Monday, August 25, 2025
Friday, August 22, 2025
Philadelphia's largest office complex could be converted to different uses after foreclosure
By Katie Burke CoStar News
Philadelphia's largest office property is prepared to hit the market as a potential conversion play, a move that could boost the future for the complex that has seen its valuation and occupancy plummet.
CBRE, the court-appointed receiver for the two-tower Centre Square property, will soon list the challenged complex for sale in the aftermath of its 2023 foreclosure. Rather than test its appeal as an office, however, the brokerage will pitch the more than 2.2 million-square-foot complex at 1500 Market St. as an opportunity to overhaul it into a future residential, retail or hospitality use.
The property is expected to land a price tag of about $100 million, a sharp decline from the $510 million appraisal Centre Square was valued at in 2020, according to public records.
The upcoming listing is part of a broader trend in which office landlords and brokers are pitching sometimes empty buildings for uses other than a place for desks, conference rooms and coffee stations. The number of office conversions across the country has hit a record high, according to a recent CBRE report, and the pipeline is expected to widen as cities dole out more incentives and landlords — especially those of older buildings — offload their troubled properties at deep discounts.
Centre Square's occupancy has fallen to about 35% in recent years, according to a Morningstar report, and CBRE was appointed to oversee the property in May 2023 after owner Nightingale Properties stopped making payments on more than $375 million in loans.
The New York-based investment firm and InterVest Capital Partners — formerly Wafra Capital Partners — acquired the Market Street properties as part of a $328 million portfolio deal that closed in mid-2017.
String of move-outs
The duo refinanced it with a $390 million loan through JPMorgan Chase two years later, and the property was foreclosed upon after a string of substantial move-outs compounded the landlords' financial challenges.
Those who list distressed or high-vacancy office properties are sometimes trying to sell them as potential conversions to apartments, self-storage facilities and even entertainment venues.
The shift represents a new level of eagerness to build interest in these properties that may be older, face pressure from lenders, or have nonexistent leasing activity.
For office properties listed for sale, potential conversions can serve as somewhat of a fallback strategy among investors who aren't yet sure they want to preserve a building's original use.
More than 81 million square feet of office space is moving through the conversion pipeline, according to CBRE, and U.S. office conversions and demolitions are on track to exceed the market’s new construction for the first time in years.
Tuesday, August 19, 2025
Empty office space tends to concentrate in a small number of buildings — but that number is rising
By Phil Mobley CoStar Analytics
It has long been true that most of the vacant office space in a market is concentrated in a relatively small number of buildings. But these days, high-vacancy buildings account for an even more disproportionate share of this unused space than five years ago.
At the same time, the post-pandemic adjustment in office demand means that the number of buildings crossing over the high-vacancy threshold has also risen sharply.
Office building financials vary widely, but at an occupancy level below 75%, it is reasonable to assume that a building could begin to have difficulty generating enough income to provide its owners with a return after covering debt, property taxes and operating cost obligations. Thus, a 25% vacancy rate is a useful delineator of high-vacancy buildings.
An analysis of occupancy performance over the past decade shows that the number of office buildings meeting this high-vacancy threshold has increased rapidly in the past few years. At the end of 2019, there were fewer than 9,000 such buildings, about 13% of all U.S. office buildings. As of mid-2025, there are now over 14,000, or about 21% of all buildings.
These occupancy-performance figures are based on the set of non-medical office buildings without an owner-occupant that are at least 25,000 square feet. Buildings completed within the previous 36 months of a given period are also excluded to remove the impact of vacancy during lease-up.
As more buildings move into the high-vacancy category, the category itself encompasses a greater share of overall vacancy. At the end of 2019, 64% of all vacant space was concentrated in high-vacancy buildings; now, however, high-vacancy buildings contain 78% of all vacant office space.
