1911 Walnut Residential Tower Gets Green Light
Southern Land Co. has received approval from the Philadelphia Civic Design Review Board for the development of the Laurel, a $300 million, 48-story luxury residential tower overlooking Rittenhouse Square. The Tennessee-based developer plans to break ground early next year and open a sales center next month at 1845 Market St., a nearby office building.
Designed by Solomon Cordwell Buenz, the tower will become the tallest residential building in the city once completed and will involve preserving the Warwick apartments and Rittenhouse Coffee Shop. The Laurel will feature 54 condominiums, long- and short-term rentals and 24,000 square feet of retail space. The condos will start at $2.5 million.
Amazon Halts Development Plans in Seattle Over Tax Proposal
Amazon has paused major expansion plans in its hometown of Seattle because of a tax being considered by the City Council. The new tax would charge large Seattle companies about $500 per employee, with the money going to support affordable housing. The e-commerce giant said it would halt construction of a planned downtown building and reconsider occupying another building that is already under construction, putting 7,000 or more jobs in jeopardy. If one assumes an average salary of $100,000, the $500 employee tax equals about 0.5%, compared to Philadelphia 3.9% wage tax.
Seattle’s mayor expressed alarm over the announcement and vowed to work with the city’s business, labor and community leaders to find common ground. Amazon’s decision comes as officials in other communities across the country, including Philadelphia, are angling to become the home of its second headquarters, or “HQ2.”
Arts & Crafts Purchases 1217 Spring Garden For $15.7M
Arts & Crafts Holdings, owner of several office and mixed-use buildings between Spring Garden and Callowhill streets east of Broad Street, near proposed Phase 2 of the Rail Park, has purchased 1217 Spring Garden St. for $15.7 million.
The 74-unit building totals 85,000 square feet, including 15,000 square feet of ground-floor retail space. Built around the turn of the 20th century as the Bilgram Machine Works factory, the five-story building was converted into apartments in 2003.
Philadelphia Makes Shortlist For Army Futures Command
The Army is considering 15 cities, including Philadelphia, for the headquarters of its planned Futures Command, a center focused on technologies that will shape next-generation battlefields. The Army hasn't said when it would choose a city for the command, which would employ approximately 500 people.
The other contenders are Atlanta; Austin, Texas; Boston; Chicago; Dallas; Denver; Houston; Los Angeles; Minneapolis; New York; Raleigh, North Carolina; San Diego; San Francisco; and Seattle.
Office Sector News
Liberty Property Trust Sells GSK's Navy Yard HQ For $130M
Korea Investment Management Co. (KIM) has acquired the U.S. headquarters building of pharmaceutical giant GlaxoSmithKline at the Philadelphia Navy Yard. KIM bought the 208,000-square-foot office building from Liberty Property Trust for $130.5 million, or $628 per square foot, according to a statement from asset manager Coretrust Capital Partners, which advised KIM on the deal.
The acquisition is Seoul-based KIM’s second in Philadelphia, after its February 2016 purchase of the 870,000-square-foot former 30th Street Station post office, now the Cira Square office building.
Residential Market News
Philadelphia House Prices Continue To Outpace Suburbs
On a quality- and seasonally-adjusted basis, house price changes were generally flat-to-mixed across Philadelphia and its surrounding counties, but sales volume remains strong and is rising as the supply of homes listed for sale remains low and continues to fall, according to a new housing report from Drexel University’s Lindy Institute for Urban Innovation.
House prices in Philadelphia are currently 19% higher than their previous peak back in 2007, while suburban prices in the region remain an average of 17% below their previous peak in the same period. And, over the last five years, Philadelphia’s house prices have been appreciating at an average annual rate of 7.1% compared to an average of 6.6% in the 10 largest U.S. cities (excluding Philadelphia).
Philadelphia Rents Steady Since Last Month But Still Up Over Last Year
Rental prices in Philadelphia remained generally flat for the month of April but represent about 1.1% growth year-over-year, according to the market tracker Apartment List.
Median rent for a one-bedroom apartment in Philadelphia now stands at $960 per month, while the median two-bedroom is $1,160 per month. That number is just under the national median of $1,170 and well below Boston ($2,080), New York ($2,470) and San Francisco ($3,060).
For CPDC’s analysis of Center City rent trends, see pages 8-10 of Housing Development in Perspective: 2018.
