Dir: +1 215 928 7505
Ten Penn Center
1801 Market Street
Philadelphia, PA 19103
Main: +1 215 925 4600
Fax: +1 215 925 1040
7535 Windsor Drive
Allentown, PA 18195
+1 610 770 3600
Eight Tower Bridge
161 Washington Street
Conshohocken, PA 19428
+1 610 684 1850
300 N. Second Street
Harrisburg, PA 17101
+1 717 730 3752
1317 Route 73
Mount Laurel, NJ 08054
+1 856 234 9300
300 Delaware Avenue
Wilmington, DE 19801
+1 302 425 4000
The last two quarters of 2015 were marked by an active take and give supply climate. The bankruptcy of the Great Atlantic and Pacific supermarket chain added to the surplus of vacant grocery anchors. Twenty-three Pathmark and Super Fresh stores in Pennsylvania were closed. However, Acme Markets is in the process of taking over fourteen of these locations.
Multiple large scale redevelopments were moving forward. The eastern portion of the Gallery reboot in Philadelphia was underway. January 2016 demolition is scheduled for the Granite Run Mall. Boscov’s and Sears will remain open as the center is redeveloped into The Promenade at Granite Run. Demolition and redevelopment at Chesterbrook Village has started. PREIT will be demolishing the Kmart at Exton Square Mall and leasing 55,000 square feet to Whole Foods.
Asking rents for new centers topped $45.00 per square foot. However, rent growth overall was dragged down by the persistent anchor vacancies.
Acme significantly expanded its footprint in the region, filling multiple former A&P locations. Regionally-based discount retailers, supermarkets and organic-oriented stores filled vacant grocery anchor spots. Wegmans continues to expand regionally.
Landlords are more actively changing the tenant mix to provide more foot traffic by courting entertainment options like “dinner and a movie” concepts, fitness/recreation operators, as well as community service providers such as medical centers.
Private investors, particularly equity funds chasing yields, were the most active buyers in the region. PREIT continued to spinoff non-core centers including the Voorhees Town Center and the Palmer Park Mall, which was under agreement. Pettinaro Management acquired a portfolio of retail and office properties in northern Delaware from Stoltz Real Estate Partners, including Power Mill Square. There were additional major shopping centers in the Lehigh Valley under contract.
Sale prices for well-leased centers were solidly over $250 per square foot while value-add properties traded for under $100 per square foot.
The vacancy in Philadelphia County increased from 7.3 percent to 8.5 percent during the last two quarters of 2015. SuperFresh and Pathmark store closings were added to Bottom Dollar vacancies from earlier in 2015.
The Gallery is currently out of the active inventory as PREIT and Macerich have commenced on the two year redevelopment project into the Fashion Outlets of Philadelphia.
The expansion of the retail footprint and strong retailer demand in Center City shows no signs of slowing.
The overall vacancy rate for the four suburban counties increased from 7.3 to 7.6 percent. Delaware and Montgomery counties had a vacancy decrease, but Bucks and Chester had increased vacancy.
The overall vacancy rate in the three counties decreased from 11.6 percent to 11.3 percent. Burlington and Gloucester County’s vacancy decreased, but Camden County’s vacancy was flat. Camden County’s vacancy may be increasing further in 2016 as one of the two anchor department stores at Voorhees Town Center is rumored to be closing.
The Gloucester Premium Outlets opened in the third quarter. Two long-delayed redevelopment projects are moving forward. The Shoppes and Residences at Renaissance Square will be constructed on the site of the Tri-Town Plaza in early 2016. Site work has commenced on the overhaul of Paulsboro Plaza.
New Castle County’s vacancy dipped from 7.4 to 7.2 percent during the last two quarters of 2015. The first phase of the Christiana Fashion Center opened, bringing new retailers to Delaware such as Nordstrom Rack, REI, Container Store and Saks Off 5th.
The next 105,000-square-foot phase is under construction.
The new owners of the Newark Shopping Center recently completed a $10.0 million renovation to the center. Additional retail space is planned in Newark at the former Avon site.
The Lehigh Valley vacancy rate trended upward over the last four quarters, mainly due to supermarket closings. Most recently, Redner’s Warehouse Markets shut the 47,900-square-foot store in Trexlertown.
However, demand has been strong at the Valley’s new shopping centers. The 570,000-square-foot Hamilton Crossings is close to being fully leased well in advance of the center’s 2Q 2016 opening. Leasing has been strong at the Madison Farms development, where ShopRite opened in the third quarter. The Westgate Mall is undergoing a major renovation, and has attracted new tenants like SkyZone trampoline park.
The overall vacancy rate in the Central PA counties decreased from 7.6 to 7.4 percent. York and Franklin counties registered vacancy increases due to the closing of two JCPenney stores, but the other counties had improved vacancy rates.
The retail landscape continued to evolve with the expansion of existing centers and ground-up developments in the planning stages. The Kmart Shopping Center in Mechanicsburg is slated for an expansion and revamp with 40,000 square feet of retail space and facade renovations. High Real Estate Group plans to commence construction on the Wegmans’ anchored Crossings at Conestoga Creek in Lancaster County in 2016. PinnacleHealth is moving ahead with its plans to redevelop the Annville East Shopping Center into a medical complex. Other retail projects in Silver Springs, Mount Joy, and Springettsbury Townships are meeting with community opposition.
Click here to download the full report as a PDF.
In our Fall 2016 Knowledge Leader, we delve into the changing nature of work and how new trends are impacting commercial space.
Trends, Forecasts, and Perspectives in Commercial Real Estate
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