Class A Office Tower for Sale in Philadelphia's CBD

Tuesday, November 7, 2017

Update:  HFF announced the sale of this property on February 16, 2018. For a current list of available commercial real estate properties, please click here.

Holliday Fenoglio Fowler, L.P. (HFF), on behalf of the owner, is marketing for sale 1600 Market Street, an 825,968-square-foot, 39-story Class A office tower in Philadelphia’s thriving Central Business District. 1600 Market is a rare, Class A value-add opportunity to acquire and stabilize the property by implementing a strategic amenity-enhancement plan and targeted leasing effort aimed to capitalize on the building’s superior “main and main” location in Market Street West, where ever-improving leasing fundamentals, including Class A, 12-month rent growth of more than 7.6 percent continues to bolster demand for the CBD’s most institutionally desired submarket.

1600 Market Street has been anchored by PNC Bank’s regional headquarters since 1996 and is currently 82.1 percent leased to a variety of legal, financial, consulting and professional service firms. PNC Bank currently leases 362,843 square feet at the property, which, until recently, was scheduled to expire on May 31, 2021. PNC Bank amended its existing lease agreement such that on January 1, 2019, the tenant will downsize to 233,411 square feet in a rightsizing lease contraction that comes in tandem with a stabilizing lease extension that runs through May 31, 2031. The amended PNC lease agreement provides more then 13 years of term from the property’s anchor and largest credit tenant.

Excluding PNC’s give-back space from the equation, the property boasts an impressive 9.1 years of weighted average lease term and contributes more than 36 percent of the building’s annual in-place income as of January 1, 2019. The new owner will benefit from more than 12 months of lead time to plan and implement the strategic repositioning of the office building for sale from as-is condition to the top-of-the-Class-A competitive set. Implementing a tenant-focused amenity enhancement plan will position 1600 Market Street at the leading edge of its Class A competition. The increased tenant demand from over 3.8 million square feet of existing, expiring leases totaling more than 20,000 square feet during 2018 and 2019 will drive competition and allow the new owner to push rents to new highs as the CBD’s most desirable tenants as they compete for premium high-rise availabilities in Market Street West.

Value-Add Office Building for Sale Investment Highlights

  • Current Yield with Significant Value-Add Potential:  With nearly 13.5 years of remaining lease term to PNC Bank, the property offers stable and predictable cash flow. The PNC give-back space located on floors 28 through 31 creates highly desirable and marketable large-block availability rarely seen on high-rise floors in the CBD. The property’s bullet proof location will generate significant interest from the most discerning retail and office users as large blocks of quality space are scarce in the Philadelphia CBD. 1600 Market Street’s pending availability puts it in a prime position to draft off the increased tenant demand from more than 3.8 million square feet of existing, expiring leases over 20,000 square feet during 2018 and 2019 will drive competition and allow the new owner to push rents to new highs as the CBD’s most discerning tenants compete for premium high-rise availability at 1600 Market.
  • Anchor Tenant Commitment:  1600 Market Street is anchored by PNC Bank, N.A., which has used the property as its regional headquarters location since 1996. PNC Bank currently occupies 43.9 percent of the building’s rentable area, across various floors including 7,276 square feet of ground level retail space with frontage along Market and 16th Streets that currently operates as PNC’s flagship bank branch downtown along with four, full-floor contiguous high-rise suites totaling 90,724 square feet prominently located on the 28th, 29th, 30th and 31st levels of the building. In connection with PNC’s corporate downsizing mandate, the tenant recently signed an amended and restated lease agreement that will simultaneously right-size its current building footprint to 233,411 square feet at the end of 2018 and extend the lease term of its amended premises by 10 additional years to expire May 31, 2031.
  • Live-Work-Play Mentality Ignites Retail Demand in Market Street West:  The dynamic live-work-play environments that are instrumental in shaping today’s thriving Philadelphia downtown is also the catalyst that is now organically repositioning areas like Market Street West from prototypical “business districts” to vibrant mixed-use consumer-centric environments. The Philadelphia CBD’s burgeoning retail market is supported by surrounding neighborhoods and by more than 300,000 workers. The growth in tourism, conventions and cultural attractions, along with an expanding residential population in Center City, now generates high volumes of pedestrians on the streets day and night. Over the past decade, the number of retail establishments along with rental rates has been trending upward. The average daily foot traffic, proximate to the property between the hours of 11 a.m. and 2 p.m., exceeds 2,700 people at any given moment, making the intersection of 16th and Chestnut Streets (one block from the property) the busiest of any recorded location in Philadelphia.
  • Compelling Ground-Floor Retail Upside:  The glass facades along West Market Street are changing. Rather than being reserved for banks and lobbies, many of the skyscrapers are adding food options to their ground floors. 1600 Market presents a new owner with a compelling opportunity to reposition 5,066 square feet of ground-floor retail availability with frontage along Market Street. Dedicated outdoor patio space between the property and Liberty Place at the property’s northwestern entrance present ideal space for a bar and/or restaurant tenant seeking coveted high-volume foot and vehicular traffic both during and after business hours. Additionally, the existing tenant mix at the property affords this new retailer access to a preferred demographic with prime retail space that exists along one the busiest commercial and tourism corridors in Center City.

1600 Market Street offers investors a rare opportunity to acquire a Class A tower building in downtown Philadelphia. For more information on this commercial property, please contact Doug Rodio, Brett Segal, Jose Cruz, Graham Stephens, Andrew Weir or Ben Appel. For information on financing opportunities, please contact Ryan Ade. To view HFF’s current real estate investment listings, please click here to be directed to HFF’s property search page.

By Topics