GlaxoSmithKline Sets Up Shop in New 208 KSF Home in Philly’s Navy Yard
- Apr 09, 2013
A mere 18 months after Liberty Property Trust and Synterra Partners broke ground on GlaxoSmithKline’s new 208,000-square-foot office building, located in the Navy Yard Corporate Center at the Philadelphia Navy Yard, the pharmaceutical giant has settled into its new digs. The $150 million project is serving as an additional tenant magnet for the Navy Yard, as well as an example of a progressive new work environment.
“[The GSK development] has had and will continue to have a very large impact on continuing the building up of momentum at the Philadelphia Navy Yard,” John Gattuso, senior vice president & regional director of Liberty’s Urban and National Development team, told Commercial Property Executive. “That project has seen now over a half-dozen office buildings completed and several more are scheduled to start in the next year or two.”
Liberty and Synterra invested $80 million and GSK contributed $70 to realize the four-story facility at Five Crescent Dr., which GSK will occupy under a 15.5-year lease. The property, designed by Robert A.M. Stern Architects, is a model for the 21st century workplace. The building features a café, fitness facility, meeting centers and a multi-purpose room, but it’s the workspace that takes the concept of modern office accommodations to a new level. Architectural firm Francis Cauffman was aboard the project as workplace strategist and brought to life the concept of an office space designed to foster collaboration and creativity by eliminating the walls and accenting the open floor plan with a four-story central staircase–encased in glass, no less.
“It sets such a new standard for the work environment so I think it will be very impactful not just at the Navy Yard and not just in Philadelphia, but nationally,” said Gattuso. “And I think more and more companies are looking at that work environment as something they need to at least think about and take into consideration as they plan for how they will work for the next several decades.”
Five Crescent also holds the distinction of being the first double LEED Platinum-certified building in Philadelphia, with Core & Shell and Commercial Interiors certifications from the U.S. Green Building Council.
Setting up shop at the Navy Yard marks a relocation for GSK, a longtime resident of the City of Brotherly Love. The 2011 announcement of the pharmaceutical company’s impending move to the Navy Yard was accompanied by the realization that a large chunk of empty space would be added to the market with the company’s departure from its offices at One and Three Franklin Plaza in the Center City submarket. However, local industry experts are undaunted by the notable vacancy. “Center City Philadelphia is very vibrant, it actually has one of the lower vacancies in the country and I think those buildings will be absorbed in either office or new uses,” Gattuso said.
Indeed, the numbers in Philadelphia’s central business district are enviable. The vacancy rate at the close of 2012 was 9 percent, compared to 15.5 percent in Los Angeles, 12.1 percent in Houston, 10.6 percent in San Francisco and the national average of 15.1 percent, according to a report by commercial real estate advisory firm Integra Realty Resources Inc. The Class A segment is the source of the market’s strength.
“The key to the Class A market is that there is a flight to quality, which often takes place during periods immediately following an economic downturn, like the one we just encountered during the Great Recession,” Joseph D. Pasquarella, a senior managing director with Integra, told CPE. “Tenants are attracted not only to the location, age and quality differences of Class A properties, but also to stronger and more professional management of the ownership that typically owns Class A property compared to Class B and C.”
Investors are paying attention; dollar signs are calling. “Philadelphia does not have an over-supplied Class A market, so prices are increasing especially for the higher floors in premium buildings owned and operated by the larger institutional investors,” Pasquarella noted. “It is also a good real estate investment long term as rents would have to rise considerably in order to support the construction cost of a new Class A property.”
And who says it’s all about the apartment sector in the current commercial real estate environment? “By comparison to the red hot multi-family investment market, Class A office investment in Center City Philadelphia offers better long term yield than other income producing property investments.”