November 25, 2019
PHILADELPHIA, PA – American Real Estate Partners plans to invest more than $15 million in a series of renovations at 1600 Market St., a building that the Northern Virginia company bought after PNC Financial Services Group vacated a significant amount of space in it.
The building’s vacancy, dated lobby and lack of amenities gave AREP an opportunity to reposition the 39-story, 825,968-square-foot office building to better compete with its Central Business District neighbors that have already undergone millions of dollars in renovations and are getting higher rents as a result. AREP enlisted Collective Architecture, a Washington, D.C., firm to come up with a design to update the nearly 40- year-old structure with a contemporary flare, reimagined common spaces that provide tenants with an improved experience and amenities that are now an accepted part of any modern office building.
“We wanted to do something that would stick out,” said Paul Schulman, chief operating officer at AREP. The real estate company paid $160 million for 1600 Market in 2018.
To that end, pop-art and fixtures will be installed in the lobby along with a pop-art inspired 1600 sculpture that seek to set a whimsical tone but also provide a unique experience for tenants and visitors. The idea is to also create something that will “stick out” and differentiate the building from the market, Schulman said.
Plans include adding an Exlir coffee bar along with 8,000 square feet of dedicated amenity space on the second floor that will have work spaces, conference rooms, a fitness facility and social areas. A restaurant will also be added to the first floor that will be accessed by the lobby and have an expansive outdoor plaza area.
“It’s great for the market, the building’s tenant base and their employees,” Schulman said.
The last time 1600 Market underwent extensive renovations was in 1996, when the building lost Provident Mutual Life Insurance Co. as an anchor tenant. It came at a time when the Central Business District was beaming with shiny new office buildings that had been erected during the late 1980s and early 1990s, giving tenants more modern options. While it’s not new buildings that 1600 Market is directly competing with, it’s office towers that have already undergone extensive renovations that have added dining, common gathering and amenity spaces.
At that time, the building quickly found a new lead tenant in PNC, which moved into 15 floors. That prompted a redesign of the lobby, a revamp of the street-level retail space and exterior facade of the building’s first floor. A former arcade area was reconfigured with a larger lobby with increased retail space on the first floor that was used by PNC Bank for retail banking and brokerage services.
Now, PNC (NYSE: PNC) is a shadow of what it once was in the building and banks no longer need to provide large areas for retail and brokerage services. The financial institution leases 230,000 square feet through May 2031 though it used to occupy 350,000 square feet. Cohen Seglias Pallas Greenhall & Furman has taken a portion of the former PNC space, leasing 34,381 square feet on half of the 31st floor and all of the 32nd floor. The law firm will relocate from 30 S. 17th St., where it has been since 2005.
The building has another 125,000 square feet it still needs to fill, Schulman said, and there active discussions on all of that space.
“I think we’re going to surprise the market with how far we are going to go,” said Doug Fleit, CEO at AREP. “I think we will set a very high standard at 1600. It’s not just to build a great space but great space that provides a great experience.”
The renovations are expected to be completed by March.
ABOUT AMERICAN REAL ESTATE PARTNERS (AREP)
Headquartered in the greater Washington metropolitan area, AREP is an institutional fund manager and operating partner focused on office and mixed-use repositioning and development. Since its founding in 2003, the Company has deployed over $4.0B across targeted geographies and acquired more than 17M SQFT of class-A real estate. AREP strives to bring a sense of place to each asset, making its properties more distinctive and desirable which, in turn, creates enhanced returns for its investors. For more information, please visit americanrepartners.com