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June 15, 2018 • Volume 21 • Issue 12 • A bi-weekly email news service

Office Sector News
One Liberty Place Unveils New Space Dubbed 'The Room'
One Liberty Place has spent more than $2 million creating an amenity-rich space that it has dubbed “The Room.” Located in about 6,500 square feet on the third floor of the building, the space was designed by Bohlin Cywinski Jackson and outfitted with two conference rooms, a lounge area, co-working spaces, full-service bar and catering kitchen.

The space is designed to provide a spot where tenants can work, conduct business, and host events for their company or a client.

More: bizjournals.com/philadelphia/news/2018/06/05/one-liberty-place-the-room-coworking-cre-amenities.html

Local Tax Policy
Development, Business, Civic Leaders Plead For Tax Sanity
In what amounted to an emergency meeting on the whirlwind of potential changes for Philadelphia's commercial real estate industry, leaders from development and business groups had the same message: the proposed tax increases will hurt job and wage growth, and the uncertainty surrounding all the changes has already hurt investment in the city.

Panelists including organizer Lauren Gilchrist, JLL Research Director, Center City District President Paul R. Levy, City Councilman Allan Domb and several commercial brokers discussed the negative effects that will result from the combination of a massive spike in property assessments and the array of tax changes that have been proposed, such as the 1% construction impact tax and the freezing of the wage tax reduction.

The proposals, as well as the proposal to change or end the 10-year tax abatement, have "noble intent," Gilchrist said, as they attempt to both fund the school district and affordable housing. But all speakers agreed that Philadelphia’s poverty levels, below-average job growth and underperforming schools are reflective of a city that needs more investment, not more taxes.

More: bisnow.com/philadelphia/news/economy/councilman-domb-development-organization-no-more-tax-madness-88994

Amazon HQ Would Be Exempt From 1% Construction Tax
The city’s proposed 1% tax on new construction projects would exempt the three sites pitched by the city to Amazon for its second headquarters. City Council amended the construction tax bill to add an exemption for Keystone Opportunity Zones that already have reduced or tax-free status.

All three proposed Amazon locations – West Philadelphia’s Schuylkill Yards and uCity Square and South Philadelphia’s Navy Yard -- are in Keystone Opportunity Zones.

More: philly.com/philly/business/real_estate/commercial/amazon-hq2-philadelphia-tax-incentives-20180614.html

PICA: Philadelphia Tax Collections Up 4.8% In May
The City of Philadelphia collected $254.7 million in General Fund tax revenue in May, compared to $243.0 million in May 2017, an increase of 4.8%, according to the Pennsylvania Intergovernmental Cooperation Authority (PICA).

Increases in every major tax category except the Business Income and Receipts Tax (BIRT) and beverage taxes drove the increase in overall collections for the month of May. Increases in the city’s portion of wage, earnings, and net profits, real estate, and realty transfer taxes led to the $12 million increase over May 2017, though the increase in year-to-date collections dipped below double-digits for the first time this fiscal year.

Through May, BIRT fell 2.4%, compared to a projected decrease of 1.0%; the real estate tax increased by 11.0%, compared to a projected growth of 10.1%; the realty transfer tax increased by 40.2%, compared to a projected 26.6% growth rate; and Philadelphia sales tax collections rose 6.5%, compared to a projected growth of 8.5%.

More: picapa.org/2018/06/just-released-picas-may-tax-revenue-report-2

Employment News
Report: Job Growth In The Suburbs Taking Off At City's Expense
Job growth has started to accelerate in the suburbs, which is expected to produce more than two-thirds of all new office jobs in the region through the end of 2020, according to a new analysis by CBRE Inc.

This will come at the expense of Philadelphia, as inflationary pressures begin to manifest themselves in the city and drive some of the activity in the suburbs. The city has also peaked when it comes to millennials, a demographic segment it attracted in great numbers. Those in that age group who aren’t saddled by an overwhelming amount of student debt are reaching prime home buying years and moving to the suburbs.

