PhillyDeals: High rents forecast for Comcast tower

Taxpayers will provide $40 million to connect the new office building to the underground Penn Center SEPTA station.
Taxpayers will provide $40 million to connect the new office building to the underground Penn Center SEPTA station. (ED HILLE / Staff Photographer)
Posted: February 08, 2014

Liberty Property Trust plans to charge rents "that are high $30s [per square foot], kissing $40," to Comcast and any additional tenants for the company's planned second Center City office tower, Liberty boss Bill Hankowsky told investors during a conference call this week.

That's higher than today's top asking rents for the priciest Philadelphia space. In Philadelphia's slow-grow office market, average leasing costs are little changed since the 1990s, and significantly lower than in New York, Boston or Washington. The new Comcast tower is a step up.

"Obviously, higher floors will charge more than lower floors," Hankowsky added.

What happens to Philadelphia's office market when Liberty opens the 59-story Comcast Innovation and Technology Center at 1800 Arch St. and Brandywine Realty Trust builds the 47-story FMC Corp. tower planned for 30th and Walnut? asked Craig Mailman, analyst at KeyBanc Capital Markets.

The FMC and Comcast moves could dump up to 800,000 square feet of office space onto the market -- or less: Hankowsky noted that Comcast might take the whole new building, as it did with its first tower in 2005, reducing the vacancy.

He's hoping Comcast, plus Center City's rising population of educated young people, will attract more tech employers to fill empty offices. And he expects old buildings will continue to "convert to hotels and apartment buildings." In short, "I don't see a problem."

Hankowsky, who is an owner of The Inquirer, also confirmed that Comcast has bought out a unit of German's Commerzbank AG and now owns 80 percent of its original headquarters tower; Comcast will own the same proportion of the new tower, with Liberty owning the rest of both.

John W. Guinee, analyst at Stifel & Co., asked for more detailed cost projections. Hankowsky said he can't say much more than what was in the news release. He noted the planned Four Seasons Hotel space atop the tower will cost more than the office space, on a per-square-foot basis. Also, Comcast, not Liberty, will likely spend "several hundred million more" fitting out its new space beyond the $900 million construction cost, he added.

As Comcast and Liberty have already noted, taxpayers will chip in $40 million ($10 million city, $30 million state) to connect the new tower to the underground Penn Center SEPTA station and underground retail concourse. Also, Philadelphia is granting its standard 10-year new-construction tax abatement - a break that made the project financially feasible, Hankowsky said.

Besides the Comcast project, Liberty is building a 201,000-square-foot, $53.4 million office for Vanguard Group at 425 Old Morehall Rd., Malvern, and an 80,000-square-foot, $25.2 million office for Michael Forman's Franklin Square Holdings investment group at 201 Rouse Blvd. in the Navy Yard business complex, plus warehouses in Logan Township, Shippensburg, and in Texas, Maryland, Minnesota and Arizona, the company reported in its year-end financial statement.

215-854-5194 @PhillyJoeD

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