Market Watch

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

Industrial Market:

The balance between new construction and absorption has remained in check for most submarkets, leading to continued reductions in vacancy rates and historic rental rate growth. The pipeline of future tenant activity is also strong. Yet, while much of this cycle’s market growth can be attributed to the expansion of e-commerce operations, there is some downside potential should the departure of traditional retailers trickle down to their distribution operations. For instance, liquidating electronics retailer HHGregg is closing its Southern New Jersey warehouse.

Closed Deals & Recent Assignments

  • SOLD: 297,500 SF building to Grammercy Property Trust, $15.3 million, Swedesboro, NJ
  • SOLD: Principio Business Park, 100 acre parcel, $7.22 million, North East, MD
  • SOLD: 109,00 SF light industrial/manufacturing facility, $4.55 million, Philadelphia, PA
  • SOLD: Airport Industrial Park, 115,300 SF manufacturing facility to Brandywine Operating Partnership, $4.15 million, Pennsauken, NJ

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Office Market:

2016 saw the arrival of multiple national and local coworking firms to the region, offering numerous options for tenants looking to rent short-term desk or office space. In 2016, 19 operators offered over 500,000 SF of coworking space in Philadelphia alone, including the Philly-based Benjamin’s Desk and several national firms such as WeWork and Joynture with more to come. The question for 2017 is: Will all of this space be occupied, or is the coworking phenomenon a fad that will result in vacant space coming back to the market?

Closed Deals & Recent Assignments

  • SOLD: Former Metro Bancorp HQ building, $7 million, Harrisburg, PA
  • SOLD: One Greenwood Square, 60,700 SF building for $6.8 million to Police and Fire Federal Credit Union, Bensalem, PA
  • LEASED: 60,000 SF R&D and office building, Invista, Newark, DE
  • LEASED: Philadelphia Magazine (Metro Corp) long-term lease, The Curtis, Keystone Property Group,
    Philadelphia, PA

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Retail Market:

Macy’s, Sears, Kmart, JCPenney, HHGregg, and Staples have announced closings, illuminating the evolution of retail: increased competition, demand for off-price retail, customers requiring better service, and continuous growth of online sales. Lack of investment in stores, brands going stale, and stores trying to be everything to everyone has failed. Customers are demanding the latest products, the best prices, and excellent service and experiences. Expect the repositioning of these big box stores to health and medical centers, theaters, office space, gyms, grocery stores, off-priced retail and smaller strip space.

Closed Deals & Recent Assignments

  • SOLD: Palmer Town Center, 153,085 SF to Phillips Edison, $32.3 million, Lehigh Valley, Easton, PA
  • SOLD: BJ’s Wholesale Club Store, $16.85 million, Single tenant NNN asset, 7.1% CAP rate, 119,600 SF on
    11 acres, Rochester, NY
  • SOLD: 5.5 acre retail redevelopment site, $7.42 million. Sold by Burlington Stores to BET Investments. Delaware County, Springfield, PA
  • AWARDED: Philadelphia Marketplace; 231,000 SF retail center,
    Philadelphia, PA

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Capital Markets:

After a spike in the Treasury index rates following the election, rates have receded slightly with the 10-year Treasury currently at 2.38%, even with two Federal Reserve rate bumps in December 2016 and March 2017. This year, a recent survey found that investors have earmarked $1.7 trillion for global CRE. Though not all will be deployed, it shows the sector will have another year with healthy liquidity. CMBS seems to be getting back on track. Banks, life companies, government entities, and private lenders still remain very active while underwriting conservatively.

Closed Deals & Recent Assignmentsmarket-watch-capital-markets

  • ARRANGED: $12 million loan, 276 student housing beds for a long-term existing client at Penn State’s main campus. 3-year fixed rate loan with a 2-year interest-only period, State College, PA
  • ARRANGED: $4.9 million loan – refinance of a 4-property mixed-use portfolio. 10-year fixed rate loan locked at term, Jenkintown, PA
  • ARRANGED: $4.3 million loan – 40-unit apartment building in University City. Rate locked at term sheet at 3.25%, Philadelphia, PA

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Investment Sales:

Apartments continue to attract capital for repositioning and new construction as millennial demand surges for high-amenity properties. Multi-tenant retail battles competition from e-commerce and an excess of legacy space, depressing rents and sale prices except for newer centers with the best tenant rosters in high demand locales. Assets of any type NNN leased to an investment-grade tenant draw multiple offers at the lowest cap rates in the industry. The prospect of further interest rate hikes and the contentiousness of the political scene will drive investors to strengthen balance sheets through sales and recapitalizations.

Closed Deals & Recent Assignments

  • AWARDED: Teva Pharmaceutical Site, 138 acres industrial land, Philadelphia, PA
  • AWARDED: Callow East collection, mixed-use redevelopment opportunity. Prime assemblage of eight parcels totaling more than 388,000 SF on 7.75 acres, $80M value, Philadelphia, PA
  • SOLD: 137-room Hampton Inn & Suites, $10.72 million to Yardley Hospital Holdings, Newtown, PA
  • SOLD: 124,311 SF, 3-building office campus, $9.6M, New Castle Corporate Commons, New Castle, DE

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Property Management:

As technology evolves, businesses are pressured to accommodate, resulting in many commercial buildings incorporating concierge-like amenities for their tenants. Said amenities are most often accessed through mobile applications which connect to a central hub. These apps have a wide range of capabilities, from adjusting lighting and office temperatures to suit employees’ personal preferences; to playing music through a centralized speaker system; to unlocking parking garages and directing employees to vacant parking spaces; and even to placing orders for food and coffee to be delivered to one’s door.

Closed Deals & Recent Assignments

  • AWARDED: Bucks Town Centre, 142,000 SF, Client C-III. Property Management and Leasing assignment, Langhorne, PA
  • AWARDED: 620, 640 & 660 Allendale Road, Sky Management, 159,669 SF, three warehouse buildings. Property Management assignment, King of Prussia, PA

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