King of Prussia Mall adding 14 new stores, including 8 making Philadelphia-area debut

By Paul Schwedelson – Reporter, Philadelphia Business Journal

The King of Prussia Mall is adding 14 new stores, including eight that are new to the region, in the coming months.

At 2.7 million square feet, it is one of the largest shopping malls in the country and as such is able to attract high-end retailers and other concepts that don't often have another location in Greater Philadelphia.

Headlining the 14 new editions in 2025 are Netflix House and Italian food emporium Eataly. The location of the former will be one of the concept's first two sites. Netflix House is also planning to debut a Dallas outpost in 2025. Eataly currently operates 10 other U.S. locations, with the next nearest outposts in North Jersey and New York.

The concepts are part of a new wave of retail that's centered around experiences that go beyond traditional shopping.

Other highly anticipated brands opening soon at King of Prussia Mall include popular cooler and drinkware brand Yeti; luxury clothing and outerwear brand Moncler; Australian fashion concept Princess Polly; and eatery Lazy Dog Café. For each, it will mark their first foray into the Philadelphia market.

“These additions are prime examples of the elevated shopping experience we strive to provide for visitors and retailers alike,” Todd Putt, the mall’s marketing director, told the Business Journal. 

The new stores add to a robust lineup at the mall, which as of February was 96% leased, according to a filing with the Securities and Exchange Commission.

Here are the stores set to open heading into 2025:

New to Greater Philadelphia:

• Amorino: The French chain, known for its Italian-style gelato, is set to open at the end of December.
• Aroma 360: The scent company makes products for homes and businesses.
• Eataly: The Italian food emporium is taking 23,000 square feet on two floors and will have an exterior entrance.
• Lazy Dog Café: Previously planned to open in 2024, the Southern California-based chain restaurant serves a menu with twists on comfort food that highlight seasonal ingredients.
• Moncler: An Italian luxury fashion brand specializing in outerwear.
• Netflix House: The retail, dining and live entertainment venue will occupy the former Lord & Taylor store.
• Princess Polly: An Australia-based women’s clothing company touting its trendy, quality fashion.
• Yeti: An Austin, Texas-headquartered cooler and drinkware brand.

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Wexford Science & Technology investing $29M to renovate University City life sciences building

 By Paul Schwedelson – Reporter, Philadelphia Business Journal

As Wexford Science & Technology stares down 80,000 square feet of vacant space in one of its University City buildings, the firm is doubling down on Philadelphia’s life sciences sector by investing $28.5 million to renovate the property.

The renovations at 3711 Market St. are planned to begin within the first two months of 2025 and be completed before the end of the year. The goal in updating the 16-year-old, 10-story, 150,000-square-foot building is to boost occupancy, which currently sits at 45%.

“Despite some of the challenges over the last 12 to 18 months in the market, we believe strongly in the depth and the trajectory of life sciences in Philadelphia,” said Pete Cramer, vice president and market executive for Wexford.

While tenant demand among life sciences companies has slowed since 2023, industry experts believe leasing will pick up in the coming year. Wexford’s renovations are intended to lure tenants to a space that's competing with new buildings.

To do so, Baltimore-based Wexford and Chicago-based development partner Ventas, Inc. (NYSE: VTR) are planning upgrades including a renovated lobby to facilitate meeting and collaboration among building tenants, increased HVAC and backup power capacity, and move-in ready lab and office suites. 

Current tenants at 3711 Market St. – part of Wexford’s uCity Square campus, which spans One uCity Square and 3675 Market St. – include Eli Lilly and Co. (NYSE: LLY), Spark Therapeutics and Good Molecules.

Cramer sees the move-in ready suites as an advantage to attracting tenants. Those are especially attractive to life sciences companies that often need new space very quickly after new discoveries are made and prefer not to wait for space to be built out.

