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May 27, 2014 • Volume 17 • Issue 11 • A bi-weekly email news service

Office Sector News
Trophy Space Tight Now, but Change Is on the Horizon
Property owners were able to reduce concessions as they negotiated office leases in Philadelphia’s central business district (CBD) during 2013, as availability slowly declined especially in Trophy properties, where total rent was $30.23/SF, according to the Studley Effective Rent Index. Nationally, concessions fell in most markets except in Manhattan (Midtown) and Washington, D.C.

In Philadelphia, net rent rose from $15.60 to $15.80/SF and real estate taxes, pre-AVI, increased from $3.69/SF to $3.98/SF.

With the supply of larger blocks of Trophy class space being filled, effective rents are likely to continue to rise in 2014 before new construction increases the supply of office space in mid-2016, the report noted.

To read the Philadelphia report, please go to bit.ly/1k8DEaN [PDF].

To read the national report, please go to bit.ly/1mabYBR [PDF].

Groundbreaking for Cira Centre South
Brandywine Realty Trust on May 14 broke ground for the FMC Tower at Cira Centre South. The 49-story, 730-foot-tall tower with 2.7 million square feet (SF) will have 10-foot, floor-to-ceiling glass walls, 861,000 SF of rentable space that will include 622,000 SF of office space, 268 luxury apartments and executive suites, and a bar/restaurant on the ground floor, according to Brandywine’s press release. Amenities will include an aquatic center with pool and deck, fitness center and spa, and a state-of-the-art business conference center.

The University of Pennsylvania owns the ground where the tower is being constructed and will occupy approximately 100,000 SF of office space at the tower.

The FMC Tower will serve as the global headquarters for the chemical company, which expects to move in by June 2016.

To read the press release, please go to on.mktw.net/1mYDxxe.

In San Francisco, Tech Companies Driving Office Demand
In San Francisco, one of the top cities for tech companies and tech jobs, fast-growing technology companies such as Salesforce.com Inc., Dropbox Inc., and LinkedIn Corp. are renting large parcels of office space in towers before they are built, the Wall Street Journal reported on May 13.

The article notes that at the beginning of 2014, six developments were under way or in advanced planning for a total 2.8 million square feet (SF), none of it leased. Since then, tech companies have committed to 64% of that space as the epicenter of the industry shifts from Silicon Valley into the CBD.

The largest lease in the city's history was signed in April, when Salesforce.com, a cloud-based software vendor, took 714,000 SF in a 1,070-foot-high skyscraper, which will be the city's tallest.

Citywide, rents are up 8% in the past year to an average $55.22/SF, 83% higher than Philadelphia Trophy rents.

To read the article, please go to on.wsj.com/1oKBjWn.

Economic News
Manufacturing and Nonmanufacturing Activity Up in May
Manufacturing firms responding to the Federal Reserve Bank of Philadelphia’s May Business Outlook Survey indicated that regional activity expanded in May.

While 40.9% of the firms reported no change in new orders, 34.8% indicated they had increased and 24.3% noted a decrease.

The number of employees remained the same for 67.7% of the firms, but 19.0% increased the number of employees, while 11.2% reduced the work force.

In a special question asked about filling key jobs with special labor skill requirements, nearly one‐third (32.9%) of the firms reported labor shortages, while 45.7% indicated a perceived skills mismatch. Almost one‐third (32.8%) reported that positions had remained vacant for more than 90 days.

To read the report, please go to bit.ly/1jzvQK4.

Meanwhile, responses to the Federal Reserve Bank of Philadelphia’s Business Outlook Survey Nonmanufacturing for May indicate positive activity, with 61.2% of firms in the region reporting an increase in business activity, while only 10.2% reported a decrease, and 26.5% saw no change.

The percentage of respondents reporting increases in new orders (51%) dramatically exceeded the percentage reporting decreases (10%).

More than half (57.1%) of the companies reported sales or revenue increases, while only 18.4% indicated a decrease.

