Wednesday, February 24, 2021

Morgan Properties makes $1.75B acquisition of apartment portfolio

 Natalie Kostelni Reporter Philadelphia Business Journal

Morgan Properties has paid $1.75 billion for a portfolio of 48 apartment communities, adding 14,414 units across 11 states.

The King of Prussia company bought what is referred to as the North Star Portfolio in partnership with Olayan America, which is part of Olayan Group, a family-owned international investment firm. The Saudi Arabian conglomerate has been valued at more than $10 billion by Bloomberg.

Plans involve investing another $100 million in upgrades to the properties.

The Class B portfolio was sold by Star Real Estate Ventures, a joint venture between El-Ad National Properties, and Yellowstone Portfolio Trust. As a result of the transaction, Morgan enters five new states including Florida, Texas, Georgia, Louisiana and Michigan. Other properties in the portfolio are in Illinois, Maryland, Ohio, South Carolina, North Carolina and Indiana.

The largest concentration of apartments is in suburban Baltimore, with 2,566.

Full story:

Will Commercial Real Estate Values Rise in 2021? (Video)

Dermody To Develop 1.2 Million-Square-Foot Logistics Park in South Jersey

by Linda Moss Costar

Looking to take advantage of the still-rising demand for industrial space, Dermody Properties is slated to begin construction this spring on a roughly 1.2 million-square-foot logistics park on a 154-acre site in South Jersey.

Dermody, based in Reno, Nevada, plans three buildings at its LogistiCenter at Woolwich development, which is located in Woolwich Township in Gloucester County. When completed, the properties will have 262,200 square feet, 552,585 square feet and 336,700 square feet available for leasing. Their addresses are 2057 Route 322, 2120 Route 322 and 2062 Route 322, respectively.

Demand for industrial space had been skyrocketing, driven by e-commerce, in New Jersey even before the pandemic last year. Stay-at-home orders and store closures gave online buying another boost, and the need for logistics space exploded. But there is scant vacant space available to build such projects in North Jersey, so distribution and warehouses are being constructed farther south in the Garden State.

The Class A, state-of-the-art facilities in Woolwich will each feature a 36- to 40-foot clear height, build-to-suit office space, 50 to 110 dock-high doors, drive-in doors and ample trailer and car parking. LogistiCenter at Woolwich is located at the intersection of U.S. Route 322 and Locke Avenue, and Dermody said it will make significant improvements to that junction as it develops its new park.

“Southern New Jersey remains a valuable alternative for many customers looking to be along Interstate 95, and the location offers tremendous access to New York City, Philadelphia, Baltimore and Washington, D.C., all within a two-hour drive via major arterials,” Gene Preston, Dermody East region partner, said in a statement. “The market continues to attract top-tier companies looking for Class A warehouse space that has become too rare to find or too expensive in central and Northern New Jersey.”

There is a good balance of residents with manufacturing or distribution experience, recent high school graduates looking for entry-level roles and college graduates looking for advanced or leadership roles all within a 30-minute drive of the Woolwich location, according to a labor study done by CBRE in conjunction with Dermody.

The real estate firm isn’t a stranger to South Jersey. It developed the LogistiCenter at Logan, a Class A business park with more than 5.5 million square feet of warehouse, distribution and manufacturing space that’s located in Logan Township.

Founded in 1960, Dermody has invested in more than 89 million square feet of industrial space.

 J.G. Petrucci Co. is also building Port Logistics Center at Logan, Building A, a 1.1 million-square-foot speculative project located in a four-building industrial campus currently under development. Construction of the logistics center in Logan Township, which will have 1.9 million square feet when completed, has already begun.

Friday, February 19, 2021

Opportunities Abound for Growing Office Users Amid Pandemic’s Disruption

By Adrian Ponsen CoStar Analytics

 Across the mid-Atlantic, available office space is piling up at the fastest pace in two decades.

Unlike America's previous two economic downturns, the coronavirus-induced recession hasn't fallen particularly hard on most white-collar employers. But office tenants across a range of industries are still shedding space, as the pandemic forces many business owners to learn the hard way that their firms can still run effectively with large numbers of employees working from home.

Still, amid this challenging backdrop, predictions of the death of the modern office as we know it also seem greatly exaggerated. Law firms still need office space to meet with clients, medical office users can't provide their full range of services online, and new hires in most industries need more than just a Zoom conference call to master the tricks of the trade and learn from their colleagues.

