Office Sector News
Corporations Moving Offices from Suburbs to Downtowns
American corporations increasingly are relocating their headquarters to the more densely populated downtowns of large cities, The New York Times reported on August 1. General Electric is moving from a 70-acre campus in Fairfield, Connecticut, to downtown Boston; McDonalds is relocating to downtown Chicago; and Chemours announced on August 2 that it is staying in Wilmington, Delaware, after considering suburban locations. While labor and amenities are part of the attraction, “the trend also represents the deconstruction and disaggregation of the traditional corporate headquarters,” the Times quotes a Harvard Business School source. “The executive suite might be downtown, but you could have the back office and administrative functions in Colorado, the finance guys in Switzerland and the tax team in the U.K.,” nyti.ms/2aO58Vk.
Meanwhile, Archetype Solutions, a tech firm based in Trevose, is moving its headquarters to a 7,300-square-foot space at 2124 Race Street to aid in its recruitment efforts, The Philadelphia Inquirer reported on July 28. The new Center City office also will house employees currently working in an office in Berwyn, bit.ly/2ahWOyV. The company is following a string of suburban companies that have transferred their offices to Center City, including the accounting firm EisnerAmpner, which moved to One Logan Square in November 2015. (For related articles, please see “A Look at the Economic Strength of Downtown” under Economic News.)
Benjamin’s Desk Expands to Five Locations
Benjamin's Desk, a coworking space that first opened at 1701 Walnut Street and expanded to University City and Washington Square, will open two additional coworking offices, The Philadelphia Inquirer reported on August 3.
The new locations, expected to open by the end of the year, are an 11,700-square-foot space at the Sun Oil Building, 1608 Walnut Street, and a 12,400-square-foot office in 2.0 University Place, 30 North 41st Street. When the new locations open, Benjamin’s Desk will be managing more than 110,000 square feet of coworking office space.
To read the article, please go to bit.ly/2axnGFg.
Value of CBD Office Space on the Rise
Philadelphia’s CBD, including University City, has 55,035,963 square feet (sf) of office space, of which 32.4% is Class A with average asking rent of $29.30/sf and an occupancy rate of 89.6%, while 67.6% is Class B with average asking rent of $23.60/sf and 92.3% occupancy, according to Integra Realty Resources’ (IRR) Viewpoint, 2016 Philadelphia, PA Office Mid-Year Report.
Suburban Class A’s average asking rent is $25/sf with an occupancy rate of 87.2%, while Suburban B office space commands $19.60/sf and has an 88.4% occupancy rate.
IRR is projecting a 4.0% increase in value in CBD Class A and B office space over the next 12 months, with suburban Class A and B value expected to grow 2.0% to 3.9%.
The report also noted an increasing volume of foreign capital investment in Philadelphia’s office market, including a Korean investment fund that recently bought Brandywine Realty Trust’s Cira Square, 2970 Market Street, for $354 million.
To read the report, please go to bit.ly/2aV2Roy [PDF].
Counting a slighting different inventory, Cushman & Wakefield's Marketbeat Office Snapshot 2Q 2016 calculates the CBD occupancy rate as 89.5% in the second quarter, up from 88.4% in the same quarter of 2015, with average asking rent also higher, at $29.56, compared to $27.37 in the same period last year.
Vacant space at FMC Tower at Cira Centre South, with asking rent of $42, raised average asking rents for Class A space to $31.42/sf, the highest Class A average in the CBD's history, the report noted. The largest new lease of the quarter, 75,000 sf, was signed by Nasdaq, Inc., for this location. The company will move from 1900 Market Street in the first quarter of 2017.
The largest sale during the second quarter was One Washington Square, sold to Keystone Property Group from Rubenstein Partners for $114 million.
To read the report, please go to bit.ly/2aVlaKw [PDF].
Mormon Temple Complete, Temporarily Open to Public
The Church of Jesus Christ of Latter-Day Saints has completed construction of its temple at 17th and Vine Streets and is holding open houses through September 9 and will dedicate it on September 18, after which, the building will be closed to the public, the Philadelphia Business Journal reported on August 4. (Two dozen CPDC members enjoyed a behind-the-scenes tour on August 4th.)
Still under construction are a meeting house and a 32-story residential building with 258 market-rate apartments, 13 townhouses and 12,000 square feet of retail space at 16th and Vine Streets. The development is activating two very large blocks, just north of the CBD, that were surface parking lots for the last 50 years.
The temple, estimated to have cost more than $200 million, is expected to have 400,000 annual visitors and generate approximately $13 million in visitor spending, the article noted.
To read the article, please go to bit.ly/2aThLiB.
