PhillyDeals: Philly's office growth is slow and small

As a commercial real estate broker, Bill Luff is a professional optimist: "I am predicting an office building will be built in Center City, 300,000 to 700,000 square feet, this year."

That would be the first mostly "speculative" building here in more than a decade, Luff told me from the Philadelphia office of Colliers International, where he's senior managing director.

He's been doing this for 30 years, so Luff is also a realist: Employers haven't moved to Philadelphia any faster than they've been leaving. In a sign of a weak market, "net rents are below where they were 25 years ago," a fraction of New York, Washington, and Boston leases, Luff acknowledges.

And many companies are taking less space - under 200 square feet per worker in some recent leases, down from 300 square feet when more people had doors and fewer had iPads loaded with Salesforce.com apps.

Still, Luff is hopeful. Look, he says, at the $1 billion in Philadelphia office buildings sales that Doug Rodio and his crew at Jones Lang LaSalle booked last year, to buyers from New York, California, Israel, at prices up nearly 5 percent from 2013 levels. Investors see potential! Or bargains, at least.

And 2015 is off to a great start, Luff adds. Nearly 400,000 square feet in "net new-office absorption," with the American Bible Society moving here from New York, Hill International from Marlton, and money managers and data centers adding space. Surely there are more coming, with all those smart millennials renting apartments at more than $2,000 a month, Luff says: "The last time I felt this way was in 2007!"

Of course, we all remember what happened right after that.

Meanwhile, out in the suburbs: Instead of reskinning aging 1970s buildings and tacking on skylit public areas and shops, Liberty Property Trust last week presented plans to knock down a largely vacant 300,000-square-foot group of buildings that formerly housed drugmaker Sanofi in the Great Valley Corporate Center.

The plan is to get East Whiteland Township approval for "600,000, 700,000, 800,000 square feet of offices, six or seven stories high, a 130-room hotel, 25,000 square feet of retail, 600 apartment units," said Jim Mazzarelli, head of Liberty's suburban East Coast operations.

"We don't have any tenants" yet, he told me.

What's the inspiration? Mazzarelli says his team studied mixed-use urban developments in Washington and Arlington, Va., where you don't need a car to move from office to bar to grocery, kids' playground, and home. "We believe these knowledge workers still want that lifestyle after they have kids and come to the suburbs."

Why not in Philadelphia? The city already has plenty of offices, Mazzarelli said diplomatically.

I reminded him of the reverse commuters who crowd the Paoli local to the Radnor Financial Center and the Vanguard Group buses each morning. Mazzarelli agrees he's been surprised by how people keep moving to Center City.

Maybe, finally, "that's going to start attracting more businesses" to Philadelphia, he concluded.

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