PMC Property Group has a novel idea for part of the
Center City office building it just bought:
Offices.
The company's practice of buying up tired old office
properties and refurbishing them into sleek, high-end apartments has helped
make it one of Philadelphia's biggest residential landlords.
It hasn't been working alone: Up to seven million square
feet of office space - the equivalent of almost six Comcast Center towers - has
left the market over the last 25 years, most of it converted to residential
use, according to real estate services firm JLL.
But as a flood of proposed rental properties in central
Philadelphia coincides with a shrinking supply of office space, PMC is tweaking
its formula at a former U.S. headquarters of drugmaker GlaxoSmithKline, which
it purchased last month.
The company plans to fill the 24-story building at 200 N.
16th St. with a mix of office and residential units, similar to its plan for
the Marketplace Design Center at 2400 Market St., which it purchased earlier
this year.
"We feel there is a tremendous amount of multifamily
housing in the pipeline, and there's not as much office," PMC executive
vice president Jonathan Stavin said. "We're working to identify a level of
office that's not being met."
Office vacancies in Center City and University City and
at the Navy Yard were at 9.9 percent in the quarter ended June 2015, down from
a five-year high of 13.5 percent at the end of 2010, according to JLL.
Meanwhile, the current inventory of multifamily
residential units in Center City has ballooned to 17,600 units, said JLL's
Philadelphia research director, Lauren Gilchrist, citing data from real estate
tracker REIS Inc.
An additional 3,300 residential units are in progress and
likely to be delivered over the next two years or so, Gilchrist said, an
inventory increase of about 19 percent.
"We've basically been swapping commercial space for
residential space now for close to 10 years," said Kevin Gillen, a senior
research fellow at Drexel University's Lindy Institute for Urban Innovation and
chief economist at Meyers Research L.L.C. "I think we're reaching a point
of near-saturation."
Major office-to-apartment conversions include PMC's
transformation of the former AAA Mid-Atlantic headquarters at 2040 Market St.
into a 282-unit residential building with ground-floor retail.
Another such project, the renovation of a historic
25-story building at 1616 Chestnut St. into the 206-unit Icon apartment tower,
sold this year for $112 million.
Developer Post Bros. is converting the 93-year-old,
21-story Atlantic Building at 260 S. Broad St. into 160 rentals and 40
condominiums.
Even part of Two Liberty Place, one of Philadelphia's
earliest skyscrapers, has been adapted into homes, all being sold as condos.
New buildings, too, have contributed to the apartment
inventory, such as developer Carl Dranoff's 85-unit SouthStar Lofts at Broad
and South Streets, which opened in April 2014, and the recently completed
110-unit AQ Rittenhouse high-rise at 2021 Chestnut St.
In the pipeline are such residential projects as PMC's
250-unit One Water Street at 230 N. Columbus Blvd. and a 29-story, 321-unit
rental building Brandywine Realty Trust, the city's biggest office landlord,
and partners are constructing at 1919 Market St.
"We're getting a little bit overbuilt, especially in
the apartment and rental sector," Gillen said. "I would like to see
our portfolio of downtown space be a little more balanced between the
commercial and residential sectors."
Some of that imbalance may be on its way to being
corrected. The 59-story Comcast Innovation and Technology Center being built by
Liberty Property Trust at 1800 Arch St. will add 1.29 million square feet of
offices to the city's inventory when it is completed in the fall of 2017,
although all of that space has been spoken for by the cable giant.
At its FMC tower project near 30th Street Station,
Brandywine plans 635,000 square feet of office space, along with 268 luxury
apartments, due for completion in the second half of 2016. National Real Estate
Development's East Market project at 11th and Market Streets and Brickstone
Cos.' development at 11th and Chestnut Streets, both now under construction,
also will include offices.
PMC's Stavin said work could begin early next year at the
16th Street tower known as One Franklin Plaza, which made up part of GSK's
headquarters complex between Race and Vine Streets. The tower has been empty
since the pharmaceuticals firm left for the Navy Yard in 2013.
Internationally prominent architecture firm Gensler,
which also is designing the interiors at the new Comcast tower, has been hired
by PMC for its plan to re-skin the structure, which will be renamed One
Franklin Tower.
The developer wants to renovate the 200,000 square feet
of office space on the building's lower nine floors, with the rest of the
roughly 607,000-square-foot building converted to apartments.
Atop the sprawling industrial building that makes up the
Marketplace Design Center, meanwhile, PMC plans to build a mid-rise tower and
develop the property into offices and residences, a financial partner on the
project has said.
"Space that might have gone residential is now going
office," said Paul Levy, president and chief executive of the Center City
District. "That's a reflection of some improving market realities,"
such as the expansion of Comcast, Philadelphia's leading technology employer,
and the growth of co-working businesses.
Bill Luff, executive managing director for Colliers
International's Philadelphia office, said the growth in apartment inventories
and office demand are connected.
Now that people live in the urban core, he said, they
want to work there, too, and corporate bosses are taking notice.
"Those decision-makers are saying, 'I want to be
near where my workforce wants to live,' " Luff said.
Source: Philly.com
No comments:
Post a Comment