Putting the office sector’s uncertain future aside, one thing is clear: Office users still willing to think proactively and make long-term commitments to new offices are in control in today’s market. Many even face enormous money-making opportunities.

As the pandemic continues to fuel more work-from-home arrangements and drive up office vacancies, investors are becoming increasingly skeptical about the re-leasing potential for occupancy-challenged properties. Average pricing on distressed office sales in the mid-Atlantic has already fallen more than 20% since late 2019 and is back down at the lowest levels in five years.

In contrast, after making big gains in 2019, pricing for fully leased office properties has held strong in recent months. This comes as lower interest rates have left investors desperate for income-producing assets of all shapes and sizes.

With yields disappearing in the bond market and stocks' price-to-earnings ratios soaring, income-seeking investors are more than happy to continue paying up for well-leased office properties, regardless of any long-term risks to office occupancy that the pandemic might have created.

In fact, the pricing premium that well-leased properties are commanding — in other words, the difference between the red and blue lines in the previous chart — is also at the highest levels since the years immediately following the global financial crisis.

Office tenants who can acquire low-occupancy properties and then offer them up sale with their own long-term leases in place can exploit this market dislocation.

CoStar Group pursued a similar strategy in 2010 when it purchased the Mortgage Bankers Association’s former Washington, D.C., office for $41 million, only to sell the property one year later in a sale-leaseback for $101 million. CoStar Group is the publisher of CoStar News.

While too little time has passed since the pandemic began to single out properties that have followed a similar path following the recent crisis, there is evidence that investor appetite for sale-leasebacks remains strong.

One of the country's largest office sales so far in 2021 involved Thrivent Financial's sale-leaseback of its newly built headquarters in Minneapolis for $130 million, or about $542 per square foot at a 4.25% capitalization rate.

New Jersey's largest sale-leaseback last year closed just outside of Trenton during December when Investors Bank sold its 47,000-square-foot facility at 2300 Route 33 in Robbinsville and then leased the property back from the buyer, Realty Management Systems, through 2034. The deal closed for $20 million, or about $424 per square foot, 11% above its initial asking price and only five months after being listed for sale.

As appetite for office investment thaws further in the months ahead and the pandemic abates, many more sale-leasebacks like these may follow. For office users with the financial wherewithal to take ownership of their next space, there is no time like the present to start shopping.

Real Estate SPACs To The Moon? What You Need To Know (Video)

Lessons Learned From A $4 8 Million Cash Raise for Commercial Real Estate Development

Philadelphia Medical Office Campus Trades for $53M

By Ingrid Tunberg

BG Capital has sold its medical office campus in Philadelphia’s Port Richmond neighborhood for $53.1 million.

The campus, comprising three medical office buildings, was purchased by the New Jersey-based commercial real estate company, the Hampshire Cos., and its international investment partner, Arbah Capital.

The sale resulted in BG Capital BG Capital has sold 90% equity ownership to the Hampshire Cos. for the three properties.

The campus’ three assets consist of a renovated 200,000-square-foot, multi-tenant office building, located at 2301 E. Allegheny Ave., a renovated 30,000-square-foot, single-tenant medical office building, and a new 16,000-square-foot, ground-up recreational facility for a medical office tenant.

BG Capital originally acquired the formerly-distressed campus properties in 2017. The company then completed a renovation program for more than 230,000-square feet of medical office space.

The firm coordinated a full lease-up of 100% occupancy with existing anchor tenants and new healthcare providers and users at the renovated buildings.

The campus is currently tenanted by Temple University Health Systems, Pediatric Dental Advisors, Ambrosia Treatment Centers and others.

Additionally, BG Capital and the Hampshire Cos. have recently formed a strategic joint-venture partnership to develop 7.1 acres of land, located near the campus at 2201 E. Allegheny Ave.

We are very proud to revitalize a large Medicare facility in our home city of Philadelphia,” states Joseph Byrne IV, managing partner of BG Capital. “The jobs that were saved, and the additional jobs that were created in this process, along with the new and existing services provided to the community, truly define the success of this project. Our firm’s new strategic partnerships established with both domestic and foreign investors, are a testament to what has been and can be accomplished moving forward on future development projects.”

