Friday, August 30, 2024
Thursday, August 29, 2024
Amazon warehouse part of $198M Philadelphia-area portfolio acquisition
By Paul Schwedelson – Reporter, Philadelphia Business Journal
Investment giant KKR bought three Philadelphia-area warehouses as part of a $377 million acquisition of six total properties across the U.S. that are all fully leased.
KKR (NYSE: KKR) declined to share details about individual properties within the portfolio.
Data from real estate research firm CoStar Group show the three local warehouses sold for a combined $198 million.
Below, the three properties and sales price, according to CoStar:
Amazon’s 650,000-square-foot fulfillment center at 240 Mantua Grove Road in West Deptford, New Jersey. The building sold for $90.8 million.
Dunkin’s 301,872 square-foot distribution center at 20 E. Park Drive in Westampton, New Jersey. The building sold for $61 million.
Penn Jersey Packaging’s 255,336-square-foot warehouse at 9355 Blue Grass Road in Philadelphia. The building sold for $46.2 million.
The buildings were previously owned by New York-based Link Logistics, according to the company's website and property records. Link Logistics is the industrial real estate arm of asset manager Blackstone Group.
The Amazon fulfillment center at 240 Mantua Grove Road in West Deptford last traded for $78 million in 2019, according to property records. Built in 2018, it has a 41-foot clear height and 57 dock doors.
Located near Northeast Philadelphia Airport, the 255,336-square-foot warehouse at 9355 Blue Grass Road last traded for $26.1 million in 2015. The warehouse was built in 2011 with a 32-foot clear height and 40 dock doors.
The transaction comes as the Philadelphia region’s industrial market has transitioned away from large-scale buildings of more than 500,000 square feet. Tenant demand has shifted from larger types of buildings to smaller properties in the 200,000-square-foot or 300,000-square-foot range.
The six properties KKR bought are an average of 10 years old with 35-foot clear heights. They’re all fully leased to a “high-quality tenant mix,” KKR said in a news release.
The other markets where properties were bought include Seattle, Atlanta and San Francisco. Since January, New York-based KKR has bought nearly six million square feet of industrial space.
Full story: https://tinyurl.com/yn79dhdh
More than 1B square feet of US office space deemed viable for residential conversion
By Ashley Fahey – Editor, The National Observer: Real Estate Edition, The Business Journals
More than 1 billion square feet of U.S. office space is feasible for residential conversion.
That's according to a recent analysis by CommercialEdge, part of Santa Barbara, California-based real estate software company Yardi Systems Inc. The analysis featured a new Conversion Feasibility Index developed by CommercialEdge, which uses a weighted scoring system to evaluate a building's physical characteristics to determine its suitability for conversion.
The CFI has three categories of potential conversion, with Tier I buildings being top candidates for conversion and Tier II buildings having strong potential for conversion but likely requiring a bit more work and investment than Tier I properties. Tier III buildings face significant challenges and limitations for conversion.
More than 228.3 million square feet of office space nationally — or 2.7% of existing stock — was classified as Tier I, while an estimated 1 billion square feet (12.1% of existing stock) was considered Tier II. Most of the identified viable conversion candidates are within central business districts or urban submarkets.
Doug Ressler, manager of business intelligence at Yardi, said the CFI considers an office building's physical characteristics, such as its floorplates, ceiling heights and dimensions, in addition to location considerations, such as a property's proximity to transit or its Walk Score, a gauge of its walkability.
A building's age also is an important factor and one of the biggest differentiators between Tier I and Tier II buildings, Ressler said. Building codes largely changed in the 1980s, so office towers built before then may have unique structural considerations — and require additional cost to address those differences — as a result.
The CFI is intended to give more visibility into the untapped potential of conversions, which have been challenging for many developers to fully realize, despite surging office-vacancy rates across the U.S.
