COMMERCIAL PROPERTIES
Q3 2021 Summary
King of Prussia’s commercial real estate market holds steady as return-to-office plans progress in the business community.
 
Overall, we are seeing most multi-tenanted buildings nearing normal capacity. Most large, single-tenant office buildings and owner-occupied commercial office buildings continue to operate at greatly reduced occupancy as larger companies continue to maintain remote-work policies.
 
The vacancy rate for Class A office space decreased slightly to 16.5% which is similar to the previous quarter and just slightly above the same time in 2019 before disruptions from COVID-19. According to CoStar, the average lease rate increased to $39.25/SF.
 
Class B office vacancy remains at 12.3%. The average lease rate sits at $21.12/SF.
 
Vacancy rates and average lease rates for Class C office space remains at 20.9% and $24.14/SF respectively. Class C office spaces remains small compared to the other classes, with only 282,628 SF in 13 properties.
 
The aggregate Q3 2021 commercial office vacancy rate is 15.3%. King of Prussia’s average aggregate lease rate is higher at $34.82/SF, an increase of almost $12/SF over the previous decade.
 
The vacancy rate for industrial property remains extremely low at .4% with a slight increase by $0.40 in the average lease rate to $10.58 NNN. Flex properties remained steady at 20.3% vacant, with the average lease dropping $0.20 to $38.49 NNN from Q2 2021.
 
The retail sector remains strong in King of Prussia as consumer spending continues to grow. The Deloitte Global Economist Network’s US Economic Forecast reported last month that the COVID variant impacted certain retail sectors over the summer, but the economic fundamentals remain strong and household savings keep building for future spending. Inflation fears are limited to a narrow group of goods and services impacted by the pandemic and supply chain issues that will increase consumer prices for those items by close to 2%. However, GDP has grown above pre-pandemic levels and, according to the report, inflation is not expected to creep into all areas of the economy. Optimism in consumer spending helps the retail vacancy rate in King of Prussia remain low at 2.4%, with average lease rates experiencing a slight decrease of $0.76 to $28.52 NNN for Q3 2021.
Eric T. Goldstein
Executive Director
King of Prussia District
Innovative Outdoor Amenities Lure Employees Back to King of Prussia
Businesses and commercial property owners continue to feel their way around in the post-COVID workplace. Upgrades to office layouts, building mechanical systems and implementation of hybrid schedules provide a safe environment for employees and tenants inside the workplace. Now, property owners are reimagining their outdoor spaces to be just as inviting for successful return-to-office plans.

Commercial property owners are embracing the importance of an inviting outdoor environment. Reducing stress and inciting creativity are two of the many wellness benefits we experience when interacting with nature. This concept, called biophilia, was introduced in 1984 and has grown in popularity with landlords and employers searching for ways to improve the workplace environment. Some of the amenities offered across urban, suburban and rural office buildings include garden plots, beehives, chicken coops, dog parks, recreational stations, public art that incorporate natural elements and even outdoor workstations that double as bird blinds. The biophilia theory has only grown during the pandemic, with employees craving the peace, tranquility and fresh air of the great outdoors.

Pre-pandemic, large commercial property owners and managers like CBRE, JLL, and Cushman & Wakefield planted community gardens and engaged commercial beekeepers to establish hives at their buildings across the country including some in King of Prussia. With a little training, commercial tenants care for the hives and gardens, gather the honey, pick the fruits, vegetables and herbs and enjoy the harvest in a collaborative workplace only found in this new office environment. Tenants also include family members in these office activities, which is emblematic of the hybrid return-to-office model so many businesses have adopted since the pandemic. These imaginative amenities create a shared experience not available at home and will continue to lure employees back to the office and King of Prussia.
Property Sales Remain Strong in King of Prussia
Investor interest remains piqued in King of Prussia commercial real estate through 2021. Whether the property is industrial/flex, office/lab, or multifamily, commercial sales continue as demand for more space persists through the pandemic. Examples in key sectors include:

Industrial/Flex
Investor Eli Kahn purchased the 230,000 SF building at 760 Moore Road in April from BNY Mellon and proceeded to flip the office/flex site to Amazon in June for $26.5M.