Cramer said 3711 Market St. can accommodate tenants wanting to take as little as a move-in ready suite, which span 3,000 to 12,00 square feet, to as much as a full floor. The building has 35,000-square-foot floor plates and nearly 15-foot ceiling heights.

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Real Estate: Several levers could determine the direction of industrial in 2025

 By Ashley Fahey – Editor, The National Observer: Real Estate Edition, The Business Journals

Suppliers who've flocked to places like the Austin, Texas, metro area are in a holding pattern as the semiconductor industry goes through a bit of a down period.

Lofty projects that were expected to debut this year are delayed, putting groups like parts makers in limbo as they wait for the facilities that drew them to the area to become operational.

"The only thing really keeping us alive is that we have a large customer base of different customers that are making different kinds of chips," Ulysses Schussler, a senior director at KoMiCo Technology Inc., told Justin Sayers at the Austin Business Journal.

Semiconductors have been a big target of massive federal investments, such as the CHIPS and Science Act passed in 2022.

Lots to watch in 2025 for industrial real estate

With the prospect of significant tariffs looming during President-elect Donald Trump's incoming administration, some industrial real estate-using groups are trying to plan ahead and stockpile goods from abroad that could become more expensive next year.

Meanwhile, as leasing activity stabilizes from the frenetic pace observed during the Covid-19 pandemic, some oversupplied markets are catching their breath.

There's a mixed — but overall optimistic — outlook for industrial real estate in 2025, although there are several levers that could influence the direction of the market.

One key factor: More than 27% of current industrial leases, as tracked by CompStak Inc., are expected to expire in 2025 and 2026. While some of those expirations may include short-term deals signed since the pandemic, others will be pre-2020 lease terms, Alie Baumann, director of real estate intelligence at CompStak, told me. In fact, according to the firm, the average rent among leases expiring in 2025 is 75.7% below current market rate.

Those lease renewals are coming at a time when industrial groups — much like their office counterparts — are prioritizing the newest, and even amenitized, warehouses for their industrial real estate. CBRE Group Inc. recently found industrial buildings built before 2000 accounted for more than 100 million square feet of negative absorption this year while properties built after 2022 saw more than 200 million square feet of positive absorption.

FULL STORY: Tariffs, lease expirations and flight-to-quality: Here's what to watch in the 2025 industrial market

Changes could be coming to federal eco-devo

Like many other things, economic-development coalitions and initiatives are facing an uncertain future with the change in White House administration next month.

Billions in grants, subsidies and other incentives have been passed as part of sweeping federal measures in recent years — among them, the Inflation Reduction Act, the CHIPS and Science Act, the Regional Technology and Innovation Hubs program, and the Infrastructure Investment and Jobs Act. Although passed during the administration of Democratic President Joe Biden, the efforts largely had bipartisan support.

Adding it up: A recent Brookings Institution report found, as of September, a little more than $40 billion in place-based funding authorizations have been allocated or awarded.

What changes might be coming to those programs from the federal government under President Donald Trump's second term is the big question.

"These big investments ... have stimulated a lot of excitement and creation of really important, more coherent [economic-development] strategies for places," Mark Muro, senior fellow at Brookings Metro, told me. "The election creates a new level of uncertainty around this."

Data-center needs rev up in core markets

There doesn't seem to be an end in sight to the nation's data-center boom, especially as artificial intelligence takes center stage and reliance on digital infrastructure continues to grow.

In fact, data-center development in Virginia — where much of the boom has occurred — is outpacing electric-power infrastructure and will likely lead to increased costs for non-data-center customers, according to a recent Joint Legislative Audit and Review Commission analysis, reports Dan Brendel at the Washington Business Journal.

In places like Virginia, legislators will have to weigh data centers' energy implications against their economic and fiscal benefits. Although not huge job generators, data centers tend to be big taxpayers. Loudoun County, Virginia, for example, gets about a third of its local tax revenue from data centers.

