Office Sector News
Comcast Expanding in Advance of New Tower
Comcast is already seeking extra space in Center City well in advance of the completion of their new tower. The Philadelphia Business Journal reports that the cable company is seeking 65,000 to 75,000 square feet of additional space to accommodate current growth. To read the article, please go to bit.ly/1qSPhaJ.
Office Towers Expected to Increase in Value
Comcast's second office tower, the Comcast Innovation and Technology Center, the 59-story (1,121 feet), 1.52 million SF skyscraper being developed by Liberty Property Trust for completion in 2017 should induce even more job growth and attract companies to Center City, seeking to be near Comcast and the burgeoning millennial demographic, according to Integra Realty Resources Philadelphia’s 2014 Mid-Year Viewpoint.
Overall, Integra reports that cap rates remained steady, and while Class A office buildings remained at the same value, Class B increased 2% to 3.9%. Looking ahead over the next 12 months, both classes of buildings are expected to rise in value 1% to 1.9% in the CBD.
To read the IRR Office report, please go to bit.ly/1rdHxMn [PDF]. (Other IRR sector reports are below in Retail News and Residential Market News.)
National Study: Office Properties in Live-Work Environment Perform Best
A national study by Emil Malizia, published in the current Journal of Real Estate Portfolio Management, concludes that office properties in 24-hour downtowns offer superior returns to investors than properties in single-use suburbs. The report draws extensively from a September 2013 national report, Downtown Rebirth, authored by Paul Levy and Lauren Gilchrist, which analyzed the live-work patterns in 150 of America’s largest cities.
To review the Malizia article, please go to centercityphila.org/docs/JREPM14.pdf.
To view the Downtown Rebirth study, please go to definingdowntown.org.
Software Startup Joins Growing Tech Businesses
PromptWorks, which makes handcrafted software for a variety of Fortune 500, midsize, and startup companies, moved last month into a new 3,300 square foot Center City office at 1211 Chestnut Street, Technical.ly Philly reported on July 28.
The startup firm has 12 developers and previously shared office space. PromptWorks is just the most recent tech startup that has joined a growing list of tech startups that call Center City home and with their new location, help expand creative economy upper-floor uses beyond South 13th Street.
To read the Technical.ly Philly article, please go to bit.ly/UGPUVM.
GPCC Launches Campaign for Growth and Job Creation
The Greater Philadelphia Chamber of Commerce (GPCC) on July 31 launched a new campaign and report, Roadmap for Growth for the City of Philadelphia: 2015-2020, to promote economic growth and job creation in the city.
The 24-page, Roadmap for Growth, A Vision for the City of Philadelphia, looks at population, employment, household income, and enterprise creation in the city over the last few decades. The report draws extensively from CCD/CPDC’s Pathways to Job Growth report and offers some suggestions for change: reductions in wage and business taxes; enhancing capital infrastructure; and producing a well-educated workforce.
To read the report, please go to bit.ly/1rRYEUv [PDF].
If you are interested in learning more about becoming involved, please contact Lisa Crutchfield, at email@example.com or Joe Grace at firstname.lastname@example.org.
Nonmanufacturing Strong in July
Overall nonmanufacturing activity in the region increased in July, according to firms that responded to the Federal Reserve Bank of Philadelphia’s survey.
Overall business activity improved for 47.7% of the firms, slipped for 13.6%, and remained the same for 38.6%.
Almost half of the companies, 47.7%, reported a rise in new orders, while 18.2% witnessed decreases, and 18.2% reported an unchanged number.
The number of employees remained the same for 59.1% of the reporting companies, but increased for 36.4%, and decreased for only 4.5%.
Looking ahead six months, none of the firms expected business to decrease, and 84.1% expected it to improve, while 6.8% predicted no change.
Partnership to Develop The Gallery at Market East
The Pennsylvania Real Estate Investment Trust (PREIT) and the Macerich Company on July 29 announced a joint venture to redevelop The Gallery at Market East.
Macerich will acquire a 50% common ownership interest in The Gallery for $106.8 million and the two companies will jointly handle the development, leasing, and management of The Gallery, and costs going forward will be split 50/50 between the companies, the press release noted.
With 1.4 million square feet, The Gallery is envisioned in its transformation as Philadelphia's only transit-oriented, retail anchored multi-use property offering accessible luxury retailing and artisan food experiences. Macerich, headquartered in Santa Monica, California, was attracted to the merger and development project because of The Gallery’s dominant positioning and strong long-term growth prospects. The company owns 55 shopping malls throughout the country.