More than half (51.0%) saw the number of employees unchanged, but 38.8% of the respondents reported an increase, while only 8.2% reported a decrease.

Looking ahead six months, 79.6% of the respondents foresaw an increase in business, while only 2.0% anticipated a decrease.

Philadelphia Among 20 Smartest Cities in the World
Philadelphia ranked 11th of the 20 best cities in the world, in the IESE Business School in Spain’s University of Navarra Cities in Motion Index (ICIM), which ranks the world’s “smartest” cities — those that have the highest levels of innovation, sustainability, and quality of life.

Researchers studied 135 cities across 55 countries, and based their results on over 50 indicators along 10 different dimensions including governance, public management, urban planning, technology, environment, international outreach, social cohesion, mobility and transportation, ability to attract talent, and the economy.

Of the top 20 cities, 10 were European, six were American, three were Asian and one was Oceanian. Tokyo ranked first, London was second, and New York was third. Philadelphia was the second-highest-ranking American city.

To read the report, please go to bit.ly/S5sCZd.

Development News
East Market Development to Begin in Summer
Work on the $230 million, 650,000-square-foot first phase of the development of East Market, which will span 4.3 acres and occupy the entire block bound by Market, Chestnut, 11th and 12th Streets, will begin this summer, the Philadelphia Business Journal reported.

After demolition of the original Snellenberg’s department store parcel on Market Street, a 17-story tower with 160,000 square feet of retail and 322 apartments will be constructed. The 200,000-square-foot building to the south, which is currently occupied by Family Court, will be renovated and offer retail space on the street level and offices above, the article noted.

National Real Estate Development, Joss Realty Partners, Young Capital, and SSH Real Estate are partners in the project. The expected completion date was not announced.

To read the article, please go to bit.ly/1kaWI8t.

Hotel and Condos Proposed for 19th and Walnut
Castleway, an Irish development company, has presented the Center City Residents Association (CCRA) with a proposal for a luxury residential condominium high-rise and boutique hotel with ground- floor retail and underground parking, on an L-shaped parcel at 19th and Walnut Streets.

The 200,000-square-foot hotel would face Walnut Street between 19th and 20th Streets and behind it, looking over Sansom Street, would be the 350,000-square-foot condominium tower with 150 units, the Weekly Press reported on May 21. Retail space on the ground floor of both properties would cover 25,000 SF, and the ground floor of the hotel would also house the lobby.

Four underground parking levels would serve both buildings.

Architect Richard Farley of KlingStubbins has designed the project.

CCRA has appointed a task force to review the proposal.

Attention Focused on North Broad
City Council President Darrell L. Clarke on May 14 announced the formation of an offshoot of the nonprofit Avenue of the Arts, to be known as the Avenue North Renaissance, which will focus on the revitalization of North Broad Street, The Philadelphia Inquirer reported.

Two major projects have been proposed for North Broad. Bart Blatstein is vying for the second Philadelphia casino license in order to develop his Provence casino complex at Broad and Callowhill Streets, and developer Eric Blumenfeld is planning to convert the Divine Lorraine Hotel at Broad Street and Fairmount Avenue into apartments and commercial space.

The primary services and funding mechanism for the new organization was not announced, though there have been discussions about using outdoor advertising revenues.

To read the article, please go to bit.ly/1glr33Z.

Eds and Meds News
Jefferson Buys Lot at Ninth and Chestnut
Thomas Jefferson University Hospital has purchased 900-908 Chestnut Street from Urban Growth Property Trust, a Chicago firm, for $12 million, the Philadelphia Business Journal reported on May 13.

The 28,750-square-foot parcel is a surface parking lot and Jefferson has not announced its plans for the property, which is zoned for commercial, mixed use (CMX-5), the article noted, and would allow a high-rise development.

To read the article, please go to bit.ly/1sqU0M9.

