Philadelphia-based appraiser says looking at individual neighborhoods provides the real story
— Carlo L. Batts, MAI, Rittenhouse Assessments
PHILADELPHIA, PA, USA, May 9, 2022 /EINPresswire.com/ — Cap rates are at historic lows, major out-of-town REITs are investing, and real estate development continues apace in Philadelphia. While the city appears to be on a positive path with no lull at the site, Carlo L. Batts, MAI, director of Rittenhouse Appraisals, says there are more nuances to what is happening in the city. “The headline on Philadelphia is a city of resilience,” says Batts, “but the real impact on the makeup and geography of the city’s commercial real estate is best examined at the neighborhood level.”
One of those strengths, according to Batts, is the unprecedented development activity in the college town. At the end of 2021, the University City District reported that more than 1.4 million square feet of new developments or major renovations worth approximately $400 million were underway, with 11 million additional square feet on the development launch pad. The vast majority of this development is for office, research and manufacturing facilities to support the growing life sciences industry in the city, dubbed Cellicon Valley.
“While these new uses for buildings are creating jobs and people,” says Batts, “what also needs to be considered is that they are also changing, and even removing, other businesses that complement the amenities of the One example is the 13-story lab at 38th and Chestnut that will replace several restaurants, including the current home of Abner’s Cheesesteaks.A neighborhood with no real steak shop goes against everything in Philadelphia Batts says that while he’s making a joke, the intention is to shine a light on how these developments change the fabric of a neighborhood.
Investment in University City has ripple effects on other real estate sectors. Multifamily investment is now shifting to secondary and tertiary neighborhoods, with the 52nd and 63rd Street corridors as primary targets. These transit-oriented neighborhoods are ideal for multi-family development to house the talent needed in research labs and manufacturing facilities as well as support services. Batts predicts this housing demand will continue to grow and said that while the market is currently expanding, he expects more. “With exceptionally low apartment cap rates, and even with possible increases resulting from rising interest rates and inflation, developers and lenders still view multifamily as a significant investment in core areas. of the region,” he said.
Focusing on a different neighborhood, while University City seems to be getting the majority of the talk related to the changing Philadelphia real estate market, there is significant activity along the North Broad corridor from City Hall to the Germantown Ave. The acquisition and investment of Netrality Data Centers at 401 N. Broad Street over the past seven years has created property for life science users north of Center City. The corridor also includes a variety of mixed-use projects such as the Studebaker Building and the Divine Lorraine Hotel, with nearly 800 additional residential units currently under construction and more planned. As a further demonstration of the neighborhood’s transformation, the Philadelphia Police Department opened its new home on North Broad Street in April, and although it’s only a proposal at this point, the Pennsylvania Ballet is considering a new building in this part of town. “The makeup of the region is changing significantly as developers continue to explore new uses for properties and see the high return on investment expected from feasibility and market studies,” says Batts.
In addition to development causing changes in the market, Batts says Philadelphia is at a point where central centers are reappearing and converging, causing more changes in real estate market value in all parts of the city. “These advancements also create new service gaps for these freshly configured areas that need to be considered in terms of assessments, risks, and returns,” he says. “One of the current shortages our business is seeing is accommodation in the North Broad Street, Northern Liberties and University City corridor, depending on the expected influx of businesses and people.”
Batts also cites that these neighborhood-specific pressures ripple outward, causing small investors and business owners to look to other Philadelphia neighborhoods, such as Germantown, Mt. Airy, East/West Oak Lane. and Overbrook. “There’s a lot of activity that goes undiscussed, especially in Germantown and Cheltenham,” says Batts. “While there is some uncertainty on the part of investors due to fears of a wartime economy, accompanied by rising interest rates and inflation, shortages and demand,” he says, “projected positive returns appear to overcome these doubts.”
About Rittenhouse Assessments
Rittenhouse Appraisals is a Philadelphia-based commercial appraisal firm that offers in-depth property appraisal, market analysis, property appraisal, and tax analysis for commercial properties throughout the Greater Delaware Valley market. For more information, visit rhappraisals.com.