The former Strawbridge’s in the 800 block of Market Street will re-open this fall with upscale fashion discounter Century 21 as an anchor for retail at The Gallery.
To read the press release, please go to bit.ly/1lXAsvR.
For more on Market East development, please go to the Center City District’s Summer Digest at centercityphila.org/docs/CCDigestSummer14.pdf.
Eds and Meds News
Innovation Center @3401 Opens in University City
The Innovation Center @3401, 34th and Market Streets, a collaborative effort of Drexel University and the University City Science Center to help attract and nurture start-up businesses in the region, officially opened its doors on July 28, Drexel University announced.
DreamIt Ventures and Point.io, along with six other companies have taken memberships in the collaborative space, and it will also host seven healthcare start-up companies for the next 10 months, as part of the Science Center’s new Digital Health Accelerator program.
With 17,000 square feet of collaborative space, ic@3401 can accommodate 50 tech entrepreneurs and freelancers, who will work side-by-side with the resident companies and also tap into the creative resources that Drexel has to offer through its faculty and students.
To read the press release, please go to bit.ly/UOuh67.
School District Introduces Innovation Initiative
The Philadelphia School District on July 22 announced the “School Redesign Initiative,” which will provide grants of up to $30,000 to implement changes in schools, based on suggestions from teachers, principals, universities, and community organizations, The Philadelphia Inquirer reported. The School District will raise the money through donations.
As many as 10 schools could be transformed beginning in September 2015. All teams who want to make a proposal must have at least one active or certified school principal on the team and submit a letter of intent by August 19, and a full proposal by October 10. Selections will be made in November. Successful teams will receive the grants, plus work space, connections to experts, and networking opportunities, the article noted.
To read the article, please go to bit.ly/1AuVADo.
Nordstrom Rack to Open in October
Nordstrom Rack will open its Center City store at 1700 Chestnut Street in the former Daffy’s location on October 24 at 9:00 a.m., Philly.com reported.
The story will occupy four-levels and 39,000 square feet in the 107,300-square-foot building. Daffy’s closed in 2012.
To read the article, please go to bit.ly/1qNRYun.
Strong Retail Rental Rate Growth Expected
Walnut Street commands the highest rental rates, surpassing $200 PSF, but Chestnut Street is seeing the biggest upcoming surge owing to a lack of available space on Walnut Street, according to Integra Realty Resources Philadelphia’s 2014 Mid-Year Viewpoint. The Century 21 store scheduled to open this fall at the Gallery on Market East is an indication of growing confidence in Philadelphia from out-of-town investors, and the retail venues associated with the development of Girard Square are expected to continue to revitalize the retail market.
The report anticipates a strong rental rate growth in the face of low vacancy, even with the new development activity.
To read the IRR Retail report, please go to bit.ly/1lAqcJS.
SugarHouse Expansion Under Way
SugarHouse Casino on July 22 broke ground on its $164 million expansion, The Philadelphia Inquirer reported.
The expansion will increase SugarHouse's gambling floor to 85,000 square feet from 50,000 square feet and will add 30 additional table games, 400 more slot machines, and a new 30-table poker room.
In addition, there will be a 30,000-square-foot space for events with floor-to-ceiling windows offering views of the Delaware River and Benjamin Franklin Bridge, and a 600,000-square-foot, seven-story parking garage.
The construction will create 1,600 jobs and SugarHouse will expand its casino workforce from 1,100 to 1,600. The expected completion date was not announced.
To read the article, please go to bit.ly/1jUlsDy.
Arts and Culture News
New Artistic Director for Pennsylvania Ballet
Ángel Corella, a former principal dancer with the American Ballet Theatre, has been hired to become the new artistic director of the Pennsylvania Ballet, The Philadelphia Inquirer reported on July 22, the day the board approved his appointment.
The current director, Roy Kaiser, announced his retirement in April and will leave in October.
The Pennsylvania Ballet reviewed 30 candidates for the job and conducted in-depth interviews with seven, the article noted.
His contract is for three years.
To read the article, please go to bit.ly/1jW2jBe.
Fringe Festival Coming in September
The 2014 Fringe Festival, produced by FringeArts, will run September 5 through September 21, include several world premieres, and utilize the organization’s new space at 140 North Columbus Boulevard (Race Street and Columbus Boulevard) as one of the primary venues, The Philadelphia Inquirer reported.
