Yesterday at the GlobeSt Philadelphia RealShare event, industry power players gave their high-level thoughts on the biggest trends impacting Philadelphia’s commercial real estate, as they tackle subjects ranging from factors fueling the market, opportunity zone incentives, sectors to watch, and vacancy rates.
There was a common thought surrounding the health of the economy and how we’re currently at a late point in a strong cycle. One of the speakers reinforced some of his publications and how he speculated that at some point in 2019 there will be a scare which will be drastically exaggerated by the press. The banks will over react and the government will become involved. A year following this initial phase, people will begin to experiment. Then everyone will gain confidence. It’s likely that the ‘greedy and incompetent’ will screw it up again down the line a few years following, however the past allows us to learn from previous recessions and economic swings. Time will tell.
Given our strong current market, opportunity in Philadelphia has been consistent across several asset classes. Many opportunities set within our communities are dictated by the millennial demographic, with unique expectations on value and cost. In the apartment market, “cereal box” type one-bedroom spaces are a typical option, however aren’t showing as notable a return as buildings with amenities considered. The lease-up results in these types of settings are notable when done correctly.
Following a similar logic, many developers are beginning to view office space as a property type with more residential features to build the appeal. These are the types of developments that will do well through economic turns—the ones that create a rare sense of place through an attention on amenities.
The conversation went an interesting direction in covering underdeveloped areas and how it’s becomes a good return from not only financial, but also social outcomes. The phase “cater to the masses, eat with the classes” emphasized how you can go broke building something, but you can’t go broke fixing something. Specifically, on North Broad and in Camden, real estate development that is needed will be a success through working towards the greater good coupled with the opp zone benefits.
In Philadelphia, the oversupply issue is a major concern (mainly toward megaprojects). As far as the stock market dictating trends, many panelists believe the market will continue to correct, and as it corrects, these corrections will produce natural ebbs and flows.