At the end of April, we told you about a warehouse in Norris Square that was approved for a 31 unit mixed-use project. Check out that article for some background information on the property.
We mentioned that the warehouse at 2155-61 N 2nd St. was purchased for $350,000 in 2018 and noted that we thought this was a great price for the 9,200 square foot, CMX-2 zoned property. After purchasing the property, the new owners proceeded to obtain approvals to demolish the warehouse and construct a 31 residential unit building with ground floor retail, 5 car parking spots, and 11 bike spaces.
It looks like these owners have no plan to develop the property themselves. The current owners did the leg work designing a dense mixed-use development and getting everything approved. Now, they want to cash in. They have put the project up for sale at a price of $2.9 million. The sale listing includes renderings by Harman Deutsch. If someone decides to purchase this property, they could use this design or start from scratch. We think an overbuild over the existing warehouse would be cool and would preserve the neighborhood’s historically industrial streetscape. However, we are not sure how dense of a project an overbuild would allow for.
Buying a property, getting plans approved, and then selling the parcel for a higher price is a common tactic in real estate development. We often see property owners get a plot of land up-zoned to allow for denser development than what would have been allowed by-right on the property. Up-zoning creates value as it allows for more units to be developed and thus, a bigger return.
It looks like the owners of 2155-61 N 2nd St. are really looking to cash in. We do not think their purchase price of $350,000, 13 months of holding costs, legal fees, and design services add up to anywhere close to $2.9 million. If they do receive their asking price, they will come up big time and pocket a nice profit.
To put the listing price of $2.9 million into perspective, a different warehouse and land on a 35,916 square foot parcel just a couple of blocks away from 2155-61 N 2nd St. sold for $5.6 million in 2018. A 142 unit development is currently underway on that property.
We look forward to seeing how much 2155-61 N 2nd St. does end up trading hands for and how long it stays on the market. The developer that decides to buy the property will obviously have demolition costs, holding costs, and construction costs on top of their purchase price. However, the potential for 31 units in an appreciating neighborhood is enticing. The property is located in a Federal Opportunity Zone. So, whoever decides to buy the project would be smart to take advantage of the incentives that the program offers.
Do you think this property will sell for $2.9 million? How do you feel about Norris Square’s ability to absorb multiple large mixed-use developments?
Kyle is a commercial real estate agent at Rittenhouse Realty Advisors, a homeowner, and a real estate investor in Philadelphia. Kyle uses his extensive Philadelphia real estate market knowledge to help his clients buy and sell multifamily investment properties, development opportunities, and industrial sites.
Email Kyle@RittenhouseRealty.com if you are looking to buy or sell a property