Retail News
Additional Vendors Sought for Center City
The Philadelphia Department of Licenses & Inspections (L&I) is inviting vendors to apply for 39 available locations in Center City, including 16 east of Broad Street and 23 west of Broad. L&I will be accepting applications from prospective vendors from June 16 to June 20, 10:00 a.m. to 2:00 p.m. in the Concourse Level of the Municipal Services Building, 15th Street and John F. Kennedy Boulevard.

The City code allows 300 street vendors to operate in Center City, but currently there are just over 200 in business. The $50 application fee has been waived for this round of applications.

Winning applicants will be notified in July.

To read the solicitation and list of locations, please go to bit.ly/1lD97yd [PDF]. Owners interested in the future in having locations on their blocks eliminated would need to have their District Councilperson introduce site-specific legislation.

Gaming News
Casinos Reported to Have Positive Economic Benefit
Expenditures on SugarHouse Casino’s construction, architectural design services, legal services, furniture, and other items generated $159 million in total economic output for the Commonwealth of Pennsylvania, supporting about 1,100 jobs, and $80 million in labor income, according to a new report from Econsult Solutions, Inc. prepared for the Pennsylvania Legislative Budget and Finance Committee.

The report, The Current Condition and Future Viability of Casino Gaming in Pennsylvania, notes that as of 2013, the casino’s operations directly employed 1,104 people, and these jobs produced a grand total of about $213 million in total output, supporting about 1,600 jobs and $85 million in labor income.

In addition, as of 2013, Pennsylvania casinos directly employed 16,665 people across the Commonwealth and produced a grand total of approximately $2.9 billion in total output, supporting about 25,000 total jobs and $1.0 billion in total labor income.

While those are positive outcomes, the future is marked by increasing competition, and the regional market is, if not saturated now, coming close to saturation.

To read the report, please go to bit.ly/1hK1swK [PDF].

In other SugarHouse news, revenue at the casino decreased slightly in April after an unusually robust March, according to the Pennsylvania Gaming Control Board.

In April, the casino took in $22,943,675 compared to $25,736,164 in March. The Commonwealth’s share was $6,118,000 compared to $6,860,094 in March. The City received $759,721, compared to $852,451 in March.

To see all casino revenues, please go to bit.ly/16izgf9 [PDF].

Arts and Culture News
Exhibition on Art Museum’s Expansion
On July 1, the Philadelphia Museum of Art will unveil the comprehensive plan that architect Frank Gehry has created for the Museum’s renovation and expansion, the Museum announced on May 15.

The exhibition, Making a Classic Modern: Frank Gehry’s Master Plan for the Philadelphia Museum of Art, will offer a first look at a design that reorganizes and expands the building, adding more than 169,000 square feet of space.

Gehry’s design focuses on the transformation of the interior through the renovation of spaces such as the Great Stair Hall, and major improvements to how visitors will enter and move through the building. The design also calls for new space for expanded educational activities and the display of the Museum’s extensive holdings of American, Asian, and modern and contemporary art in new galleries created both within the existing building and underneath the East Terrace.

To read the press release, please go to bit.ly/1jDYI9O.

New Culture Czar for City
Mayor Michael A. Nutter on May 13 announced the appointment of Helen Haynes, the current Director of Cultural Affairs at Montgomery County Community College, as Chief Cultural Officer in the City’s Office of Arts, Culture and the Creative Economy (OACCE).

Beginning June 7, Haynes will oversee day-to-day operations of the OACCE (including all of the City’s arts programs) and will work to unify the City’s arts efforts, serving as a liaison between the City’s cultural institutions. She will also be responsible for expanding arts education for young people and supporting the growth and development of the City’s arts, culture and creative economy sector by promoting public and private investments.

To read the press release, please go to bit.ly/1qAAbWZ.

Knight Foundation Arts Awards
The John S. and James L. Knight Foundation announced on May 12 awards totaling $780,000, distributed among 19 Philadelphia artists and arts groups.

