1-27-17

Real Estate Journal — 2017 Forecast — January 27 - February 9, 2017 — 11C

www.marejournal.com

M id A tlantic

2017 F orecast

By David Dolan, Newmark Grubb Knight Frank Philadelphia Metro area investment sales (Capital Markets)

A

s we move full steam into 2017 it’s impor- tant to reflect on the

Retail and Industrial sales both exceed $1 billion in sale volume with 97 and 135 sales respectively. The Ham- ilton Mall, an 853,000 s/f regional mall sold for $103 million was one of the larger trades along with Deptford Landing, a 491,000 s/f power center, selling for $82.5 mil- lion. On the Industrial front the FedEx property sale of 305,000 s/f in Bridgeport for $64 million was one of the larger regional warehouse transactions. Apartments have been a very desirable product. They experienced over $1 billion

in sales volume through 66 individual sales. Notable transactions included The Lantern at Glenn Mills with 208 units, that sold for $66 million or $236,000 per unit and The Executive House in Philadelphia sold its 302 units for $65.4 million or $216,000 per unit. The hospitality industry, with much smaller supply is typically not as active, however there were 15 deals totaling $145 million in gross sales volume. The forecast for 2017 is continued solid investment sale activity for all property

types in the Philadelphia suburban and CBD mar- kets. Although the 10-year treasury rate has increased approximately 30 basis points over the past year, which drives interest rates for commercial mortgages, rates are still historically very low. With several large sales pending, we expect the Philadelphia CBD to again surpass the benchmark of $1 billion in gross sales in the next 12 months. Institu- tional buyers will continue to be aggressively competing for deals with our strong lo- cal and New York City based

buyer pool. In the suburbs the market has shifted sig- nificantly from institutional buyers to private funds as well as Orthodox and Ha- sidic real estate groups from Brooklyn and Lakewood, New Jersey. David Dolan is senior managing director and an integral part of the leadership team of New- mark Grubb Kni ght Frank’s Philadelphia based Capital Markets Group, one of the most successful investment property sales groups in the tri-state region. n

investment sale activity in 2016 as a baseline for what is ex- pected in the New Year. This past year there w e r e 4 7 5

David Dolan

commercial real estate transactions in the Phila- delphia area, which includes the entire Philadelphia Met- ro area. The Philadelphia CBD, as expected, saw the largest deals and while the number of transactions in the CBD has slightly de- creased, the overall dollar volume has been steady and actually increased slightly in 2016 with 10 Philadelphia CBD transactions closing at nearly $1.2 billion in total sales volume. Several examples of larger transactions include: Bran- dywine Realty Trust’s sale of Cira Square to Korea In- vestment for $354 million or $407 p/s/f, University Plaza Associates selling 2.0 Univer- sity Plaza, a LEED Double Platinum multi-tenant office building to Zurich Insur- ance Group for a record price of over $41 million, which equates to $430 p/s/f and LNR sold 801 Market St. to Cohen Equites, via the TEN X auction platform, for $30.5 million or $94 p/s/f. The buyer profile for these large transactions in 2016 was made up of mostly insti- tutional players with private and REIT Capital filling in the balance. In addition, foreign capital, which for the most part had previ- ously flowed almost exclu- sively to the gateway cities (New York, Washington DC, Los Angeles, Seattle, etc.), has found its way to Philadelphia with the recent purchase of the previously mentioned Cira Square (the former Post Office build- ing across from 30th Street Train Station). I am bullish that Philadel- phia’s highest quality assets will continue to attract for- eign investment as the em- ployment base along with the residential, entertainment, retail, hospitality, academic and healthcare footprint con- tinue to expand in the CBD and its neighborhoods.

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