“The execution of a complex transaction of this magnitude in the middle of a global pandemic is an incredible representation of the proficiency and fortitude of our team here at BG Capital,” says Tyler Huffman, senior associate at BG Capital. “We are extremely excited to build off the relationships, knowledge and experience we have acquired through the development of this project to help propel the company moving forward into larger endeavors and deal sizes. In the end, being able to help bring additional healthcare services to a facility and area in need is an exceptionally rewarding project for all that were involved.”

Thursday, February 18, 2021

Top Industrial Leases & Property Sales in the Philadelphia Area

 Top Property Sales

One uCity 225 N. 38th Street Philadelphia, PA

Sale Price: $636,356,206 (allocated)*

Sale Date: November 20, 2020

Size: 852,000 SF

Buyer: GIC Real Estate, Singapore and Ventas, Chicago, IL

Seller: Ventas, Chicago, IL and Wexford Science & Technology, Baltimore, MD

Details: This transaction involves the formation of a new joint venture between Ventas and GIC, a Singapore sovereign wealth fund to recapitalize a portfolio of four university-based research and innovation projects that are currently under construction in two states. The properties will total 1.4 million square feet when completed. Under this agreement, Ventas contributed its ownership interest in the initial four properties and will own a majority interest in the new joint venture. GIC will own a 45% interest, and Ventas’s exclusive development partner and subsidiary, Wexford Science & Technology, remains a minority partner. *Part of a portfolio sale

Lebanon Valley Distribution Center 139 Fredericksburg Road Fredericksburg, PA 

Sale Price: $243,721,969 (allocated)*

Sale Date: December 20, 2020

Size: 2,108,868 SF

Buyer: GLP, Englewood, CO and State of Utah, Salt Lake City, UT

Seller: USAA Real Estate, San Antonio, TX

Details: USAA Real Estate, the real estate investment platform for the San Antonio-based financial services company, sold the Lebanon Valley Distribution Center in a year-end deal. The four-property industrial portfolio totaling 3,714,429 square feet was part of a portfolio involving properties in three states. The portfolio was acquired by Singapore-based GLP, a global investment manager with US$97 billion in assets under management in real estate and private equity funds. *Part of a portfolio sale

Arborcrest Park

Sale Price: $225,000,000

Sale Date: December 2, 2020

Size: 852,803 SF

Buyer: Sidra Capital, Jeddah

Seller: Spear Street Capital, San Francisco, CA

Details: A Saudi Arabia-based investment firm acquired a majority stake in this Philadelphia life science campus, part of a broader trend of Saudi capital flowing into the U.S. tech, life sciences and health care industries. Sidra Capital acquired a 90% ownership stake in the Arborcrest Corporate Campus, an 855,600-square-foot suburban office campus spanning five buildings in the northern Philadelphia suburbs. San Francisco-based Spear Street Capital sold the stake while keeping a 10% ownership interest. *Portfolio of 5 Office Buildings

12 Tradeport Road Hanover Township, PA 

Sale Price: $194,600,000

Sale Date: December 22, 2020

Size: 2,004,080 SF

Buyer: Granite REIT Holdings, Toronto, ON

Seller: NorthPoint Development, Riverside, MO

Details: Missouri-based NorthPoint Development sold a two-property industrial portfolio in the Hanover 9 Industrial Park to Granite REIT Holdings of Ontario, Canada, for $194 million in a year-end trade. The properties encompass approximately 2,000,000 square feet of industrial distribution space completed in 2019. Granite has pursued an investment strategy of acquiring and developing industrial properties in major e-commerce and distribution markets in North America and Europe.

111 Logistics Drive Hamburg, PA

Sale Price: Not disclosed*

Sale Date: December 3, 2020

Size: 1,900,000 SF

Buyer: Stockbridge Capital Group, San Francisco, CA and National Pension Service of Korea (NPS), Songpa-qu

Seller: Hillwood Development, Dallas, TX

San Francisco-based Stockbridge Capital Group purchased a national portfolio of industrial distribution facilities totaling approximately 14.3 million square feet as part of a joint venture with the National Pension Service of Korea and an undisclosed institutional investor. *Part of a portfolio sale

Keystone Industrial Port Complex 

Sale Price: $160,000,000

Sale Date: December 23, 2020

Size: 840,879 SF

Buyer: NorthPoint Development, Riverside, MO

Seller: United States Steel, Pittsburgh, PA

Details: Missouri-based NorthPoint Development acquired a large East Coast remediation site near Philadelphia where it plans to build a massive warehouse and distribution campus. The year-end sale involved the Keystone Industrial Port Complex, a former steel plant known as the Fairless Works in Bucks County. After cleaning up the site, NorthPoint is planning to develop a bulk logistics center containing an estimated 10 million square feet of industrial space to be called the Keystone Trade Center. The developer expects to begin the first phase of the project, totaling approximately 3 million square feet, in the spring of 2021.

