Thomas Jefferson University and its affiliated hospital network plan to take Aramark's place as the anchor tenant of the food-service giant's namesake East Market Street tower. The move aims to consolidate Jefferson's corporate functions under a single roof while boosting its regional profile.

Administrative offices for Thomas Jefferson University and Jefferson Health will occupy about 230,000 square feet over 14 floors of the 32-story 1101 Market St. building, which will be renamed Jefferson Tower, it said in a release Friday. The 16-year lease also gives Jefferson, as the university and health network are collectively known, a glowing marquee sign atop the Center City high rise and the option to expand by another six floors, it said.

Functions now housed at locations throughout the city, such as finance services, human resources, and marketing, will relocate into the new space over several years beginning late 2019, Jefferson said.

The consolidation comes amid a period of rapid growth for Jefferson, which has expanded from a three- to a 13-hospital system while merging with Philadelphia University since 2013, when current president and chief executive Stephen Klasko took his post. Its most recent acquisition was of South Jersey-based Kennedy Health, which was completed in September.

Dan Grauman, chief executive of health-care consulting firm Veralon, said Jefferson was likely consolidating administrative functions from the geographically disparate hospital networks it has acquired over the years, which also have included Abington Health and Aria.

"The system is developing and maturing," he said in an interview. "But at the same time, certain back-office operations can be consolidated, and part of doing that is to centralize them."

While the consolidation at 1101 Market St. will support Jefferson's expanding network by reducing costs and integrating nonclinical support functions, it represents "much more than realizing operational efficiencies," chief financial and administrative officer Peter DeAngelis said in the release. "By occupying one of the more iconic buildings in Center City, we will be even better positioned to demonstrate our region-wide commitment to patients and students."

Artist’s rendering of entry to 1101 Market St. office building with “Jefferson Tower” branding.
Eimer Design
Artist’s rendering of entry to 1101 Market St. office building with “Jefferson Tower” branding.

The lease widens Jefferson's physical footprint in the city center's revitalizing Market East section, expanding its presence from an urban campus now bounded largely by Chestnut and Locust Streets, between Eighth and 11th Streets. It comes about three years after Jefferson paid $4 million for naming rights over a five-year term to SEPTA's former Market East commuter rail station below Market Street between Ninth and 12th Streets, which offers direct underground access to the 1101 Market St. tower.

Real estate advisory firm Savills Studley represented Jefferson in the deal at the Market Street building. The health network explored locations in greater Philadelphia, South Jersey and Delaware before settling on the tower, the firm's Philadelphia branch manager, Hether Smith, said in a separate release.

The building's owner, the Girard Estate charitable foundation, was represented by a team at real estate services firm JLL.

Bill Luff, founder of the commercial real estate consultancy CRE Visions, said Jefferson's decision to enhance its presence in the city's Market East section is a reflection of the recent development that's occurred in what was once a depressed real estate market. Area projects include the East Market residential, office and retail development across the street from the 1101 Market St. tower.

"It's going to help them attract the workforce they want and to keep the workforce they have," Luff, who was not involved in the transaction, said of the move.

Aramark currently occupies 300,000 square feet spread over 21 floors in the 634,000-square-foot tower, though some of those floors are shared with other tenants. It will depart the tower next year for a new headquarters building being developed for the company in the shell of a former industrial structure at 2400 Market St.

Jefferson did not immediately disclose where the office functions relocating into the building would move from, but the hospital and affiliated physicians currently lease nearly 317,000 square feet of the 705,000-square foot, 14-story 833 Chestnut St. office building, according to data compiled by market tracker CoStar group. Nonclinical Jefferson functions at the building include the hospital's human resources department and paramedic-training center.

The health network's presence at 1101 Market St. means the tower will have little if any vacant space over the next 16 years, Joseph P. Bilson, executive director of the building's owner, the Girard Estate charitable foundation, said in the release from Jefferson. Revenue from the building supports Girard College, a boarding school for financially disadvantaged students in the city's Fairmount section.