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July 21, 2014 • Volume 17 • Issue 15 • A bi-weekly email news service

Office Sector News
CBD Vacancy Rate Declines
The overall vacancy rate for the Philadelphia Central Business District(CBD) declined to 11.8% in the second quarter of 2014, down from 12.7% a year ago, according to Cushman & Wakefield’s Marketbeat Office Snapshot for the second quarter of 2014. Most suburban vacancy rates were much higher, with King of Prussia at 17.0% and Blue Bell/Plymouth Meeting/Fort Washington at 20.4%.

CBD asking rents in the quarter averaged $26.12/SF, a 1% increase over the same quarter last year when rents were $25.86/SF.

The report noted the return of new office construction in the CBD with the May groundbreaking of the FMC Tower at Cira Centre South and the July start for the Comcast Innovation and Technology Center.

The largest sale of the second quarter was the purchase of the 885,786–square-foot Curtis Center by the East of Broad Keystone Property Group/Mack-Cali Realty Corporation for $125 million, or $141/SF.

The biggest lease of the quarter was by Health Partners, Inc. for 70,000 square feet at 907 Market Street.

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

Shared Workspace Pipeline Opening Office in Center City
Pipeline Brickell, a shared workspace in Miami, Florida, this fall will open a second location, Pipeline Philly, in 21,000 square feet in the Graham Building across from City Hall, the Miami Herald reported on July 8.

The 14,000-square-foot Pipeline Brickell opened in November 2012, offering private offices, dedicated desks, flexible work and meeting space, and virtual offices (pipelinebrickell.com). It has 250 members in technology, healthcare, media, law, real estate, and design, among other industries, the article noted.

Pipeline Brickell co-founder Philippe Houdard and Philadelphia developer David Grasso are spearheading the Philadelphia location.

To read the Miami Herald article, please go to hrld.us/1kFcHrW.

To read an article in the Philadelphia Business Journal, “Graham Building's new co-working space promises more than just ping-pong, beer,” please go to bit.ly/1ntwudO.

Another Tech Start-Up Opens in Center City
Think Brownstone (thinkbrownstone.com), a Conshohocken-based tech company that works with clients such as ING, Hay Group, and Comcast to improve their digital products, opened the company’s new Philadelphia office on July 10 at the Packard Grande Building, 111 South 15th Street (15th and Sansom Streets).

Think Brownstone employs 50 people, including at least 15 who will work in the Philadelphia office, with the potential to expand. Other tech companies that recently opened offices in the city to be near a tech-savvy urban workforce include Bentley Systems, Fiberlink, SevOne, and Eisner Amper.

To read the Philadelphia Business Journal article, please go to bit.ly/1rbycYW.

Hay Group Moving Offices
Hay Group, a management consulting firm whose offices have been at the Wanamaker Building for the last 17 years, in December will move its headquarters to 1650 Arch Street, where it has leased 45,000 square feet for 16 years, the Philadelphia Business Journal reported on July 11.

The firm has 200 employees and is expecting to add 65 new workers in the next few years, the article noted.

The company was attracted to 1650 Arch because it is LEED certified and contemporary in design. It will implement an open space design in its new offices and create a wide range of areas that will give employees different spaces from which to work.

Jones Lang LaSalle arranged the lease.

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

vXchnge Coming to 1500 Spring Garden Street
vXchnge, a data center services company based in Tampa, Florida, will expand into Philadelphia and open a state-of-the-art data center at 1500 Spring Garden Street, the company announced on July 15.

The data center will serve local and global companies and will offer technology deployments requiring high-density infrastructure with multiple network and service providers, the press release noted.

Construction of the 70,000-square-foot data center has already begun, and vXchnge hopes to open the facility by mid-2015.

To read the press release, please go to bit.ly/1nBC5iv.

Economic News
Manufacturing in the Region Strong in July
Manufacturing in the Philadelphia region surged in July, expanding at its fastest pace in more than three years, as new orders, shipments, and hiring all rose, according to the Federal Reserve Bank of Philadelphia, which released on July 17 its Business Outlook Survey.

New orders were up for 40.2% of the reporting firms, down for 6.0%, and remained the same for 51.1%.

Shipments were up for 45.3%, down for 11.1%, and remained the same for 43.6% of the companies.

Employment grew for 24.3%, decreased for 12.0%, and was unchanged for 63.7%.

Looking ahead six months, 59.8% of the firms expected business activity to increase, 1.7% expected it to decrease, and 33.9% foresaw no change.

To read the report, please go to bit.ly/1jFgA56.

To read the Associated Press story about the report, please go to bit.ly/UftAm0.

