M id A tlantic Real Estate Journal — Spring Preview —April 24 - May 14, 2020 — 13C
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A ppraisal By Roy Melton
Rittenhouse Appraisals sees resilience in Phila. region’sCREmarket despitedownturndue toCOVID-19
he COVID-19 crisis could create opportu- nities for the Philadel- phia region to thrive as a real estate market go- ing forward, and buttress its reemer- gence as a c ent e r f o r b u s i n e s s , according to an expert at Rit- tenhouse Appraisals. The fundamentals that have driven a recent real estate boom, largely remain, said Carlo L. Batts, MAI, principal of the Center City-based firm. There is a demand for hous- ing and services created by an influx of well-paying jobs in the medical and science fields, and those job sectors tend to remain strong, said Batts. Batts’ firm provides real estate market research for institutional and private in- vestors. And, though he ac- knowledged that the crisis has slowed the market, the in- terest in the region continues. Batts cited the West Phila- delphia submarket, which has recently been one of the region’s hottest, as one that will likely power through the economic downturn, driven by demand in the multifamily and commercial sectors. “The area is incubating into a primary office submarket and further expansion as a medical submarket and the research parks and medical research and science expan- sion is going to continue,” Batts said. “Up until the shutdown you had a consis- tent movement of new devel- opment, whether it was the Schuylkill Yards development or out at 38th and Market, that were bringing an influx of new jobs.” Those jobs have largely tended to be medical related or scientific research posi- tions, meaning they offer above average pay. That will fuel a demand for housing and services, which will drive the residential and commer- cial real estate development. “There is going to be further demand in the marketplace to support what is already in- tact, underway and to come,” Batts said. Overall, prior to the crisis, the Philadelphia region had been eyed by investors as an emerging opportunity, he T Roy Melton
said. “It was viewed as an af- fordable option because land values were in a hole and it was below everything else in the northeast seaboard. That will continue to attract investors.” West Philadelphia will con- tinue to bring investment due to the opportunities that ex- ist, Batts said. There are also tracts in the area that Batts cited which appear ripe for activity, such as the pocket betweenMarket Street andWalnut Street that is zoned CMX-4, or mixed use, are underutilized. These tracts could attract high-den-
sity, high-rise development, he said. “I don’t think there is going to be much contraction to the University City area,” Batts said. “I don’t think it is going to suffer very much from all of this. If anything, there will be an increase.” Low interest rates will also impact liquidity and the avail- ability of funds or access to capital to drive projects, said Batts. “There will be more en- trepreneurial efforts on behalf of the private market.” That could mean continued development in the medical re- search, medical office markets
and in the multi-family market. “There is still a housing crisis in Philadelphia and in the re- gion,” Batts said. He suggested that, despite the implications of social distancing to slow the spread of the virus, people still want convenience in their lives. “I believe in these sorts of times people want to be closer in, in a densely populated area.” “I think it further solidifies the trend for urban living, but in a more integrated housing structure,” Batts observed. That could lead to more mixed-use, high-rise develop- ments. “So, then, someone can accomplish everything they
need to in a confined quarter, making them less affected by environmental changes out- side of that. Because of that, you are going to see more inte- grated neighborhoods within a building.” Batts didn’t paint a com- pletely rosy picture, predicting that the overall region may see some negative impact due to some troubled projects that won’t be able to survive the dis- ruption. “I think you are going to see some bad projects hit the market or go into foreclosure or banks start taking back more assets,” he said. “You are going continued on page 16C
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