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Real Estate Bisnow
   
January 3, 2013 
 
 
Industrial Heating Up

 
The region's industrial market was stronger in 2012 than it's been in years and 2013 is looking even better. (Think of it as the opposite of the Eagles.)
 
That was the word from Bisnow's Second Annual Philadelphia Industrial Summit at the Rittenhouse Hotel. Industry folk gathered to hear our panel of industrial experts, who say that in most submarkets vacancy rates stopped growing and rents stopped declining in 2012. In addition there was more investor interest in industrial properties than during the three previous years put together.
 
Those trends bode well for Philadelphia industrial in 2013, provided the quarreling in Washington doesn’t derail the improving US economy, dampening the growing demand for goods that's going to fuel the need for warehouse/distribution space. (Though it does fuel the burgeoning Chris Christie action figure market.) Panelists included Endurance Real Estate Group principal Ben Cohen (above), Whitesell president Rick Cureton, PIDC VP Tom Delfo, CBRE EVP Michael Hines, Liberty Property Trust SVP Jim Mazzarelli, and DCT Industrial regional VP Tom Meehan. Drinker Biddle partner Christopher Boyle moderated.
 
Chima (flames) MPHI
The panel also noted that future demand for industrial space will not only be driven by logistics and supply-chain usage, but also manufacturing, which has already seen a resurgence in greater Philadelphia. So far the energy boom from expanded natural gas production in the Marcellus Shale hasn’t spurred much demand for industrial space in the I-81/I-78 corridor, with the direct impact still mostly in north-central Pennsylvania. But as Marcellus energy production continues to grow the nearby supply of gas will improve manufacturing prospects in metro Philly.
 
Bisnow (PropManage)
In his opening remarks, CBRE’s Michael Hines said vacancy rates in some metro Philadelphia markets are overstated, such as South Jersey, where a few bulk buildings are practically obsolete and shouldn’t really be counted in the total. He also noted that investor appetite for large industrial portfolios nationwide wasn’t as big as expected in 2012, and it was difficult to sell B product in secondary locations, where cap rates are as high as 9%. Still, investors are busy complementing their existing portfolios by pursing smaller properties in markets where they already have a presence. He says the investor sweet spot in 2013 will be portfolios that trade between $25M to $100M, but there’s also capital kicking around to do other deals.
Shortly before the end of the year, a Woodmont Industrial/AEW Capital Management JV bought 9747 Commerce Circle, a 385k SF industrial property in Kutztown, Pa., for $21.3M from an Endurance Real Estate/Thackeray JV in a deal brokered by Cushman & Wakefield. Built in 2007, the distribution center in the I-81/I-78 corridor is fully leased to Teva Pharmaceutical USA, Hearth & Home Technologies, and PALRAM Industries. The corridor saw a number of credit tenants take large blocks in 2011 and '12, including Crayola, Ocean Spray, Dollar General, and PetSmart.

Poor Richard Says...
 
As the year drew to a close, we asked famed Philadelphian Ben Franklin about CRE prospects for 2013, and he offered us a few nuggets of wisdom (actually from Franklin interpreter Ward Larkin, but considering that the original Ben’s been gone for 222 years, he’s a little hard to contact for a fresh quote). Anyway, Ben says to “Run thy business or thy business will run thee,” sage advice for any year. He also explained that “Creditors have better memories than debtors.” Hear, hear, Ben.

Upcoming Bisnow Events!
 
Tuesday, Jan. 29, 7am-10am. Bisnow's Philadelphia 2013 Economic & Real Estate Forecast. Join some of the most influential business and CRE leaders as they discuss the dramatic decisions that the region will face in the upcoming year. Register here.
 
Our resolution for the year: Mo' better Bisnow. Send ideas and suggestions along those lines to dees.stribling@bisnow.com.
 
 
 
 
Post Bros. (Rittenhouse)
 
Real Prop Solutions
 
Drinker Biddle (value) PH
 
Chima (steak/flames) PHI
 
NewAcre (Distressed) PHI
 
Bisnow (Writer2)
 
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