"You’re starting to see the number of potential conversions ratcheting up," Ressler said. "[It] gives a sense of validation to the fact that, if you’re a mayor of a major gateway city and you don’t have potential property revenue coming in, what do you do with this building?"
The vast majority of the buildings analyzed by CommercialEdge — more than 85% — were deemed Tier III, or least suitable for conversion. The higher interest-rate environment and a tough financing market have become additional wrinkles to making a lot of real estate deals, including conversions, financially feasible. There also remain gaps between what buyers and sellers feel a building is worth, as many groups looking to convert offices into housing or another use are looking to buy those structures at deep discounts.
It's prompted questions in some corners of the industry about whether demolition of some vacant office towers makes more sense than reuse. But in many circumstances, there's still hesitancy to demolish, Ressler said.
"It's not a panacea to demolish," he said. "If you demolish, which is a cost, then you have to look at the next steps. Am I building an economic demand center in that location? Unless you have that planned out, demolition is maybe the first step but it [might be] the wrong step."
Full story: https://tinyurl.com/yyesxvzw
Wednesday, August 28, 2024
Tuesday, August 27, 2024
Monday, August 26, 2024
Student Housing Rent Growth Overtakes Philadelphia’s Market-Rate Apartments
By Brenda Nguyen CoStar Analytics
Student housing rental rates in the Philadelphia metropolitan area have experienced a significant increase, rising at a rate surpassing that of traditional market-rate apartments.
This trend really began to take effect at the end of 2023 and has resulted in the widest rental rate spread between the two market segments since 2010 following the Great Recession.
As of the third quarter, student housing rents across the Philadelphia region had increased by an average of 3.8% compared to market-rate apartment rent growth of 2.4%—a 140-basis-point spread.
Student housing properties near Widener University, Penn State Abington, Drexel University and Saint Joseph’s University have led the region with an average rent increase of 2%. Average rents at student housing near other universities in the Philadelphia region, including Villanova University, Temple University and La Salle University saw slower rent growth averaging below 1%.
Historically, rents at market-rate apartments have outpaced student housing in terms of increases. Between 2015 and 2019, conventional multifamily rents across the Philadelphia metropolitan area increased by an average of 40 basis points above the rent growth of student housing rentals.
A confluence of factors has contributed to the current market conditions. First, student housing development activity in the region has declined since peaking in 2013. This pullback, coupled with pandemic-related construction delays, has led to a constrained supply of student accommodations at a time when universities have fully reopened and demand for housing near campuses has increased increased, driving up rental rates.
Only two off-campus student housing developments hit the Philadelphia market this year. The York, a 324-bed complex near Temple’s campus, and The Nest, a 76-bed luxury complex near the University of Delaware’s campus, were completed this summer and are in lease-up for the upcoming school year.
No other student housing project is underway in the Philadelphia region. The constrained student housing supply and a resurgence in rent growth have recently captured the attention of investors and lenders.
In July, Goldenberg Group closed on a $285.5 million refinancing of two student housing projects, Vantage and The View at Montgomery, by Temple University’s campus. Walker & Dunlop, a new party on the portfolio, arranged the refinancing, taking a preferred equity position on the new loan.
With little to no proposed student housing projects in the pipeline, rent growth may continue to perform better than it has historically. However, the long-term outlook is very school-specific, dependent on factors such as enrollment trends and nearby market-rate housing options.
Wednesday, August 21, 2024
Hankin Group plans next life sciences building at Eagleview as capacity nears
By Paul Schwedelson – Reporter, Philadelphia Business Journal
As Hankin Group opens a new 113,000-square-foot life sciences building to tenants, the developer is planning its next lab building as part of its massive master-planned Eagleview development in Exton.
Hankin Group is scheduled to break ground on a 63,000-square-foot life sciences building this fall at 100 Arrowhead Drive.
The building, dubbed Arrowhead, is sparked by the developer being nearly sold out of existing lab space at Eagleview, said Hankin Group COO Michael Hankin.
