Commerce Square - History

History

Commerce Square was part of an office-building boom that took place in the late 1980s in Philadelphia, Pennsylvania. During the boom numerous skyscrapers were constructed in the West Market Street neighborhood of Center City. The $US300 million development of Commerce Square was led by Robert F. Maguire III, co-managing partner of Maguire Thomas Partners of Los Angeles. To get his project moving, Maguire engaged the architectural firm IM Pei & Partners (now called Pei Cobb Freed & Partners) to design the complex. Using a design by a leading architectural firm as incentive, Maguire approached IBM, a company he had past associations with. By early November 1984, after negotiations with Maguire, IBM agreed to be a joint partner in the development. IBM also agreed to serve as the lead tenant for One Commerce Square, occupying about half the building as its headquarters for the Mid-Atlantic region. Commerce Square would be split between two buildings, One Commerce Square being built first, and the second tower, Two Commerce Square, being built later once a lead tenant was secured. Plans for Commerce Square were officially announced on November 16, 1984 at a press conference held by Maguire and IBM at the Bellevue-Stratford Hotel. The first phase of the project included One Commerce Square, retail and restaurant space, a plaza, and an underground parking garage. Construction began with the first phase on June 10, 1985. One Commerce Square was topped off with a ceremony on June 6, 1986, and the skyscraper officially opened on October 23, 1987.

In 1987 the Consolidated Rail Corporation (Conrail) indicated it wanted to consolidate its offices spread out across Philadelphia into one office building. In May 1988, Conrail solicited proposals from developers for a building to house its corporate headquarters. On March 30, 1990, after being sought after by numerous developers in Philadelphia and its suburbs, Conrail announced that it would be leasing 27 floors of Two Commerce Square. With a lead tenant secured, construction of the identical tower commenced in July 1990. Two Commerce Square was completed in July 1992 and Conrail began moving in approximately 3,000 employees in September of that year. Two Commerce Square marked the end of the skyscraper boom of the 1980s, being the last office skyscraper to be built in Philadelphia until the Cira Centre in 2005.

After the office-building boom of the 1980s, the 1990s saw an office glut that resulted in numerous vacancies and reduced leasing rates throughout Center City. In 1993 IBM, struggling financially, was shrinking its workforce and consolidating its operations nationwide, and its plans included moving some of its local employees out of the city. Though IBM had initially occupied nearly half of One Commerce Square, by 1993 it was using only one-fifth of the building. In 1996, Maguire Thomas Partners split up, leaving the ownership of Commerce Square to Thomas Properties Group Inc. alone. After the split, Thomas Properties renegotiated mortgage financing of the Commerce Square towers. Thomas Properties Group successfully renegotiated the debt for Two Commerce Square with Bank of America, but was unable to renegotiate the debt with One Commerce Square's prime mortgage holder, Mitsubishi Trust and Banking Corporation. To break the deadlock, Philadelphia Plaza Associates filed for Chapter 11 bankruptcy protection. Thomas Properties Group is the parent company of Philadelphia Plaza Associates which owns Commerce Square.

Philadelphia Plaza Associates emerged from bankruptcy reorganization early in 1998, but the company still concerns about filling the space soon to be vacated by Conrail. In October 1996 Conrail was bought by Norfolk Southern Railway and CSX Transportation. The merger was concluded in May 1998 and the former Conrail offices and employees began to be moved out of the building. In the merger deal, CSX Transportation absorbed Conrail's 15-year lease. CSX was responsible for paying the lease, but the 728,000 square feet (68,000 m2) of space was subleased, offsetting the cost. Between 1999 and 2000, as Conrail offices were phased out of Two Commerce Square, Thomas Properties filled the newly vacated space with new tenants.