The building now known as Aramark Tower will sustain a
financial hit from the loss of its namesake tenant, but it — and the office market surrounding it — will recover, the property's owner and some
local brokers and analysts say.
Aramark has anchored the 634,000-square-foot tower at
1101 Market St. since 1988.
Commercial Real Estate in Market East
The Girard Estate charitable foundation, which owns the 32-story
tower, has hired a team at commercial real estate investment firm JLL to plan
out the investments it intends to make toward bringing the 1980s building up to
date, foundation spokesman Kevin Feeley said.
The aim, he said, is to make sure Aramark's departure has
no lasting impact on revenue from the building, which is one of the income
streams used by the charity to support Girard College, the boarding school for
financially disadvantaged students, in the city's Fairmount section.
"While there's likely to be some short-term impact,
it is short term," Feeley said. "The reintroduction of the building
to the market couldn't have come at a better time."
Aramark announced Monday that it planned to move in 2018
from 1101 Market St. to an office development being constructed on the frame of
an industrial building more than a mile west.
The company had anchored its 634,000-square-foot
headquarters tower since 1988, not long after it was constructed as the biggest
office building east of Broad Street, a distinction it has maintained, in the
Center City area known as Market East.
Developer Scott Toombs had conceived of the project as
the first in an expected wave of office towers taking advantage of Market
East's Regional Rail stop and other transit connections, said Bill Luff, a
commercial real estate consultant in Philadelphia who helped with the
building's original leasing strategy in the 1980s.
But the neighborhood's longtime lack of revitalization
meant that 1101 Market was never able to attract high enough rents — including
from Aramark — to be considered a financial success, said Luff, now founder of
the consultancy CRE Visions.
"It never captured the economic value commensurate
to its geographic presence in the center of the city," Luff said Tuesday.
"It was a building ahead of its time."
Luff and others said the times may now be catching up
with 1101 Market.
The building stands directly across the street from the
so-called East Market mixed-use complex being constructed by Washington-based
National Real Estate Development, which will include an organic supermarket,
offices, and two residential towers.
Just to the east is the Gallery at Market East, which
Philadelphia-based Pennsylvania Real
Estate Investment Trust and Macerich of Santa Monica, Calif., are working to
transform into a name-brand shopping-outlet center.
Those projects will boost 1101 Market's desirability,
said Jay Joyce, managing director in Philadelphia for commercial brokerage
Savills Studley — once they begin to materialize.
"Nothing is complete as of yet, so it can be a
challenge in terms of re-leasing until we get a bit further along and people
can see and feel what that side of town is going to be like," Joyce said.
The 365,000 square feet Aramark plans to vacate would
bump Market East office vacancies up to 13.7 percent, their second-highest
level since at least 2010, from an average of 10.8 percent during the three
months ended June 30, according to a calculation by JLL based on an area
bounded by Broad Street and the Delaware River, from Spring Garden Street to
Locust Street.
That calculation provides only a rough sketch of the
impact of Aramark's departure because it assumes everything else in the market
remains constant until it leaves: no other tenant losses or gains, and no new
office construction.
But it does show the large impact that the loss of the
food- and facilities-management company will have on the Market East area, said
Lauren Gilchrist, JLL's director of Philadelphia research.
"It's reflective of a new, large block coming on the
market," Gilchrist said Tuesday. "It's really a smart time to have a
large block of space in this particular building becaue the market is finally
coming to this section of east Center City."
Source: Philly.com
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