PHILADELPHIA (CBS) — With word that GlaxoSmithKline will pack up its downtown offices and move to the Navy Yard at the end of next year, there are new worries about the office market in Center City.
The pharma giant’s move will leave two large buildings at Franklin Plaza vacant, and it will mean more than 1,000 fewer employees to patronize Center City’s restaurants, shops and other businesses.
While other cities have begun the recovery, real estate professionals say Center City’s office vacancy rate still hovers around 15.5 percent, although it is slightly lower in the tallest skyscrapers.
“That’s challenging. It’s of concern,” said Bob Walters, who heads the Philadelphia office of CB Richard Ellis, a commercial real estate firm. “If the Glaxo space were vacant today, we’d probably put another one to two percent of vacancy onto the market.”
Walters’ firm also studies the real estate market in the region. He says a healthy market would have an office vacancy rate around 10 percent.
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Part of the problem is the size of GlaxoSmithKline’s Franklin Plaza complex. It’s comprised of two buildings that occupy nearly two-thirds of a city block. One estimate put the space at 800,000 square feet.
Walters says it’s unlikely that will be filled with a single, high-profile tenant.
“It would be highly unusual. We’d love for it to happen, but I don’t think it will.”
“The issue with Glaxo, quite frankly, is one with saving jobs, keeping them in the city,” said Philadelphia Mayor Michael Nutter. He says without the Navy Yard, GSK might have left Philadelphia completely. It’s been in this city since 1830, when John K. Smith opened his first drugstore.
“Just because Glaxo will move out of its space – and that’s two years from now – we have time to plan for whatever other opportunities there may be,” he said. “We need more hotels in Philadelphia. That is certainly a possibility at that location.”
The GSK site is just two blocks from the newly-expanded Pennsylvania Convention Center, although it sits right next door to the Sheraton City Center.
“The market is starting to come back, that’s a fact,” the mayor said, and that certainly appears true at the Philadelphia Navy Yard.
The mayor spent part of the morning there, welcoming the expansion of URBN, the parent company of Urban Outfitters and Anthropologie. The retail giant is adding 1,000 new jobs in two buildings at the growing business park in South Philadelphia, home to its corporate headquarters. The Philadelphia Cruise Ship Terminal, currently owned by the Delaware River Port Authority, will become the headquarters of URBN’s Anthropologie division.
Reported by Ben Simmoneau, CBS 3