Among the recipients in Center City were: the African American Museum in Philadelphia, 701 Arch Street, $50,000; BalletX, 265 South Broad Street, $50,000; Bearded Ladies Cabaret, $75,000, which will partner with Opera Philadelphia and produce a show at the Wilma Theater, 265 South Broad Street; Chemical Heritage Foundation, 315 Chestnut Street, $60,000; and the Fund for Philadelphia, 708 Hall Street, $14,000.

To read the press release, please go to kng.ht/TmEmqZ.

Hospitality News
Forbes Hosting First Under 30 Summit in Center City
Forbes magazine and the City of Philadelphia on May 12 announced the launch of the first-ever Under 30 Summit, expected to bring together in Center City more than 1,000 young entrepreneurs and game changers from across the United States.

The Under 30 Summit will take place October 19-22, 2014, at the Pennsylvania Convention Center and other venues in Philadelphia and will feature a full agenda of panels, TED-style presentations and keynotes, “Shark Tank”-style pitch contests and an Under 30 Music Festival with leading bands under the age of 30, as well as mentorship from successful business leaders, including Danny Meyer and Jim Breyer among others. The summit will conclude with the Under 30 Food Festival, highlighting some of America’s most notable young chefs.

For more details on the Under 30 Summit, please visit forbesunder30.com. To read the Forbes article, please go to onforb.es/1mO3R1r.

Leisure Travel to Philadelphia Expanding
Visit Philadelphia’s 2014 annual report, Philadelphia’s New Confidence, notes that Greater Philadelphia welcomed 39 million day and overnight visitors during 2013, and these visitors generated $10 billion in economic impact, supported 90,000 full-time jobs, and generated $636 million in state and local taxes.

In 2013, 12 million more leisure travelers came to Greater Philadelphia than in 1997, when Visit Philadelphia began advertising, the report notes, and there has been a 78% growth in overnight trips and an 84% growth in overnight leisure trips.

Leisure hotel demand in Center City has grown by an average of 8.8% a year over the last 16 years, more than twice as fast as overall demand (3.4%).

To read the report, please go to bit.ly/1tbqvAj.

Transportation News
Bill Would Authorize Bike Share Program
Councilwoman Blondell Reynolds Brown on May 15 introduced Bill #140449 authorizing the City’s planned bike share system, expected to launch in spring 2015.

A second reading and final passage for this bill is scheduled for June 19, PlanPhilly reported, and a public hearing will be scheduled before that date.

In 2012, Mayor Michael A. Nutter committed $3 million in capital funding to launch Bike Share Philadelphia. After a competitive RFP process, the Mayor’s Office of Transportation and Utilities (MOTU) selected Bicycle Transit Systems and B-cycle as operator and vendor, respectively. Between 50 and 70 bike share stations are being planned.

To read the PlanPhilly article, please go to bit.ly/TrepXw.

To read the bill, please go to bit.ly/1gjcj5I.

SEPTA Taking Over Care of Concourse
SEPTA will now be responsible for the cleaning, maintenance, and repair of most of the concourse beneath Market Street between Eighth and 18th Streets, and beneath Broad Street from JFK Boulevard to Spruce Street, The Philadelphia Inquirer reported on May 22.

Since 2007, the Center City District (CCD) has cleaned the concourse through a contract with the City’s Department of Public Property, but with SEPTA assuming responsibility under a long-term lease from the City, they will now make major capital improvements to these underground corridors.

The CCD will continue to clean the commuter rail stations at Suburban and Market East Stations, under a SEPTA contract that expires at the end of 2017. The CCD also will be responsible for maintaining the area beneath the new Dilworth Park under construction west of City Hall.

To read the Inquirer article, please go to bit.ly/1k2gwFV.

Parks and Open Space News
New Report on How to Improve Fairmount Park
In a new report on how to make Fairmount Park more user-friendly, PennPraxis proposes redesigning I-76 to bring the park under the highway; rerouting Belmont Avenue to create a quieter, safer park experience; adding new pedestrian bridges and safe entrances; re-configuring existing bridges to improve neighborhood access to the park at its most difficult points; and adding a new boathouse on the west side of the Schuylkill River, among many other suggestions.

