Tuesday, April 26, 2022
Exelixis Boitech Chose Philadelphia for Its East Coast Hub
By Katie Burke CoStar News
It has roots in Boston and a recently expanded corporate headquarters in the San Francisco Bay Area, but life science firm Exelixis is planting a flag in the Philadelphia suburbs as demand for research and development space across the country fuels momentum in second-tier biotech markets.
The East Bay developer of cancer drug treatments is setting up a temporary office in King of Prussia, Pennsylvania, as it shops around for sites in the area that would accommodate an East Coast headquarters with up to 200,000 square feet. Exelixis said it is ultimately hoping to house between 135 to 140 employees at the location, which it is expecting to develop within the next two to three years.
The Alameda, California-based company signed a 23,000-square-foot lease at the Brandywine-owned Freedom Business Center to use as a placeholder until its "Exelixis East" hub is developed. The office — which Exelixis said it anticipates will be used for about two years — is slated to open in June.
“We’re growing and expanding our pipeline so our need to bring in talent is increasing,” Exelixis President and Chief Medical Officer Vicki Goodman said. “When we look at where the pharmaceutical and biotech talent is, there is a nexus on the West Coast, which is where the Alameda campus is, and there is one on the East Coast," she said, adding that the Philadelphia area "is an ideal place to set up a center of operations.”
And with fierce competition for space and employees in upper-tier biotech hubs such as Boston, Philadelphia's solid talent base, proximity to other major cities and universities, as well as cheaper lab space, combined to make it the choice from which to grow.
"We’re making a real commitment to the Philadelphia area, it's not a satellite campus for us," Goodman said, adding it could become a "launching pad to expand to Europe."
Exelixis was founded in the early 1990s in Cambridge, Massachusetts, and relocated to California several years later. In 2019 the company preleased a roughly 220,700-square-foot development at 1951 Harbor Bay Parkway to expand its headquarters, which is now moving through the final build-out stages.
Spillover Fuels Growth
The biotech firm is one in a string of research and development companies vying for a dwindling pool of available lab space across the United States. Advances in biotechnology and record levels of venture capital have resulted in the largest construction pipeline of life science projects in the nation's history, with about 25 million square feet of space underway in the nation's 12 largest biotech clusters.
Even with the unprecedented amount of new and incoming space, the gap between what's available and what tenants are demanding is widening, driving rents for life science space to all-time highs and pushing companies farther away from prime biotech clusters in pursuit of space that can accommodate their own unprecedented growth spurts.
In the San Francisco Bay Area, for example, about 3.3 million square feet of life science space was underway by the end of 2021, according to data from brokerage Kidder Mathews. It wasn't even close to the roughly 5.7 million square feet of space that prospective tenants were hunting for, however, and about 50% of the under-construction developments were already preleased.
With the shortage of space in top-tier biotech clusters such as San Diego, Boston, the Bay Area and Seattle becoming increasingly burdensome for tenants, some are beginning to shift their attention to alternatives such as Philadelphia in a move that has helped catapult the secondary city to the forefront of the life science sector's accelerating growth.
"Philadelphia is sitting in a terrific position both because of its own trajectory and because of its spot relative to other leading biotech clusters," Joseph Fetterman, Colliers' executive vice president of healthcare and life sciences, told CoStar News. "The Philadelphia area is proving to be increasingly attractive to companies on the West Coast looking East and those that are getting priced out of Boston. And there's a reason to look at Philadelphia since it's complimented by the fact that, relative to other markets, it offers a significant discount in terms of basic rent for space and the overall cost of living."
By the end of the first quarter this year, average rents for lab space in the Boston area were about $110 per square foot, according to CoStar and Colliers data. By comparison, typical rents in Philadelphia were less than $54 per square foot.
The city has also become popular among startups or firms preparing to graduate from incubator space. Nearly 2.25 million square feet of lab and research space is under construction in the Philadelphia area. Developers are pitching another 9.7 million square feet in order to capitalize on the swelling demand.
"We're looking at a strong pipeline here in Philadelphia that will be buoyed significantly by increased interest from outside the city that will absorb a lot of space," Fetterman said. "We're going to start seeing a dynamic shift in the market for larger spaces as companies relocate to the city and grow within it."
