PHILADELPHIA — Call it the Great Philadelphia Land Rush.
Real estate companies are racking up sales of development sites in the city in what appears to be a frenzy to buy strategically located land.
Most of those who are buying are developers positioning themselves to seize on market conditions where demand for residential and mixed-use projects continues to be strong, or they are making a long-term play in preparation for the next building boom.
While property sales are always ongoing, it was a spate of high-profile properties that traded hands this year that signaled something more was afoot. Among the sites that switched owners were:
- The Garrison-River City, which totals about seven acres along 60 N. 23rd St., and adjacent sites on John F. Kennedy Boulevard, sold for $93 a square foot.
- A 5,250-square-foot parcel in 2200 block of Market St., sold for $533 a square foot.
- A 37,000-square-foot parcel in the 2100 block of Market nabbed $486 a square foot.
- And 1911 Walnut, which totals 36,155 square feet, went for $1,100 a square foot. Many of the sites were sold by Richard Basciano, who had held onto them for decades, and some of the buyers were well-known Philadelphia developers, including PMC Property Group, Brandywine Realty Trust and Parkway Corp.
It’s not just the big parcels that are getting snapped up, though. Real estate observers have also noted an uptick in developers buying smaller, in-fill properties, too.
Ken Mallin of MPN Real Estate keeps a running tab of land deals he and his firm have closed and ones that are pending. If the list reveals anything, it shows last year was a banner year and this one is on track to be even better. Mallin’s tally also shows sites that had once struggled to get attention or development activity are now having their day.
Some of the properties Mallin has sold that wallowed for years include a small lot on Waverly Court in the Washington Square West neighborhood, a lot and an adjacent small building at 21st and Walnut streets in Rittenhouse Square, 22 Bank St. in Old City and even the Pincus Brothers building at 401 Race St. It sold two weeks ago for $12 million and will be knocked down to make way for a 200-unit apartment complex.
“No one would have done this five years ago,” Mallin said about some of the properties he has sold to developers.
Demand for some sites has also gotten fierce. At 1000 N. 2nd St., a 25,000-square-foot property received 12 “legitimate offers,” Mallin said. “That’s how strong things are.”
All of this sales activity is a reflection of Philadelphia’s current real estate boom, as the city gets more of a national reputation as a place to live and visit. Optimistic about the city’s future, developers are grabbing what they can now.
There is clearly a desire to do more development and real estate companies are buying many “chronic undeveloped sites” because the values sellers wanted are finally here, said Alan Greenberger, deputy mayor and chair of the Philadelphia Planning Commission. “The value of the city as a whole has gone up and land acquisitions from people who have held onto them for years is an indication there is a broader optimism. The question that people may ask is this a reflection of over confidence and can this really sustain itself? It can.”
Some of the developers who have bought sites aren’t necessarily banking them, said Greenberger, who has seen some early concepts come across his desk. He also noted that many of the developers who have acquired sites have a long and successful track record in the city.
While the activity has been robust, there are still some parcels that Greenberger wonders why they aren’t under development. One of those is a surface lot at 13th and Market streets.
The rush to buy land has started to affect other facets of the real estate market. When there isn’t enough land available, then developers zero in on tearing down buildings just for the ground. Carl Dranoff of Dranoff Properties said he is continuously looking for parcels to build upon or buildings to knock down as potential development sites,which he did with a former sound studio on South Broad Street at Spruce Street where he is constructing an SLS International Hotel and Residences. Calling land a commodity for developers, Dranoff said he seeks to have a inventory on hand that stretches a minimum of three years out.
“Land is going up in price and it’s getting scarcer,” he said. “That is why there is so much going on outside the traditional core. There’s such as scarcity in Center City that developers have to go out to other areas. It’s an inflection point.”
Another issue as a result is a decline in available parking.
Surface parking lots and garages are turning into development sites that are finally getting built. They are essentially development sites in waiting that are land banked as their owners seek to hit the market at the right time.
Parkway Corp. has a handful of parking properties with projects in the works. The sites include an old Hertz garage at 19th and Ludlow streets, a lot where Avis parked cars at 20th and Arch streets, and a narrow surface lot at 7th and Chestnut streets.
Parkway has patiently held on to some parking properties — lots and garages — for 40 years as the company waited for the right time to make a move. Apparently, the time has come.
“This is the busiest time in my career,” said Rob Zuritsky, president of Parkway.
Parkway isn’t the only one making a play on parking. Pearl Properties of Philadelphia bought a parking garage on South Broad Street at Locust Street and preliminary plans have Pearl tearing the garage down to make way for a mixed-use development that will include a hotel, apartments and retail.
Brandywine Realty Trust of Radnor bought a garage at 7th and Market streets with a long-term eye toward developing it.
As these parcels have been acquired, prices have climbed to their highest yet at $556 a square foot, according to JLL data that tracks sales of parcels 15,000 square feet or more. Prices are expected to continue to rise as demand continues.
“Supply is dwindling. Investors are thinking five years out and putting their plans in place for the next several years,” said Lauren Gilchrist, researcher at JLL. “They want to grab some sites while they can and hold on to them. There are also a number of build-to-suit requirements out there and when you get those build-to-suit rumors, developers try to control sites.”
Natalie Kostelni, Reporter
Philadelphia Business Journal