Market Watch

Trends and Activity Impacting the CRE Market in the Tri-State Area

Industrial Market

E-commerce is increasingly becoming the largest driver of industrial market activity nationally and locally, reaching 38.32% of occupier activity in the first half of 2016. Online sales comprise 8.1% of all retail sales and Prologis estimates that every $1 in e-commerce sales requires three times as much warehouse and fulfillment space than retail space, leading to an ongoing and increasing need for fulfillment space to service this market segment. Locally, there has been significant growth in this segment from companies such as Jet.com, amazon.com, Stitch Fix, and Hudson Bay Group.

Closed Deals & Recent Assignments

  • market-watch-industrialLEASED: First 33 Commerce Center, Easton, PA, buildings A & B totalling more than 500,000 SF.
  • SOLD: Former N. E. Phila. Nabisco plant. 27.5 acre site sold for $10.2M.
  • AWARDED: Principio Commerce Center, Northeast, Maryland, 1.14 MSF spec building.
  • AWARDED: I-81 Commerce Center, Shippensburg, PA, 1 MSF build-to-suit opportunity.

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Office Market

While the influx of new owners entering the office market has slowed, the exit of long-time landlords continues with Liberty Property Trust selling a significant amount of its suburban portfolio to Workspace Property Trust. Other than select build-to-suit projects, there is no significant new office construction, which means owners are debating the future of an aging inventory. Many are choosing to upgrade with new systems and amenities. The question is whether these improvements can be justified with higher rental rates, or if tenants will balk at paying more for office space.

Closed Deals & Recent Assignments

  • LEASED: Impax, 47,000 SF, 602 Office Center Drive, Ft. Washington, PA
  • LEASED: Carpenter Technology, 22,100 SF, 1735 Market Street, Philadelphia
  • AWARDED: Brookwood Financial Partners, 600,000 SF Lehigh Valley portfolio.
  • AWARDED: 77,000 SF Class A listing, Bala Cynwyd, PA, Keystone Property Group.
  • AWARDED: Northbrook Corporate Center, Trevose, PA, 45,000 SF HQ office building for sale.

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Retail Market

Ten years ago, it was fairly common for the majority of retail spaces to sell hard or soft goods, however, a significant number of retailers ceased to exist during the recession. Fast forward to 2016, and the retail leasing landscape has substantially evolved. Goods sales remain the leading category for larger retail spaces, but service retailers such as Hand & Stone, Dental Dreams, LabCorp, Supercuts, and Ideal Image are expanding at rapid paces. Moving forward, we anticipate the service categories to continue to take the lead in retail leasing.

Closed Deals & Recent Assignments

  • LEASED: Burlington Stores. New construction 40,000 SF at Wishing Well Plaza, Burlington, NJ.
  • SOLD: Nissan Dealership, Limerick, PA, $5.7M.
  • AWARDED: Elmwood Center – 30 acre retail development site in Southwest Philadelphia.
  • AWARDED: 84,140 SF on 17.6 acres in Vineland, NJ. Existing Kmart location; across from the Cumberland Mall. Parking for 1,000 cars.

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Capital Markets

At current pace, 2016 Commercial Mortgage Backed Securities (CMBS) issuance will be roughly $56 million, down 41% from 2015. For most of 2016, CMBS lending had gone into hibernation due to market volatility. Other lenders have been selective but have increased originations. Interest rates remain extremely low with the 10 year Treasury around 1.75%. The CMBS market seems to be stabilizing with spreads declining. Wells Fargo just issued the first securitization designed to comply with risk-retention rules. We should see an uptick in CMBS lending in the first half of 2017.

Closed Deals & Recent Assignments

  • market-watch-capital-marketsARRANGED: $19 million loan – 530 multifamily units in a new market for the sponsor. LIBOR + 2.44% maximum leverage.
  • ARRANGED: $9.1 million loan – 7 year fixed rate at 4.125% – new student housing at LaSalle University.
  • ARRANGED: $4.5 million loan – 479 storage units. Loan includes funds for acquisition, capital improvements, and future earn-out.

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Investment Sales

Five years ago as we began emerging from the recession, savvy investors in select suburban office markets began buying physically obsolete buildings in good locations, then gutting, rehabbing and repositioning them into Class A product. That has paid off as players such as MIM-Hayden and The Davis Companies have realized significant profits from increased occupancy, high rents, and low cap rates. This model still holds promise for properties with good bones in top markets available at the right price.

Closed Deals & Recent Assignments

  • market-watch-investmentSOLD: Laurelwood Corporate Center, 81,000 SF, $6.8 M, Voorhees, NJ
  • SOLD: Pennsylvania Lottery Building, Dauphin County, PA, 137,640 SF office building, $14.9M.
  • SOLD: Mattress Firm, Inc., d/b/a Sleepy’s Portfolio, $41M.
  • SOLD: 39 Public Square, 116,588 RSF office and retail tower in Wilkes Barre, PA, $4M ($34.31/SF).
  • AWARDED: Bucks County Business Park, 100,000 SF industrial portfolio on 7.8 ac.

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Property Management

Building amenities are essential to attract new tenants. In the CBD, building amenities can be added with a lease to a retail or service operator (lobby shop, restaurants, gym) that has no monetary impact on building expenses. In suburban buildings, amenities like on-site cafés and gyms can increase CAM charges from $0.05 to $0.20 per square foot. There are also low-cost and no-cost amenities such as dry cleaning kiosks, pop-up car wash/oil change services, and food truck days. Pop-up restaurant services like Fooda have become popular in the CBD.

Closed Deals & Recent Assignments

  • market-watch-property-managementRETAINED: County Line Commerce Center 426,000 SF Class A office; new ownership: Crossroads Partners.
  • AWARDED: iStar Financial – 208,000 SF Class A office, Harrisburg, PA.
  • AWARDED: CHOP Community Health and Literacy Center in South Philadelphia – 96,000 SF LEED Platinum.
  • AWARDED: U-Haul, Americo Real Estate Company. Three retail centers totaling 153,644 SF.

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