COVER STORY, MARCH 2007

OFFICE DEVELOPMENT SOARS
From ground-up to redevelopments, office developments flourish.
Stephanie Mayhew

As major metropolitan cities continue to grow and surrounding submarkets feed off that success, developers are breathing new life into the office market. Across the Northeast, outdated Class B and C office buildings are being redeveloped into premium Class A office buildings to meet the growing demand by large and small users. In areas where land is still available, developers are taking the opportunity to offer tenants office buildings well within reach of major metropolises with a plethora of amenities within stunning new ground-up developments. Northeast Real Estate Business profiled eight new office developments located across the Northeast region.

Metroplex Corporate Center

Metroplex Corporate Center in Plymouth Meeting, Pennsylvania, features 750,000 square feet of office space.

In Plymouth Meeting, Pennsylvania, Brandywine Realty Trust is embarking on the development of Metroplex Corporate Center. The development includes the construction of three Class A office buildings, two of which have been approved with the third currently awaiting approval from the township. With approximately 750,000 square feet of office space in the immediate area, Phil Schenkel, vice president and managing director for the northern Pennsylvania region for Brandywine Realty Trust, notes, “Brandywine has a strong presence in several Pennsylvania suburban markets, but in particular, it has had a strong presence in the Plymouth Meeting market for a number of years. This market has proven to be one of our more successful and stronger markets in terms of tenant growth and retention.” 

The first building, Metroplex Corporate Center-1, is a five-story, Class A office building that broke ground May 2006 and is slated for occupancy in second quarter in 2007. The building offers tenants 120,877 square feet of office space with many unique accoutrements. The two-story lobby is accented with granite flooring and plaster walls with a unique mesh screening. The interior contains 9-foot finished ceilings with floor-to-ceiling glass in select areas. The exterior is composed of granite and glass. Other amenities include dual-feed, high-tension electric service and dual-feed fiber optic telecommunication lines, as well as e-tenant, an exclusive amenity that offers tenants 24/7 concierge services, business providers and other local resources.

The development is strategically located at the intersection of Germantown Pike and Chemical Road at the I-476 junction, the Pennsylvania Turnpike and the Northeast extension. “The location of Metroplex accommodates companies that are looking to gain access to key highways that service entire regions. This enables owners and employees to have quick access to the highway network, and allows employers to be in a building that is close to where employees live,” says Schenkel. This area, commonly known as the Mid-County Interchange, is a key transportation hub in southeastern Pennsylvania. The complex is also adjacent to the Metroplex Shopping Center, which offers retailers such as Barnes & Noble and the Country Inn Restaurant. In addition, Metroplex is only 20 minutes to Center City Philadelphia and 30 minutes from the Philadelphia Airport.

According to Schenkel, the demand in the market is firm and Brandywine has been talking to a number of different tenants in a variety of different sizes for Metroplex-1. “There is not one particular company or type of company looking at the building. It is a variety of different users from private to public companies, large to small users and professional to corporate and high-tech. The product mix is very balanced, which is consistent with the rest of the Philadelphia suburbs, which are not inundated with one particular use in the market. This balance makes it easy to ride the ups and downs of any cycles,” says Schenkel.

Market conditions and demand will dictate the development of the other two buildings. The second building is planned and approved to be a 12-story, 336,000-square-foot building. The third building is tentatively slated to be approximately 120,000 square feet and five stories. Once the site is completely built out it will comprise three buildings totaling approximately 580,000 square feet.

177 Livingston Street

The Treeline Companies is redeveloping a former portion of the Macy’s building into 116,000 square feet of Class A office space.

In 2006, The Treeline Companies acquired a vacant portion of the Macy’s building at 177 Livingston Street in Downtown Brooklyn, New York City, from Federated Department stores. Gut renovation of the former warehouse space commenced in April 2006, and according to Howard Schor, vice president of strategic operations and planning for The Treeline Companies, the first step in redevelopment was building a firewall between Macy’s and the new office space. Treeline followed up by replacing all of the mechanical, electrical, heating, wiring, HVAC and elevator systems in the building.