According to JLARC, data centers are currently paying their full cost of service, but growing energy demand is likely to increase other customers’ costs. A typical Dominion Energy Inc. customer could see their costs increase by an estimated $14 to $37 monthly by 2040, not accounting for inflation, according to the study.

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King of Prussia hotel sells for nearly $14M, new owner plans upgrades

 By Emma Dooling – Reporter, Philadelphia Business Journal

A Lehigh Valley hospitality group has acquired a King of Prussia hotel and plans to undertake a renovation of the property in 2025.

Bethlehem-based Steel Hospitality purchased the 129-room Hyatt Place Philadelphia King of Prussia for nearly $14 million in early October, CEO Adam Patel told the Business Journal. The sale breaks down to roughly $108,527 per key.

Steel Hospitality takes over ownership of the Hyatt Place from Los Angeles investment firm Gehr Hospitality. The company bought the property for $12.67 million in 2019 in partnership with investment advisory company Oakhurst Advisors. The sale price broke down to $98,178 per key.

The Hyatt Place was put up for online auction on real estate platform RI Marketplace over the summer with a starting bid of $3.5 million. Steel Hospitality entered into the deal to purchase the hotel prior to the completion of auction.

Steel Hospitality's acquisition of the Hyatt Place includes the property improvement plan, or the agreement through which the company will renovate the hotel to bring it up to date with Hyatt Hotels Corp.'s (NYSE: H) latest design and quality standards for the select-service Hyatt Place brand.

Patel said the first phase of the renovations will likely begin in March, while the second phase is expected to get underway next fall. The project will include updates to the guest rooms and the flooring throughout the hotels, as well as repainting the property.

The 14-year-old hotel was last renovated in 2018, according to Patel.

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Pair of Institutional Investors exchange Trader Joe’s-anchored retail center

By Lauren Diggs CoStar Research 

A pair of institutional investors exchanged a Trader Joe's-anchored retail center in the North Penn Valley borough of North Wales, a suburb of Philadelphia.

Global investment management firm Nuveen Real Estate bought the retail center for an undisclosed price from fellow global investment manager MetLife Investment Management after a seven-year investment hold.

MetLife paid $57 million, or about $552 per square foot, in 2017 when it purchased the 103,029-square-foot Shoppes at English Village at 1460 Bethlehem Pike.

The center was 95% leased at the time of sale. In addition to the anchor tenant Trader Joe's, the center includes several other national retail tenants, including LensCrafters, Athleta, CycleBar, Hallmark, CHOPT and Talbots.

"The Shoppes at English Village perfectly aligns with our grocery-anchored neighborhood strategy and investment criteria. The addition of English Village further diversifies our Northeast exposure and adds yet another premier grocer to the portfolio," said Ryan Boan, U.S. head of retail transactions at Nuveen Real Estate, in a statement announcing the purchase.

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US office market vacancy rate dips — and 2025 could be volatile

 By Ashley Fahey – Editor, The National Observer: Real Estate Edition, The Business Journals

The U.S. office vacancy rate has begun to stabilize — and dip ever so slightly, according to some industry trackers — but it's still not likely to hit bottom for another several quarters.

The nation's office vacancy rate declined to 20% in the third quarter, down just barely from 20.1% the previous quarter, according to Moody's Analytics Inc. While the quarterly decline may be a positive indicator for the market, the national vacancy rate is predicted by the firm to move up and down more before settling into a new normal.

More precisely, Moody's is forecasting the national office market won't hit bottom on a vacancy basis until late 2025 or early 2026.

Matt Reidy, director of commercial real estate economics at Moody's, said office vacancy tends to move more slowly than other market metrics because of how long most office leases are — 10 or more years, in many cases. That means a significant share of leases haven't matured since the Covid-19 pandemic upended the office market.

"We’re still seeing some companies just now getting their first [lease] rollover since the pandemic and turning some of that space back over," Reidy said.

