In Philly, big deal for office market

A fast-growing Philadelphia health-care agency is abandoning its worn South Broad Street offices and moving to the Market Street corporate district in one of the biggest deals this year for the slow-moving Center City office market.

Public Health Management Corp., which employs more than 1,700 social workers, nurses, bookkeepers, and other staff on a $175 million budget funded largely by government agencies and client fees, plans to move to five floors at 1500 Market early next year, said chief executive Richard Cohen.

The complex was home to Comcast Corp. before it built its own high-rise headquarters, and to the former CoreStates Financial Corp., Philadelphia's largest bank until its sale in 1998.

PHMC is arranging to lease the mezzanine level of the tower, known as Centre Square East, plus four upper floors. The mezzanine, Cohen says, is designed as a common area with a cafe, gym, and "help office" for laptop and smartphone issues, loosely modeled on a similar space at GlaxoSmithKline's new Navy Yard building.

Upstairs office floors will feature exposed ceilings and group work areas in what Cohen calls an "open, industrial feel."

"They understand that space can really shape behavior and get people to act differently as work changes and tools change," said Nancy Richter, Philadelphia-based workplace consultant for office-furniture maker Steelcase, which worked with designers BradBerry & Kheradi and Corporate Interiors in planning the space. "We shrank down the high-paneled work station, and added places they can choose for collaboration and the needs of the moment."

PHMC is among a long line of nonprofits and government agencies taking over what were once prime commercial offices in Center City, where office rents, outside of a few choice properties, have been stuck since the 1980s in the range of $20 per square foot.

PHMC is leaving the Atlantic Building, once home to the former Atlantic and Arco oil companies and adorned with Art Deco-era paintings of oil tankers in its elevator lobby.

That building was purchased by developer Post Bros. in 2012 from banks that had foreclosed on the property after the Klehr, Harrison, Harvey, Branzburg L.L.P. law firm and other tenants left and the building's Michigan-based owner, Atlantic Investors L.L.C., stopped paying the mortgage. Post Bros. co-owner Mike Pestronk said he planned to convert the building to apartments, the latest in a string of office buildings to make that switch.

PHMC "contracts with the city and the federal government and the state government to provide public health services that the city can't or isn't able to provide," said Donald F. Schwarz, deputy mayor and health commissioner. "We work hand in glove."

Cohen says PHMC has grown in part by absorbing or affiliating with smaller agencies and centralizing their billing, bookkeeping, hiring, and data services that must meet government requirements. Sometimes, the agency and its affiliates deliver services directly to the public; sometimes, it's a conduit for government dollars to other agencies. Schwarz said a growing number of agencies were consolidating under groups like PHMC as funding for public-health services has become tighter.

PHMC says its payroll totals $55 million in salaries and benefits, including more than $800,000 paid to Cohen, according to the agency's 2010 tax return. More than two-thirds of the staff are Philadelphia residents, most are black or Latino, and nearly three-quarters are women.