2016 GREATER PHILADELPHIA - SSH Real Estatesshrealestate.com/pdf/2016_MidYear_marketreport.pdf · 2016-07-22 · At the end of Q2 2016, the average asking rent for the Philadelphia

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2016 GREATER PHILADELPHIA M I D - Y E A R O F F I C E M A R K E T R E P O R T A N D O U T L O O K

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CONTENTSEXECUTIVE SUMMARY Page 1

PHILADELPHIA Page 2

SUBURBAN PHILADELPHIA Page 12

VACANCY & RENTAL RATES Page 22

COMPANY NEWS Page 24

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EXECUTIVE SUMMARY

Select Lease Transactions

Tenant Size (SF) Building Type

SCA Americas Inc 100,000 Cira Centre Renewal

Comcast 81,000 Two Logan Square New

CDI 34,987 BNY Mellon New

UPenn Health System 29,583 Centre Square Extension

JEVS* 20,192 1845 Walnut Renewal

Sidecar* 15,550 One South Broad New

Select Lease Transactions

Tenant Size (SF) Building Type

Franklin Mint Federal Credit Union

52,000 Five Hillman Drive New

SEI Investments Co. 45,532 52 E. Swedesford Road New

Liberty Mutual Insurance Company

42,418 2200 Renaissance Blvd New

Arrow Electronics Inc 39,250 651-665 Winks Lane Renewal

Windtree Therapeutics 30,506 2600 Kelly Road New

Select Building Sales

Building Size (SF) Sale Price Price/SF

2.0 University Place 98,214 $41.25 M $420

One Washington Square 850,000 $114 M $134

Kaiserman Portfolio 702,014 $110 M $157

1501-1505 Walnut and 1520 Chestnut

67,500 $45 M $666

1525 Locust Street 98,083 $17.7 M $180

Select Building Sales

Building Size (SF) Sale Price Price/SF

20 Moores Road 320,000 $123 M $382

134 N. Wayne Avenue* 15,150 $4.6 M $307

2600 and 2700 Kelly Road 121,500 $19.75 M $163

Chester Creek Business Center 178,600 $22 M $123

Brandywine Realty Trust's 58-Building Portfolio

3.9 M $398.1 M $102

Tenants in the Market

Tenant Size (SF) Submarket

Aramark 300,000 Center City

Five Below 100,000 Center City

Margolis Edelstein 35,000 Center City

Tierney Communications 35,000 Center City

Jenkins Law Library 35,000 Center City

Tenants in the Market

Tenant Size (SF) Submarket

Undisclosed Tenant 290,000-250,000 Chester, Delaware County

Cigna 80,000-60,000 Plymouth Meeting/Blue Bell

Microsoft 50,000 Malvern

East Penn Manufacturing 30,000 Delaware County

SSRS 20,000 Glen Mills

PHILADELPHIA SUBURBS

* TRANSACTION REPRESENTED BY SSH REAL ESTATE

PHILADELPHIA

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RENTAL RATESAt the end of Q2 2016, the average asking rent for the Philadelphia CBD was $28.03 PSF. This represents a positive increase of 0.8% from the end of 2015, when the average rent was $27.80. Both University City and Market Street West exhibited strong Class A rental rates of $41.59 and $30.37 PSF, respectively. With the new developments at East Market, Class A rent at Market Street East is $29.67 and could soon equal the rent at Market Street West.

SOLDAfter purchasing the note on One Washington Square in 2014 and implementing a capital improvement plan, Rubenstein Partners has sold the 850,000 SF property totaling three towers to Keystone Property for $114 million or $134 PSF. The new owner plans to turn the ground-floor and mezzanine office space at 530 Walnut Street into retail space.

Club Quarters, a boutique hotel located at 1628 Chestnut Street, was purchased by Blackstone Real Estate Advisors for $63 million as part of a portfolio purchase. The portfolio consists of 1,228 rooms and includes the Club Quarters hotels in San Francisco, Boston and Chicago.

2.0 University Associates has sold 2.0 University Place, located at 30 North 41st Street in University City, to an affiliate of Zurich America for $41.25 million ($420 PSF), which is the highest price paid to date for a multi-tenanted office building in Philadelphia. The property is the first office building in the United States with double LEED platinum certifications. The property received significant interest from institutional investors due to its stable roster of tenants and its location within University City.

INVESTMENT SALES

Although the global markets were volatile during the first half of 2016 – due to new regulations, continued faltering economies in Europe and China, a massive oversupply of oil inventory, and finally the unexpected outcome of the Brexit referendum – the Philadelphia real estate market was unperturbed and remained robust. Many real estate deals were successfully closed. Two major transactions were the sale of 2.0 University Place and One Washington Square for $41.25 million ($420 PSF) and $114 million ($134 PSF), respectively.

OUTLOOK

VACANCYAt the end of Q2 2016, the average vacancy rate in the Philadelphia CBD was 9.96%, which was a slight increase from the end of 2015. While the average vacancy rates in most of the CBD submarkets decreased, the high vacancy rate in the Independence Hall submarket was a drag on the overall average.

MRP Realty purchased the Kaiserman Company Portfolio for approximately $110 million. The portfolio has three office buildings and one parking garage, totaling 702,014 SF, and consists of 400 Market Street (169,000 SF), 325 Chestnut Street (79,774 SF), 111 South Independence Mall East (281,000 SF) and 400 Ranstead Street (a parking garage).

Allan Domb Real Estate purchased 1525 Locust Street from Equity Commonwealth for $17.7 million, or approximately $180 PSF.