The report, The New Fairmount Park, released on May 13, offers short-term and long-term visions.

PennPraxis worked with Philadelphia Parks & Recreation, the William Penn Foundation, the Commission on Parks and Recreation, and the Fairmount Park Conservancy, held four public meetings, and conducted an email survey of park users to come up with the suggested improvements.

To read the report, please go to bit.ly/1jVlILC [PDF].

Commentary written by Harris M. Steinberg, executive director of PennPraxis, was published in the May 23 edition of The Philadelphia Inquirer: bit.ly/1op19wA.

JFK Plaza / LOVE Park Renovation Targeted for Completion in 2016
Philadelphia Parks & Recreation on May 12 held its first meeting with stakeholders to lay out plans for the JFK Plaza / LOVE Park garage sale and park renovation. The underground garage has been sold to Interpark, a Chicago-based company, who will renovate the garage and work in partnership with the City on the design and renovation of the park. Cope Linder Architects has been retained by Interpark and they are working on designs for the elevator headhouses on the surface of the plaza and will present these designs to the Art Commission on June 4. They are expected to take title on June 16.

This summer a study of how to generate revenue from the park will be conducted by consultants to the City, and an RFP will be issued for design team selection. From September through December, the project will be presented to the public for comment and civic engagement. The first three quarters of 2015 will be devoted to project design, approvals, and documentation, with construction bid and award conducted in November, December and January 2016. Construction should begin in spring 2016.

Government News
School District Funding: Council Bill Extends 1% Sales Tax Increase
Councilman Curtis Jones, Jr., on behalf of Council President Darrell L. Clarke on May 15 introduced Bill #14045 (bit.ly/1jRReKy), which would extend Philadelphia's extra 1% sales tax. For fiscal year 2015 (FY15), the first $120 million collected would be distributed to the School District of Philadelphia and the balance to the City. For FY16, the School District would receive 70% of the tax collected and 30% would go to the City. In FY17, the split would be 60% to the School District and 40% to the City. For FY18 and thereafter, the split would be 50-50. The tax collected for the City would be designated to go toward pension fund payments.

School Superintendent William R. Hite Jr. said the bill “does not reflect the urgency of the crisis facing the School District,” which he says needs $216 million in new money just to maintain its current state, The Philadelphia Inquirer reported.

On May 22, Councilman Jones introduced an additional bill, #140489 (bit.ly/1m2Jx7d), that made the bill more flexible, enabling it to be adjusted to align with whatever terms the General Assembly approves for the sales tax extension.

To read the Inquirer article about Bill #14045 from May 16, please go to bit.ly/1gxleRh. To read the May 23 article about the additional bill, please go to bit.ly/1vTcw4h.

Study: Tax Abatement Beneficial to City and School District
A new study suggests that had the 10-year tax abatement not been in place during the past economic cycle, at least 65% of Philadelphia’s recent developments would likely have not been built, and had only the City portion been abated, there would have been 45% fewer development projects, according to a new report, City of Philadelphia Economic Impact Analysis of Proposed 10 Year Tax Abatement Adjustments, prepared by Jones Lang LaSalle for the City of Philadelphia.

The report was commissioned in response to an ongoing discussion in City Council, prompted by Councilman W. Wilson Goode Jr., about doing away with the tax abatement or the part of the abated tax that would go to the school district. The most recent action has centered on Bill #130724, introduced on October 10 by Goode, which would authorize the School Reform Commission (SRC) to have the power, beginning July 1, 2014, to sign off on any tax abatement of the school district portion of the property tax. Currently property tax revenues are split roughly 55% to the School District and 45% to the City.

Eliminating the school district portion immediately would increase short-term revenue to the Philadelphia School District, the report noted, however, that short-term benefit would be outweighed by the longer-term benefits of a larger tax base that the abatement helps to foster, for both the school district and the City.