In addition, Treeline is creating 15,000-square-foot wide column floorplates, transforming the 116,000 square feet of vacant space into prime Class A office space. At nine stories tall, the building also includes 6,000 square feet of ground floor retail space and a separate entrance. In addition to extensive interior renovations, careful attention has also been paid to the exterior renovation of the building. “The exterior renovation is aimed at keeping the aesthetic of the neighborhood. The building has a long-standing history, so it was important to preserve that to keep with the surrounding area,” says Schor. The building has extensive terra cotta work, which you don’t see very often, so Treeline wanted to restore the facade to its prior self.”

Strategically, the space at 177 Livingston Street fit into Treeline’s brokerage strategy, which includes a core of properties in Brooklyn. “Treeline looks for properties or assets that they can develop into something better and bring our expertise into that piece of real estate,” says Schor. According to Schor, the office market in Brooklyn has changed quite a bit in the last several years. “Everything trickles down from Manhattan and when prices change in Manhattan, prices will change in Brooklyn as well, and you will see tenants shifting in between the two markets based on price,” says Schor. “There has always been an office presence in this area of Brooklyn and because of the ongoing residential development there needs to be jobs that are convenient. So, the next step is obviously more and more commercial development.”

Typically, the demand for office space in the area surrounding 177 Livingston Street had been from smaller law firms and financial services firms or companies that functioned off the nearby courthouse. However, today as the downtown area in Brooklyn continues to experience a profound renaissance, several city agencies and social services companies have been moving into the area. “All of those city agencies are coming into Brooklyn to take advantage of the lower rents, so there is a lot of demand right now,” says Schor.

The space at 177 Livingston Street offers large floorpates that can also be divided to serve small users as well. “The large floorplates at 177 Livingston provide a lot of flexibility, plus, the rents are attractive versus Manhattan,” says Schor. Due to this flexibility Treeline is looking to attract multiple floor tenants, but they are also looking to accommodate tenants of a smaller size. “We have the flexibility and premium access in the building to accommodate anybody,” says Schor.

The retail space could suit several different types of tenants. Treeline has been fielding offers from banks to restaurants to drugstores. “In addition, there is a basement area that retailers can also utilize. A fitness center or a bank would be very well suited in that space, or a restaurant would be able to have additional seating there,” says Schor.

Aside from all new mechanical systems, the new office space will feature state-of-the-art telecommunications access, cutting-edge security systems and 24/7 card access. Treeline is also planning on utilizing the lobby as a community arts display. “Because of the building’s unique location by the Fulton Mall and our connection to Brooklyn public arts, the company wanted to use the real estate to bring the arts back into the community. As the building redevelops, Treeline felt responsible to help redevelop the community as well,” says Schor. “Treeline wants to do a community arts exhibit within the lobby to bring sort of a Manhattan feel into the building.” 

Schor believes that the redevelopment of this vacant space into Class A office space will have a great impact on the area simply because it will provide a place where people can come and work, be productive and add something to the community. “The building will be a contribution to something we have been doing in Brooklyn for a long time, which is revitalizing the neighborhood,” says Schor. “Because of the caliber of the space and the caliber of tenants that we hope to occupy the building, we hope that people will see it as an upgrade for the community in terms of jobs and the quality of businesses that are being brought into the space and the way that Brooklyn is looked at as a place to do business.” The space at 177 Livingston Street is set for completion in early 2007.

PrincetonSouth Corporate Center

Opus East recently began construction on PrincetonSouth Corporate Center, a 104-acre office park in Ewing, New Jersey.

Opus East recently began construction on PrincetonSouth Corporate Center, a 104-acre office park in Ewing, New Jersey. The $230 million ground-up development will include approximately 1 million square feet of office space distributed throughout six buildings including three three-story Class A office buildings and three four-story Class A office buildings.

