$1B in real estate transactions for Center City in 2014

The Center City investment market shrugged off any remnants from the recession and pulled out a year in which $1 billion worth of commercial real estate traded.

Twenty-four transactions were logged in the Central Business District compared with 16 totaling $700 million in 2013 and eight in 2012 totaling $96 million, according to JLL data. The data excludes a $505 million transaction in which Comcast Corp. bought a majority stake in Comcast Center.

Property owners have decided to seize on the interest in commercial real estate and deals are getting done.

"We're seeing more velocity this year than I've ever seen," said Doug Rodio, an investment broker with JLL.

Large institutional investors who historically shied away from Philadelphia are bidding on buildings that come up for sale and have managed to execute transactions, he said.

Another factor in play is where the investment money is originating. Domestic institutions have been unable to compete with the onslaught of international capital flooding primary gateway cities, such as New York and Washington D.C. This has meant they have turned their investment attention to cities such as Philadelphia, said Jim Galbally, who is also an investment broker with JLL.

"Philadelphia shines in that second-tier, non-gateway market," he said.

While office properties in the Central Business District are in high demand, all property types are getting investor attention, said Jerry Kranzel, an investment broker with CBRE Inc.

Retail space has become a hot commodity and has recorded some of the biggest deals on a per square foot basis. For example, the 19,963-square-foot space at 1801 Walnut St. where Anthropologie occupies space, sold for $1,528 a square foot, and 1705 Walnut St., which totals 6,138 square feet, traded for $815 a square foot.

Some of the top office sales include: 1835 Market St. at $100 million; 1515 Market St. at $85 million; Curtis Center at $125 million; and 3535 Market St. at $140 million. Examples of some multifamily trades include the Sansom at $42 million, Edgewater at $113 million and the Avenue of the Arts at $33 million.

The suburban office market was not as robust as Center City.

Sales activity declined by 32 percent compared with last year and 20 transactions were recorded, according to Newmark Grubb Knight Frank research. In all, $539 million of suburban real estate changed hands this year compared with $796 million last year.

"We're back to a more level period of activity," said Mike Margolis, an investment broker with NGKF at a recent forecast event.

Even so, that is still off from the average of pre-recession sales activity of $1.1 billion.

"Suburban office investment sales haven't recovered as a much as Center City and that is a national trend as well," Kranzel said. "People have concerns about continued suburban employment growth. The leasing markets in the suburbs are still in recovery, though we're seeing a predominance of the best office properties trading and at aggressive pricing. There's also still some distressed space out there and that is still in a recovery phase rather than maturing."

In spite of this, some high notes were reached this year in the suburbs. For example, Radnor Court in Radnor, Pa., sold for more than $360 a square foot — a record setting price, and 1000 Continental Drive in King of Prussia, Pa., sold for $306 a square foot.

In addition, two big portfolios changed hands. Liberty Property Trust unloaded 24 Philadelphia area buildings totaling 1.2 million square feet for $130 million to a joint venture between Greenfield Partners and Somerset Properties, and Keystone Property Group picked up Mack-Cali Realty Corp.'s local portfolio totaling 2.3 million square feet for $230 million.

Source: Philadelphia Business Journal