The combined greater Philadelphia industrial markets closed 2018 with 718,266 square feet of positive absorption, according to research from NKF. Year-over-year, overall vacancy declined 20 basis points to 5.5 percent, while warehouse vacancy increased 140 basis points to 6.3 percent. 3.4 million square feet delivered over the past twelve months with 2.3 million square feet designated as warehouse space. The Southeastern Pennsylvania industrial market closed the year with a total of 264,511 square feet in negative absorption. Year-over-year, total vacancy for all property types increased 70 basis points to 6.2 percent. Philadelphia County accounted for a majority of Southeastern Pennsylvania’s occupancy gains, closing the year with 854,488 square feet of positive absorption. This was largely due to significant gains in occupancy that occurred in the first quarter. During the first three months of the year, Dependable Distribution moved into 332,640 square feet at 9801 Blue Grass Road and 185,000 square feet at 11200 Roosevelt Boulevard. In addition, Rainbow moved into 365,000 square feet at 2951 Grant Avenue, also in the first quarter. The negative absorption in the Southeastern Pennsylvania suburban market is not a sign that demand has slowed, quite the opposite. Ecommerce and distribution companies are aggressively seeking high-bay …
As consumer shopping habits continue to evolve and shoppers get younger, retailers are trying to strike the right balance between their online and physical presence. Those that find this omnichannel harmony are thriving in cities across the United States. Philadelphia’s Center City, in particular, is capitalizing on its booming millennial population and attracting retail concepts that cater to this group. According to Center City District’s 2018 State of Center City Philadelphia report, millennials make up 40 percent of Philadelphia’s downtown population, one of the highest percentages in all U.S. cities. With millennials moving into the peak spending years of their lives, Philadelphia is experiencing a multitude of development with most of the focus being on mixed-use. Mixed-use development, which combines retail and residential, and sometimes office, is attractive to the millennial generation who are driven by convenience and want the ease of living, working, dining, and shopping all in one place. The largest retail development projects Center City is seeing right now are happening in the Midtown Village neighborhood, which had been largely neglected until recently when it comes to large mixed-use developments. A few notable projects here are The Collins, a residential community that features 90,000 square feet of retail …
When the Philadelphia Eagles were headed to the Super Bowl in 2018, they were the underdogs. The odds — and subsequently media headlines — were against them. But the team proved those predictions wrong, and went on to clinch its first championship. The retail market in Philadelphia, and nationwide, tackled similar challenges last year. As mature department stores shuttered and retailers filed for bankruptcy, the industry faced ongoing uncertainty. However, the rapidly changing dynamics represent vital opportunities for retail real estate owners to reimagine the mall experience. In Philadelphia, the high density of residents, workers, college students and visitors create a more than $1 billion retail demand annually, according to the Philadelphia Retail Report 2018 compiled by the Central Philadelphia Development Corp. In order to capture consumer interest, industry leaders need to evolve alongside the community’s changing needs and landlords and brands today have been transforming the conventional retail real estate model, carving a new path to success. Looking ahead, the future looks bright. Here’s a look at key trends driving the next level of retail real estate in Philadelphia. Innovative Concepts As habits of shoppers continue to evolve, brick-and-mortar space today can offer opportunities beyond traditional retail whereby real …
Fueled by low interest rates, an abundance of available debt capital, and superb fundamentals, the demand for multifamily assets in the U.S. has exploded over the past few years. This increased demand has led to fierce competition between capital in the multifamily sector, and consequently, a dramatic compression of going-in cash yields. With rents in “top-tier” cities at peak levels, these markets look prohibitively expensive. As a result, foreign capital is beginning to explore new markets to find more attractive yields. Long considered a second-tier U.S. city by global capital, Philadelphia has historically been overlooked in favor of cities such as New York City, Washington D.C., Boston, Chicago, San Francisco, and Los Angeles. When evaluating Philadelphia in comparison to other major metropolitan regions, the slow and steady growth of the Philadelphia MSA did not differentiate it enough to attract the foreign investor. Instead, those capital sources targeted cities with higher population growth, job growth, and rent growth. In good times, that calculation paid off with higher yields and greater appreciation. However, today most investors conclude that we are in the late stages of this real estate bull market. Yet, they still have capital which needs to be deployed. Those divergent factors …
From large publicly traded companies to mid-size tech companies and small professional services firms, companies are taking notice of the office development and vibrant live-work communities being built in the Lehigh Valley. Located one hour north of Philadelphia and 90 minutes west of New York City, the Lehigh Valley is a two-county region in eastern Pennsylvania consisting of 62 municipalities and the cities of Allentown, Bethlehem, and Easton. It is the 69th largest metropolitan region in the United States, with a $39.1 billion GDP larger than that of both Wyoming and Vermont. The Lehigh Valley’s total office market inventory currently stands at 26.8 million square feet. There have been 281,250 square feet of office market deliveries in 2018 so far, and another 329,000 are currently under construction. A total of 669,832 square feet of office space was under construction in the Lehigh Valley as of the first quarter of 2018, with the majority of that development in the region’s urban centers. Ninety-six percent of the office buildings constructed in the Lehigh Valley so far this year have been built in either Allentown, Bethlehem, or Easton and all of the 329,000 square feet of office space currently under construction are in …