Both trends are consistent across the country’s largest office markets, though they are more pronounced in some than in others. In San Francisco, the share of high-vacancy buildings quadrupled from just over 10% in the fourth quarter of 2019 to more than 41% by the second quarter of this year. Seattle saw its share of high-vacancy buildings more than triple, while it doubled in San Jose, Los Angeles and Boston.
The vacancy concentration, or the share of vacant office space contained within high-vacancy buildings, increased the most in tech-heavy San Francisco and Seattle, which had lower market-wide vacancy rates than other major cities before the beginning of 2020. In 2019, high-vacancy buildings contained a little over half of all vacant space in these cities, whereas they now account for nearly 90%.
San Jose and Houston each saw their office vacancy concentration rise by about 10 percentage points, the smallest increase among major markets. New York, which was the only large city with a vacancy concentration below 50% in 2019, has seen it rise above 60%.
These trends reveal yet another way the ongoing shakeout in office demand has shifted the market. As tenants increasingly gravitate toward the best buildings — those with strong amenities, prime locations and modern infrastructure — the fiercely competitive nature of the office occupancy market is becoming more pronounced, and older and less desirable buildings are falling further behind.
The highest and best future use for many of these high-vacancy buildings is likely to be something other than office space. However, with development activity currently constrained by the high cost of capital and an uncertain economic outlook, the timeline for adaptation could be long.
Monday, August 18, 2025
Friday, August 15, 2025
Wednesday, August 13, 2025
Medical office demand slips further across Philadelphia
By Brenda Nguyen CoStar Analytics
Philadelphia’s medical office market — long considered one of the more resilient commercial real estate segments — shows signs of tension in 2025. After years of outperforming traditional office properties, the sector is experiencing a contraction in demand.
In 2024, Philadelphia’s medical office absorption totaled 300,000 square feet, but by mid-2025, that figure had swung sharply into negative territory to -232,000 square feet. Projections suggest another 74,000 square feet will be vacated before the end of the year.
As a result, the vacancy rate has increased to 8.6%, a 50-basis-point uptick from its seven-year low at the end of 2024.
This downturn has come despite reasonably steady leasing activity, with nearly 85 new leases signed in the year's first half. However, those deals have tended to be smaller, with average lease sizes dropping roughly 10% from late-2024.
The shift reflects a change in occupier behavior as healthcare providers adapt to slower regional job growth, tighter operational budgets and shifting patient volumes.
Adding to these pressures, Philadelphia’s smaller hospital systems have reported operating losses in recent quarters, according to a review by the Philadelphia Inquirer. Ongoing consolidation among healthcare networks has also contributed to the problem, reducing redundant facilities and centralizing administrative functions.
The most significant hit came earlier in 2025, when Prospect Medical Holdings, the parent company of Crozer Health, filed for Chapter 11 bankruptcy. Years of financial instability — exacerbated by lingering COVID-19 effects, inflation, a major cyberattack and rising insurance denials — culminated in a court-approved plan to close facilities and sell off remaining assets. The Crozer collapse has reverberated across the local medical office market.
The transition has strained care delivery, disrupted physician placements and forced many patients to seek new providers, all contributing to a short-term dip in demand for medical office space.
While medical office properties have historically outperformed traditional office assets due to their specialized nature and stable tenant base, the current environment suggests that even this niche is not immune to disruption in the near term.
Tuesday, August 12, 2025
Demand for Philadelphia industrial space stumbles to a 10-year low
By Brenda Nguyen CoStar Analytics
Philadelphia's industrial real estate market is undergoing a notable downturn, with demand reaching its lowest levels in more than a decade. The decline in leasing activity follows trade policy announcements earlier this year that have increased uncertainty in the logistics and manufacturing sectors, prompting some companies to postpone expansion decisions and reevaluate supply chain operations.
Through the third quarter, Philadelphia’s absorption fell into negative territory at -213,000 square feet, representing a significant retreat from the average quarterly leasing volume of 5.1 million square feet maintained over the past three years. This decline occurred alongside the delivery of 12.9 million square feet of new inventory, contributing to a 1.8% year-over-year increase in vacancy to 9%.
