The news that GlaxoSmithKline is moving the last remnants of its Philadelphia workforce from Center City to a low-rise office building at the Navy Yard appears to follow the contours of an all-too-familiar narrative: Once again, downtown is losing a major corporation to the tug of wide-open spaces.
Except this time, those wide-open spaces are located in the city, not the suburbs.
Two decades ago, when the 1,200-acre Navy Yard was repurposed as a corporate park, it was seen as an urban alternative to Chester County's Great Valley office corridor. Yet two of the Navy Yard's biggest employers, Urban Outfitters and Tastykake, only had to shift their operations down South Broad Street to set up shop.
Since both are companies that make things, it was possible to embrace their defections on the grounds that modern manufacturing space isn't available in the city's traditional core. The Glaxo move complicates matters. Its Center City workforce is purely a cubicle brigade, and the company could have its pick of a dozen spots downtown.
Should we be worried that the city's Navy Yard strategy is working a little too well?
Tempting as it is to view South Philadelphia's old Navy Base as Center City's archenemy, an unprincipled rival bent on poaching its best tenants, most planners, economists, and real estate brokers agree that the business center remains something that Philadelphia can't live without.
If it hadn't been for the verdant corporate park, Glaxo - the last of the city's big pharmaceutical firms - would have probably decamped for the real suburbs, taking 1,300 wage-tax-paying jobs off Philadelphia's rolls. Thanks to the Navy Yard, Philadelphia was able to offer Glaxo an "office product" that is as good as anything in the suburbs - better if you consider proximity to transit and the airport. That alone would seem to vindicate the city's Navy Yard strategy.
The Navy Yard isn't quite the jobs cannibal that the Glaxo move suggests. Just 8,000 people work at the business park, a fraction of the 217,000 laboring downtown. Most of the yard's companies relocated from outside the city, says John Grady, who manages the yard for the Philadelphia Industrial Development Corp.
Even when companies are lured from the city, he says the Navy Yard gives them room to blossom. Urban Outfitters, for example, began its Navy Yard operation with 600 people, but will soon expand to 2,300. "Where would they be today if not for the Navy Yard?" asked Grady.
Still, Glaxo's move is not without consequences for Philadelphia. When the company departs from downtown in 2013, Center City will be stuck with two empty buildings at 16th and Vine Streets, containing some 800,000 square feet of offices. The company isn't exactly trading up, either. Its new home, an $81 million, four-story building that is being designed by Robert A.M. Stern Architects, will contain all of 200,000 square feet.
Leasing Glaxo's Center City buildings won't be easy, even if the U.S. economy improves. One building, a generic, 24-story tower known as One Franklin Plaza, may be unrentable in its current form because its design dates to the energy-abusing years of the late 1970s.
Did I mention that the company also expects to save $26 million a year on rent and operational costs once it moves to its new energy-efficient home at the Navy Yard?
While those savings certainly influenced Glaxo's decision to leave downtown, the company's Dan Phelan insists that the move is driven by other factors. Glaxo was drawn to the Navy Yard, he says, because it can create a nontraditional work environment.
Glaxo has embraced one of the hottest trends in corporate America: collaborative space. Convinced that people are more creative when they work in groups, companies are ditching their glass offices and cubicles for an open-plan environment. All partitions are banished. Employees work at tables instead of desks. Conference rooms - lots of them - take the place of executive suites.
The open-plan model, sometimes called "hoteling," happens to allow companies to operate in less office space. The new building has only four stories, compared with 24 on Vine Street, but the elimination of cubicles means Glaxo can cram more people into the smaller area. Employees will have half the elbow room they now have - 130 square feet per person. The new building will be flooded with light, however, and feature an atrium where all 1,300 workers can gather.
Glaxo's philosophy goes against everything planners have been telling us about the competitive advantages of America's downtowns. Supposedly, they stood to benefit from their high density, good transit links, mouthwatering restaurants and coolness quotient - traits considered essential for attracting talent.
Center City has those qualities in spades, so why is Glaxo abandoning it all for a stand-alone building in a more sprawling and largely car-dependent development, where the best food is served on cafeteria trays?
One trade-off is that Glaxo gets to be the only tenant in its swank new building, designed by the firm that produced the Comcast Center. It's convinced that having its own address will allow it to mold a new corporate culture and forge a strong esprit de corps. The company doesn't seem to mind that employees will have a more difficult commute. Because the Broad Street Subway stops short of the Navy Yard entrance, the company's transit users will have to rely on shuttle buses.
Will hoteling work for Glaxo? It's clearly the trend of the moment. SAP, which produces business software, created a similar work space in Newtown Square. But what happens if every downtown company decides it wants the same kind of open-plan office?
It sounds like a scary prospect for Center City, acknowledges Glenn D. Blumenfeld, a principal at Tactix Real Estate Advisors. Yet, he believes the vogue for hoteling and compact offices will ultimately doom suburban corporate centers, with their limited parking, and benefit the city.
While most workers have no choice but to commute by car in the suburbs, the Navy Yard is accessible by shuttle. The city also has the option of extending the Broad Street Subway three-quarters of a mile to bring the line into the park. That transit link would integrate it more strongly with Philadelphia's core. If Navy Yard workers can zip into Center City for lunch, that can't hurt downtown.
It may not be exactly how we imagined Philadelphia's business district evolving, but it beats not having the Navy Yard.