D&H Distributing Harrisburg PA

Sale Price: $121,964,592 (allocated)*

Sale Date: December 11, 2020

Size: 1,577,582 SF

Buyer: Kohlberg Kravis Roberts & Co., New York, NY

Seller: High Street Logistics Properties, Woburn, MA

Details: High Street Logistics Properties sold an industrial portfolio of roughly 9.7 million square feet across 100 properties in seven major markets in the U.S. to private equity firm KKR. This recent acquisition brings KKR’s total industrial portfolio to about 30 million square feet. *Part of a portfolio sale

1900 River Road Burlington, NJ

Sale Price: $110,500,000

Sale Date: December 28, 2020

Size: 1,050,266 SF

Buyer: Clarion Partners, New York, NY and MRP Realty, Washington, DC

Seller: Stag Industrial, Boston, MA

Details: Stag Industrial Inc divested this industrial property measuring more than 1 million square feet on a 117-acre site in Burlington County to a joint venture between Clarion Partners and MRP Realty. The buyers plan to demolish the existing structure to make way for two new distribution buildings.

Interstate Distribution Center Pittston, PA

Sale Price: $96,000,000

Sale Date: October 29, 2020

Size: 1,078,200 SF

Buyer: Ball, Broomfield, CO

Seller: Endurance Real Estate Group, Radnor, PA and Blue Vista, Chicago, IL

Details: Ball Corp., a Colorado based aluminum packaging manufacturing company, acquired a new distribution center in Pittston, PA. The building was delivered in shell condition and Ball Corp. plans to retrofit the facility as an aluminum beverage packaging plant set to open in mid-2021.

899 Cassatt Road, Berwyn, PA 

Sale Price: $91,318,251 (allocated)*

Sale Date: December 20, 2020

Size: 695,211 SF

Buyer: Davidson Kempner Capital Management, New York, NY

Seller: Brandywine Realty Trust, Philadelphia, PA

Details: In another year-end trade, Brandywine Realty Trust sold a majority stake in multiple office parks totaling over one million square feet. The properties involved included Berwyn Park, Southpoint and Westlakes Office Park in Berwyn, Pennsylvania, and Research Office Center 270 in Rockville, Maryland. The sales price was a reported $154,239,135 for the 80% interest. Brandywine retained a 20% interest in the joint venture with the New York-based asset management firm and will provide management, leasing and construction management services to the joint venture. *Part of a portfolio sale

Top Industrial Leases 

4255 North Valley Drive, Schnecksville, PA

Space Leased: 1,326,994 SF

Deal Type: New Lease

Sign Date: October 9, 2020

Size: 1,326,994 SF

Tenant: United Natural Foods

Details: Black Creek Group’s North Valley Trade Center 1 building landed a major tenant in the fourth quarter. United Natural Foods, a premier wholesale food and meat distributor, agreed to occupy over one million square feet in this new Lehigh Valley development set to deliver in the third quarter of 2021.

1 Walnut Bottom Road, Shippensburg, PA

Space Leased: 1,100,500 SF

Deal Type: New Lease

Sign Date: October 28, 2020

Size: 1,100,500 SF

Tenant: Lowe’s Home Improvement

Details: Home improvement retail giant Lowe’s secured this new distribution center at Commerce Park, the 300-acre planned industrial development located in the southern I-81 corridor. Lowe's signed a 10-year deal with Equus Capital Partners to occupy an entire 1.1 million-square-foot distribution facility within the Shippensburg 81 Logistics Center as part of its plans to to significantly expand its supply chain to improve same-day and next-day fulfillment options for customers and speed up e-commerce shipping across the country. Last August, the North Carolina-based retailer unveiled plans to open 50 cross-dock terminals, seven bulk distribution centers and four e-commerce fulfillment centers over the next 18 months.

Penn Commerce Center, 951 Centerville Road, Newville, PA

Space Leased: 807,998 SF

Deal Type: New Lease

Sign Date: November 2, 2020

Size: 807,998 SF

Tenant: FedEx
Details: Fedex signed a full-building lease with Ridge Development for the first building in the Penn Commerce Center. The new Cumberland County warehouse facility totals more than 800,000 square feet and is located along I-81 just west of Harrisburg, Pennsylvania. Ridge Development is the industrial development arm of Transwestern Development Co.