PH Retail, an affiliate of Post Brothers Apartments, has purchased 1501-1505 Walnut and 1520 Chestnut for $45 million ($666 PSF) from Pennsylvania Real Estate Investment Trust (PREIT). The sale totals 67,500 SF.

Cross Properties purchased two adjoining properties totaling 5,706 SF at 1601-1603 Lombard Street* and 424 S 16th Street* from AlphaCare for an undisclosed price. The property was fully leased to three tenants at the time of sale.

FOR SALEEquity Commonwealth, a Chicago-based real estate investment trust, has put up Centre Square, located at 1500 Market Street, for sale. Equity Commonwealth acquired the property in 2002 for $183.5 million. The 36-story East Tower and the 43-story West Tower total approximately 1.85 million SF, along with a 415-car garage.

OUTSIDE INVESTORS ARE TAKING A GREATER INTEREST IN CENTER CITY REAL ESTATE, WHILE OUT-OF-MARKET BUSINESSES ARE

INCREASING THEIR PRESENCE DOWNTOWN.

“ “

2016 STATE OF CENTER CITY PHILADELPHIACENTER CITY DISTRICT

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In 2015, visitors to Center City filled approximately 3.1 million hotel nights, hitting a record-high average occupancy rate of 77.4% and Saturday occupancy rate of 88.2%, according to Visit Philadelphia. While Pope Francis’ visit in September 2015 and the announcement earlier in the same year of the upcoming Democratic National Convention in July 2016 have thrust Philadelphia into the limelight, accolades from influential organizations have also increased both national and international awareness for the City of Brotherly Love. In 2015, Philadelphia was named: the number three place to visit in the New York Times’ “52 Places to Go in 2015”; America’s first UNESCO World Heritage City; and the number one place to visit in the United States by Lonely Planet.

Not surprisingly, the increased interest not only includes tourism but also firms considering Philadelphia as a place for their offices. The city has many attractive qualities to these companies, including proximity to both New York City and Washington DC, access to a talented pool of potential employees, and the Job Creation Tax Credit. Since the beginning of 2015, at least 21 companies representing approximately 400,000 SF have established their offices in the City of Philadelphia.

Company Location in PhiladelphiaSF Leased

American Bible Society 401 Market Street 92,514

Make Offices Seven Penn Center 56,000

EisnerAmper* 130 N 18th Street 42,000

Make Offices Two Commerce Square 23,000

Carpenter Technology 1735 Market Street 22,000

GSI Health 1735 Market Street 15,553

Linode Corn Exchange Building 15,000

Insight Global 1735 Market Street 11,699

iPipeline 2300 Market Street 11,300

IntegriChain 8 Penn Center 10,500

Marcus & Millichap One Commerce Square 10,000

Modsolar 211 N 13th Street 9,500

DramaFever Inc Three Logan Square 9,300

Pruftechnik Inc. 7821 Bartram Avenue 9,000

HOK One Logan Square 8,833

M3 Global Research One Liberty Place 8,794

Wipfli Three Logan Square 8,000

DiD30 South 15th Street (Graham Building)

7,900

DDC Works718-20 Arch Street (Cast Iron Building)

5,000

GZA GeoEnvironmental Inc 1515 Market Street 4,629

Formcraft 1515 Market Street 3,500

Reed & MacKay Strategic Travel Management

Widener Building 1,925

Since the beginning of 2015, at

least 21 companies representing

approximately 400,000 SF have

established their offices in the

City of Philadelphia.

INCREASED INTEREST IN PHILADELPHIA

JEFFREY R. SELIGSOHN, SIOR, PARTNERSSH REAL ESTATE

WE ARE WITNESSING A MAJOR DEMOGRAPHIC SHIFT IN CENTER CITY WITH MILLENNIALS MOVING INTO THE CITY IN RECORD NUMBERS. THUS,

WE EXPECT TO SEE MORE COMPANIES ESTABLISH A BASE IN THE CITY.

“ “

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NEW OFFICE DEVELOPMENTS

There are now approximately 2.7 million SF of office space being developed in Center City, with the majority of the square footage coming from the FMC Tower and the Comcast Innovation and Technology Center. Other major projects that are poised to bring new and/or renovated space to the market include 2400 Market Street (previously home to Marketplace Design Center), One Franklin Tower (200 N 16th Street), and 1100 Ludlow Street (previously 34 S. 11th Street). Of this new space, approximately 65% of the total square feet has been leased and absorbed by the market.

Additionally, due to the limited office space currently available and the continued tenant demand for new or updated space, landlords are renovating and redeveloping existing office buildings that have become dated.

Brandywine Realty Trust’s development of the 47-story FMC Tower is expected to finish this summer. It is the new home of FMC Corporation, a chemical company, and will be the first “vertically integrated campus” in Philadelphia, featuring a 72-foot swimming pool, urban park, and retail/residential units. The University of Pennsylvania also signed a lease totaling approximately 100,000 SF.

PMC Property Group and Lubert-Adler plan to develop 2400 Market Street and the adjacent property, 2324 Market Street, into a mixed-use project consisting of offices and residences. Additionally, the new owner is considering adding retail and restaurants to serve future tenants. In a different project, PMC Property Group is redeveloping 200 N 16th Street into One Franklin Tower, a mixed-use property that will include 209,372 SF of renovated office space.

Liberty Property Trust and Comcast are constructing the Comcast Innovation and Technology Center, a 1.5 million square foot office tower at 1800 Arch Street. The building will consist of 1.3 million square feet of office space, with Comcast as the only tenant, and a 222 room Four Seasons Hotel on the top of the building.

