Wednesday, July 31, 2024
Tuesday, July 30, 2024
Nonprofit Signs One of Philadelphia’s Largest Office Leases of the Year
By Katie Burke CoStar News
A Philadelphia nonprofit's move to renew and expand its lease, in one of the city's biggest office deals this year, underscores tenants' increasing willingness to invest in more space.
The Defender Association of Philadelphia, a provider of legal services for indigent criminal defendants, recommitted to about 117,000 square feet at the Packard building in Philadelphia's Center City. The renewal at 1441 Sansom St. also included the addition of about 21,000 square feet of former storage space that will be built out so the nonprofit can expand its longstanding footprint in the 26-story central business district tower.
The decision to invest in the additional space was prompted after years of steady growth across the defense organization's workforce. The firm has increased its staff by about 3% each year for the past decade and now employs upward of 500 people. The nonprofit's new lease now extends until 2040, according to CoStar data.
“We just can’t fit any more people,,” Defender Association First Assistant Sarah Allen said in a statement.
The renewal agreement is the second-largest office lease to be signed in the greater Philadelphia area since the beginning of the year, according to the data, a notable feat considering that many tenants across the country are still offloading large chunks of space in an effort to adjust to pandemic-era trends such as flexible work arrangements and a sharpened focus on curbing expenses.
Yet some landlords and developers — especially those behind newer and higher-quality properties — are reporting upticks in touring, demand and leasing momentum, signaling that the worst of the real estate cuts among tenants is in the rear view mirror.
Growing Confidence
An increasingly optimistic economic outlook, coupled with the solidification of companies' return-to-office strategies, means tenants are becoming more confident in signing on for longer and larger deals in a recent report.
Leasing volume through the second quarter of the year hit the highest three-month total since the onset of the pandemic. Tenants collectively signed about 50.2 million square feet worth of office deals through the quarter ended June 30, a 15% spike compared to the reported volume throughout the prior three-month period.
Second-quarter leasing totals represent nearly 90% of those reported prior to the pandemic, growth largely driven by a larger share of deals exceeding 100,000 square feet.
Tenant requirements for larger blocks of space has ticked up over the past year, with the number of large leases per quarter hitting its highest level in the second quarter of the year since 2022, nearly double the activity in early 2023.
And even though the nonprofit allows its employees to adhere to a hybrid work schedule, the Defender Association's Allen stressed the importance of maintaining a physical workspace — especially one so close to the Family Court of Philadelphia and the Criminal Justice Center.
“When you’re representing people who are incarcerated, you have to have the ability to be in an office space, to be able to use your computer, to be able to get to the prison, to be able to communicate with your clients,” Allen said. “The Defender Association is uniquely positioned just by the very nature of our work and having to go to court as often as our attorneys go to court.”
Friday, July 26, 2024
Thursday, July 25, 2024
Philadelphia REIT Rides Leasing Momentum as Competing Office Landlords Face Mounting Stress
By Katie Burke CoStar News
The scale between office tenant downsizings and expansions is tipping back toward some landlords' favor after several years of consolidation, said executives of one of the nation's largest real estate investment trusts.
Brandywine Realty Trust, a landlord and developer based in Philadelphia, reported a pickup in touring and leasing activity across its United States office portfolio as companies become more confident in expanding their real estate footprints. The shift, CEO Jerry Sweeney said, has primarily benefited landlords on solid financial footing as tenants increasingly prioritize space in high-quality buildings owned by firms that aren't facing any type of distress.
"The quality curve thesis continues to gain strength as reflected in the overall pickup in leasing activity," Sweeney told analysts on the company's earnings call Wednesday. "Given some of the stress our competitive landlords are facing, we have in several submarkets seen our competitive set shrink and the quality, operating and financial stability of our platform has continued to separate us from the pack, both in the minds of prospective customers, existing tenants and brokers."
Even with the improving leasing landscape, however, Brandywine and other office landlords across the United States are still contending with a market in recovery mode.
Depressed leasing demand has plagued most office landlords throughout the United States for the past several years, with many pointing to the ongoing impact of remote work and the wobbly economic outlook for the challenges they face in getting their properties back to pre-COVID occupancy levels.
Still, "we continue to see encouraging signs on the leasing front," Sweeney said, adding tour activity remains above pre-pandemic levels by 27%. "Tenant expansions continue to outweigh tenant contractions during the quarter, and the total leasing pipeline continues in a strong position."
Building From The Bottom
Brandywine reported just shy of $30 million in net income for the second quarter, a significant improvement from the $12.9 million loss it posted for the same period last year.
The landlord leased nearly 165,000 square feet through the second quarter ended June 30, boosting its year-to-date total to more than 523,230 square feet. Brandywine's portfolio that includes roughly 70 properties that collectively span 12.7 million square feet is now about 88.5% leased.