Properties built after 2010 attract stronger interest
Current leasing trends reveal a clear divergence based on property age and specifications. Properties constructed before 2010 have experienced substantial tenant departures, recording negative absorption of 8 million square feet. The hardest-hit areas — including East Montgomery, Camden and Chester — hold some of the highest concentrations of vintage warehouses.
In contrast, properties built after 2010 continue to attract tenant interest, achieving 8.5 million square feet of positive absorption — performance consistent with the previous year. Burlington County, the epicenter of industrial development, accounted for half of the region’s positive absorption across newer buildings. These modern facilities typically feature higher ceiling heights, enhanced loading capabilities and contemporary warehouse management infrastructure that aligns with current operational requirements.
Moderate supply pressures are still anticipated in the near term, as developers are still underway on 6.5 million square feet of new industrial space, 75% of which is speculative. As a result, vacancy rates are projected to reach 9.8% by mid-2026.
Forecasts suggest demand contraction will persist through the remainder of 2025, with economic uncertainty influencing occupier decision-making regarding facility expansions.
Monday, August 11, 2025
Thursday, August 7, 2025
The return-to-office push is one factor fueling CRE activity.
By Ashley Fahey – Managing Editor, National Content, The Business Journals
Commercial real estate buying and selling activity is starting to pick up, although uncertainty about the economy's direction and a lack of downward movement on interest rates and the 10-year Treasury may still be holding back some deals.
Across the U.S. markets tracked, 12,458 deals totaling $182.4 billion transacted in the first half of 2025 — a 15.2% increase in dollar volume and a 25.2% rise in transaction count compared to the first half of 2024. Multifamily and industrial deals made up the bulk of transactions completed in the first half of this year, accounting for 35.4% and 28.4% of dollar volume, respectively.
Although it didn't represent the biggest share of deals done in the first half, office sales are starting to get done with greater frequency.
"It's taken a while for this return to office to really play out," he said. "Financial services, the JPMorgans of the world, were the first to come back five days a week, but now you have even the Amazons of the world coming back to the office as well. ... There is demand for quality office space."
Even within the obsolete side of the office market, buildings are trading — usually at steep discounts — to be converted into new uses, especially residential. In some cases, those buildings are being bought, then demolished.
Nelson said it's been challenging to finance office buildings with significant vacancy, but within well-leased office space, the debt markets are starting to open up.
"To have debt financing and equity now willing to make a move on office, that’s certainly going to help boost office sales moving forward," Nelson said.
Johno Harris, senior executive vice president at Lincoln Property Co., said during a recent webinar with The Business Journals that certain Class A-minus or B-plus buildings in good locations are starting to trade.
"[The] basis is getting reset because it's either going back to the lender or it's in receivership," he said. "And at the end of the day, on a price per pound basis, it's starting to make sense."
U.S. office market is set to hit a 13-year low of 13 million square feet delivered in 2025, at the same time as tenant demand from myriad sectors — including financial, professional services and artificial intelligence — is coming back. Those tenants have demonstrated a preference for the newest, most amenitized and best-located office buildings, the supply of which is dwindling with so little new construction happening now.
But for the Class B and C side of the office market, which companies continue to exit in favor of newer properties, some investors may seize on those opportunities, especially when loans tied to those properties mature, Chin said.
Despite new momentum in the office investment market and across commercial real estate more broadly, challenges persist for investors. Chin said the the 10-year Treasury yield remains relatively high, and capitalization-rate compression is unlikely to meaningfully happen in 2025.
When broad-based tariffs were first disclosed in the second quarter, Chin said it wasn't certain what impact that would have on commercial real estate. While trade policy remains volatile and tough to predict, some investors are starting to gain confidence about moving forward on deals, and there's a lot of dry powder on the sidelines, he said.