The developers of the East Market project (National Real Estate Advisors, SSH Real Estate, JOSS Realty Partners and Young Capital) are well underway to complete a total renovation of the former Family Court building at 1100 Ludlow (previously 34 S. 11th Street) into 175,000 square feet of new, LEED certified office space. The redeveloped building will add unique class A+ space to a submarket that lacks high-quality creative space.

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CITY

MARKETSTREET WEST

MARKETSTREET EAST

SOUTH BROAD

INDEPENDENCEHALL

30th Street Station

PhiladelphiaArt Museum

SuburbanStation

RittenhouseSquare

WashingtonSquare

JeffersonStation

PennsylvaniaHospital

IndependenceMall

CityHall

PennsylvaniaConvention Center

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MARKET WEST

WeWork will open 40,000 SF of co-working space at 1601 Market Street, making it the third Philadelphia location for the co-working giant. The other two are located at Schmidt’s brewery building in Northern Liberties and 1430 Walnut Street. While co-working spaces do not occupy a significant portion of the office market, they are steadily growing and thriving, filling a demand in the market.

Financial Industry Regulatory Authority (FINRA) signed a lease for 19,866 SF at 1601 Market Street.

Marcus & Millichap, a commercial real estate services firm, is moving from its 8,700 SF space in Conshohocken to 10,000 SF in One Commerce Square, located at 2005 Market Street.

With several recent signed leases, BNY Mellon Center (1735 Market Street) is reducing the high vacancies caused by the departure of chemicals giant FMC Corporation and Sunoco. These leases include:

• PFM Group, a financial advisory firm, which is moving its corporate headquarters from Two Logan Square to the 42nd and 43rd floors

• Carpenter Technology Corp with a 22,000 SF lease• GSI Health, a healthcare IT company, with a 15,553 SF lease• CDI, formerly known as International Visitors Council, an

organization that administers international exchange programs for the US Government, with a 34,987 SF lease.

Comcast signed a lease for approximately 81,000 SF at Two Logan Square, located at 100 N 18th Street. This is in addition to the still-under-construction Comcast Innovation & Technology Center, which is expected to be completed by early 2018.

The University of Pennsylvania Health System signed a long-term lease of 29,583 SF at the west tower of Centre Square, and now occupies a total of 264,000 SF in that building. Penn Medicine initially signed up for space in the building in 2007 and has been growing steadily since.

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MARKET WEST

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MARKET EAST

The owners of East Market – a group consisting of National Real Estate Advisors, SSH Real Estate, Young Capital, and Joss Realty Partners – are in the midst of construction of the 1100 Market Street building. Upon completion in the Spring of 2017, the 1100 block of Market Street will have 322 new apartments and 100,000 SF of retail and dining options with underground parking. Next door, at 1100 Ludlow Street (previously 34 S. 11th Street), the owners of East Market have installed a new façade with floor to ceiling windows. This building is already 50% pre-leased with Mom’s Organic, The Design Center, and Bohlin Cywinski Jackson.

Thomas Jefferson University Hospitals purchased 1100 Chestnut Street, currently occupied by the popular restaurant Milkboy, from U3 Ventures for $2.1 million.

Brickstone has been transforming various parcels within the Midtown Village area. The redevelopment of the 1100 block of Chestnut Street, previously occupied by the Oppenheim Collins department store, involves nearly an entire block of new construction and redevelopment, and upon completion it will include 112 rental apartments and 90,000 SF of retail. Target will open its first “express” small-scale store in Philadelphia and occupy the ground floor space with a July 20, 2016 opening date. This location will be one of Target’s three stores in Center City. The other two will open at Rittenhouse Square and the Art Museum area.

MARKET EAST HAS BECOME THE HOTTEST SUBMARKET IN CENTER CITY BASED ON THE RESIDENTIAL, OFFICE AND RETAIL GENERATED FROM THE TRANSFORMATIVE EAST

MARKET DEVELOPMENT AND OTHER MAJOR PROJECTS IN THE IMMEDIATE AREA.

“ “

PETER C. SOENS, PARTNERSSH REAL ESTATE

The Yard, a New York based co-working group, has leased the top four floors of the Steele Building, located at 15-21 S 11th Street. The Co-working provider will operate 24,000 SF of shared offices and provide its tenants with a 1,650 SF roof deck. This will be the first Philadelphia space for the Yard, which operates six locations in New York.

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SOUTH BROAD

SSH Real Estate is in the process of renovating the historic Witherspoon Building (130 S. Juniper Street) and is marketing 75,000 SF of the space for lease. Built in the 1890s, the 157,571 SF building was named in honor of the Reverend John Witherspoon, a signatory of the Declaration of Independence and former President of Princeton University. Upon completion in 2016, the building will feature an updated lobby and amenities with creative office space.

Zivtech, a web design and development company, signed a 9,860 SF long-term lease at One South Broad Street. Another lease recently signed at the same building includes a 15,550 SF lease to Sidecar*, an internet marketing company.

Pearl Properties broke ground on its latest project. Upon completion, the Cambria Hotel and Suites, located at 219-225 S. Broad Street, will feature 14 stories and 222 rooms. This is the third planned hotel project at South Broad in the past year and half. The other two are the SLS Lux Philadelphia Hotel & Residences (Broad and Spruce Street) and the SLS Hotel (Broad and Pine Street).

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INDEPENDENCE HALL

Cast Iron Building, located at 718-20 Arch Street, signed two leases totaling 12,488 SF. Advertising agency DDCworks decided to relocate from the suburbs and signed a 10 year lease on 5,000 SF; Vanderwell Engineers renewed and expanded into 7,488 SF.

