MARKETVIEW RETAIL

Greater Philadelphia Retail, Q4 2014

Stronger retail activity visible

across the region
Retail Sales
(Phila. MSA)

0.4%

Employment
(Phila. MSA)

8,054 new jobs

Personal Income
(Phila. MSA)

1.1%

Consumer
Confidence Index

90.9

*Arrows indicate change from previous quarter.

HI GHLI GHTS
Center

City remains a hotbed of activity in the

region, attracting retailers as never before. Among
the higher profile tenants opening this quarter were
Century 21 (The Gallery), Nordstrom Rack (1700
Chestnut St.) and Uniqlo (1608 Chestnut St.).

The

Pennsylvania, New Jersey, and Delaware

suburbs have remained generally resilient. The big
story in these markets is construction. Projects range
from new shopping centers to redeveloping malls.

Sales

transactions of retail properties remain very

strong. Cap rates are declining, and investors are
increasingly searching secondary and tertiary trade
areas in the region for value. Major Q4 2014
transactions included the One & Olney Shopping
Center in Philadelphia ($52.5 million) and the
Village at Cambridge Crossing in Mt. Laurel, NJ
($41.7 million).

Q4 2014 CBRE Research

Positive activity abounds throughout the

Philadelphia regions retail market. The scene
contrasts sharply to 2010, when our statistics show
retail vacancies peaked, and the region was
shrugging off the recession. Supporting the vibrant
activity are a host of strong demand drivers.
Record-low interest rates and recovering home
values continue to support consumption, but
strong job creation in the region this year has been
especially conducive. Add to this the decline of
nearly a dollar in the average price for a gallon of
unleaded gasoline over the past six months, and we
have the ingredients for a generous holiday
shopping season to continue. Clearly, gas prices
and interest rates may rise in 2015, but improving
economic and job growth should support
strengthening retail vibrancy.
2015, CBRE, Inc. | 1

MARKETVIEW RETAIL

Figure 1: Trade Area Statistics (Shopping Centers above 30,000 sq. ft. (excludes enclosed malls))

Average
Asking
Available Availability
Lease Rate
(SF)
Rate (%)
(NNN, $/
SF/Yr)

2014
Estimated
Population

Forecast
Population
Growth
2014 Estimated
2014-2019 Average House(Avg.
hold Income
Annual
Rate)

2014 Percentage of
Households
With Income
Over $250K

Trade Area

Inventory
(SF)