Government News and Tax Policies
City Budget Hearings End With No Consensus On Tax Strategy
City Council members are asking city finance and revenue officials to consider changes to the city’s 10-year property tax abatement, are considering a recent proposal from Council President Darrell Clarke to levy a 1% tax of the cost of construction, and they are raising concerns about spiking property tax assessments, which averaged about 14% across the city, but have increased much more in areas experiencing significant reinvestment.
The city’s Chief Financial Officer, Rob Dubow, said a soon-to-be-released analysis shows that “that there is still economic value in the abatement” and that “(e)liminating it would lead to a reduction in jobs and development,” although at a recent CPDC meeting, Commerce Director Harold Epps indicated that there was strong sentiment within the Administration to consider some curtailments to the abatement.
The city's Controller, Rebecca Rhynhart, recently released a report on the impact and alternatives to the full, ten-year abatement. See philadelphiacontroller.org/uploads/press_releases/tax-abatement-analysis-final-final.pdf.
Councilman Allan Domb has expressed opposition to the 1% developer tax and has recommended graduating the 10-year abatement so the full benefit would only last seven years and taper in the final three years. Many business and development groups are actively weighing in on these proposals.
Meanwhile, City Council President Darrell Clarke said his office expects a response soon to a recent Request For Proposals for an independent audit of the Office of Property Tax Assessments’ methods.
New Bill Suggests City Council Should Control Property Values
At the same time, City Councilman David Oh has introduced a bill that proposes to change the city’s charter to give Council members the power to approve or reject reassessments if they exceed the national urban Consumer Price Index — a cost-of-living measure set by the federal Bureau of Labor Statistics. Currently, the Office of Property Assessment is responsible for setting the values that determine how much property tax an owner pays.
Oh said that he sees the reassessments as a "backdoor" tax hike. If the amendment moves forward, Philadelphia residents would vote on it in November. It would not retroactively affect assessments made before the charter change.
City Council Grills School Officials Over Necessity Of Tax Hike
Council members also grilled Superintendent William Hite and other School District of Philadelphia officials at recent hearings, asking about the necessity of Mayor Jim Kenney’s 4.1% property tax hike earmarked for schools given the district’s current budget surplus, and expressing skepticism that the money would be prudently spent.
Uri Monson, the district’s chief financial officer, said the district has managed to eke out small budget surpluses for several years but its financial posture remains precarious because expenditures continue to outpace recurring revenues.
Making Schools More Responsive to Parents’ & Employers’ Needs
As follow-up to CPDC’s well-attended session last month with Superintendent Dr. William Hite and CFO Uri Monson, we are offering a second routable discussion with Mark Gleason, Executive Director of the Philadelphia School Partnership (PSP) on Tuesday, May 22 at 8:30 a.m. at Pennoni Associates, 1900 Market St., Suite 300.
With residents and business facing a tax increase to support public schools and a simultaneous city-wide reassessment, the PSP believes that simply increasing taxes and wishing for schools to improve isn’t enough. Employers, parents and other stakeholders have to get involved and demand better outcomes. To attend, please RSVP to Romina Gutierrez at email@example.com.
Domb: Step-Up Tax Collections From Out-Of-Town Property Owners
Philadelphia City Councilman Allan Domb wants the city to crack down on tax collections from delinquent property owners who live outside the city. Domb wants to put liens on the properties of delinquent taxpayers of non-owner occupied properties, saying that it is one way in which Philadelphia can generate more revenue and minimize the need to raise taxes.
Domb said there are 51,000 delinquent commercial, industrial or investment properties in Philadelphia. His proposal calls for a system to securitize tax liens, a method that has been successful in other municipalities, most notably New York. He has removed residential properties from an earlier proposal due to strong opposition from other members of Council.
Opinion: City’s Fiscal Errors Must Result In Consequences
In an opinion piece reacting to several recently reported “multimillion-dollar missteps,” Brett Mandel, a former Director of the Financial & Policy Analysis Unit in the City Controller's office, urged more accountability.
“Consequences, repercussions, and ramifications must result from lack of improvement and repeated wrongdoing,” he stated.
Bill Requiring Independent Real Estate Appraisals Advances
City Council's Committee on Public Property and Public Works unanimously passed a bill requiring independent appraisals of municipal property transactions assessed by City Hall at values exceeding $200,000. If signed into law, the only properties exempted from the required pre-acquisition independent appraisal would be those obtained through Sheriff Sale or eminent domain.
The bill was introduced in response to the Kenney administration’s purchase of the former Philadelphia Inquirer building at 400 North Broad St. from developer Bart Blatstein for a new police headquarters. The $249 million purchase agreement was completed without an appraisal of the building’s value.
