Group. Kinetic's headquarters new headquarters is located at 727 Norristown Road.

Kinetic Ceramics' CEO Robert A. Frantz III said in a statement that he began his search for a new office space as part of the company's expansion plan. He ultimately decided the Lower Gwynedd campus would be most suitable to attract and retain top talent.

"We found the accessibility of our new location and amenities at SHIP very appealing, but we placed tremendous value on the opportunity to grow in a state-of-the-art space customized to meet our unique needs while being positioned on a thriving campus with innovative neighbors," Frantz said in a statement.

Kinetic's new headquarters is scheduled to open next year.

The 133-acre Spring House Innovation Park comprises 11 buildings totaling 600,000 square feet. It is a BioLaunch611+Keystone Innovation Zone, a statewide initiative to foster life and technology innovation and entrepreneurship.

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Raising Private Money for Commercial Real Estate Investing (Video)

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Thursday, October 8, 2020

Adding Commercial Property to Your Portfolio [How to Do It and Why You Should] - Video

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Flexible Packaging Maker Inks Long-Term Lease in Bucks County Industrial Park

By Tyrone Leake CoStar Research

Flexible packaging maker Fres-co System USA Inc. has signed a long-term lease within the Pennridge Airport Business Park in Bucks County, Pennsylvania, expanding its footprint in the greater Philadelphia area amid a surge of growth.

Fres-co will be occupying the park's first building, a 101,920-square-foot facility developed in 2019 that's located at 500 N. Ridge Road in Perkasie. The flexible packaging manufacturer is headquartered in nearby Telford.

"Our company is growing and this large industrial distribution space will allow us to continue providing exceptional service to our customers," Fres-Co Chief Financial Officer Mark Stinson said in a statement.

A key driver for growth in Philadelphia's industrial market is demand from existing occupiers looking to expand into new, Class A space to accommodate growth within the market.

"The long-term lease with Fres-Co System USA continues to illustrate this pent-up demand and why projects like the Pennridge Airport Business Park have a tremendous runway for success."

The $60 million Pennridge Airport Business Park, located on Perkasie's northern border along Ridge Road and adjacent to the Pennridge Airport, is set to comprise 600,000 square feet of industrial space across six buildings spanning 88 acres at full build-out.

Construction on the second 100,000-square-foot building at the park is set to "begin immediately" as demand remains high for industrial space in the greater Philadelphia area, Rob Brink, president of Pennridge Development Enterprises Inc., said in a statement.

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Amazon to Open 1 Million-Square-Foot Fulfillment Center in South Jersey

by Linda Moss Costar

Amazon plans to debut what will be its 16th fulfillment center in New Jersey in time for the holiday season next year, a more than 1 million-square-foot facility in Salem County in the southern part of the Garden State.

The project in Carneys Point represents another expansion of the e-commerce giant in New Jersey, where the Seattle-based company has already invested more than $14 billion. The planned state-of-the-art fulfillment center will create 800 full-time jobs.

Amazon currently operates 15 fulfillment and sorting centers across the state in Avenel, Burlington, Carteret, Cranbury, Edison, Florence, Logan Township, Robbinsville, Teterboro and West Deptford.

It's no surprise that Amazon is increasing its footprint in New Jersey. The company has seen a boost in its online business because of the pandemic, with more people turning to e-commerce to shop, and it needs to be able to quickly ship to those customers. And in general New Jersey's industrial market has seen record demand, because of the state's location in the center of a densely populated region.

Amazon recently launched its Cranbury center, creating more than 1,000 jobs. That 953,595-square-foot building at 343 Half Acre Road houses both a sorting center, which sorts packages before they are transferred to a delivery station or last-mile delivery partner for final delivery to customers, and a fulfillment center, which will handle extra-large items such as couches.

As part of its New Jersey expansion, Amazon is also opening three additional sorting centers across the state throughout October. Two of these sites are in Burlington and one is in Edison, creating hundreds of full- and part-time jobs, according to Amazon.

