Troubles At 2 Philly-Area Academic Institutions Could Spur Redevelopment Rush Or More Blight

The sudden closure of The University of the Arts spurred immediate backlash, including class action lawsuits from four law firms in the 10 days since the school officially shuttered for good.

But where there is failure, there is also opportunity, commercial real estate players told Bisnow. And the prime real estate left behind by UArts and another Philly-area higher learning institution that has announced plans to downsize could be a blight or a bright spot, depending on what happens next.

UArts’ closure left nine properties vacant in Philadelphia: a 66K SF main campus on Broad Street and more than 500K SF in other buildings elsewhere. That worries some, like Ben Waxman, a state representative whose district includes the campus region, where twice as much office space sits empty as in 2019 and deals are few and far between.

“Obviously, a major higher education institution in Center City, which is what UArts is, becoming empty or vacant or taking a long time to come to some kind of resolution about what might happen to the assets in the property, all of that is going to hinder Center City's recovery,” Waxman told Bisnow.

The management group handling UArts' closures did not respond to Bisnow’s requests for comment.

Unloading the properties could be a tall order.

Though occupancy at offices has risen, more than 44% of Philly buildings over 250K SF are in financial distress, and vacancy is still elevated, according to the Center City District’s latest report. 

There are few enthusiastic takers for those properties, and the empty UArts buildings could worsen an already dire picture, market watchers said. And while UArts is the most prominent academic institution abandoning its real estate, two private Catholic universities in the suburbs are also looking at closures and scalebacks. 

At the end of this month, Cabrini University will close, with plans to allow Villanova University to take over its 112-acre campus. Villanova has no finalized plan for the property beyond helping the school wrap up two more semesters. 

Carl Dranoff, who purchased one of UArts buildings in 2014 and ultimately transformed it into the upscale Arthaus condominiums development, is taking a wait-and-see approach to the land left behind by closures and cutbacks, according to a spokesperson for Dranoff Properties. If his firm has future plans to repeat any 2014-style adaptive reuse, it is keeping quiet for now.

“At this point, we are hoping for the best for UArts and would like to see how things go for the institution before discussing conversion ideas,” the spokesperson said.

If the real estate for any of the UArts or other area academic properties hit the auction block soon, developers should take their time and explore their options, said Zachary Cutler, a senior analyst for Avison Young in Philadelphia. 

“Let’s say, at first, money isn't a problem in terms of what a developer has, [say] X amount that they're looking to put towards an ABC project,” Cutler said “From their point of view, they're saying, ‘Oh, we've done tons of these before, it won't be a big deal.’ But then, as they're kind of pulling back the envelope of it, they start to see this property needs this work done, or this property actually doesn't allow for this type of use.”

But a meaningful change in use for former UArts properties could be a prime chance for both community planners and developers to remake the image of the area, Cutler said.

It's a “phenomenal opportunity for the city, this is my two cents, to show that they do care about really cleaning up a portion of the city that has been struggling financially,” he said.

College dorms have historically made good adaptive reuse projects as apartments. For example, MM Partners spent $11.5M in March to buy the former student housing of Peirce College at 1420 Pine St. for apartment conversions.

The firm bought 1500 Pine St. from UArts to do the same thing two years ago, in that case for $10.7M. Several other UArts properties have also sold for similar purposes in recent years.

But academic property conversions are still fairly rare across the country. Shuttered schools made up just 3% of all U.S. apartment conversions in 2023, according to RentCafe data cited by Axios.

Before any future can be plotted for UArts’ properties, lawmakers are calling for a review of the circumstances for the abrupt closure, according to a Monday update by the Inquirer.

Jordan Harris, a state representative and Democrat, said his office “has begun the process of what an investigation would look like ... at the state level we are doing our best to look at what happened and to make sure it never happens again.”

The Pennsylvania Attorney General's office told Bisnow Monday that there are no updates on the status of UArts’ abandoned properties.

CORRECTION, JUNE 16, 10:30 P.M. ET: A reference to a restructuring at Gwynedd Mercy University has been removed based on new information provided by the school. The institution told Bisnow it will continue to use all of its existing real estate.