PICA: Philadelphia Tax Collections Up 6.9% in April
The City of Philadelphia collected $529.4 million in General Fund tax revenue in April, compared to $495.1 million in April 2017, an increase of 6.9%, according to the Pennsylvania Intergovernmental Cooperation Authority (PICA).
Increases in every major tax category except the Business Income and Receipts Tax (BIRT) drove the increase in overall collections for the month of April. Considerable increases in the city’s portion of wage, earnings, and net profits, real estate, and realty transfer taxes ensured the continued double-digit increase in year-to-date collections over FY2017.
Through April, BIRT fell 2.4%, compared to a projected decrease of 1.0%; the real estate tax increased by 11.2%, compared to a projected growth of 10.1%; the realty transfer tax increased by 39.9%, compared to a projected 16.1% growth rate; and the Philadelphia sales tax collections rose 6.9%, compared to a projected growth of 8.5%.
NYT: Jobless Rate Looks Like Old Times; Economy Doesn’t
The nation’s unemployment rate in April fell to 3.9% -- the first time since 2000 the number has dropped below 4% -- but a May 4 article in The New York Times noted that the banner number does not “resolve any of the broader questions that economists have about this unparalleled run.”
The piece suggested that the biggest question is why wage increases lag while the market continues to edge toward full employment. While the answer is complex, the Times stated in part that “(t)he upshot is that a smaller share of people are participating in the labor market, and it’s easier to get low levels of unemployment when fewer people are vying for jobs.” They also noted a generational shift as higher wage baby boomers retire and technology renders many categories of employment (travel agents, for example) as obsolete.
Target Eyes Spot In South Street Headhouse District
A surface parking lot at 5th and Bainbridge streets in the South Street Headhouse District is slated to become a seven-story mixed-use development anchored by a big name retailer that likely will be the latest Target location in Center City. Harvey Spear, owner-developer of the property, said that in addition to the 20,000-square-foot store, the $35 million development will include at least 50 apartments and a 152-space parking garage.
It would mark Target’s seventh announced small-format location in Philadelphia, with one currently under construction on the corner of Broad Street and Washington Avenue. That 36,000-square-foot store, which will also operate below high-end apartments, is slated to open in October. The new stores are designed to fit into compact parcels and reflect urban shopping habits.
Local Athletic Apparel Brand Searching For Center City Flagship Space
A New Jersey fitness center that added apparel to its business two years ago is testing the retail market with a pop-up shop in Rittenhouse Square and hunting for a future flagship location in Center City. Aiming to open in its own space within the next 16 months, Endeavor Athletic is currently testing out a hybrid retail-workout concept in a storefront at 119 S. 18th St.
Endeavor has a 1,000-square-foot sales floor and a 900-square-feet second floor studio where personal trainers or other health and wellness companies host discounted fitness events in partnership with Endeavor.
Schulson To Bring Another Restaurant In Midtown Village
Michael Schulson is opening a new steakhouse in Center City this fall, located in a former computer store next to his 13th Street restaurants Double Knot and Sampan and outdoor Graffiti Bar. The chef/restaurateur is also preparing to open a bi-level Italian restaurant, Giuseppe & Sons, with the Termini Brothers Bakery family this summer at 1521 Sansom St.
The neighborhood of Midtown Village has grown into one of Philadelphia’s key dining destinations, home to restaurants Lolita, Barbuzzo, El Vez, Zavino, and Vintage, among others.
Independence National Historical Park Visitors Spent $274M In 2017
About 4.8 million people in 2017 visited Independence National Historical Park and spent $274 million, according to new information by the National Park Service.
In addition, visitors to the park supported 3,926 jobs in 2017. Taken together, jobs support and spending equates to about $399.5 million in economic output to the Philadelphia region, the Park Service stated.
Eds and Meds News
Voucher Sale Brings $110M Payday For Spark Therapeutics
Philadelphia gene therapy company Spark Therapeutics has sold its rare pediatric disease priority review voucher to Jazz Pharmaceuticals for $110 million. Spark will receive the payment once the transaction closes.
Companies become eligible for the voucher when they receive a rare pediatric disease designation for a new drug candidate. The designation is given to experimental therapies targeting serious diseases affecting fewer than 200,000 in the U.S. Spark received the voucher after the FDA approved the company's new drug application for an inherited retinal disease that leads to blindness if untreated.
Wistar, Franklin Technology Partners Team Up To Develop Startups
The Wistar Institute and Ben Franklin Technology Partners of Southeastern Pennsylvania signed a Memorandum of Understanding to work together to accelerate the advancement of early-stage life sciences startups coming out of Wistar.
