This past Thursday November 30th, members of ULI Philadelphia convened at The Union League on South Broad Street for the Real Estate Forecast 2018. Local industry leaders shared their thoughts on the state of real estate in their respective sectors.
After a morning coffee and networking session, the event was kicked of by Bill Hankowsky, CEO of Liberty Property Trust (LPT), who spoke about the local industrial real estate market. “The industrial world is on fire,” Hankowsky proudly declared. He detailed the ongoing paradigm shift in global logistics due to e-commerce demand. Fulfillment centers and warehousing for same-day deliveries are driving industrial growth. “Warehouses are modern factories,” Hankowsky noted. He further detailed LPT’s activity in the Southern New Jersey submarket, which is becoming a hotbed for this kind of industrial development.
The next speaker, Joe Coradino, CEO, PREIT, spoke about the retail market. Undeterred by advancements in e-commerce, Coradino said the narrative that the retail sector is dead is “fake news,” and that retail in fact is going through a period of “detox.” Coradino purported that retailers are not failing due to a fundamental problem with retail, but rather because they had failed to adjust to new technology and changing consumer preferences. Instead, the sector is moving towards omnichannel retailing, in which retailers have an online and brick-and-mortar presence to offer greater optionality to consumers.
The office sector was represented by Jerry Sweeney, CEO of Brandywine Realty Trust. Sweeney noted that like the industrial and retail sectors, “the impact of technology [on office] is pervasive and real.” Office developers are looking to create an “envelope” with as much flexibility as possible for the tenants of today and tomorrow. Sweeney further noted that a great deal of office space in the U.S. is quite old, and functional obsolescence will require that new office space be built to meet tenant’s needs. Perhaps to hold his cards tight in the bid for Amazon’s HQ2, Sweeney was rather hum, though clearly bullish, about the Schuylkill Yards development in University City. With control of potential sites in Philadelphia and Austin, Brandywine figures to be formidable in the hunt for the real estate’s white whale.
Brad Korman, co-CEO of Korman Communities, took the stage to talk about the multifamily sector. Unlike those representing other sectors, Korman was more cautious in his optimism. “Capital is more selective,” Korman observed. Over the past year and a half, the market has started offering concessions to tenants, and rent growth has halted. Despite the short-term market lull, Korman felt that the long-run fundamentals in the multifamily sector were strong, as he expects continued growth among millennials and empty-nesters.
The round out the sectors, Jay Shah, CEO, Hersha Hospitality Trust, spoke about hospitality. He continued with the theme of technological disruption and the changing use of space. He pointed out that hotel guests are increasingly looking for an overall experience in a hotel, rather than simply a place to sleep. Technology has also disrupted this market, with Airbnb playing an increasingly big role in the hospitality market.
Having wrapped up presentations from the ever-optimistic developers, JLL’s VP & Director of Research-Philadelphia, Lauren Gilchrist presented the numbers for the Philadelphia market. Gilchrist’s presentation bore out the fact that it does indeed seem that we are late in the real estate cycle. And yet that there doesn’t appear to be much overbuilding going on, noting that developers have been incredibly restrained during the cycle.
The final speaker of the day was Mitch Roschelle, National Business Leader, Real Estate Business Advisory Services for PwC, who spoke about national trends. Roschelle spent a fair amount of time discussing real estate market sentiment, highlighting that the market remains quite optimistic. He also spent time discussing demographic fundamentals and generational trends, postulating how the next generation – Generation Z – will want to live, work, and play. It remains to be seen, but the integration of technology and changing uses of space figure to continue to be key drivers of emerging real estate trends. ”
- Real Estate Forecast for 2018: Mostly Sunny, With a Few Clouds – Philadelphia Magazine
- Top Philly real estate trends to expect in 2018 – Curbed Philly
- Recap video by Eric Moody
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Kyle Kobilka is from Phoenixville, Pennsylvania. He is currently studying City and Regional Planning at the University of Pennsylvania, in addition to his undergraduate focus on Urban Studies and Real Estate.