"People tend to own the buildings forever, and that makes for a very inefficient market," McDermott says.
Add to that a tradition of buying and selling properties on their own--or, on the flip side, to use brokers--and you see higher yields and lower prices per foot, he says.
"There are a lot of friend-to-friend transactions," McDermott says. "They leave a lot of money on the table."
As more and more brokerage firms come to the city, he expects prices will rise.
One factor that depresses prices is high property taxes--as well as use and occupancy taxes, McDermott says. Pennsylvania's General Assemblyrecently convened a special session to address the problem.
Philadelphia 11.25% yield, or average price of $36.39 per sf, is second only to Columbus, which has a 12% yield and an average price of $29.75 per sf.
"At this time, many clients are looking for higher returns on their investments by selling industrial properties in regions like Seattle, Ventura and San Diego, and utilizing a tax-free exchange intomarkets such as Columbus, Philadelphia and Houston," says David Frosh, president of Sperry Van Ness, in a release.
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