Are office tenants shunning Philadelphia's Central Business District?
September 28, 2016

Within weeks, two of Philadelphia’s publicly traded companies — Aramark Corp. and Five Below Inc. — made decisions to relocate their headquarters in opposite directions of the city.

Aramark (NYSE: ARMK) is moving from 1100 Market St. on the east side of the city to the far western edge at 2400 Market St.

Five Below (NASDQ: FIVE), after spending years at 1818 Market St., is trekking eastward to the Lit Brothers building at 701 Market St. where it will occupy about 200,000 square feet.

They join FMC Corp., (NYSE: FMC) which also made the leap out of the Central Business District and put its headquarters in the new FMC Tower at Cira Centre South, along with other companies that have turned to the Philadelphia Navy Yard for their new home.

Where these companies have settled says something about Philadelphia’s CBD as the city’s traditional business address: It’s harder than ever to find large blocks of space that can accommodate big tenants and West Market Street is no longer the must-have address for a company. As a result, corporate headquarters are venturing into other areas of the city that had once been overlooked or never even considered as an option.

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“The CBD has gotten strong and it’s more difficult to get large blocks of space,” said Jack Soloff, a broker with Newmark Grubb Knight Frank. “How many options would Five Below have for 150,000 square feet in West Market? One option? In order to get a block of 100,000 square feet is challenging to find but in East Market and the Independence Mall area, there are some large blocks of space.”

Where Aramark relocated to 2400 Market is a redevelopment and expansion of a building that will provide it with ample room for the 300,000-square-foot tenant.

The demand for space and rents in the West Market office corridor have reached a point that propelled Market East into an attractive, low cost alternative – a mixed-use magnet drawing creative companies, while the more established corporations have gravitated to Market West, said Ian Anderson, a researcher with CBRE Inc.

“So, in a way it’s perfectly reasonable to see Aramark move west, and Five Below move into a more dynamic environment in Market East,” he said.

The city has two dynamic ends that are evolving and it’s indicative of where the city is in terms of its growth, said Jay Joyce, a broker with Savills Studley. There’s the western end where there’s a pull into University City with the future development of Schuylkill Yards and, at the other end, $1 billion of investment and development under way along East Market.

“West Market is clearly more corporate and East Market has more creative type of space,” Joyce said. “I think it’s a positive thing for Philadelphia that they can bounce back and forth between the two parts of the city.”

Are office tenants shunning Philadelphia's Central Business District?

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