In the recent State of Center City report, CCD highlighted how the city fared with job growth, adding 13,000 office jobs since 2010 with a record number tallied in 2016 with 3,900 office jobs. By 2017, the number fell and city added only 500 office jobs.

More: bizjournals.com/philadelphia/news/2018/05/31/job-growth-in-the-suburbs-taking-off-at-citys.html

State of Center City 2018: centercityphila.org/socc

Sun Belt Posts Strongest Showings In Forbes Jobs Report
Among the 71 largest U.S. metro areas, the cities creating the most white-collar jobs are primarily in fast-growing regions of the Sun Belt, according to a new research report from Forbes.

Texas is home to three of the 10 metro areas that have generated the strongest job growth over the past decade, led by No. 1 Austin where the business services job count has expanded 37.1% since 2012 and 7.2% last year. Florida has also seen a surge of white-collar jobs, led by No. 2 Orlando-Kissimmee-Sanford, where business services job growth has grown 31.3% since 2012 and 5.1% last year.

To generate its rankings of the best places for business services jobs, Forbes looked at employment growth in 366 metropolitan statistical areas, weighing growth over the short-, medium- and long-term in that span, and factoring in momentum — whether growth is slowing or accelerating.

More: forbes.com/sites/joelkotkin/2018/05/29/the-cities-creating-the-most-white-collar-jobs-2018/#3d9490c63920

Development News
Slowdown Looms For Center City Development Pipeline After 2019
Center City’s development pipeline will trail off considerably after 2019, with significantly fewer deliveries anticipated in 2020 and 2021, according to newly released research from JLL.

A review of 241 development projects (office, retail, multifamily, and other) that JLL tracks throughout Philadelphia reveals that 2018 and 2019 will be large years for project deliveries, with 37 projects encompassing over 11.8 million square feet. Given the average new construction lead time of 30 months, the construction market could enter a lean period in 2020 if no additional large projects kick off before year’s end. Total deliveries in 2020 and 2021 are expected to total barely 2.2 million square feet for investable real estate across all asset classes.

Recent legislative discussions concerning the proposed 1% construction tax and possible modifications to the 10-year tax abatement could prolong the lull currently anticipated in future years, potentially extending it into the status quo, JLL noted.

More: jll.com/philadelphia/en-us/research/snapshots/980/philadelphia-6-11-18-develpment-pipeline-trails-off

Post Brothers To Take Over Schmidt’s Commons
Post Brothers has entered into a transaction to take a controlling ownership stake in Schmidt’s Commons in Northern Liberties — a complex of properties that many still refer to by its original name, the Piazza — in a deal valued in excess of $130 million.

Kushner Cos. and Oaktree Capital Investments acquired the Piazza from Bart Blatstein’s Tower Investments in 2013 for $130 million. With this transaction, Post Brothers will have invested around $1 billion in real estate in Philadelphia since arriving on the city’s real estate scene nearly a decade ago.

More: phillyvoice.com/kushner-companies-northern-liberties-schmidts-commons-post-brothers-philadelphia

Arts & Crafts Spotlighted For Developments Near Rail Park
Investment group Arts & Crafts Holdings LLC has over the last three years spent nearly $325 million on more than 20 buildings, most of them industrial, in an area largely bounded by Spring Garden and Callowhill streets, between 2nd and 11th streets and adjacent to the just-opened Rail Park.

Arts & Crafts’ properties encompass 1.6 million square feet of space, an area bigger than Center City’s new Comcast Technology Center tower. Although Arts & Crafts is focusing its efforts on refashioning the area into a new office district, it’s buying up a vast array of properties to engineer the right balance of work spaces, restaurants, homes, and entertainment venue. A recent profile in The Philadelphia Inquirer called the strategy “a meticulous — if gutsy — plan to convert the blighted warehouse district north of eastern Center City into Philadelphia’s next big commercial enclave.”

