Brennan Recapitalizes 1 MSF Portfolio Near Philly
High demand and tight supply continue to make the area an attractive market for existing industrial facilities.
Brennan Investment Group recapitalized its 1 million-square-foot industrial portfolio of 20 shallow-bay buildings in Moorestown, N.J., about 12 miles east of Philadelphia.
Constructed between 1984 and 2000, the properties are currently 96 percent occupied. They provide easy access to the New Jersey Turnpike and downtown Philadelphia. Having a multiple-building setup and varying suite sizes, the portfolio also gives tenants significant growth flexibility.
Brennan will continue to operate the portfolio, which it bought in 2017. Since the acquisition, the company has upgraded the properties, including converting office space to industrial.
Philadelphia’s office market slowed and prices dropped in the fourth quarter, with vacancy rising 510 basis points over the past 12-month period ending in October, according to CommercialEdge.
Chris Massey, managing principal at Brennan Investment Group, said that strong demand and tight occupancies for small-bay suite sizes throughout the overall market have made the portfolio more attractive.
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“Vacancy rates are low-single digits for this type of space, and there is basically no new construction due to high costs for building small footprint buildings,” he told Commercial Property Executive. “We believe our in-place rents are still significantly below where new leases are getting done.”
Brennan Investment Group’s portfolio totals approximately 56 million square feet across 29 states.
Philadelphia’s strong light-industrial demand
Marcus Partners’ Mid-Atlantic team has been acquiring portfolios of light industrial product in the suburban Philadelphia metro.
“The metro offers an expansive regional highway network and a deep labor pool and features exceptional population density and demographics,” Ryan McDonough, the company’s principal & CIO, told CPE.
The portfolios typically feature functional, Class B product needing physical repositioning and a diversified, multi-tenanted rent roll with shorter-term leases. “We are buying at a healthy discount to replacement cost with in-place rents that offer mark-to-market upside. This compelling risk-reward profile works across various economic scenarios, including a “higher-for-longer” rate environment,” McDonough added.
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