In the age of hybrid work, Vanguard purchases another office building in Chester County

The investment behemoth Vanguard Group is adding more office space in the Philadelphia area, even as hybrid work becomes the norm among many employers.

Last week the company purchased a nine-year-old high-end office complex in Malvern near the heart of its operations in Chester County’s Great Valley.

“There’s certain jobs where if you want the job, you do what the employer wants you to do,” said Glenn Blumenfeld of the tenant brokerage firm Tactix Real Estate Advisors. “Comcast recently said they want people in the office three days a week. They’re one of the few companies in this city that can do that. And Vanguard is a dominant company in the suburbs.”

Vanguard not did respond when asked about its plans for hybrid work and merely noted its commitment to a “hybrid working model.”

In 2018, Vanguard leased about a sixth of the almost 300,000-square-foot office complex at 1400 Atwater Dr. from Equus Capital Partners. And 90,000 square feet of the complex is subleased to Frontline Education, a K-12 administrative software company.

The two five-story buildings were constructed in 2013 for the pharmaceutical company Endo International, which filed for bankruptcy earlier this year after being sued by more than 3,000 local and state governments, individuals and other organizations over its alleged role in the opioid crisis.

Endo’s lease at the office complex expires at the end of 2024, and the company plans to remain there for the duration. A company spokesperson said that Endo would continue to manage the entire facility until the end of next year.

“The change in building ownership has no impact on our current space, operations and services,” Linda Huss, corporate affairs director for Endo, said in an email.

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Endo still has 300 workers based out of 1400 Atwater Dr., and Huss said that they are searching for new office space in the region. It could have a smaller footprint, however, because the company has adopted an option for a fully remote model.

“Our building needs have changed, and we are evaluating our office space requirements to best meet our evolving ways of working,” Huss said, who notes that many of their workers have adopted a hybrid schedule. “Endo is committed to the Malvern area.”

Vanguard purchased the Atwater Drive site, which is less than a 10-minute drive from their corporate headquarters, for an undisclosed amount.

The company employs 20,000 people across the world, almost 1,200 more workers than at this time last year. The majority of Vanguard employees work in the Philadelphia metropolitan area and largely in Chester County.

“We may expand our real estate footprint — such as the purchase of 1400 Atwater — to ensure our office space and locations fit current and future needs,” said Alyssa Thornton, media representative for Vanguard. “At a short two-mile distance from our main Malvern campus, the new building offers ample opportunity for expansion and collaboration across our Pennsylvania sites.”

Like many prominent employers, including Comcast, since the rollout of the COVID-19 vaccines, Vanguard has been allowing its workers a hybrid schedule of up to two days at home. But that still implies an expectation of largely in-person work and living within commuting distance.

“There’s clearly less demand for office space, but the idea that every company is going to let everybody work from home all the time is not realistic,” said Eli Kahn, a prominent Chester County developer and landlord, who rents space to Vanguard at a different location. “There’s no culture; there’s no interpersonal communication.”

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Vanguard owns more than two million square feet of office space and leases more than one million square feet of space in the greater Philadelphia region.

The Atwater Drive property’s allure is enhanced by its condition and Vanguard’s existing presence in the facility. Building a new office building would be challenging, given rising interest rates and elevated construction costs.

Blumenfeld estimates that the price could be $500 to $600 a square foot to build new. Whatever they paid, he theorizes, it would be a fraction of the cost of new construction on such a scale.

“It’s always been a part of their culture to have nice buildings and to try to have people together,” said Blumenfeld. “They’re always looking for buildings and land nearby as they grow, so they can keep everyone close.”