March 20, 2025
Provided Image/Keystone
An office building at 500 West Germantown Pike, on the campus of the Plymouth Meeting Mall, will be converted into an apartment building with 149 units. Keystone, the developer of the project, is one of the region's leaders in the growing trend of office-to-residential conversions.
A 60-year-old office building on the campus of the Plymouth Meeting Mall will be converted into an apartment complex with 149 units amid a recent surge in the Philly area of struggling commercial properties being repurposed into residential projects.
The office building at 500 West Germantown Pike will be redeveloped by Keystone, the West Conshohocken-based developer that has emerged as a leader in office-to-residential conversions. The company said it has secured $42 million in financing from Arbor Realty Trust to support the project, which will turn the 175,000-square-foot building into the luxury Monarq residence with a fitness center, indoor pool and outdoor communal areas.
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Keystone President and COO Rich Gottlieb called the project "a game-changer" for the mall campus owned by PREIT, which has pursued residential projects at a number of its malls since exiting its bankruptcy in April 2024. The mall owner is exploring the potential sale of land where another office building, formerly occupied by IKEA, could be used to construct another 275 apartments at the Plymouth Meeting Mall property.
The Monarq conversion project is expected to complete its first phase early next year, with leasing details to be announced in the near future. Keystone's track record includes the renovation of a portion of the Curtis Center Building at 6th and Walnut streets in Center City, where the developer converted the upper floors of the 12-story property into 86 residential units that opened in the years before the COVID-19 pandemic.
Office-to-residential conversions have picked up steam across the United States since the pandemic, when much of the commercial real estate sector was upended by the spread of remote work policies. Billions of dollars in outstanding mortgage loans prompted a growing number of building owners to pursue residential conversions, which surged from about 12,100 units planned in 2021 to more than 55,000 in the pipeline nationally just three years later.
Turning office buildings into apartments is often more costly than new construction, and projects can be technically challenging due to the structural features of office buildings that may not have much natural light and require overhauling utilities to better connect them with apartment units. Zoning restrictions and complications selling office buildings with multiple tenants also may be barriers to conversion projects.
Compared to other large cities — led by Washington, New York and Los Angeles — Philadelphia has been slower to take on office-to-residential conversions over the past few years. The metro area's pipeline of conversion units ranked 14th in the country last year with 975 units planned, according to data from RentCafe, but its 136% year-over-year change was the greatest among the top 20 cities.
The largest project underway in Philadelphia is Alterra Property Group's conversion of 1701 Market St., the former headquarters of law firm Morgan Lewis & Bockius, into a 300-unit apartment building that's on track to open this spring.
Another project will turn an eight-story building at 2100-12 Arch St., formerly owned by the Jewish Federation of Greater Philadelphia, into a 116-unit apartment complex that's been in the works since developer MM Partners purchased it for $12 million two years ago. The building was completely vacant at the time.
Keystone has plans to ramp up its slate of office conversions in Philadelphia, including two projects in Old City. The former offices at 400 Market St. will be turned into 176 apartments, and plans are taking shape with partner Lubert-Adler Real Estate Funds to redevelop the Bourse Building nearby into a 152-room hotel with a ground-floor restaurant, the Philadelphia Business Journal reported last month.
Center City's Wanamaker building at 13th and Market streets, where Macy's is closing this weekend after 18 years, also appears headed to a conversion of some of its upper offices into apartments under new owners TF Cornerstone.
Advocates of office-to-residential conversions have recently recommended Philadelphia promote such projects by offering more incentives to developers. The Philadelphia Tax Reform Commission, created by City Council last year, released a report in February that suggested doubling the city's 10-year-tax abatement to 20 years for the conversion of "hardship buildings" that have suffered from the decline in office demand.
Philadelphia's unoccupied office space has doubled since 2019 to about 10 million square feet, according to recent data from commercial real estate services firm CBRE, and the city's total vacancy rate of 23.5% is higher than the overall U.S. office vacancy rate of 18.9%. Total vacancy includes empty office spaces in existing properties and other offices either under construction or not ready to be occupied.
In Plymouth Meeting, where Keystone's project will soon get underway, CBRE's data shows a glutted office market with a total vacancy rate of 39.4%. That's the highest mark in the Philadelphia suburbs, where the average vacancy rate stood at 25.7% as of the fourth quarter of last year.