And while the vacancy rate could rise in the coming quarters, there are a number of counterbalancing forces to help keep the rate from growing too much, Reidy said. That includes a slowdown in new office construction, which is likely to continue next year, as well as gains in office-using employment.

The third quarter saw a dip in office vacancy nationally because net absorption turned positive — with more than 5 million square feet of absorption tracked by Moody's — after seven consecutive quarters of decline.

Speculation has been rampant about whether more return-to-office efforts in 2025 — fueled by Amazon.com Inc. CEO Andy Jassy's announcement this fall that the tech giant's employees would be required in the office five days a week starting in January — will turn into more space demand.

But it's tough to say beyond a few headline-grabbing moves whether many more companies will be going back to the office more days per week in 2025, Reidy said.

"We’ve seen those [announcements] coming in fits and starts since the pandemic, where you'll get several companies that will announce pretty close to one another that they’re either going fully in-office or hybrid or fully remote," he said. "It’s difficult because employees have made their feelings heard: They have a strong preference for at least having flexibility in a hybrid environment."

And as long as the labor market remains strong, employees still have some leverage when it comes to hybrid-work arrangements, Reidy said.

One potential factor to watch next year is whether the federal government — the nation's largest office occupier — pares back its real estate. Elon Musk and Vivek Ramaswamy, who've been appointed to lead a new Department of Government Efficiency within the incoming Trump administration, have talked about instating full in-office work requirements for the federal workforce, in addition to significant job cuts.

Any reduction in the federal workforce likely will mean less office-space needs for the federal government. The General Services Administration, which oversees the federal government's real estate portfolio, currently leases more than 363 million square feet of office space nationally.

"If there’s a mass wave of government layoffs, clearly that’s going to cause a lot of additional vacancy," Reidy said, although he added there's typically a fairly long lead time on GSA's real estate planning.

Additionally, other Trump economic policies could influence the direction of the economy and, by extension, how companies think about job growth and their real estate requirements. It remains too soon to say with certainty what impact those policies might have.

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Industrial sales power Pennsylvania capital's real estate market

 

By Brenda Nguyen CoStar Analytics

Pennsylvania's capital has experienced significant growth in its commercial real estate market over the past decade, with total commercial sales volume increasing from approximately $501 million in 2014 to $861 million so far this year. After adjusting for inflation, this represents a growth of over 30% during this period for Harrisburg.

However, the industrial sector continues to dominate the local landscape. That area has led sales totals over the past decade, averaging more than $300 million annually. In contrast, retail sales have averaged $158 million, office sales at $147 million and multifamily sales at $82 million.

Already this year local industrial sales hit an annual record, partly thanks to EQT Exeter’s acquisition of Building 1 at Core5 in Middletown for $170.5 million — the highest single-building transaction in Harrisburg’s history. Institutional players like EQT Exeter have played a pivotal role in the city's industrial rise. Other prominent national players, such as Prologis, GIC, Blackstone, Brookfield and XPO, are among the most active buyers in the traditionally tertiary market.

Meanwhile, private buyers and owner-users have led retail, office and multifamily transactions. While institutional investors can access vast pools of pension funds, endowment money and other institutional capital at relatively low costs, private buyers typically rely on traditional bank financing and personal wealth, which comes with higher interest rates and more stringent lending requirements. Subsequently, private buyers typically need more upfront capital to close on nine-figure deals.

For instance, in Harrisburg’s retail market, the highest-valued transaction in the last five years was locally based Prasavi Group’s mid-2021 acquisition of the Camp Hill Shopping Center, valued at $89.7 million — only 53% of the value of EQT’s recent industrial purchase.

For the office market, the highest-valued sale was the University of Pittsburgh Medical Center’s acquisition of the Tech Park Office Center in Mechanicsburg, valued at $45 million.

And for multifamily, Philadelphia-based Westover Companies’ $23 million acquisition of Shippensburg Village Townhomes, a 174-unit garden-style student housing complex, was the largest apartment sale in the last five years.

