Monday, October 1, 2018

Philadelphia's Independence Hall Office Market Heating Up

Early signs may be surfacing of a resurgence in Independence Hall’s office market in Philadelphia.

Throughout 2015 and 2017 Independence Hall was an outlier with noticeably higher vacancies than other submarkets in and around Philadelphia’s central business district (CBD) such as Market Street West and University City. These higher vacancies were caused by move outs by both government and private sector tenants including the U.S. Navy, the GSA and Dow Chemical.

Independence Hall’s concentration of older office buildings and its distance from key center city regional rail stations are potential drawbacks from many office tenants’ perspective. However, a slew of office renovations, restaurant/bar openings and high-end residential construction are now coalescing in what was once a relatively sleepy submarket.

Since 2014, Keystone Property Group has re-energized the ground floor of 100 Independence by bringing Independence Beer Garden -- which includes outdoor seating and a gaming area -- and modernist café La Colombe. One block away, MRP Realty’s newly-renovated Bourse -- previously home to the nation’s first commodity exchange -- is reopening this fall with an impressive array of new dining and drinking options on the ground floor. Coworking operator MakeOffices also recently leased 35,000 square feet on the property’s 5th floor.

More than 850 new, high-end apartment units have either completed or broken ground in the Independence Hall submarket over the past five years. Parkway Corporation recently completed its Civic Design review for a proposed 278-unit apartment tower at 709 Chestnut. Toll Brothers is also planning an 85-unit condo development on the 700 block of Sansom Street.

These improvements to Independence Hall’s ambience and amenity offerings are beginning to bear fruit for office owners. A handful of large leases including Macquaire Investment Management, FiveBelow and a few coworking operators have been signed in recent years. These leases, combined with conversions of older office space into apartments, have helped bring Independence Hall’s office space availability rate -- the percentage of space being marketed for lease -- back in line with other Center City submarkets in 2018.

Given Independence Hall’s complete lack of new office construction, the submarket’s availability rate has nowhere to go but further down as long as tenants’ interest in the area continues to rebound. It will be interesting to see just how much more tenant interest Independence Hall can garner in the years ahead.

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