PHILADELPHIA | Highrise Development Thread IX

[iheartphilly]

Interesting read, a little more insight in Vanguard's satellite office:

https://www.phillymag.com/business/2017/02/09/vanguard-philadelphia-satellite-innovation-center/

[summersm343]

Originally Posted by City Wide

Do you, or anyone, know what the occupancy rate is for CC office space?

A couple of weeks ago in reference to Parkway's noise about 23th and Market one of the articles mentioned that the developer for 1301 Market St. wasn't able to gain control of the site (who knows, maybe he was only offering pennies on the dollar) but it sounded like that possibility is dead.

That's not usually how a lot of real estate transactions work. Usually, a developer puts a parcel of land under construction with contingencies that they find a tenant and get zoning approvals. The developer probably put an option on the site, proposed the plan, and is looking for tenants.

Who knows how long the contract lasts for, but I'm willing to bet they still have an option on the site to purchase it if they were to find an anchor tenant.

After all, 1301 Market is still listed on Oliver Tyrone Pulver's website:
https://otpcorp.com/1301-market-street.html

[iheartphilly]

Originally Posted by summersm343

That's not usually how a lot of real estate transactions work. Usually, a developer puts a parcel of land under construction with contingencies that they find a tenant and get zoning approvals. The developer probably put an option on the site, proposed the plan, and is looking for tenants.

Who knows how long the contract lasts for, but I'm willing to bet they still have an option on the site to purchase it if they were to find an anchor tenant.

After all, 1301 Market is still listed on Oliver Tyrone Pulver's website:
https://otpcorp.com/1301-market-street.html

So they are the developer. Do you know if it is actively being marketed and by what commercial leasing company? Because, if the latter isn't happening, it's dead in the water.

[summersm343]

1301 Market - 840K sq ft - Morgan Lewis needs 300K sq ft, which is 35%
23rd+Market - 331K sq ft - Dechert needs 230K sq ft, which is 69%
3001 JFK (Schuylkill Yards) - 500K sq ft of office? - Blank Rome needs 220K, which is 44%

Aside from Morgan Lewis, which is close, the others are 100% anchor tenants for new towers. 1301 Market would likely need 1 of these, plus a second tenant to get off of the ground.

[summersm343]

Originally Posted by iheartphilly

So they are the developer. Do you know if it is actively being marketed and by what commercial leasing company? Because, if the latter isn't happening, it's dead in the water.

Marketed by JLL.

https://www.commercialcafe.com/commercial-property/us/pa/philadelphia/1301-market-street/

[iheartphilly]

^
Thanks. And your calculations for the law firm prospective tenants put it into perspective on each of the potential builds. I hope it happens for at least one if not all. We need more cranes in the sky. But, I presume it all boils down to dollars and cents for these firms and if the building that they are in have be renovated to bring it up to standards or will be renovated, it might be a harder sell to get them to move. Fingers crossed that something could be announced later this year.

[jsbrook]

Originally Posted by summersm343

1301 Market - 840K sq ft - Morgan Lewis needs 300K sq ft, which is 35%
23rd+Market - 331K sq ft - Dechert needs 230K sq ft, which is 69%
3001 JFK (Schuylkill Yards) - 500K sq ft of office? - Blank Rome needs 220K, which is 44%

Aside from Morgan Lewis, which is close, the others are 100% anchor tenants for new towers. 1301 Market would likely need 1 of these, plus a second tenant to get off of the ground.

The firms need space and could serve as adequate anchors for these buildings from a space perspective. That's not the problem. The problem is that the rents these developers need to charge to make everything pencil out in new construction are likely higher than what these law firms would pay. There was a very good article recently that did a great job of breaking this out with numbers, but I can't find it at the moment.

[jsbrook]

Originally Posted by iamrobk

Of course, the one thing we shouldn't forget is that law firms like these are prestige whores (for lack of a better description), and they definitely want impressive office spaces to attract and maintain clients. But they don't need 20+ floors in an office building, which is why we're not really going to see them anchor a tower.

Law firms only need nice lobbies and high floor conference rooms for clients. Clients rarely go to the office floors. They can be dumpy, and in Philadelphia, generally are. A lot of the New York firms are tricked out all the way through. It's a different money stream but also a different mentality.

[Boku]

Originally Posted by jsbrook

Law firms only need nice lobbies and high floor conference rooms for clients. Clients rarely go to the office floors. They can be dumpy, and in Philadelphia, generally are. A lot of the New York firms are tricked out all the way through. It's a different money stream but also a different mentality.

I just assume law firms are culturally more conservative anyway and would balk at paying one dime more than they absolutely have to.

[hammersklavier]

Basically what I'm getting out of this is that CC's law firms have locked up a relatively large percentage of its office space, and they're sort of wanting to grow. But because the law firms as a whole control a large percentage of the office space, and CC office vacancy remains low, the best way to do so would be through new construction ... but our law firms are also cheap and don't really want to pay the new construction premium. So there's an ongoing tension between these firms' expanding spatial needs and their cheapness, where one or the other will give: either a firm's spatial needs grow to the point where they must move and pay extra for new construction, on one hand; or their cheapness pushes just enough business away to resolve their space issues, on the other.

