GlobeSt.com UPDATE: Comcast Adds 338,000 SF to Take 70% of Comcast Center

PHILADELPHIA-Comcast Corp. has added 338,000 sf to its initial lease for 535,000 sf of the 1.2-million-sf office tower under development by Malvern-based Liberty Property Trust at 17th St. and JFK Blvd. This takes the cable TV giant’s presence in the property to 70%. Liberty commenced construction following a deal struck this January inwhich Comcast agreed to lease 44% of the building and Liberty agreed to rename what it originally called One Penn Plaza, Comcast Center in honor of the City’s largest office employer.

Liberty and Comcast sought Keystone Opportunity Zone status from the state and ended up with a state infrastructure investment of $30 million. The 57-story tower will be Center City’s tallest in a market already facing rising vacancy. With this extension of the initial Comcast 15.5-year lease agreement, the building design adds a 56th floor at the crown that is able to be occupied, increasing total space by 48,000 sf without changing its 975-ft height.

The new agreement takes Comcast’s total occupancy to 873,000 sf, or 39 floors. As a part of the original agreement, Comcast retains an option to take an additional eight floors according to a preset schedule during the construction period and lease term along with the ability to request construction of a second, 250,000-sf office building on the site.

Under the terms of the extended lease, negotiated for Comcast by David Binswanger, president and CEO of the locally based company that bears his name, Liberty is modifying the original design to not only include the 56th floor at the building’s crown, but also make “refinements to lobby finishes, exterior glass and lighting,” according to a Liberty statement. Calls to John Gattuso, SVP of national and urban development for Liberty, were not returned by deadline. Binswanger confirms to GlobeSt.com that the alterations to the building’s design were a part of the lease-extension negotiations. Incorporating the latest changes raises Liberty’s investment to $460 million, according to the Liberty statement. The initial projected cost was $435 million. The statement says Liberty anticipates an 8.65% return.

The Comcast lease extension was anticipated, but not taken for granted. The company, which is currently headquartered at HRPT Properties’ Centre Square, recently sublet 52,000 sf at 2000 Market St. in what was described as “an interim commitment” prior to completion of Comcast Center. During Liberty’s second-quarter conference call on July 28, chairman and CEO Bill Hankowsky told Wall St. analysts Comcast had not yet exercised its option to take additional floors in the building and added that he expected the tenant “to reach some decisions soon.”

Comcast’s rental rate at the property remains undisclosed, but, on condition of anonymity, more than one area broker has told GlobeSt.com it exceeds $40 per sf, a rate Binswanger has neither confirmed nor denied to GlobeSt.com. This is about $15-per-sf above the highest asking rate for Center City trophies in an atmosphere in which the vacancy rate is above the 15%-mark and rising and discounting is rampant. Nevertheless, in the statement, Gattuso says, “interest in this space is very encouraging, and we are in active negotiations with several companies ….We are also very encouraged by the level of interest in the restaurant and retail component of the project.” That component aggregates approximately 24,000 sf. Occupancy is scheduled for fall 2007.