Eagleview's 1.1 million square feet of lab space is 98% leased, he said. That’s given Exton-based Hankin Group the confidence to move forward with the project at 100 Arrowhead Drive without tenants signed. Hankin said the firm will soon begin a heavy marketing push of the site to potential users.
Arrowhead is being scheduled to be built as Hankin Group plans a separate $700 million pipeline of five future large-scale, mixed-use multifamily projects. The five multifamily projects could ultimately add up to more than 1,500 new apartments in the next five years between properties in Exton, Downingtown, Lancaster, Downingtown and Gainesville, Florida.
The residential units are planned to be a mix of market rate and senior housing. Hankin is still determining timelines for when the projects could begin.
“We’re identifying where capital markets are and things like that,” Hankin said. “Obviously those are big projects, we want to make sure we identify which ones we think are going to be successful off the jump.”
Full story: https://tinyurl.com/2p99v3a5
Developer lists Gretz Brewery development site for $6.6M, submits revised plan for 200 apartments
Tuesday, August 20, 2024
Monday, August 19, 2024
Friday, August 16, 2024
Center City Remains Philadelphia’s Office Powerhouse Despite Reduced Demand Compared to Years Past
By Brenda Nguyen Costar Analytics
Despite widespread concerns about the health of Philadelphia's downtown office market, Center City’s Market Street West section continues to attract a major share of new leasing activity to lead the overall region.
In the first half of 2024, the Market Street West submarket signed 548,000 square feet of new office leases. Notable leases signed in the first half of the year included Clark Capital’s 37,500-square-foot lease at One Liberty Place, nearly double its current office footprint. Ballinger also signed a 46,500-square-foot lease at 1650 Arch St., where the architecture firm plans to relocate and expand from its current Market East location. Several law firms, including Saul Ewing and Dilworth Paxon, also secured significant leases.
Despite a 30% decline from the average amount of office space leased during the same period between 2015 and 2019, office tenants were still signing new deals at a higher volume here than across the rest of the region.
Alongside new lease signings, office move-outs have slowed significantly since the end of 2023, resulting in positive annual net absorption, or the net change in occupancy, for the first time since 2018, totaling 175,000 square feet.
At the street level, local market participants and a walk through the Market Street West business district show street activity is notably more vibrant than last year.
However, the city's office sector still faces challenges. Along with the positive leasing activity Market Street West has also experienced the most significant increase in office availability rates in the region, surging by 900 basis points since the end of 2019.
Despite the increase in availability, Market Street West remains the epicenter of employment in Center City, which houses 280,000 employees. This stretch of Center City contains 41.5 million square feet of office inventory, with another 658,000 square feet of new office development underway.
Major new office projects include 2300 Market Street, a 220,200-square-foot office building catering to life science companies being developed by Tishman Speyer, Bellco Capital and Breakthrough Properties. A few blocks away, Parkway Corp. is well underway on Chubb’s 438,000-square-foot office building at 2000 Arch St., which is scheduled to be completed in early 2026.
In comparison, King of Prussia, considered to be Suburban Philadelphia's premier office market, has only 15.5 million square feet, not even half that of Market Street West.
Despite its smaller size, King of Prussia still secured 330,000 square feet of new leases in the first half of the year, largely thanks to its life science momentum, vibrant retail, and mixed-use characteristics—mirroring the strengths of Market Street West. Due to its smaller office footprint, King of Prussia has not faced the same challenges of excess office supply as Center City.
While Philadelphia's overall office market continues to navigate a complex landscape, Market Street West’s position as a core employment hub, coupled with emerging signs of stabilization, offers a glimmer of optimism for the downtown. However, sustained recovery will depend on factors such as macroeconomic conditions, ongoing adjustments to hybrid work models, and company-driven decisions involving lease expirations.
Thursday, August 15, 2024
Wednesday, August 14, 2024
Monday, August 12, 2024
Vacant Camden County Warehouse Slated for Upgrades Following Sale
By Ryan Cashion
A vacant industrial building in Pennsauken, New Jersey, has a new owner with plans to complete significant renovations and reposition the property at 8290 National Highway.