Mansfield Logistics Park, Columbus, NJ

Space Leased: 710,368 SF

Deal Type: New Lease

Sign Date: November 10, 2020

Size: 710,368 SF

Tenant: Elogistic

Details: Building 2 of this Class-A industrial logistics park owned by Clarion Partners was leased by Elogistic, a New Jersey-based company specializing in global logistics fulfillment. The newly delivered facility includes 710,368 square feet of space. a 40’ minimum clear height, 107 dock doors and four drive-in doors on grade.

151 Commerce Drive, Hazleton, PA

Space Leased: 440,504 SF

Deal Type: Renewal

Sign Date: October 1, 2020

Size: 440,504 SF

Tenant: Corrugated Supplies

Details: Currogated Supplies Co., a large manufacturer and distributor of currogated cardboard sheets, renewed its lease in the Cabot Properties' Humboldt East Industrial Park. CSC selected the Hazleton facility as its seventh U.S. location in 2019 to serve its northeastern customers. Cabot purchased the single-tenant distribution building last November for just under $42 million.

Barrington Business Center, 1 Commerce Drive, Barrington, NJ

Space Leased: 285,253 SF

Deal Type: Renewal

Sign Date: December 15, 2020

Size: 931,682 SF

Tenant: PAE

Details: One of Barrington Business Center’s largest tenants, Pacific Architects and Engineers, renewed its lease for just over 285,000 square feet in the fourth quarter. PAE is a defense and government services contractor that has been a tenant in the building since 2017.

9801 Blue Grass Road, Philadelphia, PA

Space Leased: 282,800 SF

Deal Type: New Lease

Sign Date: December 1, 2020

Size: 282,800 SF

Tenant: The TJX Companies

Details: TJX, the parent company of retailers T.J. Maxx, Marshalls and Home Goods, signed a fourth quarter lease for a build-to-suit distribution facility to be constructed in northeast Philadelphia. TJX is set to occupy an entire 282,800-square-foot facility that will be located on 21 acres 9801 Bluegrass Rd. The property is owned by DH Property Holdings and Bridge Development is serving as the developer for the project.  

9747 Commerce Circle, New Smithville, PA

Space Leased: 211,134 SF

Deal Type: Renewal

Sign Date: October 26, 2020

Size: 384,835 SF

Tenant: Allen Distribution

Details: This Class-A Industrial building developed by Higgins Development Partners and owned by Prologis saw Allen Distribution renew its lease for over 211,000 square feet in a fourth quarter lease transaction. Built in 2007, the 384,835-square-foot building sits on over 25 acres and features 28 docks with a 32’ clear height.

2650 Oldmans Creek Road, Logan Township, NJ

Space Leased: 194,072 SF

Deal Type: New Lease

Sign Date: December 9, 2020

Size: 194,072 SF

Tenant: Ginsey Industries

Details: Plumbing supplies manufacturer Ginsey Industries agreed to lease this entire industrial warehouse in the LogistiCenter at Logan complex. The facility was built in 2019 and features 36 loading docks and a 32-foot clear height. The property is owned by DWS Group, a New York-based asset manager.

1070 Horsham Road, Montgomeryville, PA

Space Leased: 164,740 SF

Deal Type: New Lease

Sign Date: October 30, 2020

Size: 164,740 SF

Tenant: Jillamy

Details: Jillamy, a third-party logistics and supply chain provider, leased just shy of 165,000 square feet last October in this recently renovated and climate-controlled space in Montgomery County, Pennsylvania owned by Nappen & Associates. With its latest lease, Jillamy now has over 1.2 million square feet of warehouse space across Philadelphia, Bucks and Montgomery counties.

The Commercial Real Estate Crisis: What Happens Next? (Video)

Thursday, February 11, 2021

3 Signs to Know If You're Overpaying For a Real Estate Deal (Video)

Granite Completes US$195 Million Industrial Deal in Pennsylvania

 By Garry Marr CoStar News

Toronto-based Granite Real Estate Investment Trust closed on buying two industrial properties in Pennsylvania for 194.6 million U.S. dollars, moves that come after the REIT raised 288 million Canadian dollars in late 2020.

