Drug maker GlaxoSmithKline PLC (GSK) expects to save about $26 million annually by moving its Philadelphia operations to a new facility slated for construction in a former U.S. Navy shipyard.

The U.K. company plans to move in late 2012 or early 2013 to an $81 million facility to be developed by Liberty Property Trust (LRY), a Malvern, Pa., real-estate investment trust, in partnership with real-estate development firm Synterra Ltd.

Some 1,300 Glaxo jobs will move to the South Philadelphia site from Glaxo's current offices on the northern edge of the downtown business district.

Glaxo signed a 15 1/2-year lease for the new site, and expects to generate the $26 million in annual savings by reducing its real-estate footprint, Dan Phelan, Glaxo's senior adviser to the chief executive, told Dow Jones Newswires after a press conference unveiling the plan at Philadelphia's City Hall. The new building will be about 205,000 square feet.

Glaxo and other drug makers have been on a cost-cutting spree in recent years, adjusting to generic competition and other challenges.

No new economic or tax incentives were provided to Glaxo in connection with the move, said Philadelphia Mayor Michael Nutter. The project will be eligible for a 10-year abatement on real-estate taxes, Glaxo said, but that is part of a program dating to the 1990s that's available for many construction projects citywide.

Glaxo, maker of the Advair asthma treatment, traces its presence in Philadelphia to around 1830, when the founder of what would become Smith Kline opened a drugstore. The current Philadelphia operations include marketing, finance and other corporate functions.

Glaxo says it is making the move because it wanted an open-space office layout that promotes better collaboration among employees, and it would have been difficult to refit its current location for that purpose.

The company considered other sites in the city and its suburbs before deciding on the Navy Yard, Phelan said. Glaxo employs about 6,000 people throughout Pennsylvania.

The U.S. Navy closed its Philadelphia ship-building yard in 1995, and a city-linked nonprofit has since been transforming it into a corporate center and other uses. The site has lured the headquarters of clothing retailer Urban Outfitters Inc. (URBN) and dessert-maker Tasty Baking Co. (TSTY), which were previously based in other parts of the city. The Glaxo move will bring employment at the Navy Yard to about 10,000 workers.

The new Glaxo building will be designed by Robert A.M. Stern Architects.

-By Peter Loftus, Dow Jones Newswires; 215-656-8289; peter.loftus@dowjones.com
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