The three emptiest office buildings in Philadelphia

Two of downtown’s biggest offices, Centre Square and the Wanamaker Building, are leading the city in vacancy.

They are both right next to City Hall, at the heart of Philadelphia, where their high vacancy rate — 47% for Centre Square and 65% for Wanamaker — is all the more obvious. Another neighboring poor performer is One South Broad, with an occupancy rate of just under 42%.

These are outliers, for now. The vacancy rate for the entire region is 20.5%, while for the city itself it is 19.1%, according to commercial real estate services firm Jones Lang LaSalle (JLL).

Industry experts say that in the near term, there are no easy answers. Both the apartment and life science markets appear to be glutted, as pandemic-era projects come online. Demolition would be extraordinarily expensive and disruptive, not to mention undesirable for iconic historic structures.

In the short term, stakeholders say that bringing municipal workers back to Center City offices more regularly could make a difference in the daytime activation of space around City Hall.

As policymakers and business interests mull this conundrum, here is a guide to some of the most distressed buildings in Philadelphia, how they got that way, and what can be done with them.

Centre Square, just west of City Hall, is the largest office complex in Center City.

Opened in the 1970s with a plaza adorned with the Clothespin statue by Claes Oldenburg, the buildings have been massively overhauled once a decade since they opened.

In mid-2017, New York-based Nightingale Properties and Kuwait-based Wafra Capital Partners bought Centre Square and then got a $388 million loan to refinance the property in December 2019.

JLL estimates that Centre Square had about 6,300 workers in the two towers. But since 2020, occupancy has plummeted. Big tenants such as mortgage insurer Radian (173,738 square feet) have left and are subleasing their space, and the complex’s largest tenant, the University of Pennsylvania Health System (297,380 square feet) has largely pulled workers out, too, although its lease is active until 2025.

“That’s 1,000 people our stats would say are there, but they’re not,” said Tom Weitzel, managing director with JLL in Philadelphia. “It looks bad, but it’s actually worse.”

The value of the building has dropped 14.8% since October 2019 to $401,200,000 in October 2022, according to real-estate tracker CoStar Group. Unable to pay a loan due in December 2022, the lenders filed for foreclosure and the property went into receivership last May.

The Wanamaker Building is the third largest downtown office building. It also houses the 435,000-square-foot Macy’s department store and underground parking

In 2017, Philadelphia-based Rubenstein Partners bought a controlling stake in the building and invested millions in renovations. Tenants Children’s Hospital of Philadelphia (CHOP) and Penn Medicine expanded their footprint, and occupancy rose well above 90%.

Then the pandemic struck.

“They just got caught up in a timing conundrum where the market was not flush with tenants moving in and some tenants that have been there for a while were reconsidering their space needs,” Weitzel said.

Today, only about a third of the office space is occupied. CHOP (252,631 square feet), the federal government (239,049 square feet), and Digitas Inc. (108,619 square feet) are all gone, and there are few new entrants looking for such large spaces.

The value of the building has plummeted by 72%, from $185.7 million in 2018 to $52.4 million in December 2023 according to CoStar.

Last year it became clear that Wanamaker would not be able to refinance its loan as it reached maturity in June 2023, so the lender filed for foreclosure, and a receiver was placed in control of the property in early September.

Located just to the south of City Hall and featuring McCormick & Schmick’s and the newly opened Insomnia Cookies headquarters as retail tenants, One South Broad Street is not challenged in quite the same way as its larger counterparts.

The Art Deco building was purchased in 2014 by New York-based Aion Partners. At the time, the building was 88% occupied.

But since 2020, that’s fallen by 30%, according to CoStar. Commercial mortgage-backed securities (CMBS) documents show the next major lease expiration isn’t until Huntsworth Health’s term closes in mid-2026.

“People want to return back to newer buildings, but buildings around City Hall are typically older, multi-tenant buildings targeting toward smaller companies,” said Michael Betancourt, managing director of Aion Partners. “Those are the companies that haven’t come back.”

There’s been no recent appraisal, but in April 2012 it was worth $62 million.

Last year, Aion Partners was able to extend the $37.4 million loan on the building until September 2025 according to a report in the Philadelphia Business Journal. That allowed the building to avoid receivership, unlike Wanamaker or Centre Square.