Brandywine CEO Jerry Sweeney 'reading economic tea leaves,' won't build next Schuylkill Yards tower
A rendering shows Brandywine Realty Trust's planned 800,000-square-foot office and life sciences tower at 3001 John F. Kennedy Blvd. in Schuylkill Yards.
BRANDYWINE REALTY TRUST
With the first two ground-up buildings at Schuylkill Yards in their final stages of development, Brandywine Realty Trust is plotting its next steps for the third.
Philadelphia-based Brandywine (NYSE: BDN) is relaunching marketing efforts for its planned 800,000-square-foot East Tower at 3001 John F. Kennedy Blvd., but it's waiting to begin construction until the building is at least 50% pre-leased and the company has confidence in market conditions.
“Given its significant size, given the state of the overall U.S. economy, the volatility in interest rates and uncertainty in financing, we would not start that project without a significant pre-lease and visibility on both additional leases being signed and financing certainty,” Brandywine CEO Jerry Sweeney said, “because that project is simply too big for us to take on in this kind of climate.”
The 34-story building would include 550,000 square feet of office space and 250,000 square feet of life sciences space. Sweeney said marketing for the office space is geared toward financial services companies.
Sweeney likened the planned 800,000-square-foot tower to two other University City office buildings developed by Brandywine: the 625,863-square-foot FMC Tower at 2929 Walnut St. and 730,187-square-foot Cira Centre at 2929 Arch St.
Chemical manufacturer FMC Corp. pre-leased the building that now bears the company’s name, while law firm Dechert leased space in Cira Centre prior to construction of that building.
“We’re smart investors, prolific developers who always keep our feet on the ground,” Sweeney said. “The pace of that development is going to have to dovetail with how we’re reading economic tea leaves, how we’re viewing where the economy is going, how we view the interest rate climate as well as demand drivers on all those different product types.”
Jerry Sweeney is CEO of Brandywine Realty Trust.
Waiting for lease commitments before beginning construction is a change from the first two buildings in the $3.5 billion, 14-acre Schuylkill Yards master-planned project that’s being developed in partnership with Drexel University. The first two buildings were built speculatively without tenants lined up in advance.
Brandywine has completed construction on the 28-story office, residential and retail building at 3025 JFK Blvd. also known as the West Tower. Law firm Goodwin Procter announced last week that it is the first tenant to sign a lease in the building, agreeing to take 31,500 square feet for a duration of 12 and a half years. Goodwin plans to move in during the second half of 2024. The building’s residential section, named Avira, has 326 residential apartments.
Residents began moving into those units in August and Sweeney said 45 residential leases have been signed.
Sweeney said the 200,000 square feet of office space at 3025 JFK Blvd. is a small portion of Brandywine’s Philadelphia office portfolio, which is more than 90% leased. Thus the company was willing to risk building the office space without a tenant. Sweeney called it a “sister building” to the pending 3001 JFK Blvd. tower, which is planned next door.
Construction is underway on the second Schuylkill Yards piece, a 400,000-square-foot life sciences building at 3151 Market St., and Sweeney said Brandywine is looking to sign leases in early 2024 so occupancy can take place by early 2025 at the latest. Given Brandywine’s confidence in the 12-story building — it's “unlike anything the Philadelphia market has seen before,” Sweeney said — and the strength of the city’s life sciences market, the company again didn’t feel the need to wait for pre-leasing.
Despite Sweeney saying in July that leasing has been “frustratingly slow” throughout the rest of Brandywine’s portfolio, he remains confident in Schuylkill Yards. He considers the location strong because of its proximity to businesses, universities, research work, mass transit and the Schuylkill River waterfront.
“We wake up every day believing we have one of the best development sites in the country,” Sweeney said.