Alphabroder, an active wear distributor, has expanded its sales office at 400 Market Street by an additional 3,800 SF, bringing its total occupancy to a total of 15,800 SF in the Center City location.

After Rubenstein Partners renovated One Washington Square, located at 508-510 Walnut Street, approximately 140,000 SF of new deals and expansions have been signed:

• Agro Fresh, a Dow Chemical offshoot, leased 11,000 SF• Foundation for Individual Rights in Education relocated from the

Curtis Building and leased 12,600 SF• Hersha Hospitality Trust renewed and expanded into 24,000 SF• Fox & Roach, the real estate company, moved into a new 22,500

SF space• AKRF Inc., an engineering firm, leased 3,700 SF. The building was

recently purchased by Keystone Property Group for $114 million or $134 PSF.

Blackney Haynes Architects extended its 15,000 SF lease at the Public Ledger Building, located at 600 Chestnut Street, for another five years.

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The first phase of Pennovation Works, a 23-acre innovation and research hub, is anticipated to open at 3401 Grays Ferry Avenue this summer. This 52,000 SF facility, anchored by a two-story amphitheater in the middle of the complex to promote collaboration, has received strong leasing interest from innovative companies due to the property’s proximity to the University of Pennsylvania and access to talented students. The Hershey Company will take 1,500 SF to house Hershey’s Advanced Technology & Foresight Lab, studying innovations in manufacturing, packaging, food production and consumer science.

University Place Associates (UPA) plans to develop 3.0 University Place, a proposed LEED Platinum-certified office complex at 41st and Market.

109-115 S 24th Street, an 11,600 SF mixed-use property, was sold for $2.2 million. The property consists of parking and retail space leased to a CrossFit and jiu-jitsu studio, each occupying 2,800 SF of space. The property is zoned CMX-4 and is in close proximity to University City and the Schuylkill River Banks Trail, making it well positioned for several development possibilities.

Microsoft will open a 3,800 SF innovation center this summer at 3711 Market Street, also known as The Science Center, so that it can provide training in the company’s tools and technology to entrepreneurs, students and the community.

FMC Corp., the chemicals giant which recently moved out of the BNY Mellon Building, has begun the move into its eponymous building, which is still under construction by Brandywine Realty Trust. SCA Americas Inc., a hygiene and forest products company, renewed its 100,000 SF lease at Cira Centre, located at 2929 Arch Street.

UNIVERSITY CITY

After a national search, Drexel University picked Brandywine Realty Trust to develop Schuylkill Yards, a $3.5 billion innovation neighborhood, over the next 20 years. Under this arrangement, Drexel will be granting Brandywine long-term ground leases in the land for development. The first phase of the project will start within 12-24 months and will include a new park, renovating the Bulletin Building, and a 700,000 SF tower.

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Penn Capital Management Company signed a 26,000 SF lease at 1200 Intrepid Avenue, a four-story, 92,000 SF office building that is being developed by Liberty Property Trust. This is the 14th development for Liberty Property Trust at the Navy Yard. In a different project, Liberty has now unveiled plans for another development inside the urban office park, at 351 Rouse Boulevard. Upon completion of this 47,400 SF LEED certified facility, Adaptimmune, a British biopharmaceutical company with ties to Penn, will use the space as its US headquarters. The project is expected to be completed in late 2016.

ORGANIC GROWTH AND IN-MOVEMENT OF BUSINESS ARE ACCOUNTING FOR A GREATER SHARE OF OFFICE LEASING.“ “

THE NAVY YARD

2016 STATE OF CENTER CITY PHILADELPHIACENTER CITY DISTRICT

SUBURBANPHILADELPHIA

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RENTAL RATESAt the end of Q2 2016, the average asking rental rate for both Class A and B space in suburban Philadelphia was $25.16 PSF, with Class B exhibiting a positive growth of 3% from the end of 2015.

VACANCYOverall vacancy rates in suburban Philadelphia decreased from 12.03% at the end of 2015 to 11.73%. At 1.4%, Radnor has the lowest vacancy rate in the Greater Philadelphia Region. Additionally, strong leasing activities in submarkets such as the Main Line, West Chester, Conshohocken, and Bala Cynwyd are keeping the average vacancy rates in these submarkets in the single digits.

OUTLOOK

ROBUST DEVELOPMENT ACTIVITYWith the current low vacancy rates in key suburban submarkets, it has become more challenging for companies/organizations, especially medical institutions, to find large available space in these areas. As a result, suburban Philadelphia is witnessing robust development activities. Some of the major current developments include:

Submarket Project Building Type SF

Delaware County

1020 Baltimore Pike Class A Medical Office

131,000

600 Evergreen Drive Class B Medical Office

36,690

West Chester 300 Willowbrook Lane Class A Office 60,000

Main Line 135 Bryn Mawr Avenue Class A Medical Office

108,000

Conshohocken

400 West Elm

Class A LEED Platinum Office

340,000

The Millennial (near intersection route 23, interstate 76 and 476)

Class A Creative Office

420,000

King of Prussia 955 1st Avenue Class A Office 110,550

At 1.4%, Radnor has the lowest

vacancy rate in the Greater

Philadelphia Region.

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INVESTMENT SALES

1. 52 East Swedesford Road – this 131,000 SF multi-tenant property in Malvern has been placed on the market by Brandywine Realty trust.

2. ArborRidge – this 129,000 SF office building in Malvern is being marketed for sale. Alliance Partners HSP purchased the property in August 2012 and has been redeveloping the three-building office park.