GID, a Boston-based real estate investment and management firm that invests in real estate on behalf of its institutional investor clients, purchased the 111,400-square-foot facility for $14.75 million, or about $132.41 per square foot.
Located just outside Philadelphia in Camden County, New Jersey, the building is close to I-95 and I-295. According to the buyer, the building can accommodate one or two tenants and features 20-foot clear heights, one drive-in door, and 15 dock-high doors.
GID has been active in the industrial sector since 1986 and targets light industrial warehouses in U.S. markets with high population densities and consumer purchasing power.
Thursday, August 8, 2024
Wednesday, August 7, 2024
Why Things Are Getting Sunnier for Philadelphia’s Office Market
Tuesday, August 6, 2024
Philadelphia-area industrial developers shift to smaller footprints as vacancy increases
By Paul Schwedelson – Reporter, Philadelphia Business Journal
After a surge in industrial demand and massive warehouses built throughout the Philadelphia region, demand for industrial is trending toward smaller spaces.
Few tenants are seeking more than 500,000 square feet of industrial space, Colliers Market Research Director Rose Penny said. The slowdown in demand for that much space is due to a combination of factors like tenants looking elsewhere for cheaper deals, high interest rates and tenants not needing as much space as they did during the pandemic.
That means recently built industrial warehouses larger than that size will likely need to be leased to multiple tenants to fill the building.
“I think maybe there was a slight disconnect in what the actual majority of demand was,” Penny said.
Instead of large-scale users that could fill up an entire new large building on their own, Penny said demand has been more robust in the Philadelphia region for space between 100,000 square feet and 300,000 square feet.
“Once [property owners] started being willing to divide, they’re seeing more activity,” Penny said.
The shift in the industrial market is taking place as the Philadelphia region’s overall vacancy rate was 7% in the second quarter, according to Colliers’ second quarter report. That’s the fifth straight quarter in which the vacancy rate increased, a change from when the vacancy rate was as low as 2% just a few years ago.
Throughout the past year, the industrial market has cooled following a huge increase in demand during the pandemic. In a low interest rate environment, developers were quick to build new supply to alleviate the market conditions. Now, after a year of cooling, developers with empty buildings are grappling with what to do next.
“There’s some that may hold on for that larger tenant, but I think they’re going to start dividing," Penny said.
There’s likely to be 900,000 square feet of new leases signed in the third quarter, Penny said, but that comes as 4.4 million square feet is also set to be delivered to the market. So even as demand picks up, there’s even more supply to fill.
As a result, Penny foresees the vacancy rate fluctuating for the next year before the market settles in. Instead of asking rates being lowered, Penny expects property owners to offer more concessions like free rent. The average asking rental rate per square foot in the Philadelphia region was $11.19 in the second quarter, according to Colliers.
Larger industrial users could be looking to lease space in the Lehigh Valley, Penny said, because rents there may be less than along the I-95 corridor. The average asking rental rate per square foot in the Lehigh Valley in the second quarter was $11.02 compared to $12.23 in Southern New Jersey’s Burlington County.
Examples of smaller buildings are popping up across the region. Crow Holdings Development is planning a 150,000-square-foot industrial building in Northeast Philadelphia, hoping to hit a “sweet spot” in the market in response to most new buildings having more than 300,000 square feet of space.
Full story: https://tinyurl.com/mp8xd6k7
Monday, August 5, 2024
BET Investments plans ‘legacy’ mixed-use development at Upper Dublin Prudential property
By Paul Schwedelson – Reporter, Philadelphia Business Journal
A local developer is looking to a build its "legacy project" on the 90-acre former Prudential Insurance Co. property in Dresher next to the Promenade at Upper Dublin.