Presentations at the festival building, a converted pump house, will include What I Learned in Outer Space, a dance piece co-created by the Pennsylvania Ballet and Curtis Institute of Music; Antigone Sr./Twenty Looks or Paris Is Burning at the Judson Church (L), by Trajal Harrell; and cabaret acts by Martha Graham Cracker, Dennis Diamond, and Champagne Jerry.
To read the Inquirer article, please go to bit.ly/1onPmjI.
For complete Fringe Festival information, please go to fringearts.net.
New Leader for William Penn Foundation
The William Penn Foundation on July 28 announced it has named Laura Sparks as Executive Director, succeeding Managing Director Peter Degnan, who resigned effective August 31, after six months in the post. Degnan previously served as vice dean of finance and administration at the Wharton School.
Sparks joined the foundation in 2012 and most recently served as the foundation’s Chief Philanthropy Officer, the senior executive responsible for all philanthropic investments, the press release noted.
Prior to joining the William Penn Foundation, Sparks was Director of Development Finance Initiatives at Citi.
To read the press release, please go to bit.ly/1nDdcbd.
To read The Philadelphia Inquirer’s article, please go to bit.ly/1qJ7oQs.
Commonwealth Awards Grant to Art Museum
The Commonwealth of Pennsylvania has given the Philadelphia Museum of Art a $5 million grant to help fund $150 million to $160 million in major renovations to the main building and its nearly 500,000 square feet of interior space, The Philadelphia Inquirer reported.
The renovations are part of a long-planned transformation and expansion, which will include new gallery spaces beneath the museum terrace at the end of the Benjamin Franklin Parkway.
The state funds will help improve special-needs accessibility; repair and upgrade building systems; improve fire and life safety systems; and bring the 1928 building up to 21st-century code.
To read the article, please go to bit.ly/1lkpkck.
Spending Up, Attendance Dips at INHP
Visitors to Independence National Historical Park (INHP) in 2013 spent about $196 million, an increase of about $1 million over the previous year, despite a slight drop in park attendance, The Philadelphia Inquirer reported on July 23. That spending supported 2,730 jobs in the local area, according to the National Park Service’s press release.
In 2013, 3,560,637 visitors visited the park, compared to 3,615,698 in 2012. The Park Service attributed the slight dip in attendance to the 16-day government shutdown in October 2013.
Management of Independence National Historical Park is combined with that of the Edgar Allan Poe National Historic Site and the Thaddeus Kosciuszko National Memorial. Together the three areas take up more than 54 acres in the city, with 18 buildings open for public visitation, including Independence Hall and the Liberty Bell Center, the press release noted.
The read the National Park Service’s press release, please go to 1.usa.gov/1pNgRRF.
To read the Inquirer article, please go to bit.ly/1rzzjjL.
Correction: Hotel Occupancy Up in Center City
In the Developments newsletter of July 21, we quoted an erroneous version of a Philadelphia Business Journal story concerning the Center City lodging market. This initial version of the article indicated that “In May, 7,400 room-nights were filled, an 89% decrease from the 67,000 room-nights filled in the same period last year.” What the article did not state was that those statistics related solely to the number of occupied rooms generated by the Pennsylvania Convention Center in the month of May. Overall hotel occupancy for the month of May was down, but only by 4.9%. In fact, thanks in part to a tremendous January contribution of demand through the Pennsylvania Convention Center (up by over 60,000 room-nights), hotel occupancy in Center City through the first five months of May was up 4.3% over the same period last year to 74.4%.
A change in work rules at the Pennsylvania Convention Center is expected to bring more conventions to the city in the future.
U.S. Congress Passes Temporary Fix Transportation Bill
The U.S. Senate on Thursday passed the U.S. House's version of an $11 billion bill that will keep the Highway Trust Fund from running out of money, the Philadelphia Business Journal reported. The bill, however, is a short-term fix that will provide funding through May 2015.
Congress wasn’t willing to raise federal gasoline taxes so the funding was created by “pension smoothing” — allowing employers to delay pension plan contributions, thereby raising their taxable income, the article noted, and also increased customs fees and transferred money from a trust fund for leaking underground storage tanks into the Highway Trust Fund.
To read the article, please go to bit.ly/1sd4thf.