Ireland-based Applegreen To Relocate US Headquarters to Glen Rock, NJ
by Linda Moss Costar
Ireland-based Applegreen, the largest highway rest stop operator in the United States, plans to invest $126 million in New Jersey, opening an American headquarters in Glen Rock, revamping nearly two dozen of its Garden State locations and creating roughly 900 jobs.
The commitment, announced Monday, is the biggest news so far to come out of New Jersey Gov. Phil Murphy's four-day economic mission in Ireland, a trip where he's promoting investment in his state. At a joint news conference in Dublin, the governor welcomed Applegreen’s financial commitment and the improvement it will make to the area's travel infrastructure.
Applegreen, based in Dublin and a major highway service plaza operator in Europe as well as the United States, describes itself as "a major petrol forecourt retailer."
Applegreen said it will relocate its U.S. travel plaza headquarters to Glen Rock, a Bergen County municipality where it already has a presence, adding at least 100 new jobs in finance, administration, development and logistics to the region.
“Northern New Jersey proved an ideal location for our headquarters as it is centrally located amidst many states in which we operate, is close to several major airports and offers top talent for our rapidly growing business," Elizabeth Pierce, president of Applegreen USA operations, said in a statement.
The governor's office referred questions on the current location of Applegreen's U.S. base and exactly where it will be relocated in Glen Rock to the company. Applegreen didn't immediately respond to emails from CoStar News seeking comment.
Applegreen will also be redeveloping all of its New Jersey’s rest stops, a move that will create 800 new jobs over the coming years. The first two redevelopments, at the Woodrow Wilson and Molly Pitcher travel plazas, are expected to be completed before the Fourth of July holiday.
“Applegreen is a world-class travel infrastructure partner who will generate significant economic growth for the state and bring innovation and expertise to the redevelopment of New Jersey’s 21 on-highway services plazas," Murphy said in a statement, where he also described himself as a proud Irish American.
Applegreen has more than 250 sites across 18 states including New Jersey, where the redeveloped plazas will offer commuters the latest technologies and will focus on electric-vehicle charging. In the states, Applegreen is installing EV infrastructure throughout the Northeast, which is in addition to its existing infrastructure portfolio in Europe.
The company acquired the concession for its Garden State service plazas last summer. It has a U.S. workforce of more than 5,000 employees, and its plaza redevelopment project is expected to create at least 800 new jobs, in addition to the 100 skilled new positions created by the relocation of its headquarters.
“Our Northeast footprint is expanding rapidly. ... The creation of hundreds of new jobs through these exciting projects will deliver a significant boost to the New Jersey economy, and, as such, today’s announcement is a genuine Irish-American win-win,” Pierce said.
Applegreen was taken private in March 2021 by a partnership comprised of its founders, Bob Etchingham and Joe Barrett, and Blackstone Infrastructure Partners, a leading investor in U.S. infrastructure assets.
Monday, April 25, 2022
Friday, April 22, 2022
Brandywine Reacquires Interest in Major Philadelphia Office Building
By Mark Heschmeyer CoStar News
Six years after selling the Cira Square office building in downtown Philadelphia, Brandywine Realty Trust has repurchased an interest in the property in a joint venture with Michael Dell, chairman and CEO of Dell Technologies.
The group paid $383 million for the 863,000-square-foot office property at 2970 Market St. in the University City area of Philadelphia. The building is 100% leased to the General Services Administration on behalf of the IRS through August 2030.
Brandywine previously reported posting a net gain of just $500,000 when it sold the property for $354 million in 2016.
The group is looking to take advantage of University City's office market dynamics. For most of the past 15 years, University City has been one of the tightest office submarkets in the Philadelphia metro area, with its average vacancy rate often less than 5%, according to CoStar data. This comes largely thanks to the market being home to the University of Pennsylvania and its healthcare affiliate, Penn Medicine, which together form the largest employer in Philadelphia’s dominant economic engine: the education and health services sector.
The IRS currently pays rent for Cira Square that is about 40% below the current market rate, Brandywine said. That provides the joint venture an opportunity to significantly increase the rental rate upon renewal. Or, if the IRS does not renew, the building represents an excellent life science conversion opportunity, according to the firm.
Brandywine holds a 20% interest in the joint venture along with Dell’s MSD Capital and a third unidentified institutional investor.