The Philadelphia Suburbs continued to be unaffected by international headlines by focusing on positive fundamentals in the local markets. With employment and occupancy rates continuing along healthy trend lines, investors felt encouraged and bought all property types in the suburbs, including the sale of 20 Moores Road (Saint-Gobain’s headquarters) for $123 million or $382 PSF, 955 Mearns Road* in Bucks County for $16.1 million or over $53 PSF, and The Suburban Building in Wayne for $4.63 million or $306 PSF.

Owners continue to feed the investment market with new supply. Some of the properties currently on the market include:

3. Conshohocken Ridge – this 199,570 SF office building in Conshohocken has been offered for sale by Exeter Property Group.

4. Eight Tower Bridge – this 16 story trophy office tower in Conshohocken is testing the market.

5. The Ellis Preserve – Equus is marketing this unique 600,000 SF office campus in Newtown Square.

O W N E R S H I P | M A N A G E M E N T | D E V E L O P M E N T | L E A S I N G | A C Q U I S I T I O N

52 East Swedesford RoadMalvern, PA

Suite 100 - 41,186 Rentable Square Feet



Three Floors Availible for Lease

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3

5

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SELECT TRANSACTIONS

Chester Creek Business Center, a three-building complex totaling 178,600 SF at 100, 120 and 130 Concord Road in Aston, was sold for $22 million, or about $123 PSF, to Bentall Kennedy, a Canadian real estate investment company. At the time of sale, the building was fully occupied by six tenants.

A partnership involving a group of local investors and Long Wharf Real Estate Partners of Boston has purchased Evolve IP Corporate Center, a 12-building property totaling 376,300 SF, for $42 million or about $112 PSF.

180 Gordon Drive*, a 66,755 SF flex-building in Exton, was sold for $7.4. At the time of sale, the property was fully leased to ten tenants.

A joint venture consisting of foreign investors purchased 20 Moores Road (Saint-Gobain’s headquarters) for $123 million or $382 PSF.

THE PHILADELPHIA SUBURBS CONTINUED TO BE UNAFFECTED BY INTERNATIONAL HEADLINES BY FOCUSING ON POSITIVE DEVELOPMENTS IN THE LOCAL MARKETS.

280 Great Valley Parkway, a 32,500 SF flex-building in Malvern, was sold for $3 million to Anson Bionic.

Cornerstone Real Estate Advisers, a Hartford Connecticut based company, sold Stone Manor Corporate Center, located at 2600 and 2700 Kelly Road in Warrington (Lower Bucks County), to Pembroke Hobson LLC for $19.75 million or approximately $163 PSF. At the time of the sale, the 121,500 SF property was 100% occupied.

The biggest sale for the first part of 2016 was Brandywine Realty Trust’s sale of a multi-state leasehold interest in a 58-property portfolio to Och-Ziff Capital Management, a New York-based company, for $398.1 million. Some of the Philadelphia suburban properties in the portfolio are 500 Enterprise Road and One Progress Drive in Horsham, 920 Harvest Drive in Blue Bell, and Croton Road Corporate Center in King of Prussia.

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An entity affiliated with Universal Atlantic Systems (UAS), a security system provider, purchased 45 Industrial, a 12,000 SF building in Paoli, for $2.72 million or about $227 PSF. Because UAS has been growing rapidly in recent years, it has found it a challenge to find office space that can meet its space demands. The company plans to relocate into the new location by summer 2016.

Nemours Alfred I. duPoint Hospital for Children signed a 10-year lease for 9,500 SF at 1676 E. Lancaster Avenue in Paoli.

Pharmaceutical company Egalet signed a 19,773 SF lease at 600 Lee Road, a two-story building in the Chesterbrook Corporate Center developed by Pitcairn Properties in 1987.

Bryn Mawr Surgery, an affiliate of Main Line Health Systems, signed a 27,449 SF lease at 135 S. Bryn Mawr Avenue, a 108,000 SF building currently under construction with an expected completion date of March 2017.

Radius Health Inc., a Massachusetts-based biopharmaceutical company, has opened a 14,000 SF office in Wayne, where it aims to employ a staff of about 100 people. The drug company decided to expand into the Philadelphia market because of the region’s large number of medical institutions and innovative medical companies, and its access to a talented work force.

The Suburban Building*, a 15,150 SF building at 134 N. Wayne Avenue in Wayne, was purchased by a New Jersey investor for approximately $4.6 million ($304 PSF). The building, named after The Suburban and Wayne Times, a newspaper firm which occupied a portion of the building from 1905 to 2010, was 100% leased to seven tenants at the time of sale.

MAIN LINE

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RADNOR

MALVERN / EXTON

In 2015, the University of Pennsylvania Health System purchased an 18.2-acre site at 145 King of Prussia Road for an estimated $35 million from BioMed Realty Trust. Currently, Penn Medicine is in the preliminary planning stage of developing a medical office facility.

White Label Communications signed a 10,500 SF lease at 701 Springdale Drive in Exton.

One Whiteland Plaza, a 47,908 SF office building at 740 Springdale Drive in the Whiteland Business Park in Exton, was purchased by Springdale Properties for $3.14 million or about $66 PSF. The buyer also owns three other properties in the same business park.

SEI Investments Co., a financial services company, has signed a 45,532 SF lease at 52 E. Swedesford Road, a three-story building totaling 131,017 SF. SEI will occupy the entire third floor, joining MERIT Service Solutions and Verizon in the building. In a separate deal, Maine Line Health signed a 31,459 SF lease in the building.

