6C — August 12 - 25, 2016 — Pennsylvania — M id A tlantic
Real Estate Journal
www.marejournal.com
P ennsylvania
iring boom spurs de- mand for Philadelphia retail market. The lo- Marcus & Millichap Strong economic performance drives vacancy and rent improvements for Philly assets H
supply-side, developers have been highly active in the last few years, although construc- tion remains in line with the long-term average. Annual deliveries are headlined by Le- high Valley’s massive Hamilton Crossing project as well as the completion of several big-box retailers and specialty grocers. Development has yet to have a significant impact on prop- erty operations, in particular vacancy, which has remained steady for years. Throughout the entire downturn and sub- sequent recovery, the vacancy rate never strayed more than
60 basis points above or below the 15-year average of 6.3 per- cent, the tightest range in the nation. The mitigated risk to tenant turnover coupled with rising rents will bolster demand for Philadelphia retail assets. Overwhelming optimism in multi-tenant segment. Steadily improving property fundamen- tals together with a robust local economy will support demand in the Philadelphia retail mar- ket. The strength of the multi- tenant sector is intensifying as low yields in alternative invest- ments drive cash-flow-oriented buyers into the segment. First-year returns have fallen near the prior cycle trough with multi-tenant properties chang- ing hands in the high-6 percent range. Out-of-state players, particularly those from New York City and Washington, D.C., heavily pursue multi- tenant deals, encouraged by the relative affordability and positive yield differential. On the single-tenant side, a recent pullback in investor bullishness has let price appreciation and cap rate compression stagnate in the past year. Well-located assets with favorable lease con- ditions will still garner intense attention; however, buyer scru- tiny may place a drag on future deal flow. More broadly, the retail market performed well in the past year and is positioned for future improvement in the coming months. Local Highlights • The most significant delivery of the past year was aWal-Mart Supercenter in Warrington. The 151,000 s/f discount de- partment store opened in Janu- ary and will employ up to 300 full- and part-time workers. The project highlights the re- cent interest in Lower Bucks County, which will receive sub- stantial completions in 2016. • This summer, the Demo- graphic National Convention will bring 50,000 visitors to the metro, lifting the economy. Of- ficials expect that it will require the reservation of 15,000 hotel rooms, providing a boost to the hospitality and retail markets. On the whole, estimates sug- gest that the convention will inject $300 million into the Philadelphia economy. • Hamilton Crossings, a new 570,000 s/f shopping center in Lehigh Valley is currently under construction. The proj- ect will have a transformative impact on the Lower Macungie Twp. n
cal economy is picking up strong momentumwith annual employment gains forecast to achieve a record-setting pace in 2016. Much of this job cre- ation is stemming from well- paid white-collar positions, supporting heavy growth in both median household income and retail sales. As a result, the underlying demand for Philadelphia retailers is robust and intensifying, enabling another year of vacancy and rent improvements. On the
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