"For more than a decade, the Garden State and its incredible workforce have been vital to our ability to provide great selection, competitive prices and the Prime services we know our customers love," Alicia Boler Davis, Amazon's vice president of global customer fulfillment, said in a statement. "We are excited to create thousands of new job opportunities — with great pay and great benefits — and remain committed to driving a positive economic impact in the community."

Amazon employees at the Carneys Point facility will pick, pack and ship large items. The company also said it plans to hire employees for human resources, operations management, safety, security, finance and information technology.

"This fulfillment center will help our township and Salem County with hundreds of jobs and tax revenue, and will help our small business owners recover from the pandemic," Carneys Point Mayor Kenneth Brown said in a statement. "We look forward to a strong and lasting partnership with Amazon."

The e-tailer already has more than 34,000 full- and part-time employees in New Jersey. Since 2010, Amazon said it has invested more than $14.5 billion across the state, including infrastructure costs and compensation to its employees, which has contributed more than $14.7 billion to the state's economy and helped create more than 30,000 indirect jobs on top of Amazon's direct hires.

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Thursday, October 1, 2020

Where to Invest in Commercial Real Estate (Video)

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New Jersey Sees Uptick in Industrial Subleasing Amid Pandemic

 by Linda Moss Costar news

As the pandemic continued throughout the third quarter, New Jersey saw a rise in the subleasing of industrial space, a commercial real estate sector that still remains relatively strong in the Garden State.

The increase in the subleasing of office space across the nation during the COVID-19 outbreak has been documented, as tenants continue to allow their employees to work from home and reexamine their need for square footage.

But in a report this week, stated there has also been a notable uptick in the subleasing of distribution and warehouse space in New Jersey's industrial market. For example, Japanese apparel retailer Uniqlo is seeking to sublease roughly one-quarter of its space at a nearly 1 million-square-foot facility in northwest New Jersey.

The sublease-increase finding reflects the financial strain the ongoing pandemic is putting on companies, particularly smaller ones, prompting them to put space on the market, according to the firm.

"New Jersey’s industrial market did not see a significant uptick in new sublease offerings during 2Q 2020, but this trend reversed course in the third quarter." 

Based on newly available space 20,000 square feet and larger, in the second quarter just 652,230 square feet of new sublease space was added to the market. But during the third quarter, that number "ballooned" to 1.7 million square feet of sublease space, more than double the five-year quarterly average of 810,000 square feet, according to Obeid.

Significant Subleases

And this comes even though the demand for industrial properties in New Jersey remains unprecedented, because of the increase in e-commerce and the state's location in the middle of a densely populated region.

The rapid pace of subleasing in the third quarter occurred "as certain businesses have been affected by the pandemic," such as restaurants and hospitality. Most subleasing was one by smaller tenants who lease less than 100,000 square feet.

But there have also been "a handful of significant new subleases," including restaurant supplier I. Halper Paper & Supplies looking to sublease 152,958 square feet at 51-53 Hook Road in Bayonne.

And Uniqlo has put 253,000 square feet on the sublease market at 942 Memorial Parkway in Phillipsburg, New Jersey. Uniqlo signed a lease for that entire 975,761-square-foot building at the Bridge Point 78 complex in June 2019, according to CoStar data.

Blocks Are Moving

"Despite these new additions, demand for industrial product remains strong amid the pandemic, particularly from e-commerce and logistics users," Obeid wrote. "Moreover, some of the new subleases have already been leased in the third quarter, proving that new sublease blocks can move."

In its latest report on Northern New Jersey's industrial market, CoStar's outlook was more tentative. CoStar pegged the vacancy rate at 4.2%, running below its historic average. But its forecast for the sector was murkier.

"The pandemic has enhanced the importance of the logistics industry, but that benefit has been offset by the overall economic downturn. The global supply chain has been disrupted and the economy still faces several hurdles before making a full recovery."

Amazon has been leading the e-commerce trend by "gobbling up what little warehouse space remains available at a rapid pace since the end of 2019" in New Jersey. Between the fourth quarter last year and the third quarter this year Amazon has leased nearly 8 million square feet and accounted for 19.2% of the 41.2 million square feet leased during this period, the report said.

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