AC Lordi, a consulting firm, signed a 11,000 SF, long-term lease at 75 Valley Stream Parkway in Great Valley Corporate Center.

Staffing agency People 2.0 leased approximately 14,000 SF at Valleybrooke Corporate Center in Great Valley Corporate Center.

The Radnor office market is presently

98.6% occupied.

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CONSHOHOCKEN

National Asset Services sold 300 Four Falls, a 298,482 SF office building, to Maguire Hayden for $98.4 million. The last time the building traded was 10 years ago for $100 million, or $340 PSF. Hayden, the buyer, plans to invest in upgrades to modernize the look of the space in order to attract tenants.

O’Neill Properties Group recently unveiled their plans to develop “The Millennial”, located near the intersection of Route 23, Interstate 76 and 476. Upon completion, the building will feature 420,000 SF of creative Class A office space, along with a 15,000 SF rooftop penthouse, a 1,700-unit parking facility, and amenities such as restaurants, pubs, and an amphitheater.

KING OF PRUSSIA

The owners of 198 Allendale Road, a 25,000 SF office building, will undertake a $2 million redevelopment that will involve upgrading the building’s common areas, lobby and bathrooms in order to attract tenants. The renovation is expected to be completed in fall of 2016.

Schweitzer Engineering Laboratories renewed its 16,800 SF lease at 671 Moore Road and expanded into 661 Moore Road. The tenants now occupies 21,498 SF across the two buildings.

Oak Hill Plaza, a 165,652 SF office building at 200 N. Warner Road, was purchased by Cohen Equities of New York through an auction for approximately $16.3 million. At the time of the sale, the building was 70% occupied.

AmeriGas Propane LLP signed a 34,135 SF lease with Keystone Property Group at Parkview, an office tower at 1150 First Avenue.

Liberty Mutual Insurance Company signed a 42,418 SF lease at 2200 Renaissance Blvd.

Teva Pharmaceutical signed a 60,307 SF lease at 2 West Liberty Blvd, a 100,000 SF building.

Highway to Health, a tech medical company, signed a long-term lease for a built-to-suite at 955 1st Avenue. This 110,000 SF building will be the first new office construction in the submarket in nearly a decade.

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NORRISTOWN / VALLEY FORGE

The sleepy town of Norristown might soon change with the Lafayette Street Extension, which will involve reconstructing and widening the existing Lafayette Street so that the riverfront area will be more attractive. In tandem with this project, the Pennsylvania Turnpike Commission has committed to constructing a new interchange connecting the turnpike with the Lafayette Street Extension. In an effort to revitalize the town, both municipal and school district officials are supporting a 10-year tax abatement to help lure private developers to build in the community.

MONTGOMERYCOUNTY

BOARD OFCOMMISSIONERS

Josh ShapiroChair

Valerie A. Arkoosh, MD, MPHVice Chair

Bruce L. Castor Jr.Commissioner

Scott BrownChair

Steven KlineChair

What’s Happening Here?

MCTAMontgomery County Transportation Authority

Phase 1: Extend Lafayette Street towards Conshohocken Road and Diamond Avenue Project completed

Phase 2: Widen and improve Ridge Pike, Diamond Avenue and Road; open the Lafayette Street Extension Contract awarded – Construction early 2015 to early 2017

Phase 3: Reconstruct/widen existing Lafayette Street and relocate the Schuylkill River Trail o� of the viaduct into a park setting Construction early 2017 to early 2018

Phase 4: New Interchange to PA Turnpike Planning under way

Phase 5: New Interchange with US-202/Dannehower Bridge Future project

FUNDING: 80% Federal Highway Administration 20% Montgomery County

www.lafayettestreetproject.com

Widen to 4 Lanes

Widen to 3-4 Lanes

New Off-StreetParking Alley

Widen to 5 Lanes / Turning Lanes

ConshohockenRoad Abandoned

DIA

MO

ND

RO

AD

Lafayette/Ridge PikePA Turnpike Interchange

Ridge PikeBridge Replacement with

Lafayette Interchange

PLYMOUTH

PA TU

RNPIKE

Schuylkill River Trail

RIDGE PIKE

FAIRFIELD RD

...AN EFFORT TO IMPROVE HIGHWAY ACCESS AND MOBILITY INTO DOWNTOWN NORRISTOWN AND PLYMOUTH TOWNSHIP.“ “

MONTGOMERY COUNTY PENNSYLVANIALAFAYETTE STREET EXTENSION PROJECT

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WEST CHESTER

DELAWARE COUNTY

Eagle Innovation Group, LP sold 45 Senn Drive, a 14,800 SF flex building located on 2.7 acres in Eagle Industrial Park in Upper Uwchlan Township, for $1.525 million. The property was built in 2000 and is equipeed with solar panels and geothermal HVAC.

Redgo Development has been in the process of converting a single story flex building into a 60,000 SF medical office complex at 300 Willowbrook Lane.

Teva Pharmaceutical continues to expand in West Chester and has signed a 25,000 SF lease at 500 Brandywine Parkway and a 13,000 SF lease at 600 Brandywine Parkway.

BALA CYNWYD

Keystone Property Group is planning two mixed-use development projects. 150 Monument Road will include parking and outdoor public spaces for office and residential tenants. One Belmont Avenue, acquired by Keystone in 2015, is situated on a 12-acre parcel. As well as these two properties, Keystone also owns One Presidential, 15 King’s Grant, and 225 City Avenue.

