Developer plans a second office building at University City's western edge

Developer Scott Mazo is doubling down on the office market at University City's western edge as he moves forward with a second building near the bustling district's far end.

This week, Mazo said, demolition will begin at 41st and Market Streets, at the site of a Pep Boys store, on his planned 3.0 University Place project. Groundbreaking for the $70 million office building could come in the spring.

The 190,000-square-foot, five-story structure will boast state-of-the-art eco-friendly features such as a skin of photoreactive glass, in hopes of luring tech-savvy tenants to its location, where University City's cluster of high-end offices meets its lower-income neighborhoods.

"The millennials want to break through some of those barriers, some of those social dynamics of economic disparity and race," Mazo said. "The area is so much more dynamic."

The project is a part of a building boom taking place across University City, one of Philadelphia's hottest commercial real estate markets.

Nearby, the uCity Square expansion project by the University City Science Center and Wexford Science + Technology plans to add four million square feet of office, lab, residential, and retail space to the market. Drexel University, meanwhile, has 10 million square feet of construction planned over the next two decades.

These efforts aim to cash in on office demand in University City, which covers an area reaching from the Schuylkill, encompassing the Drexel and University of Pennsylvania campuses, to about 50th Street.

Office vacancy in the district was at 2.4 percent during the three months ended September, compared with 8.9 percent across a wider swath of central Philadelphia that also includes Center City and the Navy Yard, according to real estate services firm JLL. Rents in University City averaged $38.62 per square foot, compared with $27.70 across the central area.

Mazo's first Class A office building in University City was the 90,000-square-foot 2.0 University Place at 41st Street and Powelton Avenue, adjacent to the site of the new project. That building, anchored by U.S. Citizenship and Immigration Services, is now 90 percent leased.

Mazo also owns a property across Market Street, now a Rite Aid, in anticipation of a 4.0 University Place, he said.

Alan Greenberger, deputy mayor for economic development, said he was pleased to see the off-the-beaten-path investment.

"I think the extension of a commercial office market further into West Philadelphia is a wonderful thing," Greenberger said. "It comes with jobs, with foot traffic, with people on the street at different times of day."

Mazo said 3.0 University Place is being developed in partnership with the Valley Forge-based North American subsidiary of France's Saint-Gobain, a manufacturer of high-tech building materials.

The structure will be sheathed in glass that lightens and darkens to optimize interior sunlight, he said, while reflecting different colors on the outside as the sun moves across the sky.

Bill Luff, executive managing director of commercial real estate services company Colliers International's Philadelphia office, said Mazo's success filling 2.0 University Place with high-paying tenants shows the new project has a chance of success.

But given the volume of new spaces planned in more central locations, the building's innovative construction might not be enough of a lure for many companies, Luff said.

"Are there enough people that will venture farther west to make that project successful?" Luff asked. "That's the question."

jadelman@phillynews.com

215-854-2615@jacobadelman