Industrial and Life Sciences: Two Markets Set to Change the Commercial Real Estate Landscape in 2023
Brad Adams, Director of Construction, Maguire Hayden, shares his perspective.
The uptick in the industrial market over the past few years is well-documented. The explosion of ecommerce has certainly contributed to this growth, along with other trends we’ve noted in the past including population growth and a high efficiency labor market. Another market to emerge with a high growth opportunity for commercial real estate in our region is life sciences development.
In this Q&A with Brad Adams from Maguire Hayden, we talk about both of these markets and why our region is uniquely suited to serve them well.
Tell us about Maguire Hayden and the Hayden Management Company.
The mission at Maguire Hayden Real Estate is to be a leading investor and owner in the commercial real estate industry. We are a privately-held, full-service, vertically integrated real estate development, investment and management firm that creates value beyond real estate. The core competencies at our firm are leasing, acquisitions, property and asset management, along with construction management and development.
What is your role and has it changed over the past few years as the market has evolved?
Currently I serve as the Director of Construction where I am responsible for all aspects of the construction process at Maguire Hayden from pre-con budgeting and vendor selection, to contract negotiations, schedule and budget management, and overall project outcome. I focus on Tenant Improvement work and capital projects for all buildings within our portfolio.
From your perspective, which markets have experienced the most volatility in Philadelphia over the past 12-18 months?
I think it is fairly safe to say that the office market has experienced the most volatility. Overall, there are fewer potential tenants for office space, but even when they are looking for space, the square footage requirements are dramatically lower than they were in the past.
That said, we are seeing other interesting trends with prospective office tenants that improve the chances of converting a prospect to a customer. Tenants often narrow their search more these days and don’t look at as many spaces as they might have previously. In addition, tenants in the past would plan for several different spaces at once, which would also make the process longer.
Beyond the office market, we are seeing variation, but not necessarily volatility, in the demand for warehouse and industrial space which picked up significantly. We are focusing here now more than ever, due to the opportunity.
Do you expect this to continue as we move into 2023 or settle down?
I think things are starting to balance out. More and more companies are bringing employees back to the office as employers need a “home base” for their teams because it can be difficult to operate 100% remotely.
As far as the warehouse and industrial market goes, we have not seen a slow down there yet as there is still high demand both on the leasing and acquisitions side. The hope is the trend continues.
According to research, the industrial market is set to boom in 2023. Are you anticipating this same growth from your view at Maguire Hayden?
Yes! As noted above, we are already seeing an uptick in that market and have increased our focus on the asset class. All of our most recent acquisitions have been in this market and we anticipate that we will continue to invest here well into 2023 as well. We are seeing so much potential with warehouse and industrial space that we are going beyond our legacy target markets to expand up and down the East Coast.
Do you see a similar growth trajectory for life sciences development? What are the unique characteristics of that type of build?
I would imagine this to also follow suit. These buildouts are very complicated and often focus primarily on tenant fixtures and operations. There are non-standard materials used and you have to learn and understand the nature of operations in order to help fulfill the tenant’s intended use in the space.
When life sciences clients consider a build, we try to steer them towards certain building types that are best suited for a fit-out that includes lab space. This March 2022 article from REBusiness Online does a great job identifying the features present in buildings that make the best candidates for life sciences which include “taller ceiling heights, vibration-resistant floors, abundant exhaust shafts and backup power systems in place.” The article goes on to mention the potential need for large capacity freight elevators and spacious, accessible loading docks.
Why is Philadelphia uniquely suited for success in life sciences development?
The greater Philadelphia region, including the suburbs and nearby New Jersey, has long been home to many life sciences and biotech companies, large and small, but the industry is set to grow as last year saw an incredible volume of investment - more than $1 billion in venture capital.
Philadelphia is an innovative city, with so many excellent colleges and universities, but there is more to our appeal. Outside of the city limits many suburban townships are very open to growth and development. Plus, our central location on the eastern seaboard and less expensive land and buildings than other nearby metro areas, makes us an ideal place for growth. And it doesn’t hurt that it is easy to travel into and out of the Center City Business District where so much of this innovation is happening every day.