Some are currently is forecasting 10% deal volume growth in 2025 compared to last year — a projection that may've been stronger if not for the current economic headwinds, and could ultimately be more robust if the 10-year Treasury declines this year, Chin said. The forecast still calls for an expected $247 billion in deal volume in H2 compared to $191.6 billion in H1.
Some are forecasting a more dramatic 19% uptick in office investment activity in 2025 compared to last year.
Full story:
Tuesday, August 5, 2025
Monday, August 4, 2025
Friday, August 1, 2025
Ben Franklin Technology Partners sells Navy Yard building, moving back to Center City
By Ryan Mulligan – Reporter, Philadelphia Business Journal
Commonwealth Charter Academy, the largest cyber school in the state, has acquired the building at 4801 S. Broad St. for $6.075 million. Ben Franklin Technology Partners will move in late 2025 or early 2026 to the 1600 Market St. office tower, taking up nearly a full floor with a long-term lease.
The move comes after nearly 20 years in South Philadelphia's Navy Yard for Ben Franklin Technology Partners, a commonwealth-backed economic development initiative that funds and supports startups. The Navy Yard property, also known as Building 100, was put up for sale without a price in September.
Commonwealth Charter Academy will use Building 100 primarily for its staff to virtually educate students as well as provide support for the some 5,000 students the K-12 public charter school has in Greater Philadelphia, according to spokesperson Timothy Eller. Cyber charter schools are tuition-free public schools that educate students virtually.
The building spans 33,000 square feet, of which Ben Franklin Technology Partners took up about 12,000 square feet. The 10-plus-year lease at 1600 Market will also be for approximately 12,000 square feet on the third floor, said Bill Kiesling, the chief operating officer and general counsel for the organization.
Besides part of the building's bi-level fitness center, Ben Franklin Technology Partners will be the only tenant on the floor, with some 30 employees based there, Kiesling said. The organization also plans to have some co-working space that portfolio companies can use on temporary bases to heighten collaboration.
Full story: http://tiny.cc/gcmq001
Plymouth Meeting office building sells for a third of 2018 price
By Paul Schwedelson – Reporter, Philadelphia Business Journal
Two out-of-state development partners have added another Plymouth Meeting office building to their growing real estate portfolio in the Philadelphia suburbs.
Eatontown, New Jersey-based FLD Group and New York’s Adjmi family paid $5.2 million for the 83,000-square-foot office building at 2250 Hickory Road, located just north of the Plymouth Meeting Mall and adjacent to the five-building Plymouth Meeting Executive Campus they bought in October for $65.5 million.
Bobby Adjmi, principal at the Adjmi family's firm A&H Acquisitions, described the acquisition as complementary to the partnership’s other properties nearby. The Hickory Road building gives the Adjmis and FLD Group even more control over the office landscape around the intersection of I-276 and I-476.
“Right place, right time,” Adjmi said of the purchase. “We think there’s a lot of opportunity in Plymouth Meeting."
A year before buying Plymouth Meeting Executive Campus, FLD Group and the Adjmi family bought the Bala Plaza office complex in Bala Cynwyd for $185 million. They plan to redevelop the 1.1 million-square-foot property with a mix of uses including a hotel, apartment buildings and a retail center.
Adjmi said there are no immediate plans to convert the four-story building at 2250 Hickory Road, which is about 45% occupied, to a new use.
“The plan is to operate it as office,” Adjmi said, “but we welcome partnering with the municipality in always considering any options that could benefit both the township and us, and create a win-win for Plymouth Meeting.”
Adjmi said he’s optimistic about the location based on other development projects nearby. In March, Keystone secured $42 million in financing to convert an office building at the Plymouth Meeting Mall to residential. Hanover Co. has also begun construction on hundreds of apartments on the mall property, Adjmi said.
He added that the partners would consider a redevelopment at 2250 Hickory Road in the long term if it made sense.
“We welcome speaking with the township and seeing what other adaptive reuses could be had here considering the bulk of office space that’s in the area,” Adjmi said.
Full story: http://tiny.cc/ccmq001
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