Alterra Aims To 'Invigorate Market West' With Its Newest Philadelphia Office-To-Resi Conversion

Philadelphia developers were early adopters of the office-to-residential conversion trend before the pandemic, and after a lull in activity, another series of buildings are in the process of being converted.

“The low-hanging fruit has now all been picked,” said Alterra Property Group Senior Vice President Mark Cartella.

The first of those postpandemic conversion projects is preparing to open: Alterra's 299-unit conversion of the former office building at 1701 Market St.

With parts of the 17 Market West project set to come online in May, Alterra and NAIOP Greater Philadelphia gave tours of the building to members of the real estate community on Wednesday.

Alterra has completed 15 conversion projects over the last 12 years, Cartella said during a panel at the event, adding, “We’re pretty confident about how this building is going to perform.”

Alterra purchased the 18-story, roughly 300K SF building in 2023 for a little more than $26M — about $75 per SF.

The firm got a bargain on the building, which sold for only about half of its assessed value amid Center City’s ongoing office vacancy headache.

The structure is now full of modern apartments defined by their sizable windows, gleaming fixtures and ample closet space. One-bedroom units start at $2,325, and two-bedrooms are leasing for as little as $3,875.

Cartella was especially excited about the communal amenities.

“We wanted this building to be first-class, and it needed to compete with some of the new product being built a few blocks away,” he said.

The saltwater pool, which will be open 365 days a year, is one of the main draws. The former office tower’s steam system means it can be heated with ease, even in the dead of winter.

“It’s going to be a large hot tub when it needs to be,” Cartella said.

He also highlighted the pickleball court in the building’s gym, made possible by 1701 Market’s relatively high ceilings and its direct connection to Suburban Station, meaning residents won’t need to walk outside when catching a train to the suburbs.

Alterra has ample experience with conversion projects, so Cartella and his counterparts knew to get engineers and construction experts involved early.

“Alterra engaged all of us prior to even purchasing this building,” Clemens Construction Co. Vice President Brett Pastorius said.

This allowed designers to optimize their use of the existing infrastructure, Bala Consulting Engineers Vice President Jim Gardler said.

“The biggest benefit to a project like this is, how much of the existing infrastructure can we reuse?” he said. “It’s getting into the mechanical rooms, getting into the gear, opening things up and finding out what really works, what you can keep and what makes sense.”

The building won't be LEED-certified, but Cartella and Gardler said conversion projects are generally more environmentally friendly than new construction.

“You’re actually using what’s here,” Gardler said. “You’re not creating more carbon.”

Converting the 18-story building took roughly a year less than it would have to build a new structure of the same size, Pastorius said. But that doesn’t mean there were no hiccups along the way.

“We did a lot of due diligence in this building, but it’s never enough,” he said. “A lot of the existing steel wasn’t adequately fire-proofed. … Another one that we run into often is that the building isn’t necessarily square.”

One of the main engineering challenges was figuring out a way to preserve the building’s original Indiana limestone facade, which Cartella felt tied it to nearby landmarks like 30th Street Station.

“We hope to invigorate Market West as its own dedicated neighborhood,” he said.

There are several other residential conversion projects underway in the area, according to Center City District’s most recent housing report.

That includes the 175 units PMC Property Group is building through a partial conversion at Three Parkway, on the corner of Cherry and North 16th streets. MM Partners is also transforming the former Jewish Federation building at 2100 Arch St. into 116 apartments.

CCD sees conversion potential in Ten Penn Center at 1801 Market St., just one block away from Alterra’s building. It hit the market earlier this year.

“Conversion is not a foregone conclusion, but if a buyer opts to move forward, more than 300K SF of obsolete office space could be removed from the inventory,” the CCD report says.

Cartella said Alterra will only pursue another Center City conversion project “if the right opportunity exists.”

He doesn’t think the conversion trend is disappearing but doesn’t expect it to be as prominent in the coming years.

“I don’t think it’s going to have the same volume as it’s had in recent decades,” Cartella said. “It’s going to depend on where you are.”

Cities that historically had less flexible zoning or more community opposition to conversions might have strong candidates left on the table. 

NAIOP New Jersey CEO Dan Kennedy asked if there might be some opportunities in the southern part of the Garden State, but Cartella didn’t think so.

“There’s a huge barrier to entry in South Jersey,” he said. “It comes down to zoning. You have a lot of community opposition. … It’s really hard to get these projects approved in a timely way.”