Apartments in Philadelphia’s urban core command premium rent, prompting more renters to consider living in the surrounding suburbs. Rising demand for apartments in submarkets both near and far from Center City have helped lower vacancy and improve rent growth. Southwest Philadelphia, in particular, has exhibited these trends despite elevated construction activity. The combination of favorable property fundamentals amid supply additions draws strong investor interest, leading to increased transactions and higher sales prices. Multifamily properties in Southwest Philadelphia are outperforming those in Center City. Over the past four years, apartment inventory in both submarkets rose by almost proportional amounts, 10 percent versus 14 percent, respectively. Yet, over that time, vacancy in the suburban submarket dropped 100 basis points to a rate of 4.2 percent while the downtown rate went up 70 basis points to 5.3 percent. Rent growth showed a similar disparity. In the same four-year span, average effective rent appreciated 18 percent in Southwest Philadelphia but only 6 percent in Center City. The steep decline in vacancy and strong rent growth during this construction wave have demonstrated a healthy amount of demand in the submarket as residents seek more affordable housing options. As of June 2018, the average apartment in …
During the first half of 2018, the Eastern Pennsylvania industrial market has been anything but quiet. Fueled by occupier demand and the institutional capital community’s perpetual appetite for industrial product, there has been unprecedented activity on the transactional front, which is up significantly year-over-year. From a pure volume perspective, the market is on a trajectory to make this the most active year on record. Unlike prior years where product starved capital markets would see less than a dozen quality trades in Pennsylvania, this year has proven to be more plentiful, with year-over-year sales volumes almost doubled for one-off offerings. Meanwhile, the mega transactions continue with pending portfolio and company sales like DCT to Prologis and GPT to Blackstone. Connected Markets While activity in specific submarkets ebbs and flows, the synergy between them is greater than ever before. In fact, the trend towards considering the Eastern Pennsylvania industrial market as a whole continues to gain traction. Whereas in the past, a tenant or investor may have been interested in evaluating a particular geographic region, today the various submarkets are providing equally viable options for those seeking to expand and new occupiers looking to open facilities. One exception to the rule is …
Pittsburgh was recently ranked among the “Top 100 Best Places to Live in 2018” by Livability.com, citing the region’s strong university presence, burgeoning craft beer industry and successful professional sports franchises as important factors. Home to more than 15 breweries and a variety of new restaurants garnering national critical acclaim, Pittsburgh has also added foodie town to its list of accolades. A mix of local ownership groups and national franchisees has been actively pursuing expansion opportunities and new concepts in the region. Among the most active are AMPD Group, a partnership that includes Local Bar + Kitchen, Steel Cactus and Social House 7, which has six new restaurants in the works in the coming months both in Pittsburgh and outside the region in Myrtle Beach, South Carolina. The owners behind a local gastropub, The Yard, are introducing a new concept call Stout Pub & Kitchen in the Airport Corridor submarket. This new concept will focus on a variety of cured and smoked meats coupled with local beers and spirits. The fifth location of The Yard, which specializes in craft beers and gourmet grilled cheese sandwiches, is under construction in the adjacent space. Full Menu of Food Options While full-service dining …
The Pittsburgh industrial market has historically been a relatively small property sector due to several limiting factors, including difficult topography, infrastructure constraints and Pittsburgh’s location between two major industrial markets (Columbus to the west and Pennsylvania’s Central Valley to the east). However, with the emergence of e-commerce fulfillment centers, the growth of the Pittsburgh economy and major infrastructure improvements, we are starting to see strong demand for well-located industrial properties in the region. The size of the industrial market for the greater Pittsburgh metro is 185 million square feet. of which, 23.6 million square feet is flex and 161.1 million square feet is warehouse. Flex vacancy rate is currently 9.4 percent with 98,000 square feet under construction while warehouse vacancy is 5.8 percent with 263,000 square feet under construction. Based upon the tight vacancy and limited new construction in the warehouse space, there is believed to be significant pent-up demand, particularly for Class A users requiring 250,000 to 500,000 square feet. Accordingly, there are a number of planned speculative projects in this size range in the Airport, Butler County and Beaver County submarkets breaking ground in 2018. Lenders in the region are also bullish on the strength of the Pittsburgh …
Philadelphia’s office and industrial markets have been on a hot streak for the past year, with lower vacancy rates and greater rent growth than the national average. Office vacancies are enjoying far lower vacancy rates than regional and national averages for both Class A and Class B properties in the central business district and the suburbs. Flex and industrial vacancy rates are below 7 percent overall, well below regional and national averages, with average asking rents at about $5 per square foot. We see this upswing continuing in 2018 as demand keeps pace with or exceeds new development. Philadelphia has experienced seven years of uninterrupted job growth across all sectors, with 1.8 percent growth between August 2016 and August 2017 — outpacing the national average of about 1.5 percent, according to the U.S. Bureau of Labor Statistics. We saw job growth across the board, including the education, health, and leisure and hospitality sectors. But the biggest gain was in business and professional services, where Philadelphia added 16,700 jobs over 12 months. That represents a 3.6 percent year-over-year growth rate in high-end office jobs, compared to a national average of 3 percent. Manufacturing employment declined over the past 12 months, despite …