According to Bill Walters, director of real estate development for Opus East, the site had originally been purchased by Michael Bloomberg, the current Mayor of New York City, for development. “Opus East stepped into the shoes of their approved plan when the site was purchased. In addition, Opus East has submitted plans to the township and neighborhood association to include an approximately 144-room branded, upscale hotel with an upscale restaurant, plus three upscale restaurant pads and a bank pad,” says Walters.

Located at the full-service interchange of Interstate 95 and Route 31 just 10 miles southwest of Princeton and only .5 miles from the Mercer-Trenton Airport, the new development promises to attract a plethora of business to the area. “Because of the location, the Class A product and the easy access to New York City, Princeton, Philadelphia and Trenton, Opus East believes that a lot of people will be attracted to this site when they are considering their next move,” says Walters. In fact, the new development is already being so well received, Opus East has already singed a major undisclosed tenant that  is set to lease approximately half of the building.

The building and the floorplates are designed to be flexible to attract a mix of tenants. “Each building can offer a different feel, so we can fit almost any tenant’s needs. The site also offers a terrific build-to-suit opportunity for larger tenants that are looking for tremendous access, so Opus also expects to have build-to-suit interest along the way,” says Walters.

Designed by Opus Architects & Engineers, construction commenced on the first 160,000-square-foot building in October 2006 and is slated for completion in October 2007. The second building of 120,000 square feet will trail the first building by about 120 days. Opus does not have completion schedules for the four other buildings, but plans to begin construction on the remaining buildings once the others reach 50 percent occupancy. “There is a sequence plan, but our timeframe could be anything from 4 years to 7 years based upon how things unfold,” says Walters. Prior to development, the site contained farmland and an old farmhouse, which Opus plans to convert into a conference center.    

The fist building will feature amenities such as an onsite fitness center, a conference center and a café. In regards to amenities in future buildings, Walters notes that Opus East will remain flexible to satisfy its tenant’s needs. The new development is expected to bring in approximately 3,500 jobs and will have a favorable impact on tax revenues since it promises to add a great deal of rateables to the Township. “All of New Jersey has a problem dealing with rising residential tax rates and this will greatly help the situation,” says Walters.

11 Times Square

In August 2006, SJP Properties acquired 11 Times Square, the last developable site in Times Square in Manhattan, New York City. SJP acquired the parcel of land, located on the southeast corner of 42nd Street and Eighth Avenue, in a joint venture with Prudential Real Estate Investors from the Milstein family. The new building, a ground-up development designed by FXFowle Architects, will be 600 feet tall consisting of 38 stories and approximately 1.1 million square feet of Class A office space in a marquee location. The roughly $1 billion development is slated to break ground this summer and is scheduled for delivery by fall 2009.

The tower’s design features a sculptural composition of forms sheathed in combinations of a sheer glass curtain wall and unique silk-glass spandrel panels. High-performance, spectrally selective Low-E glass will be used as part of the LEED Certification program from the U.S. Green Building Council. Private roof terraces with glass windscreens are included on several of the building setbacks, along with exterior sunshades that animate portions of the southern and western facades to reduce glare and provide thermal comfort.

Commercial office spaces rise from the third to the 38th floor featuring column-free corners with 9-foot, 6-inch floor-to-ceiling glass and a 5-foot-wide window module that offers views of the Hudson River, Times Square and Midtown Manhattan.

11 Times Square is one of the only office buildings in Midtown Manhattan that is being built on a speculative basis. The ideal location in Midtown Manhattan and the availability of large blocks of Class A space make the new building a vital opportunity in this core commercial market.

Waterfront Corporate Center III

Waterfront Corporate Center III is a 550,000-square-foot Class A office building in Hoboken, New Jersey.