Franklin Mint Federal Credit Union signed a 15-year lease in Chadds Ford, where developer Henderson Group plans to build a 71,000 SF building at Five Hillman Drive. The financial firm has been located at 1974 Sproul Road in Broomall but has outgrown its space and needed a new space that would accommodate growth.

The Rothman Institute is expanding in Delaware County with the opening of a $10 million, 36,000 SF medical office complex in Glen Mills. The office focuses on physical therapy and orthopedic services and is located at the intersection of Route 322 and Route 1.

Pentec Health has signed a long-term lease for 35,000 SF at 9 Creek Parkway in Boothwyn*.

DELAWARE COUNTY

Five Hillman Drive

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PLYMOUTH MEETING / BLUE BELL

Brightview Landscapes signed a six year 26,058 SF sublease at 401 Plymouth Road, a 204,186 SF building in Plymouth Meeting.

Henkels & McCoy, an engineering and architectural firm, signed a 22,077 SF lease at 512 Township Line Road, an 84,906 SF building in Montgomery County. The company plans to occupy its new space this summer.

FORT WASHINGTON / SPRINGHOUSE

BET Investments, Inc. purchased Montgomery Corporate Center II, a four-story building totaling 225,722 SF located at 200 Dryden Road, in Dresher PA for $34.75 million, or approximately $154 PSF. BET separately purchased 75 acres of land adjacent to this property with plans to develop a mixed use business park.

TruMark Financial Credit Union signed a lease for 74,000 SF at 335 Commerce Drive.

HORSHAM / WILLOW GROVE

Workspace Property Trust, the new owner of the 41-building business park in Horsham, has leased over 150,000 SF of office space during the first three months of 2016. Some of the recent leases include Tyco SimplexGrinnell (36,000 SF), Finance of America Mortgage (33,200 SF), and New York Life Insurance Company (25,320). Workspace acquired the property for $245.3 million in December from Liberty Property Trust, which is strategically selling assets in the suburbs to focus on key markets.

MRA Group has begun construction on the Warminster Wellness Center at 201 Veterans Way. Upon completion, this 36,000 SF facility will be part of the Holy Redeemer Health System.

Gateway Funding Diversified Mortgage Services has renewed its 33,205 SF lease at 300 Welsh Road and will occupy the entire building until 2023.

LOWER BUCKS

Arrow Electronics Inc., a provider of electronic components and products, renewed its 39,250 SF lease at 651-665 Winks Lane in Bensalem.

Bracket Global, a clinical trial provider, relocated from multiple floors at 1 Summit Square into a 26,714 SF sublease at 1150 Northbrook Drive in Langhorne. The new space offers the company the opportunity to occupy a single floor, while still allowing for future growth.

An affiliate of MIM-Hayden Real Estate sold 955 Mearns Road*, a 303,000 SF flex-building in Warminster, to LRS Corp. for $16.1 million, or approximately $53 PSF. At the time of sale, the building was 96.5% occupied with seven tenants, including ChemPump, which occupies over half of the building.

International advertising firm Saatchi & Saatchi* has moved into its 3,000 SF space at 3600 Horizon Blvd., a 126,858 SF office building in Trevose. The New York-based company selected the Trevose location for is proximity to Philadelphia and Trenton.

Windtree Therapeutics, a biotechnology company, has signed a long term lease for 30,506 SF at 2600 Kelly Road, a three-story building totaling 61,775 SF in the Stone Manor Corporate Center in Warrington.

Sapling Clocks has acquired 670-682 Louis Drive, a 65,000 SF industrial building in Warminster, to serve as the company’s new headquarters and manufacturing site. The clock producer purchased the property for $3.2 million or about $49 PSF.

955 Mearns Road

22

PHILADELPHIA

Type Inventory (SF) Vacancy Avg. Asking Rent (PSF)

