By 2012, 1 Country View Road, a 48,000-square-foot office building located within Liberty Property Trust’s 700-acre, 5 million-square-foot Great Valley Corporate Center in suburban Philadelphia, had become a “dinosaur.”
The drab, two-story structure, which was completed in 1981 but looked and felt even older, saw its last tenant depart when its lease expired in 2012. Rather than simply hold onto the empty structure and try to re-lease it as Class B space, Liberty invested $3.75 million into the base building, updating its design and adding amenities with the goal of quickly luring Class A tenants. The result: the company preleased 41 percent of the building during construction and leased another 41 percent shortly after the transformation was completed in the first quarter of 2014, at Class A rates.
“Before” photo 2012 Gregory Benson
How and why did Liberty decide to reposition 1 Country View Road? Tony Nichols, vice president and city manager of Liberty’s Horsham, Pennsylvania, office, who oversees 8 million square feet of space for Liberty in southeastern Pennsylvania, admitted that not every aging suburban office building can start over as a Class A beauty. Liberty won’t invest in repositioning a building that is substantially smaller than 50,000 square feet, that cannot be rebuilt with nine-foot ceilings and large windows, and that cannot achieve LEED Gold certification. When it has smaller buildings with less potential than 1 Country View Road, Liberty aims to lease them “as is,” as Class B space, or installs limited upgrades such as a new lobby, “collaborative” areas and renovated restrooms to capture Class B+ deals.
Reskinning and Enlarging the Building
In the case of 1 Country View Road, Liberty opted to “reskin” the structure. According to Nichols, when Liberty reskins a building, the company removes everything but the steel frame, floors and roof structure. The company was able to recapture wasted space when it redesigned the rectangular structure, which featured a lobby and side entrance with two-story indentations. “Training up the rectangle,” as Nichols put it, allowed Liberty to add almost 3,500 square feet per floor, for a total of around 7,000 square feet of additional space, increasing the building’s net leasable space from 48,000 to 54,798 square feet.
Focusing on Tenant Drivers
Nichols noted that when Liberty renovates an older office building, it focuses on the major “tenant drivers” in the marketplace. In suburban Philadelphia, for example, those drivers are high ceilings, big windows, easy access by car and transit, plentiful parking, and a workout area and showers. In addition, tenants want collaborative space in a well-appointed lobby with pleasant views.
“One way to bring amenities to a smaller building such as this is through the addition of an unstaffed, card-access fitness center and a fresh vending area,” explained Nichols. “The building size would not support a cafeteria, but it did allow for fresh vending, which is restocked with fresh food products every day.”
Liberty installed a highly energy-efficient HVAC system that can be monitored and controlled remotely to keep building tenants comfortable and avoid energy waste, helping to keep costs in line for both Liberty and its tenants. The new restrooms feature showers. An aesthetically pleasing rain garden on the building’s front and side — and, of course, all of the open space at Great Valley Corporate Center — create an appealing setting.
But the tenant driver that Nichols considers the “game changer” for this project was the construction of a new on-off ramp from the Pennsylvania Turnpike into Great Valley, which was completed in December 2012, as well as planned expansions of the Route 202 “High-Tech Corridor.” A four-mile stretch of Route 202 that has been widened from four to six lanes and an upgraded exit at Great Valley Corporate Park opened in September 2014; work on widening an additional two miles is underway. “This makes the commute feel more ‘doable’ to tenants, because it saves time and eliminates stress,” he added.
Redevelopment Versus New Construction
Asked if an owner of another dinosaur building should tear it down and start new or renovate it, Nichols responded, “it depends.” If an aging building can be turned into a Class A structure, he noted, the investment can be worthwhile. Redeveloping an existing property can be more cost effective than new construction. And some elements of the redevelopment process, like increasing the number of parking spaces, involve simple, inexpensive changes. At 1 Country View Road, the number of parking space was increased from four to five per 1,000 square feet of rentable building area (RBA), simply by slightly expanding and reorganizing the existing parking lot.
Nichols also likes redeveloping older buildings for another important reason: the speed to market. Liberty’s internal market surveys showed that the vacancy rate for the best Class A space in the market in eastern Pennsylvania was below 5 percent. To Nichols’ thinking, this meant it was negligible. Yet it could have taken years to construct a new building to meet this perceived market demand. Redeveloping 1 Country View Road took only six months.