In addition to its New York City office building, SJP Properties has begun site work on Waterfront Corporate Center III, a 550,000-square-foot Class A office building adjacent to Waterfront Corporate Center I and II in Hoboken, New Jersey. The build-to-suit development represents the final phase in the joint venture between SJP Properties, the Port Authority of New York and New Jersey, and the City of Hoboken. Much like neighboring Manhattan, Hoboken has become known for its 24/7 lifestyle and is quickly becoming a sought after address by corporate America. Following tremendous residential and retail growth in the area, SJP Properties is banking on the success of Waterfront Corporate Center III.

Situated adjacent to the new W Hotel, which is currently under construction, and the Hoboken Terminal, which accommodates all public transportation carriers serving the New Jersey waterfront, the site is considered one of the most desirable and coveted locations in the country. Based upon the enormous success of Waterfront Corporate Center I and II, the newest edition to this office triumvirate is expected to take advantage of the spillover effect from Manhattan, appealing to tenants who want a Manhattan-quality building at New Jersey waterfront prices.

545 Madison Avenue

On 55th Street and Madison Avenue in the Plaza District of Manhattan, New York City, LCOR has begun redeveloping 545 Madison Avenue into Class A space. LCOR signed a 75-year ground lease and is redeveloping the site in a partnership with Lehman Brothers and BlackRock. David Sigman, vice president of LCOR, notes that the building offered a unique opportunity for LCOR and the rest of the partnership. “The building was in a great location with great light, and it was an expiring ground lease in which all of the tenants leases were expiring at the same time. So, the building was completely vacant giving us the opportunity to come in and do a complete renovation,” says Sigman.

The full-scale gut rehabilitation of the 17-story office building began the first of 2007 and is scheduled to be complete in April 2008. LCOR will be installing new electrical and mechanical systems as well as new elevators. The redevelopment, designed by architects Moed de Armas & Shannon, will also include the replacement of the existing façade with a state-of-the-art glass curtain recladding, giving the building an open, clean and modern look. LCOR is completely redeveloping every single detail and the steel and concrete will be the only original part. The current building has relatively low ceilings, but the new space will have at least 9-foot ceilings. The building will include 140,000 square feet of rentable office space with floor plates ranging from 4,900 to 9,300 square feet, plus an additional 10,000 square feet of retail space on the ground floor.

Sigman likened the redevelopment to a European standard with flexible systems so tenants not only have control of their individual floor, but of their individual offices as well. “It is harder for smaller tenants to find space. Several of the larger buildings in the area have been consolidating space in order to offer it to larger users, and the buildings that tend to cater to smaller users are older, so the quality is not there. Therefore, we think this is a chance to have a brand new product geared to smaller tenants,” says Sigman.

Currently located in one of the premier office districts in the country, 545 Madison is expected to attract a host of financial services firms and other tenants such as boutique law firms. “Although it is a smaller building geared to smaller tenants, 545 Madison will provide an extremely high level of service that you simply cannot find in a smaller building in this market,” says Sigman. LCOR plans on offering a mix of pre-built space for smaller users, but expect tenants that lease an entire floor to do their own fit-ups.

According to Sigman there has been a growing interest in retail space in the area and he believes this will generate quite a bit of interest in the retail pace at 545 Madison. “There is a lot of interest from fashion users within the stretch of Madison Avenue above us and that market is starting to move below 57th Street, so our hope is that a single user that is commiserate with the quality of the office building above it will rent the retail portion of the building,” says Sigman. “This location has been a vacuum for office space, so LCOR will create a building that will jump into the upper reaches of the market very quickly. The architecture is great and the location is great, so LCOR has a chance to create an instant icon in the Plaza District.”

Advance at Southgate

Advance Realty Group is redeveloping Advance at Southgate, a 320,000-square-foot office facility in Morris Township, New Jersey.

In October 2006, Advance Realty Group began redeveloping Advance at Southgate, a 320,000-square-foot office facility located at 445 South Street in Morris Township, New Jersey. The approximately $15 million capital improvement involves renovations from top to bottom, including a new heating, air conditioning and ventilation system; window lines; a two-story large atrium lobby; a new conference center, cafeteria and fitness area; plus all new common areas, which includes bathrooms, lobbies and hallways. Advance will also construct new parking lots and complete various site work and landscaping. “The only thing that is remaining is the brick skin, everything else is being redone,” says Brian Banaszynski, vice president at Advance Realty Group. The three-story facility is slated for completion in March or April 2007.

