Firm gets traction with coworking model in Society Hill, sees opportunity with 'dirt cheap' office buildings
By Paul Schwedelson – Reporter, Philadelphia Business Journal Jun 26, 2024
Three years after buying and renovating the former Nelson building, Vert Properties has leased half of the Society Hill property and expects it to be 80% occupied by the end of the year. Already 15 companies have taken space in the three-story, 30,000-square-foot building at 222-230 Walnut St., with an average of 1,000 square feet per tenant. The style is a hybrid between coworking space and traditional office leases with a minimum length of six months. The space is already fit out for firms, meaning they can move in as soon as they sign a lease.
Mantua, New Jersey-based Vert Properties bought 222-30 Walnut St. in 2021 for $4.8 million and undertook a $1 million renovation of the building. Vert owns Incutate Workplace, the company that operates the coworking spaces.
Vert Properties President Frank Lauletta believes this style is effective given the state of the office market.
“The cheaper you buy it, the lower you can rent it,” Lauletta said. “It helps us better compete against traditional office space.”
The building sits on the border of Old City and Society Hill at the site of the former home of Alexander Hamilton, the first U.S. secretary of the treasury. The space at 222-30 Walnut St. has been named the Hamilton Collective in a nod to the founding father.
The building was previously owned by John Nelson and housed the architectural firm Nelson, which relocated to 100 S. Independence Mall West. The site was once eyed for a high-rise condominium tower, but those plans never materialized.
The building's tenants include several law firms and technology companies. Incutate Workplace’s IT department works out of the building and has established internet protections for each tenant. It’s a key benefit for law firms requiring robust security measures and a differentiator from more standard coworking space, Lauletta said.
“We’re selling the ability to walk in, plug your laptop in and start working versus a traditional office where you walk in, you’re sitting there with some boxes on a floor on top of carpet and now you’re figuring out utilities and internet and you've got to get your IT guy there and space designers and printer...," Lauletta said. "There’s so many things you have to worry about to rent a traditional office.”
In addition to renting to businesses, individuals can secure a single desk for a minimum of one month. Those desks are located in a different section of the building from firms that need extra security.
Lauletta declined to share how much he charges for rent on a per-square-foot basis, but estimated it’s about a 60% discount compared to traditional office space because amenities like conference rooms and kitchenettes are shared among tenants.
The average asking rent in the Market East submarket in the first quarter of this year was $31.64 per square foot, according to JLL. A 60% reduction from that would be $12.66 per square foot.
“Before, your leased space was maybe the second most important part [behind employees],” Lauletta said. “Now, your leased space is down the totem pole, maybe five or six, because a lot of people work remotely, they don’t need as much office space and no one’s really willing to commit to long-term, expensive leases.”
Vert has seen success with the model so far. It also owns properties in Mantua,
Turnersville and Glassboro, all in New Jersey, where Incutate operates the office space. Those three buildings, which use a similar model as the one at 222-30 Walnut St., are 95% leased.
In April, Vert paid $650,000 for a three-story, 27,000-square-foot building at 1099 White Horse Road in Voorhees, New Jersey, which was previously occupied by Jefferson Health. Lauletta said it’s already fully furnished and coworking space is planned to open there within the next two months.
“The nice thing about the crash of the office market is that office buildings are selling dirt cheap right now,” Lauletta said. “You can buy a building for pennies on the dollar, open it up, turn the electric on, clean it up and rent it out under this model and get it rented up fairly quickly.”