Granite has not disclosed its latest purchase, but CoStar data shows it bought properties with more than 2 million square feet of space at 12 Tradeport Road and 250 Tradeport Road in Nanticoke, Pennsylvania, about 120 miles northwest of Philadelphia, from NorthPoint Development.

Granite officials would not comment on the transaction, but in a securities filing for an equity raise in November, the REIT said it was "engaged in discussions with respect to the possible acquisition and financing of new assets," without offering specifics.

CEO Kevan Gorrie did offer some clues during a third-quarter conference call about where the REIT was looking to expand.

"Well, we're looking in Canada, but I think, rightly so, we're being very selective about what we're doing in Canada. We still are seeing superior returns in the U.S. and Europe. So I would say the bulk of our acquisitions, including development sites that we would look to acquire, would occur in Europe and the U.S.," said Gorrie.

The REIT is scheduled to release its fourth-quarter results March 3.

A new report suggests tenant demand for industrial real estate in Canada did not let up, with the vacancy rate dipping to 2.7% at the end of 2020 and rents in Toronto up 15.3% from a year ago.

Monday, February 8, 2021

New Warehouse Campus Coming to Hazelwood, Pennsylvania

by Ben Atwood Costar Analytics

Earlier this week, Luzerne County officials in Pennsylvania approved a 10-year tax incentive plan for a 5.5 million-square-foot industrial park in Hazelton.

The 400-acre tract, upon which the project will be built, has sat unused for decades, as it was historically used for coal mining and landfill purposes. With the tax abatements now set, the developer, a Bethlehem-based group called Hazelton Commerce Center Holdings, plans to develop five warehouses atop the land and will be marketing the space to national e-commerce firms.

The project will cost $500 million and will showcase the level of confidence in the Scranton market and the logistics sector as a whole.

E-commerce levels have skyrocketed thanks to the coronavirus, as sheltering in place to stop the spread has fueled a surge of online shopping. This has spiked demand for logistics space across the country and this impact has been particularly strong in the Scranton market.

Through 2020, the region saw some of the state’s highest levels of industrial net absorption, which was driven almost entirely by logistics tenants. Scranton ended last year with over 4 million square feet of positive absorption, more than nearby Lehigh Valley and Harrisburg, which typically outperform Northeastern Pennsylvania markets.

What’s even more telling about this development is that an outside firm was behind the project. Because of the region’s mountainous terrain, the development of large warehouses can be tricky and nearly all of the market’s major development has been done by Mericle, a local firm specializing in logistics facilities.

The arrival of an out-of-market developer such as Hazelton Commerce Center Holdings indicates that even with the development barriers, demand is anticipated to be strong enough to make the project worthwhile.

International manufacturers have been scouting out the Scranton region, and Hazelton in particular, for some time. Their interest in the region stems from its labor pool and logistics capabilities.

More warehouses could help bring in more manufacturers and strengthen a market that has struggled for generations to overcome the decline of manufacturing and coal.

U.S. Economic Outlook | February 2021 (Video)

Taking a Closer Look at the Strong Lancaster Industrial Real Estate

by Ben Atwood Costar Analytics  

Despite some slight softening of occupancies over the course of 2020, data unequivocally shows that the industrial market in Lancaster, Pennsylvania, remains on rock-solid ground at the start of the new year, indicating growth could be on the horizon.

This is due in large part to the surge in e-commerce generated by the coronavirus. As the country sheltered in place to stop the spread, the number of consumers buying goods online skyrocketed, fueling unprecedented demand for logistics space.

So, even though Lancaster’s industrial market saw negative absorption over the course of 2020, it’s not troubling locals at all.

“We’re still in a great place,” said Bill Boben, a senior vice president at developer High Associates. “Because of our agrarian roots, Lancaster is sort of the mini-breadbasket of the mid-Atlantic, so there is plenty of food production and processing here.”

Central Pennsylvania’s location and distribution capacity have made it a national player in the snack food industry. It’s why brands like Utz, Snyder’s and Hershey’s are household names, and Boben believes that food distribution is playing a key role in keeping the local industrial sector stable.

Lancaster’s industrial assets are over 97% occupied, especially impressive considering it's a smaller market with a hefty amount of local manufacturing. This meant it was somewhat exposed to risk at the start of the pandemic, which is why absorption took a hit. But with the worst of the disruption likely out of the way, Lancaster now looks primed for growth.

