Philadelphia office sells for $328m
CBRE Capital Markets has arranged the sale of Centre Square, a two-building, 1.8 million-square-foot, class A, multi-tenant office complex in Philadelphia, to an affiliate of Nightingale Properties. The seller was Equity Commonwealth.
The sales price was not disclosed; however, it is approximately $328 million, according to other media outlets.
This sale marks the largest office transaction based on square-footage in the city’s history.
Located at 1500 Market St., in the heart of Philadelphia’s CBD, the office complex is an iconic part of the city’s skyline. Built in 1974, the complex is equally as well known for a 45-foot tall Clothespin art sculpture that sits in its front plaza. The property consists of a 36-story East Tower and a 43-story West Tower, which houses market leading tenants including the University of Pennsylvania Health System, Towers Watson, PHMC, Saul Ewing, Dilworth Paxson and the mortgage insurer, Radian.
In addition to a parking garage that can accommodate 450 vehicles, Centre Square also includes a 41,000-square-foot retail component with several shops, stores and restaurants.
Nightingale Properties has plans to do an extensive renovation at Centre Square.
The overall vacancy rate for the Philadelphia CBD increased to 10.3 percent in the first quarter of 2017, up 50 BPS from the first quarter of 2016, according to Cushman & Wakefield. Overall absorption was positive to begin 2017 with 61,377 square feet. Overall average rental rates for all classes increased by 5.2 percent year-over-year to $29.81 per-square-foot. Overall class A asking rates experienced the largest growth, increasing by 7.6 percent to a current value of $31.65 per square foot.
More full floors came to market during the second quarter 2017 as large tenants are consolidating or relocating, according to JLL. But leasing activity held steady during the second quarter compared to the first quarter 2017. With no major expansions or inbound relocations, absorption was negative as a function of CHOP’s relocation out of 3535 Market and into its own property at 700 Schuylkill. This is not of major concern for University City, which has suffered from a lack of lower-cost space. Across town, stalled plans for the residential conversion of a portion of the Public Ledger Building brought several hundred thousand feet of space back on the market, contributing to an uptick in Market East vacancy.
With large and inbound tenants showing less price sensitivity than longtime occupiers, it is likely that new construction and buildings with robust capital improvement plans will continue to outperform status quo options.