Top Philly landlord plans apartments on 3 big ex-office sites: Update
Brandywine Realty to exploit "high demand for both market-rate and student housing."
Top Philly landlord plans apartments on 3 big ex-office sites: Update
Joseph N. DiStefano
Update: More from Brandywine boss Jerry Sweeney in my column in today's print Inquirer here. Earlier: Brandywine Realty Trust, the Radnor landlord that controls half the high-end office towers in Center City, plans to fill vacant city and suburban space with apartments (more on the lack of office demand here): 1) "1919 Market, which is owned through a 50/50 joint venture with [Independence Blue Cross] will include 292 market-rate apartments and 55,000 sq. ft. of retail, and is expected to be delivered by 4Q’14," writes Daniel P. Donlan, real estate analyst at Janney Capital Markets, in a report to clients this morning after Brandywine bosses met with investors. The move accelerates the expansion of residential development into the Market Street office tower district west of City Hall. The vacuum created by weak office demand since the mid-2000s has also attracted the Liberty 2 office-to-condo conversions, the Murano condos and developer Ron Caplan's residential redevelopment of the former AAA insurance building. 2) "At Cira Centre South, which is located in University City (proximate to both University of Pennsylvania and Drexel campuses), management intends to take advantage of the high demand for both market-rate and student housing by building a mixed-use residential development through a [joint venture] with another public company," timetable TBD, Donlan added.
Brandywine's plan for a Cira II office tower (in a tax break zone south of its successful Cira I near its renovated 30th Street Post Office and new parking garage) fell through in the 2008+ collapse, but the company has increased its west-of-Schuylkill holdings by foreclosing on a Market Street office building.
3) "On the Plymouth Meeting site, the REIT plans to enter into a JV agreement for a 400-unit apartment development." UPDATE: Brandywine ceo Jerry Sweeny confirms this will be "new construction." Donlan added: "Additional land parcels in New Jersey and Pennsylvania are currently undergoing planning and zoning for residential, hotel, and mixed-use, or for potential sale." (For example, Tredyffrin Township, Chester County is considering changes to height and building use limits that could allow Brandywine and other landlords there to 'repurpose' aging properties. More here.)
Office rents in the region are still so weak (stuck in the $20s/sq ft range for high-end space, same as 10 and 20 years ago) that there's little economic justification for new construction (which costs in the $40s/sq ft and up). But demand for rental apartments in Center City and other parts of Philadelphia is on the rise. Donlan cites three groups of tenants: "empty nesters" who still work in the city or have retired and sold their larger suburban homes; recent college graduates who don't own cars; and, "as people are waiting longer to get married, they are staying in the city longer." "T Most importantly, the more diverse the downtown has become, the more we have retained real estate values – the assessed value of property within the Center City District, which represents about 22% of the assessed value of all property in the city, has gone up every year during this recession. "So diversification pays dividends. Now if the City would also start reducing the wage and businesses taxes, there would also be demand for more downtown office space."
The Janney report says Brandywine data projects its office rents will grow around 3%-5%/year in its Philadelphia-area and Texas markets -- an improvement over recent years -- but still face weaker demand in New Jersey, Wilmington, Washington DC and Virginia.
Brandywine is expected to sell about $175 million worth of property this year (including recent sales in northern California) while investing around $84 million in acquisitions (including a deal with Allstate Insurance to buy half a million sq ft of 1980s-era buildings in Silver Spring, Md.)
I wonder what it's like to live in an office tower where businesses still have space. When I have to run out for a loaf of bread and some milk do I have to take the same elevator with those office workers?— CommonSense in Philly- Go visit Two Liberty. Condos have their own entrance and elevator tower, separate from the mall entrance and separate from the office entrance.— Echo
- Nice to see demand is still on the rise. The city's baby-stepping its way into a renaissance, I hope City Hall can stay out of the way.— evolutionary
- lol yeah CommonSense, Cole Hamels takes the same elevator as the Liberty office denizens.— evolutionary
Then there was The Murano (count the lighted condos after dark on the fingers of two - but no more - hands) and there was 10 Rittenhouse Square (68 out of 135 condos sold as of May 2012 - that's an improvement yet) and there was...
Comment removed.- Comment removed.
- George Bush (both) and Paulson are more liberal than Obama..
The only conservative Republican is Ron Paul. All others are either fiscally liberal, socially-corrupt, right-wing Christian conspirators, or just plain war-mongering buffoons.— USAFirst1 - Comment removed.
- The Murano is over 80% sold. As someone that lives her I thought that I'd point out that these CC owners could eventually change the face of the city politicians. That is why the dems are so sared.
- Are these "CC owners that could eventually change the face of the city politicians (take away Nutter's beard?)" living in the dark intentionally.
I live in a house off Rittenhouse Square and have a rooftop garden. I look at The Murano every summer night - including last night - and see no more than a very few lighted condos. Few enough to make me believe it's 80% vacant. - Shouldnt housing demand ride the coat tails of job creation? With all these new apartment towers going up in Center City you would think jobs and corporations were pounding down the doors to get into Center City but obviously we know this is not the case.
What gives?— joe smith - Comment removed.
- Big questions, if and when they make the conversion to apartments will they be tax abatement properties for the owner?— Centrist
- Comment removed.