[summersm343]

Center City Philadelphia by Brian Kushner, on Flickr

[City Wide]

Originally Posted by hammersklavier

Basically what I'm getting out of this is that CC's law firms have locked up a relatively large percentage of its office space, and they're sort of wanting to grow. But because the law firms as a whole control a large percentage of the office space, and CC office vacancy remains low, the best way to do so would be through new construction ... but our law firms are also cheap and don't really want to pay the new construction premium. So there's an ongoing tension between these firms' expanding spatial needs and their cheapness, where one or the other will give: either a firm's spatial needs grow to the point where they must move and pay extra for new construction, on one hand; or their cheapness pushes just enough business away to resolve their space issues, on the other.

I'm guessing that large law firms could be organized in one of several different methods, but if you are a partner with a nice office and the firm has a good space for dealing with clients, why do think they are cheap if they don't want to have their rental expense go up by 50%, especially if that added expense comes out of the partners pay packet?

I thought that with many people working from home and the idea of having a secretary died in the stone age, that space needs for many firms have fallen, not grown. But of course the firms themselves could be growing-----that would be nice. As a society I'm sure we need a lot more lawyers!

[City Wide]

Originally Posted by summersm343

That's not usually how a lot of real estate transactions work. Usually, a developer puts a parcel of land under construction with contingencies that they find a tenant and get zoning approvals. The developer probably put an option on the site, proposed the plan, and is looking for tenants.

Who knows how long the contract lasts for, but I'm willing to bet they still have an option on the site to purchase it if they were to find an anchor tenant.

After all, 1301 Market is still listed on Oliver Tyrone Pulver's website:
https://otpcorp.com/1301-market-street.html

From post #19502 in this thread, quoting from Philly.com----
West Conshohocken-based developer Oliver Tyrone Pulver Corp. announced plans in late 2016 for a 38-story office tower at 13th and Market Streets, but never acquired the land where the project was to rise

granted, that doesn't preclude OLP from having some type of arrangement with the owner of that site.

[Urbanthusiat]

Originally Posted by City Wide

From post #19502 in this thread, quoting from Philly.com----
West Conshohocken-based developer Oliver Tyrone Pulver Corp. announced plans in late 2016 for a 38-story office tower at 13th and Market Streets, but never acquired the land where the project was to rise

granted, that doesn't preclude OLP from having some type of arrangement with the owner of that site.

That's not abnormal at all - in fact that's how many deals happen, especially big ones.

[acenturi]

From summersm343's previous Post reference: https://www.flickr.com/photos/bkushner/47316462881/

Photographers who have the talent to get that type of night shot are super impressive to me. Obviously, timing is everything, particularly when you attempt to maximize traffic flow and the lighted skyline. It's doubly impressive since the photographer captured an alien saucer craft hovering over the city.
Refer to summersm343's post (not referenceable) for the expanded view.

[Aaamazarite]

Originally Posted by City Wide

From post #19502 in this thread, quoting from Philly.com----
West Conshohocken-based developer Oliver Tyrone Pulver Corp. announced plans in late 2016 for a 38-story office tower at 13th and Market Streets, but never acquired the land where the project was to rise

granted, that doesn't preclude OLP from having some type of arrangement with the owner of that site.

This is precisely what happened exactly 30 years ago when the same developer proposed an office tower on the same property, owned by the same owners! It was a 42 story tower called the Philadelphia CityCenter.

[Jayfar]

Originally Posted by Aaamazarite

This is precisely what happened exactly 30 years ago when the same developer proposed an office tower on the same property, owned by the same owners! It was a 42 story tower called the Philadelphia CityCenter.

…and that owner is the late Sam Rappaport (or rather his estate). Because of course it is.

[jsbrook]

Originally Posted by hammersklavier

Basically what I'm getting out of this is that CC's law firms have locked up a relatively large percentage of its office space, and they're sort of wanting to grow. But because the law firms as a whole control a large percentage of the office space, and CC office vacancy remains low, the best way to do so would be through new construction ... but our law firms are also cheap and don't really want to pay the new construction premium. So there's an ongoing tension between these firms' expanding spatial needs and their cheapness, where one or the other will give: either a firm's spatial needs grow to the point where they must move and pay extra for new construction, on one hand; or their cheapness pushes just enough business away to resolve their space issues, on the other.

Probably when the existing buildings become increasingly obsolete and too expensive to renovate to be state of the art (at least while occupied) is when we'll them forced to pony up to lease in new construction. Not sure how far away we are from that. I'm not sure how much Morgan's Philly office has grown in recent years or is projected to grow though. They've been split across 1701 Market and their auxiliary spaces for a long time now. I think Dechert's Philly office actually may have shrunk in size. At least in attorney headcount.

[jsbrook]

That nighttime shot is amazing, Summers!

[City Wide]

Originally Posted by jsbrook

Probably when the existing buildings become increasingly obsolete and too expensive to renovate to be state of the art (at least while occupied) is when we'll them forced to pony up to lease in new construction. Not sure how far away we are from that. I'm not sure how much Morgan's Philly office has grown in recent years or is projected to grow though. They've been split across 1701 Market and their auxiliary spaces for a long time now. I think Dechert's Philly office actually may have shrunk in size. At least in attorney headcount.

What does obsolete mean these days? Even a older building like Liberty Place was construction with a central core so the rest of the floor plate can be configured in whatever fashion a tenant needs. With dropped ceilings and raised floors its fairly easy to change and update systems. That era building was built with insulated glass and a reasonable tight envelope and the landlord is often responsible for suppling AC, so as long as it works the tenant doesn't care where it comes from or how efficient the system is. I wonder if the same old model that worked for buildings put up pre 1990 applies to office towers built in the last 30 years. I was in a meeting held in 1818 Market St. and once I got off the elevators it seemed to me that I could have in a fresh, newly built tower.