Office Sector News
American Real Estate Partners Closes On 1600 Market
American Real Estate Partners has completed its purchase of 1600 Market St., for $160 million from Equity Commonwealth. The 39-story, 825,968-square-foot tower is 84% leased. Since 1995 it has been the home of PNC Bank, which has leased 230,000 square feet through May 2031 though it used to occupy 350,000 square feet.
By shrinking the amount of space PNC occupies, Herndon, Va.-based American Real Estate will be marketing 115,000 square feet of contiguous space at the end of the year.
1818 Market Starts Phase II of Renovations
Shorenstein Properties has announced that 1818 Market’s $21 million renovation project is moving into Phase II of construction. Planned additions will include a fitness facility, a conference center and a new coffee shop in the building lobby, part of a growing trend of adding on-site amenities to office buildings.
Previous upgrades include a building facade restoration, lobby renovation, elevator cab retrofit, new cooling towers and chillers, select corridor and bathroom upgrades, and pre-built office suites.
1650 Arch St. On The Market
CBRE Global Investors has put up for sale 1650 Arch St., a 553,000-square-foot building that has been the home of the Environmental Protection Agency since 1998.
The EPA is the building’s biggest tenant and occupies 307,847 square feet and has a lease until 2020. When CBRE bought the building three years ago, it paid around $70 million. The tower is 93% occupied and could trade for an estimated $85 million.
Liberty Property Trust to sell suburban holdings and relocate HQ
Liberty Property Trust plans to sell nearly all its Philadelphia suburban office inventory by the end of this year, and concentrate its focus on industrial and warehouse properties.
The sales will leave Liberty with office holdings only in Philadelphia, where it is building the Comcast Technology Center and is the main landlord in newly developed portions of the Navy Yard.
After 44 years, Liberty is also relocating from the Great Valley Corporate Center, established in 1974 by founder Willard Rouse, to a new modern headquarters in Wayne. The company plans to move in June.
The new four-story building, which Liberty owns, totals 100,000 square feet and was substantially vacant after a tenant departure. The company has launched a $12 million redevelopment of the property and will house its operations on the top floor, which totals 25,000 square feet. Two other tenants occupy space in the property and a floor remains vacant.
For more, go to bizjournals.com/philadelphia/news/2018/02/13/liberty-property-trust-to-relocate-hq-to-wayne.html.
Jewelers' Row Tower Needs More Work, City Board Says
The city’s Civic Design Review board has asked Horsham-based developer Toll Bros. to return in March with revised plans for its proposed 24-story condominium tower on Jewelers’ Row. Board members expressed concerns about traffic flow, a lack of green design, and the disconnect between the building’s brick-clad base and the glassy tower above it.
Toll first announced its plan in August 2016 to demolish the shop buildings between 702 and 710 Sansom St., along with a contiguous property at 128 S. Seventh St., and to replace them with a condo tower and ground-floor retail.
For more, go to planphilly.com/articles/2018/02/07/jewelers-row-tower-needs-more-work-city-board-says.
Met Opera House To Feature More Than Concerts
Thanks to $56 million in financing arranged through a combination of sources, Metropolitan Opera House developer Eric Blumenfeld is working on a sweeping plan for the North Broad Street landmark as a multi-use facility.
Blumenfeld told Philadelphia magazine that he plans a multipurpose dining, function and entertainment venue that would also be accessible to the surrounding community when it opens December 2018. The facility will also once again serve as the home of co-owner Rev. Mark Hatcher’s Holy Ghost Headquarters Revival Center. Hatcher’s congregation bought the building in 1997 to save it from demolition.
Philadelphia Construction Growth Slowing, Report Suggests
After growing by nearly 25% from 2015 to 2016, the number of construction permits issued in Philadelphia slowed to an 8.6% increase from 2016 to 2017, according to the annual report from Fixlist, a Philadelphia-based company that provides businesses with real estate data. Of these 1,301 permits, the overwhelming number was for residential projects, indicating this is a likely result of the surge in apartments that are under construction and will need to be absorbed by the market.