What is particularly interesting here is that this development might not resemble what is seen in the other markets within the North Atlantic Trade Corridor. From any warehouse within these seven Pennsylvania markets, more than 60% of the country’s population is within a single day’s drive, and that level of access has fueled more than 100 million square feet of warehouse and distribution space since 2010.

Only 5 million of that was in Lancaster, but developers haven’t been sleeping. Around 33 industrial assets have delivered here since 2010, double what delivered in nearby Lebanon and roughly the same number of properties that arrived in York and Scranton.

What’s curious about this is that the total square footage delivered in each of those markets exceeded what arrived in Lancaster, indicating that in other regions, larger assets are the demand drivers. This makes sense because these markets have better access to major interstates, something Lancaster lacks.

Instead, the suburbs of Philadelphia could be Lancaster’s great strength. Most of its newest buildings are close to smaller routes like Interstate 30 and Interstate 222, which run directly into Philly suburbs like Kennett Square, West Chester and Exton.

Last-mile delivery into these expansive suburbs could be pushing demand, and there is some data to back this up. Lancaster industrial demand comes from small leases. In fact, just over 20% of the total number of leases signed for 50,000 square feet or less across the North Atlantic Trade Corridor was in Lancaster. This is the third-highest total, just behind Harrisburg at 21% and Lehigh Valley at 23%. That figure is even more impressive considering that the inventories of those two markets dwarfs Lancaster’s.

The local market could get even tighter in the near future. Though nothing has been finalized, local news has been reporting for several months that a major e-commerce firm is looking to fill a vacant 415,000-square-foot warehouse in Mount Joy.

This seems plausible given the acceleration of e-commerce and Lancaster’s prime position near Philadelphia’s suburbs. Even if it falls through, with occupancies as tight as they are, a slight uptick in demand could justify more development.

Commercial Real Estate Syndication For Beginners (Video)

Economic Impacts of Commercial Real Estate, 2021 U.S. Edition (Video)

Thursday, February 4, 2021

JV to Develop $287M Mixed-Use Tower in Philadelphia

 By Ingrid Tunberg

Brandywine Realty Trust and a global institutional investor are partnering to develop a 570,000-square-foot, mixed-use tower in the University City neighborhood of Philadelphia, PA.

The tower will be the first vertical development within the $3.5 billion, 14-acre Schuylkill Yards innovation neighborhood, which is being developed by Brandywine and Drexel University.

The property, located at 3025 JFK Blvd., will cost $287 million and will deliver a mix of residential, office, life science and retail space. The tower will feature 326 luxury rental residences, 200,000 square feet of life science and innovative office space, 29,000 square feet of indoor and outdoor amenity space and 9,000 square feet of retail.

Construction on the tower is slated to commence in March 2021. The project is expected to be completed in October 2023.

“As true believers in the promise of Philadelphia, we are pleased to continue partnering with one of the world’s top real estate investors who sees the same tremendous opportunity we do,” states Jerry Sweeney, president & CEO of Brandywine Realty Trust. “This announcement furthers our expansive portfolio of outstanding joint-venture relationships and signifies our deep-seated commitment to the vision we are bringing to life at Schuylkill Yards. With this partnership, we are poised to deliver a market-leading mixed-use tower within a city that is gaining significant momentum as a world-class life science hub.”

The tower has been designed by its executive architect, HDR, alongside the Practice for Architecture and Urbanism, as well as a team of nationally recognized engineering firms.

Titled the West Tower at Schuylkill Yards, the development will incorporate health and wellness, technology and integrated work/life experiences. Featuring 29,000-square-foot flexible floorplates, the tower’s ninth floor will host a 29,000-square-foot lifestyle club, which will feature indoor and outdoor lounge spaces, conference spaces, co-working spaces, a fitness center, a terrace, a lap and recreational pool, cabanas and grilling stations.

The tower’s residential component is being developed in partnership with the Gotham Organization. The property’s residences will range in size from studios to duplex three-bedroom units. The units will feature flexible layouts and an array of amenities.

“The addition of this highly-anticipated tower is a pivotal moment for both Philadelphia and University City, bringing Schuylkill Yards one step closer to realizing Drexel and Brandywine’s vision of a world-class setting for work and living, learning and innovation, socializing and making meaningful community connections,” says John Fry, president of Drexel University.

The West Tower at Schuylkill Yards will eventually be joined by the neighboring East Tower. The two properties will be linked together by a pocket park, titled the Highline Park.

The project serves as Gotham Organization’s first Philadelphia-based development.

