It all began back in 1987, when William Penn, (perched
atop City Hall) was dwarfed by a taller skyscraper. At the time, the city’s
office vacancy rate was 12%, but like many other former industrial hubs,
Philly’s population had been dwindling and companies were being lured out to
the suburbs. With the end of the “gentlemen’s agreement” that had prevented
buildings from being taller than Penn, Philly’s skyline was transitioning,
giving way to new commercial real estate opportunities.
Fast forward to 2008, the completion of the Cira Centre
and the Comcast Center marked the start of a new era for reviving Center City
and the region. The highly educated workforce, reasonable cost of living and
quality of life for employees began to attract top-tier employers. More than $1
billion was allocated to transition the Navy Yard into a modern facility. It is
now home to 145 businesses, many with recognizable names like GlaxoSmithKline
and Urban Outfitters. It was recently announced that a 94,000-square-foot spec
building was going up. The Pennsylvania Convention Center’s successful 2011
expansion has spurred a renewal in Center City commercial properties, including
a multi-million-dollar revitalization of parts of Market Street. The Comcast
Innovation & Technology Center, currently under construction, signifies a
new level of demand for vertical, high-end development.
Many of these new employers and developments are
delivering the next generation of office, industrial and lifestyle properties.
Finding creative ways to replace or adapt older properties to meet the new
demand is the next challenge. New buildings are garnering rent prices of 30
percent to 50 percent higher than available existing properties. Demand for
high-end commercial real estate, and limited supply, have made Philadelphia one
of a few markets reaching pre-recession peak rent numbers. Big space occupiers
like Cigna Corp. are part of the latest group vying for limited Class A space.
The industrial market is in a similar situation, with distribution companies
eyeing Philadelphia’s easy accessibility to major highway arteries, port, rails
and airports. Upper Merion will soon be home to a $52 million FedEx
distribution center as a result of its proximity to these assets. In order to
continue this positive growth, new sites in the vicinity of Center City need to
be developed.
The right fit in commercial real estate for now is
focusing on the millennials, more specifically those who want to work and live
in the urban areas. Technology companies are one of the most sought after
tenants and University City is positioning itself to become the innovation hub
of the Mid-Atlantic, cultivating start-ups then leasing them space to stay in
the area. University of Pennsylvania is in the midst of a multi-million
“forward thinking” development along the Schuylkill River banks. Billions of
dollars will be spent to build the ever-popular mixed use developments,
especially in University City, to keep millennials happy both in work and play.
Another big driver behind demand for premium space is the
medical field. Medicine has been a mainstay for Philly, from opening our
country’s first hospital and medical school to having one of the best
children’s medical centers in the world at CHOP. Continuing to attract top
medical researchers and biotech firms means providing state-of-the-art
facilities. Hospital systems are snatching up surrounding city properties to
repurpose, even rebuild, to fit the growing medical needs. With primary
research hubs near the universities, the medical field is also developing away
from centralized locations as they continue to seek out places for doctors’
offices, rehabilitation centers and walk-in clinics.
There is also a push to keep looking beyond the city
limits for available opportunities. Suburban developers are keen on keeping and
even enticing more businesses. It is why places like the Great Valley Corporate
Center underwent a multi-million-dollar facelift that included the addition of
a six-story building occupied by Vanguard. The developers saw new opportunities
with the interchange connecting Malvern to the PA turnpike. It is the same hope
that an interchange in Conshohocken will spur greater interest in a $500
million development in the area. Similarly, industrial areas along the Delaware
River are getting monetary opportunities in hopes of making new and available
for additional manufacturing and industrial investment.
In the next year, two key events - the Pope’s visit and
the Democratic National Convention - will certainly put Philadelphia in a
positive spotlight. They present a great opportunity to highlight
Philadelphia’s ability to move forward without losing sight of William Penn’s
utopian city plan to make Philly feel more like a “great towne” than a large
city. Under his watchful eye, Philadelphia will continue to be one of the most
livable cities in the nation where the Live/Work lifestyle has been thriving
for centuries.
Catherine Swift Sennett, Esq., is the Partner in
Charge of Advisory Services for Jackson Cross Partners. She has been a licensed
attorney since 1983 as well as a licensed real estate broker in PA and NJ. She
is a member of the Forum for Executive Women and serves on the Women in
Leadership & Governance Committee. She can be reached at
csennett@jacksoncross.com.
Source: Philadelphia
Business Journal
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