Aramark announced Monday that it planned to move in 2018 from 1101 Market St. to an office development being constructed on the frame of an industrial building more than a mile west.
Developer Scott Toombs had conceived of the project as the first in an expected wave of office towers taking advantage of Market East's Regional Rail stop and other transit connections, said Bill Luff, a commercial real estate consultant in Philadelphia who helped with the building's original leasing strategy in the 1980s.
But the neighborhood's longtime lack of revitalization meant that 1101 Market was never able to attract high enough rents — including from Aramark — to be considered a financial success, said Luff, now founder of the consultancy CRE Visions.
"It never captured the economic value commensurate to its geographic presence in the center of the city," Luff said Tuesday. "It was a building ahead of its time."
Luff and others said the times may now be catching up with 1101 Market.
The building stands directly across the street from the so-called East Market mixed-use complex being constructed by Washington-based National Real Estate Development, which will include an organic supermarket, offices, and two residential towers.
Just to the east is the Gallery at Market East, which Philadelphia-based Pennsylvania Real Estate Investment Trust and Macerich of Santa Monica, Calif., are working to transform into a name-brand shopping-outlet center.
Those projects will boost 1101 Market's desirability, said Jay Joyce, managing director in Philadelphia for commercial brokerage Savills Studley — once they begin to materialize.
"Nothing is complete as of yet, so it can be a challenge in terms of re-leasing until we get a bit further along and people can see and feel what that side of town is going to be like," Joyce said.
That calculation provides only a rough sketch of the impact of Aramark's departure because it assumes everything else in the market remains constant until it leaves: no other tenant losses or gains, and no new office construction.
But it does show the large impact that the loss of the food- and facilities-management company will have on the Market East area, said Lauren Gilchrist, JLL's director of Philadelphia research.