More: philly.com/philly/business/real_estate/commercial/office-district-rising-north-of-center-city-built-of-beer-bbq-and-exposed-brick-20180606.html

Request Dropped For Waterfront Wawa With Gas Pumps
Developer Bart Blatstein has withdrawn his application to build a Wawa convenience store with a fueling station on a site near the Delaware River in South Philadelphia. Blatstein pulled the application for a variance from zoning rules barring gas pumps along central Philadelphia’s Delaware River waterfront to mull other options with nearby neighbors who oppose the plan.

Community members and representatives of the Delaware River Waterfront Corporation, a city-affiliated nonprofit that oversees waterfront development, and the Central Delaware Advocacy Group, a coalition of river-adjacent neighborhood associations, have also voiced opposition, saying the development would counter efforts to make the waterfront more inviting to walkers and cyclists.

More: philly.com/philly/business/real_estate/commercial/wawa-with-gas-pumps-plan-withdrawn-south-philadelphia-delaware-river-20180611.html

Parks & Open Space News
Rail Park Opens To The Public
City and state officials, philanthropic organizations, cultural and business leaders, neighbors and civic groups joined Center City District (CCD) President and CEO Paul R. Levy and hundreds of excited visitors on June 14 for a ribbon cutting event to celebrate the official opening of Phase 1 of the Rail Park. CCD oversaw the fundraising, design and construction of the $10.8 million project, which has transformed a blighted section of the former Reading Railroad Viaduct into an elevated park with walking paths, landscaping, lighting, swinging benches, and expansive city views.

The first phase of the eagerly awaited 25,000-square-foot park starts across from the former Philadelphia Inquirer building at Broad and Noble streets, includes the 1300 block of Noble, and runs southeast across 12th and 13th streets to Callowhill Street. Designed by Studio Bryan Hanes and Urban Engineers, the park is a much-needed green amenity to the Callowhill and Chinatown North neighborhoods on Center City’s northern edge. It was funded through a combination of state, city, foundation and private resources.

More on opening day: bisnow.com/philadelphia/news/construction-development/philly-opens-rail-park-first-phase-89573

Photos of the Rail Park: whyy.org/articles/philadelphia-rail-park-from-photoshop-to-reality

CCD Overseeing New Holocaust Memorial Plaza On Parkway
Based on Center City District’s experience building three parks on the Benjamin Franklin Parkway, the CCD was approached by the Philadelphia Holocaust Remembrance Foundation (PHRF) in 2015 to help oversee the development of a new, cost-effective improvement plan for the Holocaust Memorial Plaza located at 16th Street and the Benjamin Franklin Parkway. The PHRF and CCD selected WRT to create a new design that tells the story and honors the memories of the victims and survivors of the Holocaust while celebrating the freedoms afforded in the United States.

Construction commenced in early 2018 with demolition, excavation and the installation of utilities and the concrete base for new improvements. New white and willow oaks have been planted with new pavers and site furnishings to be installed this summer. Through the leadership of PHRF board and fundraising by Fairmount Ventures the project is aiming at an October completion during the centennial celebration of the Benjamin Franklin Parkway.

More: philaholocaustmemorial.org

NYT: New Parks Sprout Around New York
A recent article in The New York Times examined how new parks are coming to life across New York City, many courtesy of new apartment complexes “offering swaths of switch grass and swamp oaks, waterfalls and fountains, benches and boulder-lined paths.”

The story notes that “although these nods to nature are created by developers and are on the grounds of condo and rental buildings, you won’t need to have a pricey apartment there to enjoy them. In a change from the residents-only courtyards of the past, these open spaces are truly open and, despite their private roots, can be used freely by the public.”

The new parks aim to “balance the demands of the real estate industry with the needs of the public, especially where projects have the potential to significantly alter the landscape,” the Times noted.

More: nytimes.com/2018/06/08/realestate/new-parks-sprout-around-new-york.html

Transportation News
Pittsburgh Transportation Expert Discusses Congestion, Mobility
Karina Ricks, Director of Mobility and Infrastructure for the City of Pittsburgh, discussed Pittsburgh’s approach to mobility and congestion management on June 8 to a group of about 70 professionals in transportation and related fields, convened by CPDC’s transportation management association.