CPDC’s annual housing report will be released shortly and see rental story below.
Hyatt At The Bellevue Rebranding With New Logo, Signage
The 172-room Hyatt at the Bellevue is being rebranded as The Bellevue Hotel by its parent company. A new logo and signage will be unveiled in March. The 113-year-old hotel will be the first in the Northeast region that will be part of the Unbound Collection by Hyatt, a portfolio of luxury properties.
Hyatt officials said that physical changes for the rebrand will mostly be minor updates like signage, because the hotel completed an $8 million renovation in 2016. The hotel’s restaurant XIX, or Nineteen, will also undergo updates but the main features of the space will remain.
For more, go to hotelbusiness.com/the-unbound-collection-by-hyatt-to-nearly-double-portfolio/.
Hotels, Restaurants See Business Spike From Eagles Parade
The victory parade following the Philadelphia Eagles’ Super Bowl win provided Center City hotels and restaurants with a boost in what is traditionally a slow month. The Philadelphia Business Journal said the Ritz-Carlton, The Logan, Loews Philadelphia and The Independent in Midtown Village were among the hotels reporting that they were fully booked in the days before and after the parade on Feb. 8.
Business owners throughout Midtown Village, Rittenhouse Square, Fairmount, and Northern Liberties all reported busier Thursdays than normal for the month.
For more, go to bizjournals.com/philadelphia/news/2018/02/07/eagles-parade-fans-book-hotels-ritz-broad-street.html.
Residential Market News
Philadelphia's Ultra-Luxury Condo Market Is In Full Swing
In 2017, the city recorded 144 deed transfers of condos costing $1 million or more — the highest volume of million-dollar sales in Philadelphia’s history. In December, the sale of developer Tom Scannapieco’s 500 Walnut penthouse closed for $17.03 million, the highest price in city history.
Since 2012, Center City has increasingly seen condo listings for $5 million to $15 million or more, The Philadelphia Inquirer reported.
Philadelphia Rent Prices Fell Slightly In January
Rental rates for one- and two-bedroom apartments in Philadelphia fell last month, a trend consistent with rates nationally, according to the latest monthly index by Zumper. In Philadelphia, the one-bedroom price fell 0.7% to about $1,400 in January and the two-bedroom price fell 3.2% to $1,500.
While rates have fallen in Philadelphia, they are still above national median rents for one- and two-bedrooms. In addition, a one-bedroom unit in Philadelphia will cost about 2.2% more this year than last year, even with the January decrease. The report lists Philadelphia as the 16th most expensive market in the nation for rentals.
Connecticut Firm Buys 2nd Philadelphia Apartment Building
A Connecticut-based real estate investment firm has made its second Philadelphia acquisition with the purchase of a newly completed 32-unit apartment building at 514 South St. Dalzell Capital Partners purchased the five-story building for $9.35 million on Dec. 19. In August, it paid $10.8 million for another newly constructed apartment building, a 34-unit project at 1430 South St.
The company told The Philadelphia Inquirer that the properties are in attractive neighborhoods for such investments because of the difficulty in other areas of assembling parcels for new apartment supply.
Inclusionary Zoning In Portland Fails To Deliver Promised Results
Officials in Portland, Ore., are reporting a marked decrease in new apartment construction a year after its City Council enacted an “inclusionary housing” policy requiring any apartment building of 20 units or more to rent a portion of them below market rates. City officials said there’s still ambiguity as to whether the new policy or other market forces are the reason.
According to the city’s Bureau of Development Services, 12 qualifying buildings with a total of 682 units have applied for permits since the policy went into effect on February 1, 2017. Portland’s housing market from 2013 to 2017 typically built between 3,000 and 6,000 new units per year.
Center City’s Retail Outlook Remains Good Amid National Decline
Philadelphia has sustained a strong retail real estate market, running counter to overall trends nationally, with Center City playing a key role. Though retail indicators continue to decline at a national level, total retail sales increased by 4.3% from the fourth quarter of 2016 to the same period last year in Philadelphia, according to a Cushman & Wakefield report. Sales are projected to increase again by 4.7% by the end of this year, in large part due to the significant new deliveries in the Market East area.
