8C — February 28 - March 12, 2020 — Commercial Office Properties — M id A tlantic Real Estate Journal
C ommercial O ffice P roperties
Including suburbs, Southern New Jersey, and Northern Delaware The Greater Philadelphia Office Market closes the decade on a high note
relocation and expansion into 105,000 s/f at 785 Arbor Way in Blue Bell, FXI’s relocation and slight downsizing into 34,122 s/f at 100 Matson- ford Rd. in Radnor, and Pilot Freight’s consolidation of mul- tiple locations to a 45,000 s/f new global headquarters at 2 Braxton Way in the Southern 202 submarket. The suburban office development pipeline expanded in the fourth quarter as construction commenced on the 260,000 s/f Seven Tow- er Bridge in Conshohocken, which is 50.0% preleased. More new development is ex- pected in 2020; there are seven major proposed projects being marketed across the suburban region. Speaking about the tenant interest generated by these opportunities, NKF execu- tive managing director Jeff Mack said, “There are mul- tiple proposed office projects in advanced negotiations with anchor tenants to kick off construction, including 675 E. Swedesford Rd. – a 145,000 s/f new Mass Timber office build- ing that Equus Capital Part- ners will begin on speculative basis in spring 2020.” Overall asking rents closed out 2019 at $27.76 psf, up over $0.50 psf from the prior year. New construction is setting new standards for rent achieve- ment in the suburban market, with rents for the office proj- ects being negotiated at levels near or even exceeding $50.00 psf full service. The capital markets sector was active in the fourth quar- ter: a notable sale transaction occurred at 200 North Warner Rd. in the King of Prussia submarket where the property traded for $37.9 million ($230 psf). With an additional 3.0 million s/f of space on the mar- ket for sale in the suburbs, the capital markets environment is expected to remain healthy throughout 2020. In the Southern New Jersey office market, net absorp- tion accumulated in the last quarter of 2019 totaled 28,274 s/f. The largest quarterly oc- cupancy occurred in Marl- ton, where Friedman LLP relocated and expanded within the submarket, occupying 21,000 s/f at Four Greentree Centre. Vacancy in the Cam- den/Pennsauken submarket reached a record low at 8.4% in the fourth quarter of 2019; as a result, demand by tenants
in the market for large blocks of space continues to feed into the suburban submarkets. NKF associate director Keith McClure said, “We ended the year on a strong note. Solid intermarket activ- ity and large move-ins from Jefferson and Camden County scheduled in the quarters to come will keep momentum healthy going into 2020.” On the capital markets side of the Southern New Jersey office sector, total sales volume for 2019 eclipsed $252.5 mil- lion, just under the five-year historical high of $261.6 mil- lion achieved in 2017. Con- tributing to the 2019 total was Strategic Funding Alterna- tives , expanding its local foot- print this quarter by purchas- ing Woodland Falls Corporate Center for $33.0 million, and the eight-property portfolio of East Gate Business Center for $10.0 million. Investor inter- est is likely to remain positive through the upcoming year, as private investors continue to explore a wealth of value-add options for sale in the market. At year-end, well over 1.0 mil- lion s/f of office product was being marketed for sale in Southern New Jersey. At the close of 2019, demand in Wilmington’s office market sector was strong. Total net absorption in the fourth quar- ter reached 63,000 s/f and as a result trimmed vacancy down to 16.3 %. Overall rental rates in Wilmington remained flat quarter-over-quarter at $26.05 psf yet were up over $0.50 psf from a year ago. The largest occupancy this quarter oc- curred at 90 Christiania Rd. in Wilmington South where Sallie Mae expanded into 54,000 s/f, bringing its total footprint in the building over 100,000 s/f. The Wilmington market’s most successful co- working operator, The Mill, occupied a second location in the Concord Plaza in Wilm- ington North, and will expand into the entire seventh floor of the CBD’s Nemours Building – and is reportedly in talks to take another floor at Nemours. Capital markets activity, driven primarily by new-to- market investors, totaled $136.4 million for the year, a substantial increase from 2018’s volume, and is likely to continue at a productive pace throughout 2020 as multiple office properties are being marketed for sale.
The Wilmington market witnessed exciting new devel- opment announcements this quarter: The University of Delaware’s STAR campus is expanding with a $38 million, 100,000 s/f office building that will directly cater to fintech tenants in both the public and private sector, and life sci- ences firm Incyte acquired 20
acres of land on which it plans to expand its existing campus. According to NKF senior managing director Wills El- liman , “The forthcoming new development highlights sec- tors of industry, like fintech and scientific R&D, that will be integral parts of the mar- ket’s growth in the new de- cade.”
HILADELPHIA, PA — Newmark Knight Frank (NKF) released
i t s f our th - quarter 2019 office reports for the Phila- delphia CBD and suburbs, S o u t h e r n New Jersey, and Northern D e l awa r e .
Bergman Real Estate . . .
Across the region, the office market concluded 2019 with robust positive absorption, continued rent growth, new construction, and the prom- ise of more demand-driven development to kick off the new year. In Philadelphia’s Central Business District (CBD), market activity was largely driven by the “eds & meds” sector, which contributed sig- nificantly to the overall quar- terly absorption of 142,976 s/f through notable deals such as Children’s Hospital of Phila- delphia and Limelight Bio, each leasing a full floor at 3535 Market St. in University City. “Eds & meds” is also among the sectors catalyzing new de- velopment. Drexel University officially signed for a 258,000 s/f build-to-suit in University City this quarter and exer- cised the option to expand the building to 454,000 s/f to ac- commodate multiple College of Medicine programs. This was one of two new build-to- suit deals signed in the fourth quarter downtown; Morgan Lewis & Bockius also signed with Parkway Corporation for a 308,000 s/f build-to-suit at 2222 Market St. Regarding the heightened build-to-suit activity in the CBD, NKF executive manag- ing director Jim Egan said, “Organizations are looking for the latest design concepts that best accommodate their use. Getting the right layout is more important than the rent delta between new con- struction and existing product. Cost is important but not the only factor in their real estate decisions.” Overall asking rents rose 1.0% or more every quarter in 2019 to just under $34.00 psf CBD-wide at year-end. In the suburban Philadel- phia office market, overall vacancy fell to 14.0% in the fourth quarter, a rate not seen since 2001. Notable occupan- cies included Signant Health’s
It’s located close to hotels, banks, shopping, and minutes from the heart of downtown Morristown. For out of town travelers, Newark Liberty International Airport is just 20 minute trip, and midtown Manhattan is less than 30 miles away. Montclair for quite some time now. It’s proximity to the train station and downtown make it appealing to investors,” said Blanc. “The new owner is an investor who is active in the area and is looking use the space for his real estate com- pany office.”
partner, Time Equities, imple- ments an “Art in Buildings” program throughout all of its properties across the country. Jefferson Exchange is easily accessible with convenient ac- cess to I-287 as well as Rtes. 24, 10, 46, 202, I-78 and I-80. continued from page 7C MONTCLAIR, NJ — The Blau & Berg Co. brokered the sale of 1,000 s/f office in Montclair. Karine Blanc, sales associate of The Blau & Berg Co. represented the buyer and seller in this transaction. “42 Elm St. has been a pro- fessional services office in
The Blau & Berg Co. arranges sale of 1,000 s/f office in Montclair, NJ
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