East Norriton/Plymouth
Meeting

3,097,875

168,330

5.4%

$16.60

67,123

1.7%

$94,816

5.5%

Exton/Downingtown

3,332,482

127,938

3.8%

$16.85

45,405

3.2%

$110,175

7.2%

Jenkintown/Willow Grove

2,528,831

73,834

2.9%

$20.40

90,610

-0.1%

$98,266

5.5%

King of Prussia

1,817,262

89,417

4.9%

$29.82

54,430

1.7%

$107,703

7.7%

Main Line

2,032,657

52,757

2.6%

$34.40

164,658

0.6%

$86,617

6.5%

Montgomeryville

2,932,476

179,937

6.1%

$25.30

68,312

2.0%

$99,093

5.4%

Oxford Valley

2,900,419

387,647

13.4%

$17.74

79,097

-0.4%

$87,494

3.7%

Springfield/Marple

2,836,722

93,219

3.3%

$23.13

93,062

0.1%

$94,061

5.0%

Pennsylvania Trade Area

Totals/Averages

21,728,724

1,286,914

5.9%

$22.09

662,697

0.8%

$94,808

5.8%

Cherry Hill

4,235,430

622,701

14.7%

$15.67

125,936

0.6%

$81,935

3.1%

Deptford

2,611,300

115,415

4.4%

$14.49

82,579

0.1%

$74,020

1.4%

Maple Shade/Mt Laurel

2,655,485

183,744

6.9%

$21.79

55,238

1.6%

$109,373

8.7%

Marlton

2,336,265

380,462

16.3%

$18.75

55,512

0.1%

$111,157

7.3%

Princeton/South
Brunswick

1,040,812

67,858

6.5%

$22.22

43,550

2.9%

$141,059

15.6%

New Jersey Trade Area

Totals/Averages

12,879,292

1,370,180

10.6%

$17.57

362,815

0.8%

$95,146

5.6%

Christiana

3,370,310

54,316

1.6%

$18.35

65,731

1.9%

$69,499

1.0%

Concord Pk

2,457,823

22,169

0.9%

$17.33

50,621

1.1%

$112,464

8.5%

Delaware Trade Area

Totals/Averages

5,828,133

76,485

1.3%

$18.05

116,352

1.5%

$88,469

4.3%

Source: CBRE Research

Q4 2014 CBRE Research

2015, CBRE, Inc. | 2

MARKETVIEW RETAIL

REGIONAL HIGHLIGHTS

MONTGOMERYVILLE , PA RE -DEVELOPMENTS
CHANGING RETAIL LANDSCAPE

KING OF PRUSSIA, PA A FRUITFUL YEAR AND

MORE TO COME

The largest shopping mall in the United States is

growing larger. With the luxurious new expansion
of 140,000 square feet connecting the Plaza and the
Court, the King of Prussia Mall is going to add 50
more retailers and restaurants to its upscale
corridor under one roof in October 2016. The
construction began in November following the
grand opening of Dicks Sporting Goods in
November, which replaced Sears at its 75,000 sq. ft.
space on the upper level of the Plaza. Currently, the
King of Prussia Mall employs more than 7,000
people with over 400 stores.
Adjacent to the King of Prussia Mall, as well as the
new 130,000 sq. ft. Wegmans, is a 250,000 sq. ft.
retail project waiting for construction to kick-start
in Spring 2015 and expected to be delivered around
Summer 2016. The King of Prussia Town Center,
previously known as the Village at Valley Forge, is a
significant retail component of the mixed-use
development project of the 125-acre conveniently
located land site at the crossroads of four major
highways Routes 202 and 422, the Schuylkill
Expressway, and the Pennsylvania Turnpike.
According to the developer JBG Rosenfeld Retail,
King of Prussia Town Center will be a distinguished
lifestyle center that offers a pedestrian-friendly,
healthy and fashionable shopping and dining
experience. Surrounding the retail destination,
there will be 3,000 residential units, 500 hotel
rooms, multiple office buildings and a brand-new
Childrens Hospital of Philadelphia, creating a
featured live, work and play community.
Moreover, across the street from the Court at King
of Prussia off Route 202, Courtside Square has
recently undergone a significant renovation to
improve the look of the commercial complex.

Q4 2014 CBRE Research

Five Points Plaza, the community power center at

the intersection of Route 309 and 202, is going to
enter a new phase of development, anchored by
Lowes and the forthcoming BJs Wholesale Club.
According to the landlord RD Management, an
existing building of 79,200 sq. ft. will be
redeveloped and expanded to around 123,710 sq.
ft., housing a potential junior anchor of 35,967 sq.
ft. and BJs Wholesale Club of 87,743 sq. ft.
Meanwhile, BJs Wholesale Club is going through
the land development process to build its third
club in Montgomery County, adding to existing
locations in Oaks and Plymouth Meeting. The
decision to take the former American Signature
Furniture site could be BJs further step to compete
with Costco in the Greater Philadelphia Region and
a result of increased traffic counts after Wegmans
joined the Montgomery Mall on November 3 2013,
which has successfully attracted more retailers and
restaurants to play in town.
Springhouse Village Shopping Center, positioned
at the intersection of Bethlehem and Sumneytown
pikes in Lower Gwynedd, is looking forward to
Whole Foods Market. Whole Foods announced its
relocation plan from the current 18,000 sq. ft. store
in North Wales to Springhouse Village on May 6,
2014 and the target opening date is late 2015.
Based on Whole Foods news release, the store will
be approximately 45,000 sq. ft. with a walking path,
green space, increased parking and new offerings.
It was a significant move for Stoltz Real Estate
Partners, the owner of the shopping center, to lease
the Clemens Markets space which had been vacant
for several years. Stoltz recently submitted
preliminary development proposals for the site
construction. The Lower Gwynedd Township
officials had a first meeting on December 16, 2014
and will meet again on January 13, 2015 for further
discussion. On the other hand, the departure of

2015, CBRE, Inc. | 3

MARKETVIEW RETAIL

(cont. from previous page)

Whole Foods Market will create new vacancies at
the Gwynedd Crossing Shopping Center in North
Wales off Routes 309 and 63, across from The
Shoppes at English Village Lifestyle Center.
MAPLE SHADE/MT LAUREL , N J SALE OF
CAMBRIDGE CROSSING

On November 14, 2014, Paramount Realty Services

and Cornerstone Real Estate Advisers completed
the sale of Village at Cambridge Crossing for $41.7
million, or about $326 per sq. ft. Cambridge
Crossing, anchored by LA Fitness (43,000 sq. ft.), is

a 128,000 sq. ft. community shopping center

strategically located at the intersection of Route 38
and Interstate 295 in Southern New Jersey. Only
one mile away from the 730,000 sq. ft. Centerton
Square power center anchored by Wegmans and
Target, it has been one of the local shopping
destinations and was fully leased at the time of
sale. The buyer Cornerstone, as one of the largest
global real estate managers, also owns Baederwood
Shopping Center, an 117,000-square-foot strip
center anchored by Whole Foods in Jenkintown,
PA.