Purolite Corporation broke ground on its new 74,000 SF manufacturing facility in Renaissance Park in April. The company will be investing more than $39M in construction and fit out with this new space.

Red River Asset Management purchased the 127,000 SF industrial building at 250 King Manor Drive for $9.65M in May. The largest current tenant in the facility is Workhorse Brewing Company.

MLP Ventures purchased the former Philadelphia Inquirer printing plant at 800 River Road in January for $37M. The development company is rumored to spend another $400M converting the industrial site into a 900,000 SF life sciences manufacturing complex.

Office/Lab
Besides manufacturing, MLP Ventures is expanding its life science office and lab space in King of Prussia with the purchase of two properties in Renaissance Park. The two buildings, 2100 and 2201 Renaissance Boulevard, were purchased for $41.8M and add 232,606 SF to MLP’s large life science portfolio in the area called Discovery Labs.

Jack Lingo Asset Management company purchased 211 South Gulph Road for $25.8M in June. This 102,204 SF multi-tenant office building, which includes the headquarters of data analytics company Qlik, is the group’s first acquisition in King of Prussia.

Multifamily Residential
UDR recently added to its inventory of multifamily properties in King of Prussia, purchasing The Smith Valley Forge, for $115M. This 310-unit apartment complex will join UDR’s Park Square, featuring 313 units and The George Apartments, a 200-unit project under construction on the western edge of The Village at Valley Forge. This is in addition to Toll Brother’s 271 townhouses and single-family home development under construction on the east side of King of Prussia.
Commercial RE Transactions
Sales

NE IND Owner 6 LLC
305 E. Church Rd., Unit A
$4.875M

1030 OVF Partners LLC
1022/1030 Old Valley Forge Rd.
$940K

Red River King Manor Partners LLC
250 King Manor Dr.
$9.65M

Leasing

200 N. Warner Rd.
44,825 SF

421 Feheley Dr.
15,087 SF

421 Feheley Dr.
10,125 SF

2520 Renaissance Blvd.
8,895 SF

450 S. Henderson Rd.
5,760 SF

200 N. Warner Rd.
4,523 SF

640 Freedom Business Center Dr.
4,509 SF

200 N. Warner Rd.
3,421 SF

660 American Ave.
3,149 SF

660 American Ave.
3,101 SF

620 Freedom Business Center Dr.
2,525 SF
555 Croton Rd.
2,476 SF

215 W. Church Rd.
2,403 SF

601 S. Henderson Rd.
2,400 SF

215 W. Church Rd.
2,263 SF

214 Hertzog Blvd.
2,246 SF

Tourneau (expansion)
King of Prussia Mall
4,976 SF

Psycho Bunny
King of Prussia Mall
1,201 SF

Scotch and Soda
King of Prussia Mall
1,655 SF

Capital One Café
King of Prussia Mall
3,186 SF

AE77
King of Prussia Mall
2,596 SF

Purple
King of Prussia Mall
3,418 SF

Therabody
King of Prussia Mall
800 SF

Arabian Oud
King of Prussia Mall
700 SF


* Commercial Office
* Retail

Not a complete listing.
Retail leases submitted to King of Prussia District for Q3 2021 as of 10/18/21. All other sales and leasing info from CoStar.
King of Prussia District is a 501(c)(3) not-for-profit, special services organization.
King of Prussia District engages public and private partners to collaboratively
improve the economic environment in King of Prussia by making it more vibrant,
attractive and prosperous.

DISCLAIMER: All information obtained using CoStar Analytics and field checked for accuracy by King of Prussia District. Vacancy rates are calculated using existing, non-owner occupied commercial buildings in Upper Merion Township only, over 10,000 SF, Class A, B, and C plus retail, industrial and flex. King of Prussia District uses "Direct % Vacant Available" in its vacancy reporting. All industrial and flex statistics are NNN.
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