Rather than trigger panic over the emptying of more downtown office space, where the vacancy rate has hovered between 12 and 15 percent, landlords have largely regarded the Glaxo decision as an opportunity to reimagine a pocket of the city.
That certainly is the outlook of Dave Campoli, regional vice president for CommonWealth REIT, who would have reason to freak. His company is the landlord of the 600,000-square-foot One Franklin Plaza, larger of the two properties Glaxo will start moving out of at the end of next year. A Sheraton hotel separates the properties.
"The way we're looking at One Franklin Plaza is almost like a blank slate," Campoli said last week.
The only thing keeping him from a meltdown over the prospect of watching 24 stories of office space go dark is the $786 million Pennsylvania Convention Center expansion, which debuts Friday. Much anticipated for its hoped-for economic impact on the city, the addition extends the 18-year-old Convention Center several blocks west to Broad Street, putting an entrance just two blocks east of One Franklin Plaza's lobby, which could, for instance, become a hotel lobby.
"Without it, it would have been a much more difficult proposition for us to deal with," Campoli said.
Glaxo's departure still smarts, he said, because CommonWealth REIT had been working with Glaxo on plans for a $110 million redevelopment of One Franklin, built in 1979.
The remake would have included outfitting offices with floor-to-ceiling glass, creating a six-story atrium, and replacing the building's heating and air-conditioning systems with energy-efficient models as part of an effort to bring the building up to the U.S. Green Building Council's LEED (Leadership in Energy and Environmental Design) standards.
CommonWealth REIT, the largest Center City office landlord, with ownership of 4.7 million square feet of space, found out Glaxo was bound for the Navy Yard from reporters, Campoli said. In the time he has been working with the company on the renovation plans for One Franklin, Campoli said, the only place Glaxo mentioned as another prospect was Three Franklin, where it is leasing all 216,000 square feet. Together, One and Three Franklin house 1,300 Glaxo employees.
The company, which was not fully using One Franklin although leasing all of it, will move all 1,300 jobs to the Navy Yard, where it will lease 205,000 square feet in a four-story, glass-walled, green-roofed LEED-certified building to be developed by Liberty Property Trust, its landlord in Three Franklin. Part of a Keystone Opportunity Improvement Zone, it will qualify for a 10-year tax abatement.
Spokeswoman Jennifer Armstrong said Glaxo would have had to occupy more than 50 percent more space than it needed for CommonWealth to fund the renovations for One Franklin.
"The Navy Yard was the most cost-effective option that we explored and will save the company at least $26 million each year compared to current commitments," she wrote in an e-mail Friday.
Campoli said he hopes to have a new plan for One Franklin by summer. That plan might include a combination of hotel and offices, or hotel and student housing, along with outside gardens similar to the courtyards at the nearby Four Seasons Hotel, Campoli said.
At Three Franklin, built in 1999 with a wall of bow windows overlooking the Vine Street Expressway, Liberty Property plans extensive renovations once Glaxo leaves. The work, price still undetermined, will include modernized bathrooms, a restored lobby, mechanical-systems upgrades to meet LEED certification, and construction of a rooftop patio and conference facility overlooking Center City, said John Gattuso, regional director of the Liberty, which also developed the Comcast headquarters.
The property will remain an office building, he said. With no vacant office space available in its Center City portfolio, a renovated Three Franklin "will give us a great opportunity to have a competitively priced modern office building," Gattuso said.
Of the Franklin Plaza area, Alan Greenberger, deputy mayor for planning and economic development, said that with the Convention Center expansion and a planned plaza by the Pennsylvania Academy of the Fine Arts on Cherry Street, "there's a lot of energy being pushed in that direction."
He also noted other assets "that haven't quite made themselves evident yet," including the Mormon temple planned for 17th and Vine Streets and the future Barnes Collection on the Ben Franklin Parkway.
The only thing missing is "meaningful tax reform," said Jim Mullarkey, partner at commercial brokers Newmark Knight Frank Smith Mack. The wage tax recently "knocked Center City out of the running" for offices for a Canadian energy company looking to establish a regional presence. It chose Bala Cynwyd, Mullarkey said.
Contact staff writer Diane Mastrull at 215-854-2466 or firstname.lastname@example.org.