Market Street West A and B 26,954,008 9.37% $29.05

Market Street East A and B 5,212,185 9.36% $27.14

South Broad Street A and B 2,853,483 4.55% $25.46

Independence Hall A and B 6,126,148 15.62% $25.53

Philadelphia CBD A and B 41,145,824 9.96% $28.03


Market Street WestA 21,717,835 8.98% $30.37

B 5,236,173 10.96% $23.54

Market Street EastA 2,663,256 7.73% $29.67

B 2,548,929 11.07% $24.50

Independence HallA 2,710,711 10.14% $28.81

B 3,415,437 19.98% $22.93

University CityA 1,925,165 2.07% $41.59

B 1,735,938 6.69% $24.82

VACANCY & RENTAL RATES


Navy Yard A and B 1,095,449 3.09% $30.24

University City A and B 3,661,103 4.26% $33.64

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SUBURBAN PHILADELPHIA


Radnor A and B 2,395,323 1.37% $37.37

Main Line A and B 2,194,062 8.33% $29.68

Malvern | Exton A and B 8,053,251 9.05% $25.44

West Chester A and B 2,288,581 4.22% $23.76

Conshohocken A and B 3,191,076 5.32% $31.88

Norristown | Valley Forge A and B 4,589,882 10.19% $20.58

King of Prussia A and B 6,391,813 14.25% $25.94

Bala Cynwyd A and B 3,360,407 8.23% $31.85

Delaware County A and B 10,180,998 8.35% $22.62

Fort Washington | Springhouse A and B 3,311,967 22.09% $24.05

Lower Bucks County A and B 6,757,690 24.25% $22.01

Horsham | Willow Grove A and B 4,105,725 10.11% $24.30

Plymouth Meeting | Blue Bell A and B 6,257,944 14.34% $22.81

Suburban Philadelphia A and B 63,078,719 11.73% $25.16


Radnor A 1,954,073 1.20% $38.37

B 441,250 0% $33.00

Main LineA 733,648 3.20% $31.02

B 1,460,414 7.90% $29.00

Malvern | ExtonA 6,127,546 8.30% $26.03

B 1,925,705 10.50% $23.57

West ChesterA 699,228 2.10% $25.91

B 1,589,353 4.80% $22.82

ConshohockenA 2,680,003 7.70% $32.73

B 511,073 0% $27.40

Norristown | Valley ForgeA 2,401,518 9.20% $21.83

B 2,188,364 12.50% $19.21

King of PrussiaA 4,079,334 15.60% $28.75

B 2,312,479 16.00% $20.90

Bala CynwydA 2,259,067 8.50% $32.49

B 1,101,340 5.50% $30.55

Delaware CountyA 3,978,692 14.80% $26.62

B 6,202,306 7.40% $20.06

Fort Washington | SpringhouseA 1,628,120 22.60% $25.44

B 1,683,847 14.90% $22.70

Lower Bucks CountyA 2,933,187 28.80% $25.17

B 3,824,503 24.40% $19.58

Horsham | Willow GroveA 2,271,324 7.40% $24.77

B 1,834,401 9.60% $25.28

Plymouth Meeting | Blue BellA 3,605,840 11.10% $22.95

B 2,652,104 17.00% $22.62

24

COMPANY NEWS

SELECT TRANSACTIONS

• Cathryn Coate represnted The Committee of Seventy, a political watchdog group and provider of election information, with its 2,663 SF lease at 123 S. Broad Street.

• Eric Muller represented Sidecar, an internet marketing company, with its 15,550 SF lease at One South Broad.

• Eric Muller represented Saatchi & Saatchi with its 3,000 SF space at 3600 Horizon Blvd., a 126,858 SF office building in Trevose.

• Jeff Seligsohn represented JEVS Human Services with a 20,192 SF lease at 1845 Walnut Street.

• Jan Kennedy represented Mather Brothers with a 2,962 SF lease at 400 Market Street.

• Brian Mears and Kevin Hagenberg represented ownership at 370 Reed Road in Broomall, DE County with a long term renewal with GSA for 17,500 SF.

• Eric Muller represented Play on Philly with its 2,150 SF lease at 1520 Locust Street.

• Donald Grimes and Brian Mears represented Priority Express, Inc with two leases: 25,926 SF lease in Annapolis Junction, MD and 15,000 SF in Piscataway, NJ.

• Mike Kennedy represented Pond Lehocky Stern with its 2,693 SF lease at 532 Lackawanna Avenue in Scranton.

• Brian Kash represented GDI, Inc. with their 7,300 SF lease at 780 5th Avenue in King of Prussia, PA.

• Kevin Hagenberg represented an investor with their purchase of two medical office peroperties in Thorndale and King of Prussia totaling $4.5 million.

• Brian Mears and Kevin Hagenberg represented ownership at Naamans Creek Business Center in Boothwyn, DE County with two leases: 11,400 SF with Diplomat Pharmacy and 17,200 SF with Pentec Health.

INVESTMENT BROKERAGE

The SSH Investment team, led by Dan Mayock, represented the sellers in the sale of the below:

• Suburban Building, a 15,150 SF building at 134 N. Wayne Avenue in Wayne.

• 955 Mearns Road, a 303,000 SF flex-building in Warminster.• 1601-1603 Lombard Street and 424 S 16th Street in Center City.• 1075 Andrew Drive, a 65,200 SF building in West Goshen.

MANAGEMENT NEWS

• SSH has been selected by Allan Domb Real Estate to manage 1525 Locust Street, a 98,083 SF building in Center City.

NEW HIRE

Tyler Berlinsky is an Associate in the Investment Services Division. Tyler, who has his real estate licenses in New Jersey and Pennsylvania, recently graduated from Pennsylvania State University with a concentration in Communications and Information Technology. During his most recent summer internship at Markeim Chalmers Inc., he oversaw the sale processes of $4 million of office

transactions. He is also actively involved in community service and has had leadership roles in fundraising for Autism Speaks/Cure Autism Now and Bringing Up Down Syndrome.

Tyler has interned at real estate firms Markeim Chalmers, Inc. (Cherry Hill, NJ) and Resource Real Estate (Philadelphia, PA).

A day at the Phillies! SSH Real Estate enjoyed an outing to Citizen’s Bank Park in May. Our very own Tom Borgese caught a foul ball!

25

SSH Real Estate is one of the largest privately held commercial real estate companies in the Greater Philadelphia Region.

The firm is unique in that it is the only commercial real estate company in the area with the size and scope of experience in brokerage, property management, and investments. SSH Real Estate’s expertise in each line of service provides a better knowledge base and “big picture view,” which enables the firm to produce superior results for its clients.

SSH REAL ESTATE

ABOUT

CENTER CITY OFFICE123 South Broad Street | 8th Floor | Philadelphia, PA 19109 | (215) 893-3000

Jeffrey R. Seligsohn, SIOR, Partner | (215) 825-1500Peter C. Soens, Partner | (215) 825-1510Gregory B. Muller, COO & Partner | (215) 825-1513

SUBURBAN OFFICE2 Country View Road | Suite 110 | Malvern, PA 19355 | (610) 995-1010

Brian D. Mears, CCIM, Partner | (610) 601-4202

Documents

2016 GREATER PHILADELPHIA - SSH Real Estatesshrealestate.com/pdf/2016_MidYear_marketreport.pdf · 2016-07-22 · At the end of Q2 2016, the average asking rent for the Philadelphia