McGrath, Rodio, Orcutt, Breitmayer Discuss Repositioning Philadelphia's Historic Properties
Last Wednesday at the Union League of Philadelphia, I had the pleasure of hosting a panel of four of the most respected and dynamic real estate professionals in the region - Charley McGrath (MRP Realty), Doug Rodio (HFF), Chad Orcutt and Alex Breitmayer (JLL) - for a wide-ranging discussion of the region's commercial real estate landscape in general and challenges and rewards of repositioning landmark buildings in general.
In short, Philadelphia real estate has come a long, long way since Bill Rouse had the guts to take on the city's unofficial height limit and build Liberty Place, and the future looks bright.
It is well-known that Philadelphia has made remarkable gains in its CBD, with the proliferation of repositioned and upgraded commercial and office buildings, and even a few new towers rising in (and over, in the case of Comcast's second tower) the iconic Philadelphia skyline. Maybe less discussed, as Rodio pointed out, is the significance of mainstream institutional investors arriving in Philadelphia, such as Shorenstein Properties LLC's purchase and upgrades to two trophy Market Street towers, and developers like DC's MRP Realty joining local developers who have institutional partners, such as Leo Addimando's Alterra Property Group. Chad Orcutt, SVP of Capital Markets for JLL, sounded a cautiously upbeat tone. "Capital flows into Philadelphia remain strong...we'll see what happens when rates really begin to rise," he said. Although the consensus was that there may be a slowdown, Philadelphia's fundamentals remain solid and we should see additional growth from employers and residents moving into the city, especially to capture and accommodate demand from the desired millennial demographic.
The group turned the discussion to repositioning some of Philadelphia's best-known landmark buildings. Repositioning old buildings always presents challenges, and historical landmarks such as the Philadelphia Bourse often present unique difficulties, and sometimes opportunities. During MRP's demolition at the Bourse, for example, McGrath and his team were surprised to find original mosaic floors and high ceilings that been had lost to prior renovations. "In the Bourse's offices, we found layer upon layer of dropped ceilings, as if each new tenant just dropped the ceiling by six inches for their space," said McGrath. "By the time we got rid of them all, we had these amazing high ceilings with great detail that today's tenants want." Those original details are in high demand by today's employers, according to Alex Breitmayer, who represents landlords in the region and nationally for JLL. "A historic building, renovated for today's users and technology, combined with a location like the Bourse, is an unbeatable mix for tenants, landlords, and their investors," he said.
Our biggest problem may be that there are only so many historic properties remaining to be converted. Look for a grand reopening of the Bourse sometime in September.