Roger Thomas is bullish on the ’burbs.
That may be an understatement. Thomas sees the suburbs as the third rung in the real estate cycle following, in order, apartments and then office properties located in urban centers.
“We’re big believers in the suburbs,” he said. “Perhaps we’re a bit contrarian.”
Maybe you need to say that if you spent $245.3 million buying 41 office buildings in Horsham from Liberty Property Trust, which Thomas’ new company did last year. Sitting in the conference room at 5 Walnut Grove Drive, one ofthe buildings he bought, Thomas made his case for the suburban office. He’s not the only one.
Even though companies such as Liberty Property and Brandywine Realty Trust have unloaded large portfolios of suburban office properties and exited some suburbs such as Horsham and South Jersey, there’s a bit of a drum beat tamping its way into the milieu about the suburbs. Earlier this month, Urban Land Institute held a developer’s forum in which Eli Kahn of E. Kahn Development Corp., Michael Markman of BET Investments and Jim Mazzarelli of Liberty Property disabused those who think the suburbs are dead. Or as Thomas put it, invoking a variation of an oft quoted line from Mark Twain: “The reports of the death of the suburbs have been greatly exaggerated,” he said.
Thomas is familiar with the suburbs having spent years with Mack-Cali Realty Corp., which owned properties in the Philadelphia area before selling them to Keystone Property Group.
With his new company, Workspace Property Trust, Thomas is banking on the success of the suburbs. But it’s not just any suburbs. It’s well located suburbs that aren’t too from urban centers, near transit or highway access and with amenities nearby. These are suburbs that almost mimic the vitality of a 24/7 city.
It’s what Kahn called “urban light” at the ULI forum. They are the suburbs that give people a “quasi-urban experience,” he said. Those are the type of communities where Kahn focuses his work and they include Malvern, West Chester and Media. That’s also what Liberty is looking to create at the Great Valley Corporate Center in Malvern. It wants to integrate social, work, entertainment and other spaces in something more akin to a community rather than an office park.
In contrast, those properties on the outskirts, those that once had their heyday in the mid-1990s and early 2000s, aren’t as attractive. “Far-flung suburban office assets aren’t coming back at all,” Thomas said.
Horsham, which isn’t quite Conshohocken, Radnor or Wayne, has a lot going for it, Thomas said. Among its strengths, he said, is that it draws from the east and west with its highway access, its housing stock is strong, and the township is seeking to improve the business center with zoning that will encourage denser development and a range of development uses. Thomas is already thinking about putting a hotel on a nearby parcel at 104 Witmer Road.
What Thomas and the other developers keen on the suburbs are also banking on is the return of millennials to the suburbs as they look for better public schools for their children, a little more room to live in and more green space around them.
“I think they will come back to the suburbs — kicking and screaming,” Mazarelli said at the ULI forum. But they will come back.
“You’re starting to see that now,” Thomas said. “Not all millennials can live and work in an urban environment. Not all want to live and work in an urban environment and not all employers want to be in an urban environment.”
To that end, Workspace is on the hunt for more suburban portfolios here and across the country. Since Wall Street keeps pressuring public real estate companies to sell suburban office parks, Thomas will be poised to buy.
“Suburban office is one of the few places to get yield,” he said.
Source: Philadelphia Business Journal