By Katie Burke CoStar News
With one foot already out the door, insurance giant Chubb has sold off its soon-to-be-former Philadelphia office hub as it prepares to relocate to one of the city's newest developments.
The Zurich-based insurer finalized a deal with Extell Development for the historic Old City building at 436 Walnut St., a more than 331,350-square-foot property Chubb has owned for more than two decades. The $30 million sale lands just a few months ahead of the company's plans to move its extensive Philadelphia operations to 2000 Arch St., an 18-story development Chubb will anchor once construction wraps up later this year.
Chubb, the world's largest publicly traded property and casualty insurance company, unveiled plans for the new 438,000-square-foot project back in 2022, which it is developing through a partnership with local real estate firm the Parkway Corp. Already one of the largest employers in the city, Chubb's future Arch Street space is expected to house an additional 1,250 people to the insurer's existing 3,200-person Philadelphia workforce.
The $30 million price tag for the Walnut Street property is just a bit more than the nearly $29 million Chubb paid when it acquired the building in 2004, according to local property records.
Changing spaces
Extell, a New York-based developer, has a track record that includes some of Manhattan's newest luxury residential skyscrapers, such as the 98-story Central Park Tower and One57, the condominium high-rise along Billionaire's Row.
They had pitched the Philadelphia building as a feasible residential conversion opportunity. It touted the property's "large, flexible floorplates on every floor" that would offer "an investor the opportunity for a variety of redevelopment opportunities including luxury apartments, upscale condominiums, a boutique hotel or state-of-the-art offices."
While the future of the former Chubb building has yet to be determined, any conversion would fit into a pattern unfolding across the Philadelphia area in which investors have scooped up heavily discounted properties to transform into other uses.
An overhaul of the historic Wanamaker Building in Center City, for example, is on deck after TF Cornerstone took control of the 1.4 million-square-foot property last year. The New York firm is planning to convert most of the office space at the 114-year-old building into as many as 600 residential units.
It's a playbook that has gained popularity across the United States as landlords and investors attempt to overhaul struggling office properties into newer and higher-demand uses.
“Building owners are coming to grips with the fact that some of these older properties aren’t going to be great office assets going forward,” said Tim Karp, JPMorgan Chase's head of historic tax credit equity. “We’ve seen a significant uptick in the amount of office-to-multifamily conversions.”
While Philadelphia is behind other cities across the country in terms of its conversion pipeline — Manhattan and Washington, D.C., are the leaders on that front — there has been a surge of activity over the past several years as officials streamline the permitting process and the demand for housing has outstripped that for aging office space.
Companies in the Philadelphia area handed back more than 7.6 million square feet of office space between 2019 and 2023, according to CoStar data, and rents have fallen alongside the decline in tenant demand.