Residential Market News
Population Growth in the City and the Demand for Housing
Two new reports reinforce the findings of the CCD/CPDC report, Sustaining Demand for Downtown Housing: centercityphila.org/docs/CCR16_housing.pdf [PDF], released in February, showing that in 2015, for the third year in a row, more than 1,500 housing units were brought to market downtown, while rents and housing prices continued to rise and more people continued to move into Greater Center City, where the population has increased by 17% since 2000, driven by empty-nesters and millennials.
A report by The Pew Charitable Trusts, A Portrait of Philadelphia Migration, released on July 13, focuses on the demographics that characterize newcomers to the city, bit.ly/2aTSHaZ.
An article in The Philadelphia Inquirer on August 2, based on a study by the firm Marcus & Millichap, predicted average apartment rent in the region will rise to $1,221 a month by year's end, an annual increase of 3.1%, following a 2.6% annual rise during 2015, with demand driven by people moving to the area, including millennials, empty-nesters, and young professionals, bit.ly/2aOakHC.
Variety of Activities Animated Dilworth Park During DNC
During the Democratic National Convention, Dilworth Park at City Hall was filled day and night with a record number of workers, transit riders, local residents, visitors, children playing in the fountain, delegates and protestors – all helping to fulfill William Penn’s original vision for the city’s Center Square.
Paul R. Levy, President and CEO of the Center City District, highlights the impact of the convention on Dilworth Park, in an essay accompanied by photos: centercityphila.org/about/dnc_week_dilworth.php.
Eds and Meds News
Penn and Drexel Ranked in Top 100 for Patents
The 2015 Top 100 Worldwide Universities for utility patents include the University of Pennsylvania at #19 with 93 patents and Drexel University at #49 with 42, the Philadelphia Business Journal reported on July 25. A utility patent is issued for a new process, machine or other useful invention.
The University of California ranked first. The list was compiled using information from the U.S. Patent and Trademark Office by the National Academy of Inventors and the Intellectual Property Owners Association.
To read the Philadelphia Business Journal article, please go to bit.ly/2aI4ZQM. To view the chart with all 100 universities, please go to bit.ly/2aI5SZJ [PDF].
Jefferson Health Expands
Jefferson Health has acquired a controlling interest in the Rothman Orthopaedic Specialty Hospital in Bensalem, Jefferson’s ninth hospital in the region and its first specialty hospital, the Philadelphia Business Journal reported on July 28.
Earlier in July, Jefferson completed its merger with Aria Health, which operates two hospitals in Northeast Philadelphia and one in the Oxford Valley section of Bucks County. Jefferson, which merged last year with Abington Health, is also exploring an alliance with Kennedy Health in South Jersey, the article noted.
To read the article, please go to bit.ly/2auNRNx.
Philadelphia Has Top Hospitals in Pennsylvania
The Hospital of the University of Pennsylvania-Penn Presbyterian Medical Center, part of Penn Medicine, has been ranked as the best hospital in Pennsylvania and among the top 10 in the nation, according to the new U.S. News & World Report annual Best Hospital rankings, Philly Voice reported on August 2. Thomas Jefferson University Hospital in Center City was named the third-best hospital in the state.
The Children’s Hospital of Philadelphia ranked as the second best children’s hospital in the country, behind only Boston Children’s Hospital.
To read the Philly Voice article, please go to bit.ly/2atKGH9. To see all the rankings, please go to bit.ly/1zF7wSP.
Arts and Culture News
Franklin Institute to Be Allowed Digital Sign
The Franklin Institute has reached an agreement with the City to convert its street-level, 128.5-inch-by-68-inch sign at 20th Street and the Benjamin Franklin Parkway to a digital format, a request it made in 2012, The Philadelphia Inquirer reported on August 1.
The content of the digital sign cannot change more frequently than every 30 seconds and is limited to the Institute’s programs, exhibits, features, and activities. In addition, the museum must turn the sign off between 10:00 p.m. and 6:00 a.m. and use an automatic light sensor to maintain acceptable levels of brightness.
To read the article, please go to bit.ly/2aJI1vd.
Parks and Open Space News
Dog Days and Yappy Hours at Dilworth Park
National Dog Day is in August and Dilworth Park is celebrating with TD Bank from 11:00 a.m. to 1:30 p.m., Tuesday, August 30, through Thursday, September 1. Stop by the Dog Days at Dilworth booth each day to check out pet product retailers, ask questions of a professional trainer or learn how to adopt your own furry friend. Morris Animal Refuge, Philadelphia Animal Welfare Society (PAWS) and Red Paw are partners.
From 5:00 p.m. to 7:00 p.m. on Wednesdays, August 3 through September 28, it's Yappy Hours! Pets and their owners are invited to the southern end of the park to join the Friends of Center City and Dilworth Park for CCD Sips-priced cocktails, featuring $5 sangria, $4 wine and $3 beer. Pennsylvania Society for the Prevention of Cruelty to Animals (PSPCA), Brûlée Catering, Philadelphia Animal Welfare Society (PAWS), Red Paw and Morris Animal Refuge are partners.