Development News
Affordable Housing Project to Break Ground
A $23.5 million, nine-story affordable housing project will break ground on an empty lot at 810 Arch Street in September, The Philadelphia Inquirer reported on July 8. The development is a partnership among Sister Mary Scullion’s Project HOME, the City of Philadelphia, and the Philadelphia Chinatown Development Corporation.

The public-private project will create 94 efficiency apartments for lower-income rental tenants ranging from seniors to children aging out of foster care, the article noted.

The Philadelphia Redevelopment Authority donated the land. The goal is for the 78,000-square-foot building to be LEED Silver certified. The architect is Kramer + Marks of Ambler.

To read the article, please go to bit.ly/1mK2uAe.

Eds and Meds News
Penn Will Open Center for Energy Policy
The University of Pennsylvania this fall will open the Kleinman Center for Energy Policy, where leading industry, environment, and government leaders can resolve some of the nation's most vexing energy-policy problems, The Philadelphia Inquirer reported on July 17. The center will be housed on the third and fourth floors of the Fisher Fine Arts Library. The center is named for Scott Kleinman and his wife, Wendy, who donated $10 million to Penn for the center. Scott Kleinman is a Wall Street private-equity manager and 1994 Penn alum.

The center will be directed by Mark Alan Hughes, a professor of practice at Penn's School of Design. Hughes was the City of Philadelphia’s first director of sustainability and is a former adviser to Mayor Nutter.

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

Wills Eye in Top U.S. Rankings
Wills Eye Hospital, 840 Walnut Street, was named the #2 eye hospital for difficult cases and procedures in the country by U.S. News and World Report, the hospital announced via press release on July 15. Voting is conducted among peer physicians, the release noted. Opened in 1832, Wills Eye was the nation's first hospital dedicated exclusively to ophthalmology.

Rated first was Bascom Palmer Eye Institute-Anne Bates Leach Eye Hospital in Miami, Florida.

To read the press release, please go to bit.ly/1ntvXc6.

To view the U.S. News and World Report rankings, please go to bit.ly/UbnYt6.

Residential Market News
Multifamily Sector Cooling Slightly
A mid-year report on the Philadelphia metropolitan area’s multifamily sector indicates rising vacancy rates, lower rents, and some degree of worry about how many units under construction can be absorbed, the Philadelphia Business Journal reported on July 10.

The vacancy rate for the Class A apartment market increased in the suburbs, Center City, and South Jersey, between mid-years 2013 and 2014, the article noted, citing a Delta Associates report. Vacancy in Philadelphia rose to 5% percent, 4.5% in the suburbs, and 5.7% in South Jersey. In the Center City market, average monthly rents decreased by 1.6% to $2,141, or $2.24 a square foot.

Delta projected that the 36-month supply will exceed the number of units absorbed in and around Center City by the end of the forecast period (mid-2017). However, due to trends toward renting and urban living, the company expects there will be enough demand to support the number of apartments in the pipeline.

To read the Philadelphia Business Journal article, please go to bit.ly/1mOQc7Z.

Home Ownership Down in Philadelphia
The percentage of residents in Philadelphia who live in a home they own has fallen from 59.3% in 2000 to 52.2% in 2012, according to a new report, Homeownership in Philadelphia: On the Decline, from The Pew Charitable Trusts.

A decline in owner-occupied housing is a national trend, but Philadelphia experienced the second-steepest drop among the country’s 30 largest cities—despite not having been hit as hard as other localities by the housing bubble and foreclosure crisis of the past decade, the report noted.

Philadelphia remains a city of relatively high homeownership, however, and ranks 12th in the country’s 30 largest cities. Peer cities Baltimore (46.3%), Boston (33.2%), New York (31.7%), and Washington, D.C. (41.5%), all ranked lower.

Several Center City Zip codes, however, saw an increase in home ownership: 19103, Center City West, 3%; 19102, Center City West, 4%; and 19107, Washington Square West/Chinatown, 10%, the Philadelphia Business Journal noted.

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

To read the Philadelphia Business Journal article, please go to bit.ly/1tIXRtS.

Gaming News
Revenue Dips at SugarHouse
Revenue at SugarHouse Casino on the Delaware River dipped slightly in June, according to the Pennsylvania Gaming Control Board (PGCB).

In June, the casino took in $20,462,847 compared to $23,452,080 in May. The Commonwealth’s share was $5,519,406 in June and $6,305,877 in May. The City of Philadelphia received $684,269 in June compared to $759,721 last month.