8.5%

$360

8.0%

$320

7.5%

$280

7.0%

$240

6.5%

$200

6.0%

$160

5.5%

$120

5.0%

$80

4.5%

$40

4.0%

$0

Sales Transactions (R Scale)

Millions

Figure 2: Philadelphia MSA Retail Property Sales Transactions

Cap Rates (L Scale)

Source: Real Capital Analytics, Q4 2014 (4-qtr. averages)

CAPITAL MARKETS

Investment demand for the Philadelphia regions

retail assets has surged to pre-recession levels.
Through the end of October, over $1 billion of
retail properties were purchased in 2014. This is
greater than the amount purchased in 2012 and
2013 combined ($882 million). The average retail
cap rate declined rapidly in 2014, reaching an

Q4 2014 CBRE Research

average of 6.1% in Q3 2014, versus 7.4% a year

earlier. Demand for retail properties continues to
be strong, and with improving fundamentals,
investors should continue to chase assets with
vigor in 2015. However, with prices rising and less
properties available for sale, investors have been
reaching farther out to secondary and tertiary
submarkets in the region for potential buys.

2015, CBRE, Inc. | 4

MARKETVIEW RETAIL

Mirroring the nations stronger consumption activity,

Philadelphias metropolitan retail sales continue to
trend higher. Through the end of Q3 2014, the regions
retail sales were estimated to have grown 3.0% on a
year-over-year basis. Furthermore, by the end of 2015,
Philadelphia metropolitan retail sales are forecast to
grow 5.0%, the fastest pace since 2011, as shown in
Figure 3. The strongly diversified regional economy,
which continues to grow jobs, underpins the
improving consumer activity. However, the
rebounding local real estate market, record low
interest rates, and substantial savings from lower
gasoline prices may help retail sales statistics post to

Figure 3: Philadelphia MSA Retail Sales

Billions

RETAIL SALES

$130
Forecast

$120
$110
$100
$90
$80
$70

Source: Moodys Analytics

the upside.

Figure 4: Retail Completions

Sq. ft.

SUPPLY

After years of little construction activity, new projects

are popping up across the region. Our statistics track
major projects that will deliver net, new space, and
include notable developments such as the King of
Prussia Town Center, Christiana Fashion Center, and
Uptown Worthington, among others. Moreover, there
is significant activity occurring in redevelopment. The
King of Prussia, Granite Run, and Exton Square malls,
in addition to Center Citys The Gallery, are all at
some stage of redevelopment. The surge in
e-commerce sales has helped provide incentive for
many of these malls to reinvent themselves for an
omni-channel world.
RENTS

800,000
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0

Source: CBRE Research

Figure 5: Average Asking Lease Rates (NNN, $/Sq. ft./Year)

$40
$35

Our shopping center data (centers over 30,000 sq. ft.)

indicates the highest average asking rents are offered
in the Main Line trade area. The high rents along the
Main Line, unsurprising due to the attractive
demographics and densely populated nature of the
trade area, are also attributable to the dearth of large
available space. The King of Prussia trade area, even
excluding the Mall, offers much higher than average
rents due to its highly attractive location. On the other
end of the scale, Deptford, NJ offers the lowest average
asking rents, as well as the nearly lowest average
household incomes among trade areas.

Q4 2014 CBRE Research

$30
$25
$20
$15
$10
$5
$0

Source: CBRE Research

2015, CBRE, Inc. | 5

MARKETVIEW RETAIL

Figure 6: Metropolitan Philadelphia Primary Retail Trade Areas

CONTACTS

LOCAL OFFICES

Ian Anderson
Director of Research and Analysis
+1 215 561 8997
ian.anderson2@cbre.com

Center City
Philadelphia
Two Liberty Place
+1 215 561 8900

Lauren Koshgarian
Senior Research Analyst
+1 215 561 8932
lauren.koshgarian@cbre.com

Cira Center
+1 215 921 7400

Wei Luo
Researcher
+1 484 567 2473
wei.luo@cbre.com

Wayne, PA
+1 610 251 0820

Allentown, PA
+1 610 398 6900
Harrisburg, PA
+1 717 540 2700
Mt. Laurel, NJ
+1 856 359 9500
Wilmington, DE
+1 302 661 6700

Conshohocken, PA
+1 610 834 8000

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