For additional information, please visit dilworthpark.org/events/.
SEPTA to Begin Returning Silverliner V Cars to Service
SEPTA later this month will begin replacing defective parts on the 120 Silverliner V cars currently out of service and return 10 cars per week until early November, The Philadelphia Inquirer reported on August 4.
The 120 cars made by Hyundai Rotem developed cracks in their equalizer beams and SEPTA removed them from service on July 2, a safety move that has proved costly. In July, SEPTA paid $235,000 in refunds to riders and has seen ridership drop between 10% and 20%. In addition, SEPTA is spending nearly $1 million each month to lease cars from other agencies. Responsibility for the additional costs has not been determined, but SEPTA has indicated they will not be passed along to riders. To read the article, please go to bit.ly/2b5Li5z.
In related news, on Monday, August 1, SEPTA stopped selling tickets on Regional Rail trains that stop in Center City between 3:00 p.m. and 6:00 p.m., and now require passengers to have a ticket in order to board, Philadelphia magazine reported. The stops are 30th Street, Suburban, Jefferson, Temple, and University City Stations, where SEPTA employees will check for passes or tickets before allowing passengers to board. The goal is to lessen wait times and make the commutes smoother. To read the article, please go to bit.ly/2anjjNT.
DRWC to Replace Steps to Penn’s Landing
The Delaware River Waterfront Corporation will begin work this month to build a new pedestrian ramp to replace the steps that lead from the Market Street Bridge to Penn's Landing, The Philadelphia Inquirer reported on August 1.
The project is being financed with a $625,000 grant from the Pennsylvania Department of Community and Economic Development and city funds. The work is expected to be completed in November.
To read the article, please go to bit.ly/2asn83y.
FRA Releases Comments on Northeast Corridor’s Future
The Federal Railroad Administration (FRA) on July 28 released the Comment Summary Report containing 3,200 comments regarding Northeast Corridor Futures’ proposals for Amtrak's route from Boston to Washington, The Philadelphia Inquirer reported. One proposal is to create a new Amtrak stop at the airport, a new station in Center City at the present Jefferson Station, and a tunnel that runs through the heart of the city to reach the new station.
The FRA will use public and government input to create a blueprint for the corridor’s maintenance and improvements through 2040, which should be released late this year.
To read the article, please go to bit.ly/2agaWaC. To read the report, please go to bit.ly/2aLjRjO [PDF].
PennDOT Safety Survey
PennDOT is seeking input on highway safety, traffic safety enforcement and driving behaviors through an online survey, available until August 23. Among the topics are seat belts, impaired driving, speeding, motorcycles, and distracted driving. Participants may remain anonymous, but are asked to provide their gender, age and county of residence. To take the survey, please go to svy.mk/2axQJtd.
New City Bike Map
The Philadelphia City Planning Commission has released its new 2016 Philadelphia Bike Map, noting bike lanes, Indego bike share stations, and sharrows throughout the city, Curbed Philadelphia reported on August 2. The updated 2016 map highlights in gray all of the suggested connections to use to make a bike trip easier.
To read the article and see a copy of the new map, please go to bit.ly/2ag7M6M.
I-676 Detours for Bridge Construction
I-676 will be closed and detoured in both directions between the I-76 and Broad Street (Route 611) interchanges today, Monday, August 8, through Thursday, August 11, from 11:00 p.m. to 5:00 a.m. the following morning for overhead bridge construction, PennDOT announced on Thursday.
The overnight operation is part of the four-year, $64.8 million project to replace seven structurally deficient bridges over I-676 between 22nd and 18th Streets and to make landscaping and streetscape improvements above the expressway. Construction began in April 2015 and will finish in fall 2019.
For more information on the I-676 project, please go to bridgesover676.com. For detours and other information, please go to 511PA.com.
DVRPC Awards $20.9 for Infrastructure Projects
The Delaware Valley Regional Planning Commission announced the award of $20.9 million in federal grants for 17 green transportation infrastructure projects, including $416,000 for an additional shuttle from Center City to the Navy Yard, PlanPhilly reported on August 5.
To read the article, please go to bit.ly/2azYfD2. To see a list of all the grants, please go to bit.ly/2aZM885 [PDF].
A Look at the Economic Strength of Downtown
Philadelphia and Delaware Counties, the “urban core” of the metro region, are leading the area’s comeback during the current economic expansion, providing 38% of the region's professional and business service jobs, according to CBRE’s Friday Flash, Weekly Insights from CBRE Research, Greater Philadelphia. During economic expansions of the past 45 years, the suburban counties of Bucks, Chester, and Montgomery have created the bulk of those jobs in the larger region – and continue to do so, bit.ly/2aOnDHY.
