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It's what everyone wants the answer to. Even though we won't really know it for another 360 days: What's going to happen to Philly's CRE world this year? To help us, we contacted our local Nostradamusii for some insight.
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The Martin Architectural Group's Mike Rosen tells us the keyword for 2012 is multifamily (as in the plural sense). His firm is getting a lot of work from developers looking to incorporate apartments into their projects, whether they be shopping centers or even industrial parks. “There are guys tearing down office buildings and putting up apartment buildings,” he says. Mike notes that capital markets are craving multifamily, and adding an apartment is the quickest way for a developer to improve the value. Plus, Mike says, there's a “window of opportunity,” where the entitlement process has eased on new multifamily projcts with both local governments and neighborhood groups. “Today you will not get the push back that you would have five years ago.”
newmark knight frank smith mack sid class a rent growth office tenants
Next up, we consulted Newmark Knight Frank Smith Mack's Sid Smith, who stared deeply into his crystal ball and saw rent growth!(He also saw a crack in the crystal ball... haphazard shipping!) “There is a shortage of prime space in Philadelphia CBD, and Class-AA space should experience strong rent growth,” Sid tells us. Unfortunately, that will come at the expense of Class-B buildings, which will “continue to suffer as tenants upgrade their space in the classic flight to quality or pit one distressed building against another to reap substantial rent savings.”
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We also pounced on the predictive powers of The Flynn Co's Kevin Flynn, who says politics will dictate whether we have a strong recovery or not. Unless the adminstration changes in the next election, Kevin says we're in for more of the lackluster economic same for the next four years. Studley's Greg Soffian says he expects more of the same in 2012, with tenants continuing to benefit in the market. “The hope is that things will improve and hiring will take place and we'll see some absorption, although we're not there yet,” Greg says.