Under the partnership, Ben Franklin and Wistar will develop a mentoring program around technology development for both scientists and entrepreneurs. The program will feature Ben Franklin representatives providing support and guidance on technology commercialization, with the potential to fund Wistar startups.
Report: Philadelphia Among 10 Best Cities for New Business Grads
Philadelphia is one of the top 10 cities for recent business school graduates, according to a new data analysis by technology services company Business.org of employment and cost of living data, among other factors.
The city came in 10th nationwide after an analysis of Bureau of Labor Statistics data on the number of open positions per 1,000 jobs in the business sector in each U.S. metro area; the percentage of income left over for discretionary spending after subtracting each metro area’s average cost of living from the median hourly wage of business professionals; and unemployment rates as a gauge for each city’s job market.
Bike Lane Project Work Soon Underway in Center City
Work gets underway the week of May 21 on a nine-month bike lane and safety pilot project in Center City that will change traffic patterns on Market Street and JFK Boulevard between 15th and 20th streets by reducing traffic from four lanes to three. The lane reduction will create space for parking-protected bicycle lanes, with parked cars acting as a barrier between the bike lanes and traffic.
The city’s Office of Transportation and Infrastructure Systems (OTIS) said signs and fliers will be posted before the start of work, which will take about two weeks and will include line-striping and flex post construction. OTIS said the work will be done exclusively at night, and daytime parking and loading will remain as usual. The test project is part of Vision Zero, an effort to eliminate traffic deaths in Philadelphia by 2030.
Concerns about street safety are part and parcel of the worsening congestion and parking difficulties in Greater Center City. A recent CCD/CPDC report, Keep Philadelphia Moving, looks at the city’s unique challenges and examines possible solutions.
State Awards Grant For South Broad Street Improvements
Philadelphia has received a $1 million state grant to continue the renovation of the Avenue of the Arts. The grant will be used to improve accessibility, safety and aesthetics at the intersection of Broad and Locust streets, by replicating the work currently under construction on Broad Street at neighboring intersections of Chestnut and Walnut streets.
The grant was awarded through the Surface Transportation Block Grant program based on criteria including safety benefits, reasonableness of cost, readiness for implementation, statewide or regional significance, integration of land use and transportation decision making, collaboration with stakeholders, and leverage of other projects or funding.
SEPTA Mulls Ending Transfer Fees As Part Of Bus Network Overhaul
SEPTA officials are considering the elimination of its $1 transfer fee in an effort to boost falling bus ridership. The idea is being floated as part of an evaluation of SEPTA’s current bus system and its eventual redesign.
Over the past five years, SEPTA has seen its bus ridership drop by 17% from its 2012 peak, when 189 million individual trips were recorded. Transportation agencies in other large cities don’t charge transfer fees, which discourage riders from using multiple buses to get to their destination.
Parks and Open Space News
New Report Outlines Approval Framework For Parkway Events
A new study commissioned by the City of Philadelphia and the Parkway Council recommends a scorecard-style framework to determine which events are suitable for the Benjamin Franklin Parkway, and which might be better suited for other city venues. Factors include a variety of criteria in the categories of public benefit, economic impact, city image, quality of life and institutional impact.
The Parkway, now in its 100th year, is a highly desirable location for community and corporate festivals, parades and rallies; its popularity has created adverse impacts to adjacent areas, institutions, businesses and residents. The study involved input from residents, visitors and public and private stakeholders, and examined best practices in other cities and by the National Park Service.
City, CHOP Officials Dedicate New Schuylkill Trail Segment
Children's Hospital of Philadelphia (CHOP) joined city and state officials at a dedication of the South-to-Christian Street segment of the Schuylkill River Trail. The event included a ceremonial opening of the gates and bridge that provide neighborhood access to this new section of the trail at CHOP's Roberts Center for Pediatric Research.
The addition of the newly constructed segment extends the Schuylkill River Trail in Center City by 1,400 feet. This segment, which is part of the regional trail network known as The Circuit, was constructed in two phases, which together cost approximately $5 million.
Rail Park Opens On June 14
Please join us for the official public opening of the Rail Park at 11 a.m. on June 14. Additional details about the event are coming soon.
Center City District has been overseeing all of the fundraising and managing the design and construction of this transformative project, which broke ground in October 2016. The Rail Park will provide a much-needed green space to the Callowhill and Chinatown North neighborhoods, along with stunning 360-degree views of the city.