“We are excited to have been chosen by Brandywine to develop our first luxury residential building in Philadelphia,” states David Picket, CEO of Gotham Organization. “We have been enamored by the growth and diversification of the residential marketplace and fascinated by the new neighborhoods popping up all over the City. Philadelphia is a city on the rise and deserving of what we believe will be a unique and inspiring living experience at the West Tower at Schuylkill Yards.”

For the project, Brandywine has additionally partnered with the community development corporation, Mount Vernon Manor, as part of its larger $16.4 million neighborhood engagement initiative for the Schuylkill Yards neighborhood. The initiative aims to prioritize apprenticeship training, local sourcing, capacity building, business development and more.

Private Equity Real Estate's New Favorite Asset Class (Video)

Monday, February 1, 2021

Life After Kmart for Three Philly-Area Retail Properties

 By Adrian Ponsen CoStar Analytics

The coronavirus has brought plenty of headaches for Philadelphia retail landlords, many of whom were already facing intense competition from Amazon even before the pandemic got underway.

But anyone who has been to a crowded local supermarket, fast-food drive-thru or home improvement store recently can easily confirm that despite rising e-commerce sales, most Philadelphians haven't given up on leaving their homes to buy things. Far from it.

While some retailers are struggling and closing locations, others are thriving. The latter group's resilience, and their customers' willingness to turn out and support them, even amid a deadly pandemic, is a testament to consumers' enduring preference for browsing at certain brick-and-mortar retailers over buying goods online.

The stark contrast between winners and losers among retail tenants also highlights the scale of opportunity in today’s market for investors who can re-tenant low occupancy shopping centers.

Kmart is one down-and-out retailer whose former locations are being repurposed at a particularly fast clip. It’s worth examining a few recent examples as templates for how today’s growing number of vacant retail spaces can be brought back to life.

713 E. Baltimore Ave., Clifton Heights, Pennsylvania

This 93,000-square-foot property in Delaware County was occupied solely by Kmart until late 2019. But even amid the pandemic, Gator Investments' decision to subdivide the building helped secure leases from Big Lots and Lidl for well over half of Kmart’s former space.

Meanwhile, most of the remaining square footage is being marketed as industrial space. The owners are also seeking tenants for a planned 3,800-square-foot outparcel with optional drive-thrus. As this repositioning takes shape, the loss of the property's former anchor may have only accelerated the property’s evolution into a more bustling retail destination than it was before.

7101 Roosevelt Blvd., Philadelphia

This former Kmart, located along the arterial roadway of the most ethnically diverse corners of Philadelphia, closed its doors in early 2019. One year later, an entity taking title as Hengda Investment Properties LLC purchased the 70,000-square-foot property for $10.3 million, or about $148 per square foot, according to Philadelphia real estate records.

The buyer’s address is recorded as 4429 N. American St., which is the site of King Seafood, a wholesale seafood distributor in the Juniata neighborhood. The buyer's plans for the former Kmart site have not yet been disclosed, but moving King Seafood to this new Roosevelt Boulevard address, or opening a similar business in the new location, could fit well with No. 1 Asian Supermarket and the handful of Chinese and Vietnamese restaurants that are all located on the adjacent parcel.

3205 E. Lincoln Highway, Thorndale, Pennsylvania

This 103,000-square-foot former Kmart property sold at the tail end of 2020 for $4.15 million to Thorndale Realestate LLC, according to public real estate records. The buyer's recorded address is 230 N. Dupont Highway in New Castle, Delaware, which is where the Airbase Carpet & Tile Mart is located.

Chester County, where Thorndale is located, has the highest average household income of any county in Pennsylvania, and no shortage of large, single-family houses over 2,000 square feet. When combined with the region’s fast-rising homeownership rate, these features could prove to be fertile ground for a growing flooring business.

It’s difficult to pinpoint what exactly makes former Kmart locations particularly compelling properties for growing retailers in today’s environment, though their ample parking certainly doesn’t hurt. They also tend to offer large spaces in dense, low- and middle-income areas, where residents have been slower to adopt online shopping. And since most Kmarts were built as standalone properties, these locations also offer retailers the rare opportunity to secure a large footprint, without sharing a parking lot with powerhouse national chains.

Regardless, it will be worth watching how these properties evolve as this could be a trend that likely won’t stop, given there are more than 10 other recently shuttered Kmart locations in the Philadelphia metropolitan area alone.