Office tenants moving on up

"Marshall Dennehey, a law firm with offices in 1845 Walnut St., has zeroed in on relocating to 2000 Market St. after 19 years in the same building overlooking Rittenhouse Square.

The firm, which has 119 attorneys in Philadelphia, considered a dozen different office towers before narrowing its list down based on price and location, said Pete Miller, chief operating officer.

“The folks at 2000 Market have been very aggressive and the economics of the move are attractive,” Miller said, without divulging any details because a deal is still in negotiations. The building will also allow Marshall Dennehey to consolidate into a contiguous block and make the offices more efficient.

Indeed, 2000 Market could use a big lease like Marshall Dennehey. The firm would backfill about 130,000 square feet being left by Arkema Inc., which is emptying out of five floors at the building and moving its 300 Center City employees to a renovated building the company owns at 900 First Ave. in King of Prussia. Arkema had been in 2000 Market 17 years.

The current state of the downtown office market, with rising vacancies, negative absorption and falling rents, has allowed some tenants that have resided in the same, modest offices for decades to move up to a fancier business address on the cheap. As market conditions remain challenging, the trend is expected to continue.

In Center City, vacancy rates rose in the third quarter to 14.85 percent, which is 5.9 million square feet. The vacancy in Class B space is even greater at 16.23 percent and on the rise. “B buildings will struggle to maintain occupancy as the Class A owners work aggressively to lease” the space they have empty, the report said.

“It depends on the extent of the renovation and the economics of deals,” “Sometimes the renovations you have to do to your space are so extensive that people decide they’d rather move over a weekend rather than live through 18 to 20 months of a renovation, eating your dust. And sometimes in a market like this when you have buildings so stressed, a landlord will provide enough to offset the cost of moving.”

Klehr Harrison, which moved into 1835 Market St. this year after a decade at 260 S. Broad St. Klehr moved into space that had been occupied by another former law firm and came already decked out, leaving few renovations that needed to get done.

The Reinvestment Fund is considering leaving the Cast Iron Building at 718 Arch St. where it has been for more than two decades. It is the largest tenant in the 105,000-square-foot building but is looking to lease 22,000 square feet uptown at 1700 Market St. in a 15-year deal, according to market sources.

Drucker & Scaccetti, in some form other another, has spent the 33 years at 1845 Walnut St.

Two years ago, the tax consulting firm decided to take a look at other office space throughout Center City and examined 20 buildings along Market Street.

“We love the Rittenhouse location but wanted a modern building with better air quality,” said Ron Drucker, one of the firm’s founders.

Its search list included a building with a restaurant, one with enough space to allow it to consolidate on one floor, and competitive terms on a lease. Drucker & Scaccetti found what it was looking for. After three decades in the same space, the firm signed a 12-year lease on 17,742 square feet with an option to grow to 22,000 square feet at 1600 Market St., and moved its more than 50 employees at the end of last month. It grew from about 13,500 square feet.

Some of tenants who are moving may leave with fond memories of their old locations. “We’re going to miss this,” said Miller at Marshall Dennehey. “Rittenhouse has become a jewel.”

Not so for Drucker & Scaccetti. “We’ve moved on,” Drucker said."