Brandywine’s initial contribution in the new joint venture was $28.6 million, the Philadelphia-based real estate investment trust said in its first-quarter earnings report. The REIT funded the acquisition through the sale of a vacant land parcel at 25 M St. NW in Washington, D.C., for $29.7 million. The Swedish construction firm Skanska said in a statement Thursday it bought the parcel.
At the closing of the Cira Square deal, the joint venture secured a $257.7 million mortgage loan from Bank of America, according to Philadelphia County records. The loan matures in two years, Brandywine said.
The REIT will provide management and construction management services to the joint venture.
Cira Square was sold to the joint venture by a fund set up by Korea Investment Management Co. based in Seoul, South Korea.
Apartment Leasing Season Is Already Breaking Records For Morgan Properties
By Kelsi Maree Borland Globest.com
“I anticipate that demand will continue through the end of the year,” Sean Organ of Morgan Properties tells GlobeSt.com about the current leasing season. Usually, the season runs from April through September, but it has started early, and Organ expects that it will run late.
On student housing properties, Organ already has a waitlist and 100% pre-leasing. “Normally we don’t get to that point until late June,” he says, noting that it is one indication of strong demand, but conventional properties are seeing similarly strong demand. In the Mid-Atlantic region where Organ operates, high occupancy rates have helped to drive strong rent growth. We are seeing very little push-back despite historically high renewals and lease trade-outs for new leases.”
While demand is high, supply is not, and Organ admits that will be a challenge later in the year. “Looking across the entire nation, we have had a significant slowdown in new deliveries,” he says. “As a result of that, the push for new leasing is just tremendous. There has been a lot of pent-up demand, but unfortunately, there are not a lot of options for people to move to due to the slowdown of new deliveries.” Now that inflation has increased above 8%, Organ expects that the dearth of supply and limited new construction will continue to fuel a supply-demand imbalance.
In Organ’s portfolio specifically, the team plans ahead to have limited supply in the fourth quarter to offset the decreasing demand an stabilize performance. Now, that means even fewer available apartments. “We are not going to have nearly enough supply because of our lease expiration management,” he says. “We consolidate our leases through a revenue management software, and because of that, we are going to have fewer expirations in the fourth quarter. We have set ourselves up for a strong fourth quarter for the last several years, and we expect that to continue this year.”
Although rental rates have increased, Organ says they haven’t seen much push-back from tenants. “I would naturally think that coming out of the pandemic, most residents are sensitive to price hikes, and that is actually not the case,” he explains. “People have been able to save and the stimulus has helped people.”
Thursday, April 21, 2022
Tuesday, April 19, 2022
Wharton Realty Group Snags Shopping Centers in New Jersey, Pennsylvania
By Michelle Stockner CoStar Research
Wharton Realty Group paid roughly $142 million for two shopping centers in New Jersey and Pennsylvania, according to public real estate records.
The Eatontown, New Jersey-based investment firm purchased Deptford Landing in Deptford, New Jersey, which is located about 12 miles from Center City Philadelphia, and Exeter Commons in Reading, Pennsylvania. Wharton acquired both centers from Chicago-based ShopCore Properties, according to CoStar data.
The South Jersey shopping center sold for about $70 million, according to Gloucester County real estate records. Wharton paid about $72 million for the Reading property, according to Berks County records.
Located on 67.33 acres, Deptford Center totals 517,096 square feet and is fully leased. The South Jersey center is anchored by a Walmart Supercenter and Sams Club. Other tenants located at Deptford Center include DSW, Michaels, Five Below, PetSmart, Raymour & Flanigan Outlet, The Mattress Factory, Hand & Stone, Carter’s, Five Guys, Great Clips, Chipotle and National Vision.
Built in 2009, the 361,095-square-foot Exeter Commons is located off Perkiomen Avenue and is 99.5% leased. The center features a mix of necessity and contemporary retail tenants, including Giant Food, Lowe's, Ross, PA Wine & Spirits, Five Below, Petco, Staples, Famous Footwear, America’s Best Contacts, Moe’s Southwest Grill, Red Robin, Supercuts and Mattress Firm. The center is also shadow anchored by Target.
Monday, April 18, 2022
Thursday, April 14, 2022
Thursday, April 7, 2022
Wednesday, April 6, 2022
Monday, April 4, 2022
Philly Based Five Below Looks To Triple Its Store Count to 3,500
By Linda Moss CoStar News
Discount retailer Five Below is aggressively ratcheting up its growth plans, looking to triple its store count to 3,500 by the end of 2030 and double its sales by 2025 as it creates a shopping experience that caters to younger customers.
