Can Suburban Office Parks Be The Next Mixed-Use Destination?
As commercial development in the Philadelphia suburbs continues to center around mixed-use communities that can approximate urban walkability and transit access, sprawling office parks seem like a relic from a previous era — but that could soon change.
With more value being placed on transit access and walkability, location is more important than ever for suburban development, but precious few parcels of land remain available to develop in areas that make sense. Many older corporate campuses occupy well-positioned land, and developers and municipalities alike are looking for ways to leverage them.
“We have a future land-use map, and we need to talk about how our business parks need to be dynamic places with retail, and a good portion of new multifamily projects have been proposed in office parks,” Montgomery County Planning Commission Executive Director Jody Holton said at Bisnow’s Strength of the Philly Suburbs event last week.
The MCPC has rezoned business parks in Fort Washington, Lower Merion and Upper Dublin to allow for them to diversify and create walkable areas like the King of Prussia Town Center, which sits at the center of multifamily developments and medical office buildings near the King of Prussia Mall and has created buzz across the real estate community.
Whereas the town center and mall are big enough draws on their own in the current climate, King of Prussia has business parks farther out that have seen interest wane, and the King of Prussia rail extension will include two stops at such parks to increase access. In addition, the MCPC is working on additional exits from Interstate 76 to feed more directly to those parks. By beefing up the infrastructure, Holton hopes to inspire developers to reinvest and reinvigorate such parks.
Such redevelopments have already proved successful, with projects like Ambler Yards, the conversion of the Dow campus into Spring House Innovation Park and Corporate Office Properties Trust’s redevelopment of the Unisys campus in Blue Bell into Arborcrest. In the absence of major new development, and with rents rising all over the Philly suburbs, these parks are already garnering serious interest again.
“I think everyone’s starting to price a little bit of inflation into their rents, and what we’re seeing is that tenants are being cost-conscious, as always,” Henderson Group President and CEO Brian Coyle said. “So when they might have favored ground-up development, they might now be looking at retrofits, and a business that once considered Class-A offices now considers Class-B.”
These successes are driving multifamily development interest, even as that sector’s cycle looks to be nearing the end. Developers know that office tenants are looking for any edge in their space to attract talent, and accessibility can be considered an amenity just like a café or fitness center.
“We’re starting to see older millennials moving out to the suburbs to be close to their places of employment, because those reverse commuters are sick of heading out to the suburbs every day,” Bozzuto Development Manager Pete Sikora said. “Putting multifamily in an office environment to create walkability will be successful, and if we increase walkability, we improve traffic.”
Though multifamily can rejuvenate an office park, suburban multifamily itself is virtually a mixed-use-or-bust proposition at this point. If an apartment building pops up next to an office building these days, retail needs to be present to stitch the two together into something more.
“Whenever you talk about mixed-use, you use buzzwords like ‘experiential’ and ‘sense of place,’ which are all great terms for what we’re trying to feel,” Kimco Realty Mid-Atlantic Region President Tom Simmons said. “But whenever we invest in multifamily, there has to be a retail reason for what we do.”
Every panelist asked about the most important retail component for creating a mixed-use community put food and beverage at the top of the list. A successful bar or restaurant can draw interest from office and multifamily tenants and put people on the street to add activity to an area.
“All of us here are competing against the couch,” Revere Suburban Realty CEO Brian Regli said. “Even in multifamily properties, we want people to get off of their couch into the community, into gyms, restaurants, movie theaters, distilleries and breweries and such.”
“Private amenities are great in multifamily, but as residents spill out into the adjacent area, they want restaurants in the community with outdoor seating, beer gardens where people can be seen talking from the street, and spaces for events to give the sense of an urban node,” Sikora said.
Office parks have a ways to go to catch up to areas like Ardmore and Conshohocken with transit-oriented developments already creating these urban nodes, but organizations like the MCPC and local governments recognize the importance of maintaining the viability of office parks to prevent companies from leaving the tax base.
“Even the town commissioners who weren’t as friendly to development in the past realize that they need to build communities, and I think in general people are getting better about that,” Regli said.
The Village at Valley Forge, where Bozzuto has developed two apartment buildings, and, to a lesser extent, Kimco’s Suburban Square project are outliers: They own swaths of land large enough to implement master plans. For many business parks — bought, sold and divided up over the decades — sweeping change is difficult, and needs to be encouraged by outside groups.
“A lot of business parks don’t have individual owners like the Navy Yard, so they depend on business improvement districts to provide amenities, and to receive public dollars to invest in infrastructure,” Holton said, noting that the new rail extension’s business park stops are “to make them more valuable and more responsive to what people are looking for.”
Even if the drive to turn business parks into mixed-use communities is a wild success, office will remain the most important component, both for a town’s tax base and because offices fit more people per square foot than apartments, putting more people in the area to keep it vibrant and the retail successful. As a result, no one should expect multifamily to be anything more than a complement in business parks.
“We do want to make sure that there’s enough room to grow,” Holton said. “Multifamily is hot right now, but these well-positioned office parks need some space for what we think might be the next wave of new office growth.”
CORRECTION, FEB. 20, 2:15 P.M. ET: A previous version of this article implied that Bozzuto owns the Village at Valley Forge, which is owned by a joint venture between Realen Properties and Northwestern Mutual Life. This story has been updated.