As investment continues to flow into this tertiary market, Harrisburg has an opportunity to highlight its retail, multifamily and office segments. The adage "location, location, location" is particularly relevant here, as the city's placement between major Northeast markets has the potential to draw more attention from national retailers, white-collar companies and prospective residents.

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Universe Holdings enters greater Philadelphia apartment market

 By Jon Leckie CoStar News

A Los Angeles-based multifamily investment firm is reaching beyond its West Coast roots with a deal that expands the company’s portfolio into the greater Philadelphia market for the first time.

Universe Holdings has purchased Mi-Place at West Rancocas in Mount Holly, New Jersey for $33.6 million from Fernmoor Homes, the first of a two-property deal valued at $93.5 million. The second half of the transaction is expected to close in early 2025; details of that property weren't disclosed.

“We have been in the New Jersey market for several years and believe in its stable long-term viability,” Henry Manoucheri, chief executive at Universe Holdings, said in a statement. “We have boots on the ground … and our plan is to acquire additional assets that will fortify our position in the market.”

Mi-Place at West Rancocas consists of 108 units including 12 three-bedroom townhouses with the remaining units evenly split between one- and two-bedroom apartments with individual balconies, according to news release announcing the sale. The project was completed in 2022, the statement said.

Universe Holdings cited a small-town environment, strong school system, and proximity to job centers in Philadelphia that are reachable by commuter train or car as consistent demand drivers in the area.

Under the terms of the deal, Universe Holdings will assume a $24.25 million bridge loan from Dwight Capital that it plans to refinance into a fixed-rate loan through the U.S. Department of Housing and Urban Development.

The deal comes as overall multifamily investment in the Philadelphia area has declined 96% since the third quarter of 2022 as institutional buyers have shied away from the market due to decelerating rent growth and elevated interest rates, a CoStar analysis showed.

“We believe that the best time to buy is on weakness while everyone else runs for cover,” Manoucheri said.

Expanding portfolio

The acquisition also marks Universe Holdings' third acquisition on the East Coast.

In December 2023, the firm purchased a 250-unit multifamily property in Tampa, Florida, built in 2016 for $66 million from Passco Companies. It made its first East Coast purchase in May 2021 with the $60 million acquisition of 226 units in Toms River, New Jersey, roughly an hour east of Philadelphia from Morgan Properties.

In addition to one property in Las Vegas, Nevada, the remainder of Universe Holdings' 72 properties run from Ventura to San Diego in California, according to CoStar data.

Since its founding in 1994, Universe Holdings has completed multifamily transactions involving more than 7,500 units. The privately held investment and management firm focuses on value-add and off-market transactions aimed at long-term appreciation.

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What's in store for CRE investment in 2025

By Joshua Mann – Editor, The National Observer, The Business Journals

Welcome to The National Observer, a roundup of top business news and actionable insights from across The Business Journals' network of publications. Today we're looking at what Walmart's CEO had to say about expansion plans, a $1.4 billion deal between two lenders and a multibillion-dollar federal loan to support a new manufacturing plant in Georgia. First, however, we'll dig into the cautious optimism being felt in the commercial real estate sector.

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CRE investors express cautious optimism

As 2025 fast approaches, executives are zeroing in on possible targets for their respective businesses in the coming year. For commercial real estate investors, there’s an expectation new opportunities might come available despite a slowdown in transaction activity year-to-date this year.

Ashley Fahey, editor of The National Observer: Real Estate Edition, reports the national commercial real estate market saw $40.1 billion in transactions in the third quarter, down from $43 billion in Q2 and $44.4 billion in Q3 2023, according to Altus Group research. While transaction activity slowed, the rate of the slowdown has moderated, especially on a yearly basis. Additionally, 10 of the 15 property types tracked saw a quarterly uptick in Q3 in price per square foot, including mixed-use, manufacturing, automotive and office properties.

