Friday, December 9, 2011

Reed Smith moving to Three Logan tower

by Natalie Kostelni

"Reed Smith is relocating its Center City offices to Three Logan after spending more than 20 years at One Liberty Place.

The law firm signed a long-term lease on 115,000 square feet on floors 28 through 33 at the signature office building owned by Brandywine Realty Trust. Terms of the deal weren’t disclosed and Brandywine declined comment.

The lease means one of the big tenants fishing around Center City for office space has landed, leaving fewer large blocks of contiguous trophy space for them to consider even though it does open up a large chunk in One Liberty.

At the beginning of the year, nearly a dozen big downtown office tenants totaling more than 1.5 million square feet — enough to fill Comcast Center and then some — began to have early conversations about their office prospects and begun to assess what space is or, what they fear, isn’t available. Since then, three of these tenants have secured leases and the others continue to mill about.

The Reed Smith lease, added with some other deals, also means Brandywine has made significant inroads to chip away at the empty office space that had plagued Three Logan. At the end of September, the 53-story, 1 million-square-foot building was 67.2 percent leased, according to Brandywine’s quarterly report. When Janney Montgomery Scott moves in to 146,321 square feet at the building, it will be 82.1 percent occupied, and this deal will mean the building will be more than 90 percent leased.

Reed Smith started its search in earnest a year ago and considered seven buildings, said Patricia A. Hiltibidal, chief of office services at the firm, in a statement. It then narrowed the list based on some of its requirements.

“Office moves of this magnitude are long and challenging,” Hiltibidal said in the statement. “We needed a turnkey solution with little disruption to our busy attorneys and Three Logan accomplished that.”

The firm will move in early 2014.

Reed Smith occupies floors 23 through 28 and portion of the 22nd floor of One Liberty. It had been in the 58-story skyscraper at 1650 Market St. since it opened in 1987. “There are a lot of moving parts in the Double A market. I think certainly the Double A market continues to get a lot tighter and vacancies Double A market is single digits.”

Though space in the fanciest office buildings is diminishing, most believe it’s not enough to kick off new construction since lack of rental growth doesn’t support it.

“New construction happens when rates get well north $40 a square foot,” Cauffman said.

Though, Reed Smith lease punches a 150,000-square-foot vacant hole in the 1.2-million-square-foot building, downtown office brokers believe it will have a good opportunity to get leased up. One Liberty has about 88,213 square feet already vacant, which is about 7.4 percent of the total building’s square footage.

“I think Liberty will be fine. It’s a Class A building with Class A management and a Class A location. It won’t take long to backfill that space. There are lots of big guys looking and not a lot of big blocks of space, so you have to nail down your opportunities. That’s always been the case in Philadelphia with trophy space.”

One Liberty has faced defections before. For example, Duane Morris moved out of 215,000 square feet in 2004. “We wish we could have kept Reed Smith but we’re not concerned that we can’t fill that hole. We’re already talking to three different people about the space.”
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