For more information about HR 5021, the "Highway and Transportation Funding Act of 2014," please go to 1.usa.gov/1p5rKN4.
30th Street Station To Be Named for Congressman Gray
The U.S. Senate on Thursday unanimously consented to a bill that will change the name of 30th Street Station to William H. Gray III 30th Street Station, The Philadelphia Inquirer reported.
Gray represented Philadelphia in the U.S. House from 1979 to 1991 and died in July 2013 at age 71.
During his tenure in Congress, Representative Gray secured millions of dollars to help renovate 30th Street Station, the article noted.
The bill now goes to President Obama to sign.
To read the article, please go to bit.ly/1sazelS.
DRPA Seeks Volunteers for Committee
The Delaware River Port Authority (DRPA) is seeking volunteers to serve on its Citizen Advisory Committee (CAC), a group established in 2010 to give customers, neighbors, and other stakeholders the opportunity to provide input on issues related to DRPA and PATCO.
Currently there are vacancies on this committee of 24 members, 12 each from Pennsylvania and New Jersey and with a mix of DRPA bridge and PATCO transit users.
Relatives of DRPA commissioners, officers, or employees and vendors and their employees are not eligible. No deadline for applications was announced.
For more information and to download an application, please go to bit.ly/1rCiova.
Parks and Open Space News
Public Spaces Need Tech Amenities
In contrast to the perception that mobile phone and other tech device users are isolated and anti-social in their use of public spaces, a new study shows that they are still performing social activities: social networking, checking the news, reading blogs, or talking on the phone, the Project for Public Spaces reported on July 17.
The study suggests that in addition to the more traditional amenities such as fountains, food, and activities, public spaces should also accommodate the new technologies with such conveniences as power outlets, tables that accommodate a variety of uses, and seating arrangements that can be used for various types of socializing.
To read the article, please go to bit.ly/1pop8wG.
To read a free abstract of the report, please go to bit.ly/1s4eQUB.
Residential Market News
House Prices in the City on the Rise
Quality-adjusted prices of single-family houses in Philadelphia increased by an average of 5.1% this quarter and are up 3.1% from a year ago, according to the Philadelphia Housing Index, Q2 from Econsult Solutions, Inc.
There were 2,825 arms-length sales of single-family homes in the quarter, compared to 2,774 in the first quarter. There were 357 sales in the most expensive category with prices over $200 per square foot, and 348 in the least expensive category of $25 per square foot or less.
The median sale price of $125,000 represents a $10,000 increase from last quarter. Prices in the area described as “Central” in the report had the highest median sale price at $435,000, a 2.4% increase over the previous quarter, and a 4.8% increase over the same quarter last year.
To read the report, please go to bit.ly/Umn1yc [PDF].
Multi-Family Growing in Quantity and Value
Developers are increasingly turning to urban core markets such as Philadelphia for multifamily projects, and in Center City more than 4,400 multifamily units are in the pipeline. Prominent Center City new developments include The Goldtex Building, The Granary, 2040 Market, 1616 Walnut, Rodin Square, Avenue of the Arts, and Museum Towers II, according to Integra Realty Resources Philadelphia’s 2014 Mid-Year Viewpoint.
In the last 12 months, Urban Multifamily Class A buildings have increased in value by 2% to 3.9% and in the next 12 months, the value is expected to continue to climb by 1% to 1.9%. This reflects a national trend as Urban Multifamily buildings are expected to increase in value in 87.70% of U.S. markets.
To read the IRR Multi-Family report, please go to bit.ly/1jXQaMa [PDF].
Vote on Cigarette Tax Canceled
A vote on a new cigarette tax, scheduled for today (August 4) by the state House of Representatives was canceled on Thursday, The Philadelphia Inquirer reported. The House had been expected to vote on the Senate’s version of an amended cigarette tax bill that, if passed, was expected to yield about $45 million this year and would help close the Philadelphia schools' $81 million budget gap. The House now plans to return when the summer break ends September 15.
School Superintendent William R. Hite Jr. had previously announced that if he did not have an answer on the tax funding by August 15, he would initiate as many as 1,300 layoffs that were on the table if adequate funding wasn’t available for the school district.
On Friday, Governor Corbett scheduled a meeting for today (August 4) with legislative leaders in Harrisburg to discuss the imperiled proposal that would help close the Philadelphia schools' budget gap, The Philadelphia Inquirer reported.
