Friday, October 30, 2020
Thursday, October 29, 2020
Interstate Distribution Center in Pittston, PA Trades to a Fortune 500 company
Interstate Distribution Center (“IDC”) a 1,078,200 SF Class A bulk distribution building located at 140 Industrial Drive in Pittston, PA traded for $96,000,000.
The user/buyer is establishing a new manufacturing facility at the former Techneglas manufacturing site. IDC is an impressive 225 acre development located in the heart of the I-81 Corridor industrial submarket. The project is located at the confluence of Interstates I-81 and I-476 (PA Turnpike) in Pittston, which offers direct access to those major arteries as well as Interstates 80, 84 and 380.
The seller purchased the IDC site in 2012, which at the time contained over 1MM SF of existing manufacturing and distribution space and was 50% leased. They demolish the existing structures on the site and transform the site into a modern bulk warehouse/distribution park ultimately attracting a Fortune 500 company.
As completion of the building wrapped up earlier this year, there was a tremendous uptick in deal velocity from prospective tenants and user buyers. Several e-commerce related companies as well as manufacturers were attracted to the historical infrastructure IDC was able to provide. IDC was very well received from a logistics standpoint for e-commerce and other distribution users due to its location, however the site’s historical infrastructure as a result of its prior manufacturing operations really distinguished it from its competitors. IDC has significant in place utilities including a 69 KV substation fed by two separate grids, 10” water and sewer mains, ample gas service capacity, and Class 1 rail infrastructure adjacent to the site, which were instrumental in the sale of the site. The new building offers 40’ clear heights, a cross-dock configuration with two 75’ speed bays, 54’ wide x 45’ deep column spacing, 193 dock doors (9’ x 10’) including 108 with dock packages upon building completion, 2 drive-in doors, 421 car parking spaces (expandable), a 195’ deep truck court with 60’ dock aprons and 129 truck parking spaces (expandable). The building was constructed with precast concrete panels on a 7” thick concrete slab.
“The redevelopment of this former brownfield site over the last 8 years, into a state of the art new distribution and manufacturing facility, attracting the likes of a global company is a major milestone.
Brandywine Realty makes inroads on Dechert, other leases and pivot to life science focus
By Natalie Kostelni – Reporter, Philadelphia Business Journal
Brandywine Realty Trust collected 99% of its rents, made inroads on lease negotiations with three of its biggest Philadelphia law firm tenants — Dechert, Blank Rome and BakerHostetler — and saw 58,000 square feet of Covid-related closures in the third quarter.
The bulk of those closures was at 555 Lancaster Ave in. Radnor where Harvest Seasonal Grill & Wine Bar, which occupied 8,000 square feet, and Philadelphia Sports Club, which had 42,000 square feet.
As for striking lease deals with Dechert, Blank Rome and BakerHostetler, Brandywine told analysts on a call Thursday that there has been active dialogue with the firms but “no pen to paper at this point but the expectation is that we should be able to retain a good portion of those tenancies,” said George Johnstone, executive vice president.
Dechert and BakerHostetler occupy space in Cira Centre while Blank Rome is in One Logan Square. Dechert has been looking at new space in a tower Brandywine plans to develop at Schuylkill Yards.
Office landlords such as Philadelphia-based Brandywine (NYSE: BDN) are being closely watched these days for rent collections, new leases, how well capitalized they are and how they are positioning themselves for the future as companies mull their own space needs going forward. The company released its third quarter results this week.
While tenants have been paying Brandywine rent, the company said it has $4.5 million in deferred rent that is expected to be paid back over the next 18 months and, of that amount, $536,000 had already been collected.
In a sign of how much of its space is being used by tenants returning to their offices, Brandywine said that it averages 15% across its portfolio, ranging from 8% in Austin to 25% in the Washington D.C. area. In Philadelphia, it's 15% in the Central Business District and 18% in the suburbs. The disparities reflect the differences in local and state government policies addressing the coronavirus, the company said.
In the meantime, the company continues a proactive effort to get tenants to enter into near-term lease extensions. That outreach has been met with mixed results. So far, it has renewed 45 leases totaling 313,071 square feet and has another 10 deals in active negotiations and other 27 active proposals. A total of 103 tenants totaling 906,619 square feet have declined to renew at this point.
