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Liberty Property adapts, thrives

Willard G. Rouse III has been gone a decade, but his handiwork - Liberty Property Trust - continues to thrive.

Willard G. Rouse III has been gone a decade, but his handiwork - Liberty Property Trust - continues to thrive.

Liberty Property's ongoing success stands as testament to Rouse's forward thinking, but also the mutability of clever corporations, which often must shift and remake themselves to keep ahead.

As Liberty Property is doing now under the leadership of William P. Hankowsky, who served his apprenticeship as president of the Philadelphia Industrial Development Corp. (Full disclosure: Hankowsky is part owner of The Inquirer.)

In a conference call last week to discuss Liberty Property's third quarter (funds from operations available to common shareholders were 57 cents per share, compared with 64 cents a year ago) Hankowsky explained where the company was going and why.

Once known for cutting-edge office parks, such as the Great Valley Corporate Center in Chester County, Liberty Property increasingly sees its future in industrial warehouse space.

"Over the last year or so, we've been thinking very much about Liberty Property's strategy for the next five years," Hankowsky said. "The conclusion is we want to be more industrial and less suburban office."

In fact, Hankowsky said Liberty Property's future was about two-thirds industrial and one-third office.

To that end, the company earlier this month spent $1.47 billion to buy the operating partnership of Cabot Industrial Value Fund III, which brings with it 177 properties and 23 million square feet of industrial space.

Liberty Property also is selling 6 million to 7 million square feet of suburban office and flex properties for $650 million to $750 million, Hankowsky said. The purchase of Cabot and sale of office space will leave Liberty Property with about 60 percent industrial, Hankowsky said.

"We think there'll be generally less demand for office space than there has been historically because of efficiency," Hankowsky said, linking that change to technology. "I don't need file cabinets. I don't need law libraries. I don't need server rooms because I can do it in the cloud, so the number per square feet per employee is going down."

The flip side has been the growth of e-commerce.

"That's a whole phenomenon that requires industrial buildings that have a lot more parking, that run three shifts, run seasonally, just operate in a way that's different than a rack building serving a network of stores," Hankowsky said. "And that's a systemic change in that those buildings are needed and necessary."

For Liberty Property, then: "We see a world where there is enhanced demand for industrial product."