Like Philadelphia, Pittsburgh’s downtown is mostly comprised of narrow streets, many only 30 feet curb to curb, according to Ricks. Ricks described the mobility situation in her city as having half the population and three times the congestion of 50 years ago, which she attributed to simple geometry: more people are driving and the vehicles those people are in take up more space per person than modes like public transit, walking, and biking, and thereby can quickly overwhelm the capacity of the streets.

Pittsburgh has responded to their congestion and mobility issues by: 1) combining functions of what had previously been three separate government entities into the one department that Ricks now leads and which controls the regulations for all use of curb lanes for parking, loading, buses and bike lanes; 2) defining the values that frame policy responses: every mobility objective cannot be achieved on every block, so what are the goals for different streets; 3) acknowledging the constraints and trade-offs inherent to allocating the scarce resource of space; and 4) continually refining a strategy to address changing mobility needs.

On-Ramp Traffic Signals, Variable Speed Limit Signs Coming To I-76
Pennsylvania Governor Tom Wolf has announced an $8.6 million plan to alleviate traffic congestion on Interstate 76 through variable speed limit signs and overhead signs that drivers will soon pass while traveling on the Schuylkill Expressway.

By summer 2019, PennDOT will install variable speed limit systems, which adjust speed limits in real-time based on traffic and weather conditions. A “queue warning” sign system that alerts drivers to slowdowns on I-76 will also be implemented to cut down on stop-and-go traffic and rear-end collisions.

Federal grants will cover 80% of the project, with the state paying the balance.

More: planphilly.com/articles/2018/06/08/penndot-wolf-announce-a-series-of-small-tweaks-to-i-76-aimed-at-easing-traffic

Dockless Bike Share Coming To Philadelphia
A new bike share system in which bicycles can be parked and picked up anywhere in the city via smartphone will likely be active in Philadelphia by the end of the year. Aaron Ritz, the city’s transportation programs manager, told the City Council Committee on Streets and Services that a regulatory framework could be in place by late summer or early fall.

The current Indego bike share system, which debuted in 2015, will continue to operate with city oversight. Ritz said an expansion of service for Indego is planned for later in the summer. Indego has about 1,200 bicycles at 120 docking stations.

More: billypenn.com/2018/06/05/dockless-bike-share-is-coming-to-philly-could-be-active-by-end-of-year

DVRPC Survey
We have been asked by the Delaware Valley Regional Planning Commission to request your participation in a survey as part of funding our transportation management association, CPTMA. Each year, CPTMA gets a grant of $165,100 from PennDOT, which is matched 20% by CPDC for a total budget of $206,375. Your participation in this brief survey is helpful:
surveygizmo.com/s3/4348969/DVRPC-Member-Survey

Demographic News
Pew Report: Immigrants Boost Philadelphia’s Population
In 2016, more immigrants were living in Philadelphia than any time since 1950, according to a new report by the Pew Charitable Trusts' Philadelphia Research Initiative. The number of foreign-born residents in the city climbed rapidly between 2000 and 2016, the most recent year of available federal data, spurring entrepreneurship and reversing years of population decline, according to the report.

Chinese immigrants make up the single largest group of foreign-born residents, numbering about 22,100; the fastest-growing group of immigrants is from African countries. First- and second-generation immigrants — those born in another country and their children — make up more than a quarter of Philadelphia residents.

The Philadelphia Research Institute also surveyed 1,601 city residents — immigrants and those born in the U.S. — about immigration. A majority of Philadelphians surveyed said they appreciate the contributions immigrants make to the city and they believe that immigrants bring new vitality to Philadelphia’s neighborhoods.

More: pewtrusts.org/en/research-and-analysis/reports/2018/06/07/philadelphias-immigrants#0-overview

Philadelphia Ranks Low In Amazon HQ2 Housing Health Study
A new report ranking of housing costs and quality of life puts Philadelphia 15th out of 19 U.S. cities vying to become the home of Amazon’s second headquarters. Attom Data Solutions, the California company best known for providing residential foreclosure data, ranked the cities based on median home prices, five-year home price appreciation, affordability, average school test scores, crime rate, property tax rate and environmental hazards.