QUOTABLE: "Transaction activity effectively begets transaction activity," said Cole Perry, associate director of research at Altus Group. "What I’m seeing is really more of the same: There is still slow transaction activity, it's declining year over year, price discovery remains pretty challenged — but I think it’s picking up a bit."

Perry said the market is in a new normal of transaction activity, with buyers and sellers learning how to deal with a lack of comparable sales. Industry players also are trying to anticipate what President-elect Donald Trump's policies and a Republican-controlled Congress could mean for the economy. While most are optimistic the incoming White House administration will mean deregulation or tax cuts, there's also concern policies around immigration and tariffs that were signature aspects of Trump's campaign will result in more inflation and economic uncertainty.

Walmart CEO on expansion plans, new-look Black Friday

Black Friday will be a lot different for Walmart Inc. this year than in years past. The retail giant’s stores will be different, too.

Chandler France of the Houston Business Journal reports that Walmart made a significant financial investment to renovate 650 locations this year and build or convert an additional 150 stores over the next five years. That follows the company in October 2023 reopening 117 remodeled stores across 30 states — an investment of more than half-a-billion dollars.

But as Walmart U.S. President and CEO John Furner told France during a site visit Tuesday, customers who visit one of those remodeled stories on Black Friday won’t be the only ones seeing a new-look Walmart. The company also has worked to enhance its online-shopping service — with the growth of e-commerce having “bifurcated” the traditional Black Friday experience, Furner said.

QUOTABLE “Competition makes you better,” Furner said. “A phrase I think about a lot is, ‘Loyalty in retail is the absence of something better.’ If we’re not the brand that’s providing the best choice for our customer, then someone else will happily come serve them for you.”

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Empty office space is costing Philadelphia big money

By Joanne Drilling – National Data Reporter, The Business Journals

Office vacancy rates are at their highest point in 45 years. Commercial real estate insiders predict one-quarter of existing American office space could be vacant by early 2026. And currently, 11 major metros have at least $1 billion worth of empty space.

Philadelphia falls just outside of that $1 billion group. Locally, 27.6 million square feet of office space was vacant as of mid-year, with an expected lost rent value of $801 million.

That’s according to a new report by insight firm Switch On Business, which compared second-quarter occupancy data against market rates provided.

Philadelphia's office vacancy rate has hovered around 20% throughout 2024.

While companies are settling into their post-pandemic office plans and long-term hybrid schedules, industry insiders expect more clarity to come in 2025 when a larger number of leases are set to expire. The trends that emerge could chart the course of Philadelphia's office market for years to come.

For now, the office vacancy rate has stabilized in large part due to chunks of space being repurposed for other uses. Still, there's a significant portion of Philadelphia's office supply that's going unused — and it's costing the market hundreds of millions of dollars in potential leasing revenue.

A bite out of the Big Apple

While plenty of Fortune 500 companies have called workers back to the office full time, at least 28.6 million workers — approximately 20% — are working hybrid or remote schedules.

New York has felt that shift more strongly than any other metro in the country. Earlier this year, 105.8 million square feet of office space was sitting empty in the city — an estimated rent loss of $7.61 billion per year.

While New York has seen similar declines in the past, some see the current trends as part of a long-term, broader cultural shift. Much like office-vacancy peaks in the 1970s and 1980s, overbuilding may also be to blame.

“What happens to New York City from here on out depends on the actions we take and the policy decisions that are made,” said Stijn Van Nieuwerburgh, the Columbia Business School professor who coined the term “urban doom loop,” in a statement that accompanied the report.

“In a best-case scenario, we remove 30% or 40% of the office stock in New York City and turn it into wonderful housing," he said. "New York City has all these great amenities, it’s a wonderful place where young people want to live, regardless of where they work."

Of course, those office-to-residential conversions have proven to be easier said than done — in New York and elsewhere.

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