Full story: https://www.bizjournals.com/philadelphia/news/2020/10/23/brandywine-realty-third-quarter-results.html
Owner-User Sales Boom Hits Mid-Atlantic Industrial Market
By Adrian Ponsen CoStar Analytics
The coronavirus and its economic shock have slowed commercial real estate trading across all property types in the mid-Atlantic. Even in the industrial sector, which has benefited from the consumer’s accelerating shift to online shopping during the pandemic, property sales across Pennsylvania, New Jersey and Delaware are down roughly 50% on a year-over-year basis.
But one type of industrial transaction continues to reach new heights across the region: sales by individuals and owner-users. Within Pennsylvania, New Jersey and Delaware, sales volume of these transactions has reached an all-time high surpassing $2.5 billion over the past 12 months.
In many cases, these sales come at an opportune time for all parties involved. The pandemic has brought challenging times for most small- and medium-sized enterprises. By selling the industrial buildings they own and occupy, many businesses are able raise cash needed to survive the recession.
These trades also help investors increase their holdings in one of the few commercial property types with underlying demand drivers that appear well intact, even as the pandemic transforms how millions work and shop across the globe.
One of the region’s largest owner-user sales closed in June, when Big Lots sold its 1.3 million-square-foot Tremont, Pennsylvania, distribution center in a sale-leaseback deal with Chicago-based Oak Street Capital. Big Lots agreed to lease the facility for 20 years, with 2% annual escalations. The deal was part of a portfolio sale involving five buildings throughout the U.S., and the Tremont facility commanded $129.5 million, or $100 per square foot.
During August, the former owner of Jerith Manufacturing, which makes aluminum fencing products, sold the firm’s 445,000-square-foot distribution center in Northeast Philadelphia to Ivy Realty Services. The deal closed for $20 million, or $45 per square foot, at a 4.5% capitalization rate. Jerith’s lease was set to expire in two years, and the new buyer saw potential to raise the property’s below market rents.
That same month, Costume Gallery, a business that sells costumes to dance studio owners — and has presumably faced a challenging 2020 — sold a 72,000-square-foot flex property it had already vacated to California-based private REIT Metro Commercial Realty. The deal closed for $41 per square foot, and the new owner plans to convert the property to climate-controlled self-storage.
At a time when the coronavirus recession has left commercial brokers anxious for higher-level transactions to facilitate, these owner-user sales provide at least one persistent source of deal flow. These trades aren’t likely to grind to a halt anytime soon, given the clear benefits they offer to both the buyers and sellers involved.
Scranton Industrial Looks Strong Early in Fourth Quarter
By Ben Atwood CoStar Analytics
Scranton, Pennsylvania, industrial remains on firm footing through the fourth quarter, a positive development for the region and the logistics sector as a whole.
The market’s prime location along Interstate 81 and the Pennsylvania Turnpike had made it a hot spot for logistics tenants, and there was close to 5 million square feet underway at the time of the shutdown.
In recent years, Scranton was able to pull in big-name tenants such as Amazon, Adidas and Chewy, so developers were confident enough to build most of the new supply on speculation. Millions of square feet of unleased space will always test a market, but these projects were delivered into a world radically different than the one in which they were conceived.
The shutdown has likely muted demand, and vacancies have softened by close to 2% over the past 12 months, but that’s not too surprising since close to 5 million square feet of largely speculative space delivered during that time.
Indeed, there are signs that demand remains quite healthy. Year-over-year absorption rates for the market remain close to the market’s three-year average. In the past few months, multiple major deals have closed.
In late October, 1.2 million square feet was filled at Humboldt Northwest One, a proposed project near Hazelton. Chewy signed for over 1 million square feet in the second quarter, while True Value signed for nearly 1 million square feet in June. Two manufacturers also had a pair of move-ins post-shutdown, with Cardinal Glass Manufacturing filling nearly 200,000 square feet in the second quarter, while Golden Technologies took up 100,000 square feet at the same time.
One other indication of strength is the lack of sublet space being put on the market. While some softening in local demand would be expected from the virus, particularly from troubled retailers, as of the fourth quarter, this has not happened. An October survey shows that nothing substantial, over 200,000 square feet, has been flipped to available or placed on the market since the onset of the shutdown.
Such interest in a market that often plays second fiddle to nearby Lehigh Valley is a good indication that the logistics sector remains strong and might even be strengthening through 2020. Much of the space underway in Scranton is now filled and with developers holding off through the year on major groundbreakings, a market that looked to be in a precarious position in mid-March now appears primed for the future.