House leaders said they did not have the votes to pass the bill and would ask the Corbett administration to advance education money to the city's schools.
To read the Thursday story, please go to bit.ly/1qOw5Lr.
To read the Friday story, please go to bit.ly/1pMLeX0.
To read HB 1177, which would create the cigarette tax, please go to bit.ly/1pZMhEK (page 25).
PICA Approves City’s Five-Year Financial Plan
The board of the Pennsylvania Intergovernmental Cooperation Authority (PICA) unanimously approved the City’s five-year plan on July 21, the authority announced.
The Plan projects significant operating deficits of $10.1 million in FY14 and $78.4 million in FY15. The projected operating deficit is reduced to $14.2 million in FY16, a reduction of $64.2 million. Beginning in FY17, the Plan projects operating surpluses. These surpluses are due to projected tax base growth, offset by lower tax rates for the wage, earnings, net profits, and business income and receipts taxes, and minimal projected labor cost growth after FY16.
Various risks were still associated with the Nutter administration's long-term budget, including unresolved labor contracts, the school district's fiscal crisis, and the pension fund.
The Plan indicates the City’s intention to continue lowering the rates of the wage and business taxes. Wage, earnings, and net profits taxes are projected to decline from 3.92% in FY15 to 3.746% in FY19.
To read the report, please go to bit.ly/1A33jIO [PDF].
To read an article in The Philadelphia Inquirer about the report, please go to bit.ly/1jTWc0m.
City Tax Revenues Up in June
City of Philadelphia tax revenues for June totaled $196.7 million, an almost 7% increase over the same month last year, according to the Office of the City Controller’s June Financial Forecast & Snapshot.
Wage, earnings and net profit tax collections for the month totaled $127.6 million, a less than 1% decrease over the same month last year. Total FY14 revenues for this tax category totaled almost $1.7 billion, which is a 3% increase over the same period last year, the report noted.
Monthly sales tax collections in June totaled $22.1 million, a less than 1% decrease compared to last June. Yearly collections have totaled almost $264 million, a 2.5% increase over last year’s collections.
Yearly real estate tax collections totaled more than $540 million, a less than 1% increase over collections in FY13.
To read the report, please go to bit.ly/WQ319j [PDF].
Good Returns for Philadelphia Pension Fund
Philadelphia's municipal pension fund ended the fiscal year up 15.6%, outperforming its benchmarks by 1.96%, The Philadelphia Inquirer reported on July 24. Another portfolio, managed internally by the City, showed an 11.97% return, or 3.5% higher than comparable benchmark funds.
The City's pension system, however, is severely unfunded, with only about half the money it needs to pay its $5 billion in obligations to current and future retirees, the article noted.
Investment firms handle the bulk of funds, but the pension board staff manages a portfolio of about $260 million, or 5.3% of the pension fund, known as the Independence Fund, intended to be used to rapidly respond to opportunities the staff might see.
To read the article, please go to bit.ly/1pTwE1r.
New Basic Education Funding Commission
The new Basic Education Funding Commission, created by Act 51 of 2014 (HB 1738) and tasked with developing and recommending to the General Assembly a new formula for distributing state funding for basic education to Pennsylvania school districts, held an organizational meeting on July 24, according to Capitol Recap, a subscription news service that covers the statehouse. The commission is to present its report and findings by June 10, 2015.
At the meeting, the 15-member commission elected as co-chairs state Representative Mike Vereb (R., Montgomery) and state Senator Pat Browne (R., Lehigh County).
In addition to developing a funding formula, the committee also will identify factors that will affect distribution of funding to school districts throughout the state.
The commission will meet again on August 20.
To read Act 51, please go to bit.ly/1qJ0B9p.
City Opens Coworking Space
The City of Philadelphia on August 1 unveiled its Innovation Lab coworking space for city employees on the 16th floor of the Municipal Services Building across from City Hall, as part of the city’s overall innovation plan, Technical.ly Philly reported.
The lab features an open floor plan, five mounted screens, whiteboards, and WiFi, the article noted.
Programming will include topical research modules in areas such as GIS and spatial analysis, economic development, and arts and culture, and will focus on enhancing civic collaboration and engagement, according to Mayor Michael A. Nutter's press release.
To read the Technical.ly Philly article, please go to bit.ly/1nZYI6d.
To read the mayor's press release, please go to bit.ly/1qzs60t.