(To read more on the multifamily market, click here.)

PHILADELPHIA-On condition of anonymity, two developers with condo properties under way in Center City tell GlobeSt.com that representatives from America's CapitalPartners have had discussions with city officials about converting the top 25 floors of Two Liberty Place into residential condos. Neither source would identify the officials. Both also suggested that the required renovation would take about two years, and, thus, as one put it, "miss the mark (of residential demand)."

A published report that Miami-based ACP is exploring converting sent ripples through both the office and multifamily real estate sectors here. Center City office vacancy is above 15% and projected to climb above the 20%-level next year, while residential condos are proliferating downtown. Calls to America's Capital, Shorenstein and the local office of CB Richard Ellis, which obtained the building's office leasing assignment from Shorenstein in Nov. 2004, were not returned by deadline.

America's Capital is in the process of acquiring the 58-story, 1.2-million-sf office tower from San Francisco-based Shorenstein Co. While Cigna, the largest tenant in the building, has renewed until 2016, it has downsized by approximately 200,000 sf, and Ace Ltd. is exiting to its own building. In all, the building faces a hole aggregating approximately 800,000 sf.

Dave Campoli, who manages Boston-based HRPT Properties Trust's office properties here, tells GlobeSt.com, "Certainly taking 250,000 sf off the office market would be beneficial right now. But, a negative, a big negative in my view, is the indication that an outside investor doesn't have faith in the Philadelphia business community's ability to generate business and fill office space for workers. It's pretty sad that a big building like Liberty II can't be filled."

Acknowledging, "I'm not an expert in condos," Campoli adds, "it's just my hunch that there's soon to be a condo glut." While some older buildings are considering conversion to condos, which gives them a 10-year tax abatement, "I don't see this as a trend –not on Market St." At a recent real estate conference here, Peter Linneman, a real estate professor with the University of Pennsylvania's Wharton School of Business, head of Linneman Associates, and a frequent speaker on real estate trends, cautioned about over-development and rising prices of Center City condos. "If you have a condo, sell it to the first U. of Penn graduate willing to buy it," he said, "and, if you're looking to buy one, wait two years."

Jeff Algatt, regional manager of the local office of Marcus & Millichap, lists pros and cons for GlobeSt.com. On the plus side, "it's a high-quality building in a very good location with jobs, services and entertainment nearby," he says, adding, "I think demand for downtown living will continue."

Among the challenges, he says, "it's a very large floorplate and apartments need windows and light. I'm not sure how that can be accomplished. Meeting the sensibilities of both office workers and residents in a mixed-use environment is a delicate situation, but I'm sure it can be overcome. "

He notes that he has some concern about over-supply (of downtown residential). "I think demand will continue, but how much is a question." Contemplating an average unit size of from 1,000 sf to 1,100 sf in the approximately 250,000-sf space, Algatt arrives at a guestimate of about 227 units and says, "that's not a huge amount. I think there could be demand."

Instant Insights /

Liberty Two Buyer Said to Explore Partial Residential Conversion

Related Stories

Recommended For You