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PHILADELPHIA-'With no new industrial planned for 2010 or 2011, the swing to a supply-constrained market could be as short as 12 months,' says Jackson Cross' Battagliese.

By Alyson Grala | Updated on May 04, 2010

PHILADELPHIA-While the worst hit markets in the US were those areas where there had been exponential growth through the early part of the decade, the Greater Philadelphia region was fortunate that it had avoided much of that excess development and did not suffer as badly as areas like Florida, Arizona, Nevada and California. As the larger economic news seems to be improving, the regional markets are also starting to show some signs of life. While office and retail activity are still a bit sluggish, movement in the industrial markets has begun to pick up, and there are a few deals getting done, including Benjamin Foods, which leased 122,432 square feet in Hatboro, PA and Dependable Distribution Services, which signed for 122,000 square feet at 2500 Grant Ave.

There are still major hurdles related to the refinancing of maturing CMBS loans–over $1 trillion in next five years–but the wholesale foreclosures and write-downs that were predicted are not materializing, says Lou Battagliese Jr., a partner at Jackson Cross Partners/ONCOR International. “It will be interesting to see where the hundreds of billions of dollars of dry powder being accumulated by REITs and private equity firms waiting for these opportunities will eventually be invested. Financing for investment properties is available, but the new normal involves 30% to 40% equity, recourse financing for projects under $5 million and higher interest rates (6.5% to 7.25%) than at the height of the CMBS market.”

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