An office skyline shoots up in Philly, Tony Hsieh's failed Las Vegas experiment, and more...

National market report

Feb.February 01, 2017 07:00 AM

Rendering of 1301 Market St.

Philadelphia

The City of Brotherly Love is seeing a crop of new office high-rises shoot up as more corporate tenants flock to its central business district. Among the upcoming projects is a 38-story office tower, which is to be built on a long-vacant lot close to City Hall and the Convention Center, the Philadelphia Inquirer recently reported. Developer Oliver Tyrone Pulver, who is under contract to acquire the site, previously developed two office buildings on Market Street in the 1970s and 1980s before shifting his focus to suburban projects.

“The wind is blowing a little bit back toward the city now, so that’s why we’re back,” Pulver told the Inquirer. “The investment community seems to be high on downtowns.”

The tower would represent the first trophy-class office property in Philadelphia’s Market East neighborhood, according to Lauren Gilchrist, Philadelphia research director at commercial real estate firm JLL TRData LogoTINY.

The 35,000-square-foot site, at the corner of 13th and Market Streets, was previously owned by infamous Philly slumlord Samuel Rappaport. Pulver expects to complete the project, known as 1301 Market Street, in early 2020.

Architecture firm Skidmore, Owings & Merrill has been commissioned to design a glass-sheathed tower with a total of 840,000 square feet of office and retail space. The developer estimates it will take at least a year to complete permitting and other predevelopment work.

Other projects either completed or in the works include the FMC Tower and the Comcast Technology Center, which is now rising at 18th and Arch Streets.

“There’s a strong appetite for office development in Center City,” said Michael Silverman, a managing director at Integra Realty Resources in Philadelphia. “You can actually feel this excitement going on.”

Boston

In a rare move, a Boston-area landlord has put his entire property portfolio — a total of 444 apartments in 33 buildings — on the market, seeking $166 million.

The properties are spread out across eight towns, ranging from a 75-unit building in Boston to two-family properties in Watertown. James Batmasian, a real estate mogul based in South Florida, and his wife, Marta, accumulated these rental properties in 1970s and 1980s and still manage them through their firm, Investments Limited, according to the Boston Globe. 

In South Florida, the Batmasians have a property empire worth more than $1 billion.

“I started in Boston when I was 21, and I’d like not to wait until I’m in a wheelchair to cash out,” Batmasian told the Globe, adding that he wants to focus on his charitable foundation.

The developer has gained some notoriety over the years. He was convicted of tax evasion in 2008 and has been slapped with sexual harassment lawsuits.

His move to sell could be a sign of a peak, but some rivals suspect he might be dangling the portfolio to test the market. He has tried to sell before. But whether he is serious or not this time, his property portfolio is likely to attract some serious bidders, according to Travis D’Amato, a JLL broker who specializes in apartment building sales in Boston.

These days, there are big investors who want to enter Boston’s housing market. Rents for low-priced apartments are poised to rise, especially in Cambridge and Somerville. In addition, some of Batmasian’s smaller buildings could be converted to larger condominiums, the paper said.

Denver

Denver developers are homing in on an old industrial stretch known as the River North Art District (RiNo). Over the last five years, the neighborhood has seen an influx of startups and technology companies as well as larger established firms, including Uber.

All told, the area is set to see roughly 3 million square feet of office space.

Sean Campbell, a Wall Street trader-turned-developer, and World Trade Center Denver, a nonprofit, have proposed building a $200 million business hub in the district, the New York Times recently reported.

“Whether you’re in New York or the San Francisco Bay Area, Denver is going to be 60 cents on the dollar for the foreseeable future compared to those markets,” Campbell told the Times. “We’re seeing large companies saying, ‘Places like Silicon Valley are nice, but we can use Denver and its Rocky Mountain backdrop as a lifestyle tool for recruitment and retention.’”

Land costs in RiNo are averaging $150 per square foot, almost five times what they were four years ago, according to Tim Harrington, an executive managing director with Newmark Grubb Knight Frank in Denver. 

The first phase of the World Trade Center Denver project is set to bring a 200-room hotel, 250,000 square feet of offices and creative working space, conference centers, shops and restaurants. The development is located next to a new stop on a light rail line that runs between Denver International Airport and Union Station downtown.

Campbell, who is currently seeking tenants and financing, told the Times that he hopes to lease about 60 percent of the office space before breaking ground late this year.

Rendering of Denver’s World Trade Center

Las Vegas

Five years after Tony Hsieh, CEO of online shoe retailer Zappos, committed $350 million to remake downtown Las Vegas, his mission of creating an urban utopia is far from becoming a reality, Quartz reported last month.

This month marks the fifth anniversary of the Downtown Project, a venture Hsieh envisioned in 2012 as “the most community-focused large city in the world.” The city, anchored around his company’s new headquarters in downtown Las Vegas, was to become a global capital of co-working, among other things.

Toward this end, Hsieh — who sold Zappos to Amazon in 2009 — invested $200 million in real estate, accumulating more than 60 acres of land, and spent $50 million to build small businesses, $50 million to grow tech startups as well as $50 million to fund arts, education and culture in the area.

Around 300 entrepreneurs participated in the Downtown Project. However, once the cash ran out, numerous projects were cut, and many of those involved left Las Vegas. In 2014, Hsieh decided to embed himself further in the redevelopment and moved from a luxury apartment complex on Las Vegas Boulevard to a trailer park on the edge of downtown. But the Downtown Project has continued to lay off staff and is now being run more like a traditional urban planning project, with a focus on real estate and money-making operations. Hsieh, however, defended his initiative last year, saying, “It’s a work in progress — like any startup.”


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