Situated just across the street from each other and a block away from the Pennsylvania Convention Center and Reading Terminal Market, the concurrent developments East Market and Fashion District Philadelphia will deliver around 1 million square feet of new retail space between them when completed in an area that was previously considered blighted.
For more, go to bisnow.com/philadelphia/news/retail/market-east-philadelphia-retail-national-trends-east-market-fashion-district-84864.
Day Carts Bring New Mix To Reading Terminal Market
A recent effort by Reading Terminal Market management aims to give small businesses a foothold in a venue that has low turnover and stores that haven’t moved for decades. The 125-year-old market has started leasing carts to merchants for $50 a day, moving them into a 900-square-foot space in the market’s center recently vacated by a seafood business.
The wheeled carts are left over from the market’s days as a train station. The space has no built-in cooking station but is ideal for businesses to start selling ready-made food, market general manager Anuj Gupta said.
For more, go to philly.com/philly/food/reading-terminal-market-day-carts-20180124.html.
PHL Buys More Land In Effort To Bolster Shipping
Philadelphia International Airport has acquired a mostly vacant 135-acre parcel to the west of its passenger terminals, as part of a plan to develop the site into a new air-freight complex and shipping hub serving a swath of the northeastern U.S. The city took possession of the parcel on Jan. 19 for $54.5 million in compensation after settling litigation over past efforts to condemn the land for airport use.
An estimated $50 billion in air-cargo business is generated in the Philadelphia region, most of which is now lost to other regional airports because Philadelphia doesn’t have the capacity to take it on.
For more, go to philly.com/philly/business/real_estate/commercial/philadelphia-airport-shipping-buys-land-amazon-fedex-ups-20180212.html.
Concerns Mount On Trump Infrastructure Proposal
The federal budget proposal for the 2019 fiscal year includes a $3.7 billion cut to the Department of Transportation’s annual budget, leading Philadelphia officials to voice concerns over President Trump’s $200 billion infrastructure spending proposal. Deputy Managing Director Mike Carroll told PlanPhilly that the plan “signals apathy towards urban infrastructure to the point of negligence.”
Officials in the region have expressed concern that reductions in federal support could imperil planned repairs to I-95 and other area highways. The proposal calls for increased private investment in transportation infrastructure, raising concerns in some minds that the only way to secure funding will be by adding tolls on highways like I-95.
To review the full Trump Administration proposal and opportunities for private sector involvement, go to whitehouse.gov/wp-content/uploads/2018/02/INFRASTRUCTURE-211.pdf.
The cuts to the DOT budget, as now proposed, would grow over time to total $178 billion over 10 years. The proposal also calls for the elimination of the TIGER grant program and the Federal Transit Administration’s Capital Investment Grant program (aka “New Starts”). Those cuts would derail the region’s forward momentum on expanding and modernizing its aging transit systems. The budget also calls for states to cover a larger share of the government operating subsidies that go to Amtrak’s longer lines, like the Northeast Corridor between Washington, D.C. and Boston. All these proposals may be modified as the proposal moves through Congress.
Downtown Traffic: A Growing And Serious Problem
The mounting traffic congestion in Center City is a reflection of the downtown’s growth and vitality, but it also is a problem that must be managed if Philadelphia is to keep thriving. A new article from Philadelphia magazine outlines the problem, its causes, and possible solutions.
The piece notes that “the answers matter, because the cost of all this gridlock isn’t mere irritation. It’s not just that traffic potentially undercuts the very thing — Philly’s livability — that’s helped spur our recent revival.” Ongoing construction, more people, increases in bicycle traffic, the introduction of ride-sharing services and the proliferation of delivery trucks are all contributing factors.
For more, go to phillymag.com/news/2018/02/17/philadelphia-traffic-center-city/.
CPDC’s report on Center City’s growing traffic and congestion will be released shortly.