To read the bill, please go to bit.ly/GJSm7c.

To read the report, please go to bit.ly/1jwGAyN [PDF].

PICA Approves PGW Sale
The Pennsylvania Intergovernmental Cooperation Authority (PICA) on May 20 approved the $1.9 billion sale of the Philadelphia Gas Works (PGW), The Philadelphia Inquirer reported.

Mayor Michael A. Nutter wants to sell the 176-year-old utility to UIL Holdings, Inc. and use the proceeds to reduce the city's pension obligations, but City Council must approve the deal and they have not yet introduced a bill to authorize it.

The PICA board will send a letter to City Council, expressing its support of the sale in hopes that Council seals the deal, the article noted.

To read the article, please go to bit.ly/1jSjFbq.

Sims Introduces ‘Green’ Legislation
State Representative Brian Sims (D., Philadelphia) on May 13 introduced a series of bills that would establish tax credits for businesses, manufacturers, and individuals that would encourage sustainable development and manufacturing practices.

HB 2256, the High-Performance Buildings Tax Credit, provides a base tax credit of $35,000 to residential and commercial owners or tenants for either the construction of a green building or the rehabilitation of a non-green building into a green building. Additional tax credits of up to $10 million annually are offered based on the size of the building and level of performance achieved. To read the bill, please go to bit.ly/1nKw0TS.

HB 2257, Energy Star Rated Product Manufacturing Tax Credit, would enable manufacturers of Energy Star Rated Products to apply for a tax credit against the capital, operation, and maintenance costs associated with manufacturing Energy Star Products, capped at 20% of those costs per applicant and not to exceed $10 million per year. To read the bill, please go to bit.ly/1oM99rc.

HB 2259, the Energy Star Rated Glass or Window Technologies Tax Credit, would enable manufacturers of energy-efficient glass technologies to apply for a tax credit against the capital, operation, and maintenance costs associated with the manufacturing of Energy Star Rated Glass or Window Technologies, with the credit capped at $10 million per year. To read the bill, please go to bit.ly/1jplFrr.

HB 2261 would establish the Green Roof Tax Credit, which would provide a tax credit to individuals and businesses building and maintaining a green roof, and for a tax credit equal to 25% of all costs initially incurred to construct the green roof; as well as, maintenance costs incurred, up to a maximum $100,000 annually, for six years. To read the bill, please go to bit.ly/1mnnwT1.

First Energy Benchmarking Report
A new report from the Mayor's Office of Sustainability (MOS) finds that commercial buildings 50,000 SF or larger in Philadelphia have an average ENERGY STAR score of 64, well above the nationwide average of 50.

The report, the first issued under the city's new benchmarking rules, found that the most energy-intensive sectors were food sales, including grocery stories, laboratories, and healthcare facilities, including hospitals.

The report analyzes the first year of reporting (completed in 2013), which covers energy and water usage for the 2012 calendar year.

To read the report, Philadelphia Building Benchmarking 2012 Reporting Year Initial Results, please go to bit.ly/1h95sMU [PDF].

Mayor Signs Spring Garden Overlay Bill
Mayor Michael A. Nutter on May 14 signed into law Bill #140098, which was passed by City Council on May 1 and created the Spring Garden/NCA Overlay District.

The District is bound by Spring Garden Street, Broad Street, Callowhill Street, and 18th Street, and includes properties on both sides of the streets. The overlay forbids personal credit establishments in the district.

To read the bill, please go to bit.ly/1nhseop.

Upcoming Events
Save the Date!
The next Membership Meeting of the Central Philadelphia Development Corporation (CPDC) will be Tuesday, June 10, at 8:30 a.m. at the Union League of Philadelphia, Meade Room, 140 South Broad Street.

A full agenda and speakers will be announced soon.

Business casual attire required. No denim.

CPDC members are encouraged to invite both young professionals and other members of their firms to attend this meeting.