BET Investments is planning to develop 600 apartments, 160 stacked townhomes, 150 senior and assisted living units, a 100-room hotel, 106,000 square feet of shops and restaurants, 100,000 square feet of medical or office space, a police substation and connected trails with outdoor exercise stations.
The project would be at 2101 Welsh Road, along the western side of Welsh Road and north of the Pennsylvania Turnpike. It’s southeast of the Promenade at Upper Dublin, which BET also developed and debuted in 2020.
The developer bought the property from Prudential for $30 million in 2022.
“The way we’re looking at this is it’s such an opportunity to build our legacy project,” BET Investments President Michael Markman said.
BET is owned by Bruce E. Toll, the co-founder of homebuilder Toll Brothers Inc.
BET presented its plans to Upper Dublin Township’s Planning Commission in mid-July and is seeking a zoning change to allow for the hotel, townhomes and senior living units. The text amendment process could take three to four months and the following conditional use and site plan approval could take most of next year, Markman said. He’s aiming for construction on apartments to begin at the end of 2025. While the entire project could take eight to 10 years to complete, Markman said the majority of it could be built within five years.
The existing property has three interconnected office buildings totaling 861,000 square feet and a parking lot with 2,175 spaces. Demolition is planned to start in two weeks, Markman said. The building housed more than 2,000 employees at its peak but only had 100 by the time the insurer moved out at the end of last year.
BET’s office is at the Montgomery Corporate Center, a 226,000-square-foot office building that overlooks the $200 million, 402-unit Promenade at Upper Dublin. Being based so close to the site gives BET an advantage in the development process, Markman said.
He foresees the development becoming a premier destination.
“It’s just taking into account the planning on a very large parcel of ground on an infill location. It’s rare we have the opportunity to do that,” Markman said. “Because we are here and it’s where my office is, we put much, much more thought into it than we have in a lot of other occasions. It puts us in a situation where we can make one of the most interesting projects that’s ever been built in the Philadelphia suburbs.”
The 600 apartments are planned to be split among three buildings in the middle of the property so they have the least impact on neighbors. The three buildings would be built above a podium with the majority of parking underneath.
Monthly rent for studio, one-bedroom and two-bedroom apartments is projected to average $2,500, Markman said. Amenities would include an indoor and outdoor pool, office spaces, podcast rooms and a large fitness center. The apartment buildings would be designed to offer a resort-style environment and even more luxurious than the Promenade at Upper Dublin.
“Just really the best in class apartments in the suburbs of Philadelphia,” Markman said. “That would be our goal here.”
The stacked townhomes would have two floors for the bottom units stacked beneath two floors for the upper units. They’d be on the western side of the property, closest to Enclave at The Promenade, a single-family home development built by Toll Brothers. The senior living building would be next to that, along the edge of the property next to the Dublin Hunt single-family home development.
Unlike at the Promenade at Upper Dublin, no retail would be included in the apartment buildings. The retail is planned to be built in phases along Welsh Road on the east side of the property. Instead of building it all at once, BET would wait for tenants to sign leases before construction starts, meaning each retail space would be catered to specific tenants.
Full story: https://tinyurl.com/t9s34xbc
Sunday, August 4, 2024
Friday, August 2, 2024
Developer Breaks Ground on 636,000-Square-Foot Distribution Building in Exton
By Christopher Ashworth CoStar Research
Atlanta-based real estate development company Portman Holdings has broken ground on its 636,120-square-foot distribution building for the I-76 Trade Center, Warehouse B, at 1130 Pottstown Pike in Exton, Pennsylvania.
Currently, this is the only property in the industrial park that is under construction, and the building will compose approximately 33% of the overall square footage upon its scheduled completion in 2025. The other two buildings of this park are set to break ground in September 2024, with construction expected to be completed in late 2026.
The ownership of this four-star property closed its construction loan and was able to break ground on the first building at the end of June 2024. Currently, CoStar is showing no signed leases on this property, but there is an active for-lease listing for the entire building.