What's more, nearly 70% of the new deals the landlord signed in the second quarter were a result of what Sweeney attributed to the "flight to quality" trend in which tenants have increasingly prioritized real estate investments in new and top-tier buildings located in the best neighborhoods.
Demand for office space across the country has dwindled in the years since the COVID-19 pandemic's 2020 outbreak. Tenants have collectively handed back more than 205 million square feet since the beginning of 2020, according to CoStar data.
"Clearly we're still in a market that is over 20% vacancy," Sweeney said. "We're still competing against other product and sublease space."
Even so, the landlord is optimistic that the worst of the tenant offloading trend is behind it as companies return to their physical workspaces on an increasingly frequent basis.
"Companies want to bring tenants back to high quality space," the CEO said. "Part of the pipeline activity isn't necessarily what I would categorize as net new demand. I would indicate it as more shifting demand from lower- to higher-quality space, and I think we're very well positioned to take advantage of that."
Wednesday, July 24, 2024
Tuesday, July 23, 2024
Wednesday, July 10, 2024
Industrial Vacancy Rate Hits Highest Level Since 2017 in New Jersey Capital
By Mateusz Wnek CoStar Analytics
The Trenton, New Jersey, metropolitan area posted an average vacancy rate of 4.2% between 2021 and 2023, as newly completed logistics space was easily filled amid the pandemic. Lately, a significant supply-demand imbalance has pushed the measure to 7.7% as of July, the highest reading since the second quarter of 2017.
Tenants who overcommitted to space beyond their long-term needs, such as third-party distributors, have recently been recalibrating their footprints. Markets such as Trenton, Northern New Jersey, and New York have all seen negative absorption, or change in occupied space, totaling at least negative 1 million square feet over the past year.
Across the Trenton area, the second quarter of 2024 culminated in the weakest quarterly showing for industrial space demand since the last three months of 2014. The period also capped 12 months of net absorption totaling a negative 1.1 million square feet.
Ongoing space expansion has added to the headwinds for existing industrial owners. The past year saw 1 million square feet finished across eight projects led by the Lawrence Logistics Center. The nearly 262,000-square-foot warehouse and light manufacturing facility opened its doors in December and is still unoccupied, asking $13.95 per square foot, triple-net.
Amid the supply additions, Trenton’s total industrial space now totals roughly 44.5 million square feet, representing an increase of 2.3% from last year. Properties are mostly concentrated in Trenton, Robbinsville and Hamilton, with the largest clusters situated primarily along routes 1, 130 and 206.
Digging deeper, Hamilton has led the metropolitan area in move-ins and move-outs over the past year. However, move-out activity has far outpaced the amount of space occupied, resulting in a net absorption total during the past 12 months of negative 657,000 square feet. Other notable weak spots were Ewing (-227,000 square feet) and Lawrenceville (-207,000 square feet).
The absence of a demand catalyst has recently weighed on leasing activity across Trenton. For the 12 months through June, leasing volume has decelerated sharply to just 470,000 square feet, down from 3.1 million square feet in the comparable period last year. Accordingly, move-in totals will be limited through early 2025, resulting in average vacancy hovering well above 7% in the near term.
Monday, July 8, 2024
Sunday, July 7, 2024
J.G. Petrucci breaks ground on Bucks County warehouse, acquires another in Philadelphia
By Paul Schwedelson – Reporter, Philadelphia Business Journal
J.G. Petrucci Co. has broken ground on a 320,250-square-foot warehouse in Bucks County, another example of the firm’s belief in industrial properties along the East Coast.
Asbury, New Jersey-based J.G. Petrucci, along with Boston private equity firm Cabot Properties, are developing the warehouse distribution center at 4626 Somerton Road in Bensalem, near the intersection of I-276 and Route 1.
J.G. Petrucci Co. also recently acquired an industrial building at 717 Callowhill St. in Philadelphia for $8.6 million, according to property records. The building is leased by Grainger Industrial Supply. J.G. Petrucci plans to own and operate the building as is without redeveloping it, a company spokesperson said.
The property’s location, just north of the Vine Street Expressway and near the Benjamin Franklin Bridge, and Grainger’s tenancy attracted J.G. Petrucci to buy the property.
Similar to the Callowhill property, J.G. Petrucci is anticipating a single tenant leasing the future Bensalem warehouse.
“4626 Somerton Road is strategically positioned for warehouse, distribution and manufacturing users alike,” J.G. Petrucci Project Executive Dominick Baker said in a statement. “The project provides significant utility capacity, a strong labor pool and premier access to major Northeastern cities and beyond.”
Construction financing was arranged by JLL, which is also handling the leasing. J.G. Petrucci declined to share development costs. The project is planned to be completed by the end of 2024. J.G. Petrucci is using its in-house firm Iron Hill Construction Management for the project.
Full story: https://tinyurl.com/2cbdxxed