Philadelphia had a few positives. The median home price was the third lowest at $140,000, and the city ranked fourth in home price-to-income ratio. However, Philadelphia’s five-year home price appreciation of 27% was ranked just 14th and the city has the eighth-highest effective property tax rate and environmental hazard risk.

Raleigh, N.C. topped the list, followed by Atlanta, Pittsburgh, Nashville and Austin, Texas.

More: prnewswire.com/news-releases/amazon-hq2-finalists-ranked-by-housing-market-health-300657064.html

Retail News
Craft Beer Pioneer Opening New Brewery
Dock Street Brewing Co. plans to open a new production space and taproom in a former tile warehouse at 2118 Washington Ave. sometime next spring.

The company’s entire canning operation will move from the 6,500 square feet that it occupies in a former West Philadelphia firehouse and adjacent buildings to the 10,300 square feet space on Washington Avenue. Through the expansion, Dock Street aims to ramp up production capacity from about 2,000 barrels a year to around 9,000 barrels, aimed at better saturating the Pennsylvania and New Jersey markets where it already has a presence.

More: dockstreetbeer.com/news/dock-streets-new-location-on-washington-avenue

Hospitality News
Independence Visitor Center Completes First Phase Of Expansion
The Independence Visitor Center has completed Phase 1of its $15 million expansion project announced two years ago.

Capping the first phase is the expansion of the visitor center's gift shop, its top revenue generator. The retail space has grown to 3,450 square feet, is double its initial footprint.

The second phase of the expansion project is underway and includes upgrading the center’s two theaters that show free informative films, and the construction of a new welcome desk and exhibit space for the National Park Service.

More: phlvisitorcenter.com/sites/default/files/2018-05/ivcc_reveals_exciting_changes_for_memorial_day_2018.pdf

Philadelphia Breaks Visitation Record For 2017
The five-county Philadelphia region in 2017 welcomed 43.3 million domestic visitors, a 3% increase over 2016's record of 42 million, according to a new report by Visit Philadelphia.

Center City hotels booked a record 1.1 million leisure room nights in 2017, an 8% increase from 2016. Friday and Saturday night stays — indicators of a city’s health as a leisure destination — in 2017 averaged 82% occupancy on Friday night and a record 90% occupancy on Saturday night.

Center City saw a 77% growth in hotel room night sales, higher than the 36% national growth rate nationally, according to Visit Philadelphia.

More: phillyvoice.com/philadelphia-tourism-record-visitors-2017-travel

Eds & Meds News

$30 Million Rehab: Magee Shifting To All-Private Rooms
Magee Rehabilitation Hospital has completed the first phase of a $30 million renovation project to create all private rooms for patients. The Center City rehab center, which is licensed for 96 beds, spent about $9 million creating 20 private rooms on the second floor of the hospital in space that previously housed administrative offices. Those offices were relocated to nearby One Penn Center.

Prior to the start of the renovation project, Magee had 18 private rooms and 36 semi-private rooms. The conversion to all private rooms on Magee’s four patient floors is expected to be done in stages and completed by July 2020.

More: bizjournals.com/philadelphia/news/2018/06/08/magee-rehab-hospital-private-rooms-construction.html

Upcoming Events
CPDC: Funding Parks and Transit Improvements With TIF Districts
Join us for CPDC’s membership meeting at The Union League on Tuesday, June 26 at 8:30 a.m., to learn how Tax Increment Financing (TIF), backed by increases in tax revenues from large, multi-property districts that benefit from the public improvement, is being used by other cities for transit lines, streetscape enhancements and public parks.

Panelists will include Robert M. Eury, President of Central Houston Inc. and Carole Morey, Chief Infrastructure Officer of Chicago Transit Authority, to discuss how their cities are using TIF districts to invest in transportation and public space improvements and how this might be replicated in Philadelphia.

CPDC members are encouraged to invite both young professionals and other members of their firms to attend this meeting. Please RSVP by June 20 to Romina Gutierrez at rgutierrez@centercityphila.org or 215.440.5543.