By Katie Burke CoStar News
A Philadelphia-area office property anchored by a pharmaceutical giant was what drove PRP Real Assets to scoop it up. Now, the national investment firm is testing how far the market has come since the COVID-19 pandemic with its move to list the fully leased building for sale.
The Washington, D.C.-based investor is on the hunt for a buyer for the more than 429,120-square-foot building at 1 W. First Ave. in Conshohocken, Pennsylvania. The 11-story property was developed in the earlier years of the pandemic as a built to suit for Cencora, the pharmaceutical distributor that occupies its entirety to house its corporate headquarters.
The building, completed in 2021, serves as an anchor for the Sora West district, the mixed-use project spearheaded through a joint venture between local developer Keystone Property Group and the Montgomery County Redevelopment Authority in an effort to create a more walkable and mixed-use environment for the Philadelphia suburb.
The more than 1,500 people who commute to Cencora's corporate hub have access not only to the property's fitness and wellness amenities, on-site dining outposts, corporate event space and various lounges, but also to the broader development's hotel, outdoor event space and proximity to Center City Philadelphia.
PRP acquired an 89% stake in the Cencora headquarters building in early 2021 for $340 million alongside equity partner Riyad Capital. Pricing for the listing has not been publicly disclosed.
All about timing
The listing hits at a point when capital markets, long frozen by the residual impacts of the pandemic, are quickly heating back up.
The national vacancy rate of about 14% has largely hit its peak, according to CoStar research. While U.S. office leasing has yet to fully recover to pre-pandemic levels, the 12 million square feet of deals signed in the third quarter is the most since 2019.
Improving market dynamics has meant sellers are betting on their chances of landing higher prices for their properties, and a growing pool of large office landlords and investment firms is on the hunt for listings aimed at strengthening their spots at the forefront of the office market recovery blooming across the United States.
All of that has collided to create a sense of urgency and competition for attractive listings. To be clear, that attention has largely been concentrated on properties in the most desirable locations, which already include an attractive bevy of amenities or come with a solid tenant roster.
PRP is betting the Sora West office property will deliver on it all.
The Conshohocken area, known as "Conshy" for locals, accounts for just a small slice of the greater Philadelphia office market. Its size has meant that leasing activity in the suburb is far less compared to Center City, but it has also been largely insulated from the dramatic vacancy and demand swings that have plagued the downtown Philadelphia area over the past several years, said Brenda Nguyen, CoStar's local director of market analytics.
Yet the area has also attracted a larger share of new developments, Nguyen said, helping to attract a crowd of life science and technology firms looking to take advantage of the suburb's more modern inventory and transit-oriented perks.
Office sales are few and far between — there have only been four to close over the past year — but considering its long-term deal with Cencora and the property's desirable address, PRP and its partners think it makes for a compelling investment play.
"Sora West is one of only a handful of trophy office buildings constructed in the Philadelphia market over the past five years. With no significant new development on the horizon, the property is strategically positioned as a flagship asset in the region for years to come."
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