In the New Jersey market, rents are hovering around 15 percent, there is far less Class A product available than Class B space and there is a lack of large blocks of 100,000 square feet or more in Class A buildings available in the market place. According to Banaszynski, the redevelopment of Advance at Southgate is indicative of much of the office development currently taking place in New Jersey.

Twenty years ago, there was a significant amount of development in the area and now there is very little viable land left for new development. In addition, the restrictive approval process adds to the risk associated with development. “Tenants can find a redeveloped building like Advance at Southgate that is well-located with great amenities or they will go into an urban environment. All of these factors contribute to redevelopment rather than new development,” says Banaszynski.

Aside from Jersey City and Hoboken, Morris and Mercer counties are two of the top-performing marketplaces in New Jersey. According to Banaszynski, Advance is repositioning this 1970s building to meet the growing and phenomenal demand in this market. Advance Realty took into account such factors as efficiency, parking, location, technology communication and aesthetics when repositioning Advance at Southgate. Amenities at the redevelopment include a cafeteria, a spacious lobby and a fitness center with men’s and women’s locker rooms. “Employers have to think about how they can attract the best and the brightest employees and how they can keep them. Employers look for an aesthetically pleasing building that is in a good location and can offer a pleasant working environment and culture for employees,” says Banaszynski. Advance at Southgate not only provides exceptional amenities, but it is strategically located between downtown Morristown and downtown Madison, providing a plethora of downtown centers for restaurants, cleaners and several other services.

The redevelopment is also near train stations for commuting to New York City, downtown Newark and the Newark Airport. “This is a building that has every amenity, every logistical consideration and every cultural consideration that a CEO is going to look for in a large block of space. Today with the globalization of companies, there is competitive pressure to drive profitability, efficiency and the bottom line; therefore, when companies today look at their occupancy costs they have to think of these factors,” says Banaszynski.

Metropark South II

Denholtz Associates is currently constructing Metropark South II, a 53,000-square-foot office space in Old Bridge, New Jersey.

Denholtz Associates, a New Jersey-based development, investment and management company, is currently constructing Metropark South II in Old Bridge, New Jersey. The new three-story building offers 53,000 square feet of office space situated on 2.7 acres. According to Steven E. Geltzeiler, the director of leasing at Denholtz, the company acquired the location because of the tremendous success they are having with Metropark South I, which is currently 100 percent leased, and because of the ideal location.

The site is located at a four-way interchange directly off Exit 120 of the Garden State Parkway. It is also in close proximity to the New Jersey Turnpike, Interstate 287 and routes 35, 36, 1 and 9. In addition, the development is close to rail and ferry service for Manhattan, New York City. Denholtz has been in this market for about 8 years and has had tremendous success. “This is a niche market, that is a market unto itself,” says Geltzeiler.

Denholtz broke ground on the Class A building in November 2006 and anticipate that the project will be completed by late spring/early summer 2007. The building will feature a two-story lobby and include amenities such as a state-of-the-art energy management system, abundant parking that includes executive covered parking, tenant storage and 24/7 building access.

Currently, being marketed for multi-tenancy, the new building will be ideal for professional firms as well as medical offices. “The footprint of this building allows Denholtz to carve it up into two, threes, fours and fives and still give tenants adequate window exposure with ample space on a single floor,” says Geltzeiler. In addition, the design of the building, a mix of glass and brick to add color, gives the space a boutique feel that many tenants are currently looking for. Metropark South II will also act as an overflow for tenants in Metropark South I that are looking for additional space. “The new building will of course offer more jobs and rateables to the area, but most importantly it will offer a niche to the area that is not present right now,” says Geltzeiler.


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