Liberty Property Trust plans to charge rents "that are high $30s (per square foot), kissing $40," to Comcast and any additional tenants for the company's planned second Center City office tower, Liberty boss Bill Hankowsky told investors during a conference call yesterday. That's higher than the $20s/sq ft range where Center City rents have been stuck since the 1990s. "Obviously, higher floors will charge more than lower floors," Hankowsky added.
What happens to downtown Philadelphia office leasing when Liberty opens the 59-story Comcast Innovation and Technology Center at 1800 Arch St. and Brandywine Realty Trust builds the 47-story FMC Corp. tower planned for 30th and Walnut? asked Craig Mailman, analyst at KeyBanc Capital Markets.
Hankowsky said the FMC and Comcast moves could dump up to 800,000 sq ft of office space onto the market. Or less: Comcast might take the whole new building, as it did with its first tower in 2005, reducing the vacancy. He's hoping Comcast, plus Center City's rising population of educated young people, will attract more tech employers to fill empty offices. And he expects old buildings will continue to "convert to hotels and apartment buildings... I don't see a problem." Hankowsky also confirmed that Comcast has bought out German insurer Commerz and now owns 80% of its original headquarters tower; Comcast will own the same proportion of the new tower, with Liberty owning the rest of both.
John W. Guinee, analyst at Stifel & Co., asked for more detailed cost projections. Hankowsky didn't give much more detail than the companies have already disclosed: the planned Four Seasons Hotel part of the tower will cost more, per square foot, than the office space; Comcast, not Liberty, will likely spend "several hundred million more" fitting out its new space beyond the $900 million construction cost, he added.
Taxpayers will chip in $40 million ($10 million city, $30 million state) to connect the new tower to the underground Penn Center Septa station and underground retail concourse. Also, Philadelphia is granting its standard ten-year new-construction tax abatmement -- a break that made the project financially feasible, Hankowsky said.
Besides the Comcast project, Liberty is building a 201,000 sq ft, $53.4 million office for Vanguard Group at 425 Old Morehall Road, Malvern, and an 80,000 sq ft, $25.2 million office for Michael Forman's Franklin Square Holdings investment group at 201 Rouse Blvd. in the Navy Yard business complex, plus warehouses in Logan Township, Shippensburg, and in Texas, Maryland, Minnesota and Arizona, the company reported in its year-end financial statement.