In a related article from the August 5th edition of The Wall Street Journal, “For More U.S. Cities, Downtown Is a Center of Economic Strength,” which focuses on Philadelphia, the writer notes that “increasingly, many urban cores are islands of economic strength surrounded by decay that reaches out into inner-ring suburbs —beyond which fortunes rise again in more distant suburbs.” But the article is premised on a mistaken assertion that "job gains are concentrated in urban centers, largely to the benefit of downtown-area residents and suburban commuters, leaving many city dwellers with few good options," when the reality in Philadelphia is that only 10% of downtown jobs are held by Center City residents, 41% are held by residents of other city neighborhoods, and 39% are held by suburban residents. Still, Paul R. Levy, interviewed for the article, noted: “"To have huge poverty right next to wealth, that's just not healthy for democracy," on.wsj.com/2aAhAau.
Service Industry Sees Growth in July
Business activity in the service industry expanded in July, according to firms responding to July’s Nonmanufacturing Business Outlook Survey, conducted by the Federal Reserve Bank of Philadelphia, with new orders up for 38.6% of the companies, down for only 9.0%, and remaining the same for more than one third, 36.0%.
The number of full-time employees remained the same for slightly more than half the respondents (56.9%), increased for 17.0%, and decreased for 15.0%.
Looking ahead six months, 50.8% anticipated business conditions to improve, while 7.8% expected business to worsen, and 35.0% responded they expected no change.
To read the report, please go to bit.ly/2aDKvLc.
In other news, the Federal Reserve Bank of Philadelphia on July 26 announced it will host a new Federal Statistical Research Data Center (FSRDC), which will provide area researchers with access to high-quality census data for analysis of economic and public policy issues. It is expected to open in 2017.
The Bank will partner with Drexel University, University of Pennsylvania, and Pennsylvania State University to operate and fund the Center.
The U.S. Census Bureau will review and approve requests for access to the FSRDC and researchers are required to protect the confidentiality of the data. To read the announcement, please go to bit.ly/2ahRvKK.
City Creates Inventory of Street Trees
Philadelphia Parks & Recreation has created a digital inventory of the city’s street trees using a street-view tool developed by CycloMedia, PlanPhilly reported on July 29. The tool accurately measures distances and heights and records images that are time-stamped.
The inventory of nearly 112,000 street trees with geolocation data was scheduled to be made public on Friday, August 5, at Open Data Philly and is available as an interactive map.
To read the article, please go to bit.ly/2a5BTOh. To visit Open Data Philly, please go to opendataphilly.org.
Realty Transfer Tax Almost Doubles in Five-Year Period
The City of Philadelphia’s total tax revenues for fiscal year 2016 (FY16) were just over $3 billion, an increase of $430 million over FY12, with every major tax category posting a double-digit increase over the five-year period, according to the Office of the City Controller’s report of August 1.
Realty Transfer Tax collections almost doubled during the five-year period, from $119 million to more than $236 million. In addition, Real Estate Tax revenues were up by 16% during the same period.
The Wage/Earnings and Business Income taxes posted increases of 16.2% and 28.2%, respectively.
To read the report, please go to bit.ly/2aKn8B6 [PDF].
Construction Begins on Octavius V. Catto Memorial
The City of Philadelphia began construction on the Octavius V. Catto Memorial on the south side of City Hall, east of Dilworth Park, on Thursday, August 4. Today (August 8), demolition of the sidewalk will begin and will include the use of jackhammers, though the City has stated no work will start before 8:00 a.m. on any day. This work is expected to take up to two weeks as an abandoned entrance to a SEPTA station will be excavated.
Once the demolition is completed, concrete will be poured to fill the evacuated spaces. Granite pavers that will match those in Dilworth Park will be installed and, finally, the granite pillars and the statue that comprise the $1.5 million sculptural grouping, A Quest for Parity, designed by sculptor Branly Cadet of Oakland, California, will be completed shortly before Thanksgiving.
For additional information about Catto and the memorial and to see a miniature replica, please go to The Philadelphia Inquirer’s article at bit.ly/2b2W1xR.
State Cigarette Tax Increased
The cigarette tax in the Commonwealth of Pennsylvania increased by $1 beginning August 1, bringing the state tax to $2.60 per pack, the 10th highest in the nation, and $4.60 per pack in the City of Philadelphia, with $2 per pack allocated for the Philadelphia School District, the Associated Press reported.
The state Department of Revenue estimates the additional tax will generate an extra $425 million a year for the state treasury. The Philadelphia cigarette tax brought in $58.7 million in FY2016, according to the City’s Office of the Controller.
To read the article, please go to bit.ly/2azfi8i. To read the Office of the Controller’s report on local taxes for the School District, please go to bit.ly/2aTTkRv.