The Philadelphia-based chain, which now has 1,190 stores in 40 states, unveiled its “Triple-Double” strategy Wednesday at the company's first investor day event. The retailer said it aims to open about 1,000 more stores by the end of fiscal 2025 alone. In addition, the company reported its fiscal fourth-quarter earnings and gave Wall Street analysts a tour of its newest store prototype, the latest iteration of what has typically involved increasing the square footage at a typical brick-and-mortar site.
Five Below targets tweens, generally considered those 9 to 12 years old, and teens with an array of toys, candy, tech accessories and gadgets, bedroom decor, sports items and other merchandise that they can play with or “experience,” priced from $1 to $5. The idea is to offer young shoppers a venue where they can “treasure hunt” and spend their allowances, CEO Joel Anderson said. That's something online shopping can't provide.
In addition to its ambitious expansion plans, the company will be offering ear piercing, a more extensive selection of balloons, and pet products at some sites this year, looking to cater to customers that might have gone to Toys R Us before it liquidated, while also adopting the appeal of discount chains like Target. It will also offer buy online, pick up in store service for the first time, according to Anderson. The CEO, and all the Five Below executives who spoke at the investor event, wore blue T-shirts that said “2025: Ignite the Vision.”
The rise of e-commerce and the pandemic’s blow winnowed out many weak retailers and left a pool of survivors that came out stronger and are opening more stores, particularly discounters and off-price chains such as Burlington Stores, T.J. Maxx and Target. Five Below is part of this group.
Philadelphia, New York Openings
Company officials on Wednesday said part of their strategy is to open more locations in urban areas, not only its home base of Philadelphia but also in New York City, including one in Times Square. The chain recently debuted a store in Manhattan’s Union Square neighborhood at 40 E. 14th St., and 11 of its 15 urban store openings this year will be in the Big Apple. Five Below is seeking to double its stores in Philadelphia, to 120 from 60, as well.
Back in December during a third-quarter earnings call, Anderson said Five Below was targeting more than doubling its number of stores, to 2,500. But that long-term goal has been ramped up, to a fleet of 3,500 or more stores by the end of fiscal 2030, Anderson said. Five Below is also looking to double both its sales — $2.85 billion in fiscal 2021, up 45% compared with the prior year — and its earnings per share by the end of fiscal 2025.
That will entail debuting 375 to 400 new stores over the next two fiscal years and 550 to 600 new stores over fiscal years 2024 and 2025. For the year ending Jan. 29, Five Below opened 170 net new stores compared to 120 net new stores in fiscal 2020.
Five Below now has a portfolio of five distribution centers that it owns and operates, including one that is about to open in Indianapolis. That network as it stands now can handle inventory for 2,000 stores, and those existing sites can be expanded by 1 million square feet to serve Five Below’s brick-and-mortar fleet as its growth continues, according to officials.
Five Below has even opened up a store at its distribution center located in Buckeye, Arizona. The chain has found success in not only that experiment, but with opening stores in suburban, urban and even semi-rural areas such as Flowood, Mississippi, which is among the company’s top five stores overall in terms of volume.
In some ways, Five Below is seeking to fill the Toys R Us gap. While that toy retailer is aiming for a revival under new ownership, with a flagship at the American Dream mega-mall and store-within-store sites at Macy’s. But Toys R Us is essentially starting out again and doesn’t have the national footprint it once did. Five Below looks to cater to the tweens and teens that Toys R Us once served.
Five Below looks to help its young shoppers celebrate “the rituals of life and the milestones of growing up,” said Michael Romanko, the retailer’s chief merchandising officer. In line with that, Five Below will pilot offering ear piercing at 150 stores this year. It will also offer an expanded selection of balloons at 250 stores in a test. And the retailer will be selling more accessories for pets, as well as offering items for first-time drivers and car owners, products like steering wheel covers, according to Romanko.
The new store prototype is located at Pembroke Commons at 450 N. University Drive in Pembroke Pines, Florida. The prototype includes a new upgraded technology department and a store-within-store layout for Five Beyond, the select merchandise that costs more than $5 that the retailer is now selling at some stores. That prototype also offers ear piercing and the expanded selection of balloons.
