Lines Blur between Office and Retail Properties
While there is very little new office building construction in the Philadelphia Region it sounds like there is new competition for Suburban Office Landlord’s coming from Retail Landlord’s. At a Philadelphia Retail Summit on February 16th representatives from Federal Realty Investment Trust, The Goldenberg Group, Wal-Mart Stores, Regency Centers, PREIT, Brixmor Property Group, RAS Brokerage, A & E Construction moderated by Jerald Goodman of Drinker Biddle & Reath. It was mentioned several times that the retail spaces were being redeveloped-reused for other purposes such as office space and medical office space. With this new competition there still were over 2.3 + million square feet of office space absorbed in the Philadelphia region in 2011. Will this new competitor reduce rental rates? Doubtful — because there is very little new construction of office buildings in the region. For example the vacancy rate for Office space in Montgomery County is approximately 12%. From a recent survey of Office Buildings in that county it appears that the trend for rental rates is that they are stable, not trending up yet. Using the Montgomery County office market as an example, even with this added competition from retail properties the office market in Montgomery County PA will most likely continue a stead slow improvement for 2012 following the employment picture.