Last week, some of the Mid-Atlantic region’s top real estate minds converged for the spring meeting of the Philadelphia Real Estate Council (PREC). On the agenda was a topic I’ve explored a bit on this blog: the opportunities and challenges of resurgent neighborhoods. Central to this conversation were three areas in Philadelphia, all of which are in varying states of “resurgence.” These areas are North Broad Street (comprised of north Center City, some of North Philadelphia and the Temple University area), University City (easily the most mature of these three areas, with high occupancy and a thriving office market), and South Philadelphia’s Navy Yard.
North Broad, it seems from PREC’s discussion, still faces numerous political and economic obstacles in its resurgence, while University City is at the opposite end of the spectrum and thriving on commercial opportunities.
I’m most interested in the third area, a long-neglected former Navy property that’s finally seeing new life thanks to the efforts of Liberty Property Trust (LRY) and the Philadelphia Industrial Development Corporation (PIDC).
This 1,200 acre area on the Delaware River is unique because it offers a very different, campus-like space for its tenants, while nonetheless lying in the city. In this way, the Navy Yard provides direct competition to suburban office complexes, a feature that is essential in light of changing trends in the business world.
Consider, for example, the Navy Yard’s most famous current tenant: Urban Outfitters (URBN). This youth-driven company pretty much epitomizes the new breed of workplace: collaborative, casual, emphasizing mobile technology and an open-air environment that privileges central work spaces over private offices or cubicles. (Other famous examples of this workplace model might include Google and Facebook.) This trend, clearly, calls for a different approach to architecture, furnishings, and other development concerns, and sometimes necessitates a departure from central commercial areas and their more established (read: outdated) office inventory.
One example of this is the announced move of GlaxoSmithKline, the pharmaceutical giant which calls Philadelphia home. While the company is not leaving city limits, it is departing from the Center City area where most major companies in Philadelphia currently reside. Its future headquarters will be near Urban Outfitters’ in the Navy Yard, an area that allows for a new facility with larger work spaces like this:
As more companies update their culture to this free-form style of workplace, we’ll likely see further rejuvenation of struggling or abandoned areas like Philadelphia’s Navy Yard. Keep in mind, major cities like Philadelphia (or Detroit, or Baltimore…) which have suffered in the last few decades from declining industrial activity now have a chance to resurrect these abandoned places (if a commercial real estate firm with an eye for potential chooses to get involved).
Such properties offer room for the kind of flex space that could host the headquarters of the next Internet start-up, pharmaceutical company, or innovative retailer.