Report: Only16% Of Philadelphia Households Underserved By Transit
Most lower income households in Philadelphia are well-served by public transit, leaving only 16% underserved by public transit, according to an nationwide interactive map based on U.S. Census data. This confirms findings in CPDC’s 2016 report, Getting to Work: Transit, Density and Opportunity.
The tech company AllTransit used information from public transportation systems around the country and census data to create its Gap Finder interactive map. While overall, the city scored very high, parts of South Philadelphia and areas in North Philadelphia would benefit from increased frequency of service routes or adding new routes altogether.
Bills to Build New Bike Lanes Advance In City Council
A trio of bills to expand Philadelphia’s disjointed bike lane network has advanced out of City Council’s streets and services committee and may be voted upon as early as this week.
The first two bills call for new, short bike lanes on Race Street in Chinatown and on Island Avenue near Philadelphia International Airport. The third removes parking on Torresdale Avenue to allow for a crosswalk connecting two sides of the Pennypack Trail. If the bills are approved, the bike lanes could be operational by the end of the year.
United Way of Greater Philadelphia Names New CEO
United Way of Greater Philadelphia and Southern New Jersey has named Bill Golderer, pastor of Arch Street Presbyterian Church and founder of Broad Street Ministry, as its new president and chief executive.
Golderer is joining the United Way as the organization adopts a new focus on ending intergenerational poverty in an effort to deepen its impact on the region. He succeeds Jim Cawley, who resigned in August to take a job at Temple University.
For more, go to prnewswire.com/news-releases/bill-golderer-named-president-and-ceo-of-united-way-of-greater-philadelphia-and-southern-new-jersey-300595075.html.
Councilman Calls For Outside Appraisals In City Real Estate Deals
Philadelphia City Councilman Allan Domb is proposing legislation to stop the city from buying most properties without an assessment to make sure it doesn’t overpay. The bill was a response to Domb’s discovery that no independent appraisal had been done for 400 N. Broad St.
Philadelphia officials have agreed to pay a developer $249 million for a new city Police Headquarters in the building, which housed offices for The Philadelphia Inquirer, the Philadelphia Daily News, and Philly.com until 2012. Domb’s proposed legislation would make such appraisals obligatory, bringing its rules in line with cities including Los Angeles, Houston and Phoenix.
For more, go to philly.com/philly/business/real_estate/commercial/philadelphia-police-headquarters-assessment-alan-domb-legislation-blatstein-20180215.html.
$7.3M In Pa. Funding For Philadelphia Transportation Projects
Philadelphia has secured more than $7.3 million in state funding to cover a variety of repair and improvement projects.
The projects, announced Feb. 8 by Gov. Tom Wolf as part of PennDOT’s Multimodal Transportation Fund, include $567,774 for 21 additional Indego bike share stations in strategic transit hubs throughout Center City; $3 million for infrastructure improvements around the Philadelphia Museum of Art to encourage pedestrian and bicycle use; and $1.5 million to build a new street on the future campus of the uCity mixed-use tech district in University City.
For more, go to governor.pa.gov/governor-wolf-announces-45-multimodal-transportation-projects-benefit-22-counties.
PICA: Philadelphia Sees Double-Digit Tax Growth in January
The City of Philadelphia collected $329.1 million in General Fund tax revenue in January, compared to $259.4 million in January 2017, a considerable increase of 26.9%, according to the Pennsylvania Intergovernmental Cooperation Authority (PICA).
Increases in all major tax categories drove the growth in overall city collections for the month. While parking and other miscellaneous minor taxes decreased, large January increases in the Business Income and Receipts Tax (BIRT), realty transfer tax, and real estate tax ensured the continued double-digit increase in total year-to-date collections, with five months remaining in the fiscal year. These increases may be attributed to the changing Federal tax landscape.
Through January, BIRT rose 22%, compared to a projected growth of 8.3%; the real estate tax increased by 33.1%, compared to a projected growth of 11.0%; the realty transfer tax increased by 43.6%, compared to a projected 3.4% growth rate; and the Philadelphia sales tax collections increased by 6.9%, compared to a projected growth of 5.2%.
For more, go to picapa.org/2018/02/just-released-picas-january-tax-revenue-report-2/.