Leasing activity and prospective tenant interest in the Philadelphia Navy Yard has been so vigorous that Liberty Property Trust anticipates kicking off one — or maybe two — new buildings this year at the former military base.
This comes as McKean Defense Group gobbled up 10,000 square feet of space at Three Crescent Drive, a 96,000-square-foot office building Liberty finished constructing last year. McKean’s lease, which was signed during the last week of December, meant Three Crescent is fully leased up. At Liberty’s other building, One Crescent Drive, just 3,500 square feet out of a total of 76,000 square feet remains available.
Other tenants already are seriously considering the Navy Yard and Liberty’s Navy Yard Commerce Center, a three-building flex complex that would total 190,000 square feet, said John Gattuso, senior vice president at Liberty Property.
“We believe we will have some significant pre-leasing done then will have to start constructing buildings at the Navy Yard Commerce Center this year,” Gattuso said. “They are designed, and we’re actively in discussions with perspective tenants and putting in place one or more of those buildings. The level of activity at the Navy Yard is as good as any single location we have in the country.”
As companies look at the Navy Yard, Liberty is also poised to construct more office buildings. The company has so far erected six buildings totaling about 650,000 square feet, which includes Tasty Baking Co.’s new baking facility. At build-out, the Navy Yard Corporate Center will total 1.4 million square feet.
The Navy Yard’s appeal has continued to grow over the years and is perhaps approaching a critical mass.
“It’s definitely gaining momentum,” said Sid Smith of Newmark Knight Frank Smith Mack.
Smith arranged last year for a joint venture among the Rothman Institute, Thomas Jefferson University Hospitals Inc. and Nueterra Healthcare Equity Partners to lease 15,236 square feet of space at Three Crescent for a new surgical center.
It became apparent in its search that the Navy Yard would enable the joint venture to capture some of the South Philadelphia market. The location ended up allowing it to lure patients from Delaware County and South Jersey, Smith said.
“That’s the fantastic thing about the Navy Yard,” he said, noting its direct access to I-95 and its 10-minute drive from Center City. While traveling to the site by car is easy, taking public transportation isn’t as convenient.
“Transit by car is great but mass transit isn’t the end of the world, but it’s not ideal,” he said. “If your employee base uses mass transit, then you care about it.” It typically takes three modes of mass transit to get to the Navy Yard, whereas most commuters usually need only one or two to get to work.
“Extension of the Broad Street Line would be huge,” Smith said.
While the Navy Yard has gained more traction in the last couple of years as an office address, it could still use more amenities, such as dry cleaners, banks and the like, within walking distance, Smith said.
That doesn’t keep companies and professional partnerships from looking at the site, especially since they can take advantage of its Keystone Opportunity Zone status that gives tenants breaks on state and local taxes, he said.
Liberty has so far invested $125 million in infrastructure, including roads, utilities, sidewalks and lighting, and more is on the way. The company is set to begin another major phase of infrastructure work this year, including completing an extension of 26th Street.
In addition, new buildings are erected and existing ones are renovated. For example, Urban Outfitters is going through the approval process to renovate another historic building at the Navy Yard totaling 75,000 square feet. The building will mean the retailer will occupy six properties at the Navy Yard off South Broad Street and a total of roughly 350,000 square feet.
Urban Outfitters, which moved its headquarters from Rittenhouse Square in Center City to the Navy Yard in 2004, has about 1,200 employees working there.
More than 80 companies operate from the Navy Yard and its daily population has swelled to about 7,500, and it’s expected to continue to grow. It’s quite a reversal from when the 1,200-acre base closed in 1995, eliminating one of Philadelphia’s major employers.