Revenue for fiscal year 2014 (FY14) was down slightly from the previous fiscal year. In FY14, SugarHouse took in $262,001,052, down from $269,602,150 in FY13.

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

Hospitality News
Board Dismisses Complaint Against Convention Center
The Philadelphia regional office of the National Labor Relations Board on July 14 dismissed complaints by the Metropolitan Regional Council of Carpenters and Local 107 of the International Brotherhood of Teamsters against the Pennsylvania Convention Center Authority (PCCA), The Philadelphia Inquirer reported.

The unions had alleged that the PCCA had engaged in unfair bargaining, but the NLRB dismissed the case saying it had no jurisdiction over the case because PCCA is a public entity, the article noted.

The Carpenters indicated they would follow up with a complaint filed with the Pennsylvania Labor Relations Board.

To read the article, please go to bit.ly/1mHKwx2.

Hotel Occupancy Down
A lack of conventions in Philadelphia has lowered convention-related hotel occupancy, the Philadelphia Business Journal reported on July 7.

In May, 7,400 room nights were filled, an 89% decrease from the 67,000 room nights filled in the same time period last year, the article noted. For the first five months of 2014, however, hotel occupancy in Center City 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.

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

Transportation News
U.S. House Passes Transportation Bill
The U.S. House of Representatives on July 15 voted 367-55 to pass the “Highway and Transportation Funding Act of 2014,” an $11 billion stop-gap funding bill to avert the transportation funding cliff. The entire Pennsylvania delegation voted in favor of the bill.

The current authorization law for transportation, called MAP-21, expires at the end of September. The Highway Trust Fund, funded by a federal tax on gasoline and the principal source of funding for transportation projects, is expected to run out of money before that.

The bill is now on the U.S. Senate’s calendar.

To read the bill, please go to 1.usa.gov/1qfHqDP [PDF].

SEPTA Management Backed by Presidential Board
The emergency board appointed by President Obama after a one-day SEPTA strike in June sided on July 14 with SEPTA management on most of the issues in its long-running labor dispute with the Brotherhood of Locomotive Engineers and Trainmen and Electrical Workers Local 744, The Philadelphia Inquirer reported.

The board, whose recommendations are not binding, said the Regional Rail workers should get the same 11.5% raises negotiated in a five-year contract in 2009 by bus drivers and subway operators, and they are not entitled to retroactive raises, the article noted.

If the workers do not agree to accept the board's recommendations or reach some other resolution, the workers could strike on February 9, 2015, 240 days after the creation of the emergency board on June 14, 2014.

Also, the contracts of SEPTA bus drivers, subway operators, and maintenance workers, represented by Transport Workers Union Local 234, expired in the spring, and talks have stalled, raising the possibility of a strike by these workers.

To read the article, please go to bit.ly/1tNsi2c.

On Friday, the two Regional Rail unions expressed their disappointment with the recommendations of the presidential emergency board, The Philadelphia Inquirer reported.

To read the article, please go to bit.ly/1n1Yo4O.

Real-Time Information on Transportation Options
TransitScreen, a new comprehensive digital sign offering in one place information on all types of available transportation, is currently being tested in the Boston area. The idea is to give commuters at a given location real time information about all their options, such as commuter rail schedules and nearby ride and bike-sharing, Next City reported on July 8.

While people who have smart phones can use apps to find out some of the information, TransitScreen offers information to everyone and suggests transportation alternatives that commuters might not previously have considered.

At the transportation hub beneath the new Dilworth Park, two LCD panels will display real-time information for five trolley routes servicing University City and West Philadelphia.

To read the Next City article, please go to bit.ly/1mVa5u6.

Top Cities Where Residents Choose Not to Drive
Philadelphia, where 33% of the residents do not own a car, ranks #4 of cities where people prefer not to drive, according to the website 24/7 Wall St., which used information from a report from the University of Michigan Transportation Research Institute to create its rankings, Philly.com reported.

Cities where people prefer not to drive generally have very dense urban centers, highly-accessible public transportation as an alternative to driving, and a high percentage of households without cars.

New York City ranked first, with 56.5% of residents not owning a car; Washington D.C. was second, where 37.9% of residents don’t own a car; and Boston was third, with 36.9% without cars.

San Francisco, Baltimore, Chicago, Detroit, Milwaukee, and Seattle also made the top 10.

To read the article, please go to bit.ly/1tku62i.

Public Space and Park News
Partnership to Address Newspaper Boxes
As part of an effort to clean up the appearance of newspaper boxes, which are often covered with graffiti, the Center City District (CCD) is partnering with newspaper publishers, Titan Outdoor and the City for a demonstration project at three locations in Center City: the northwest corner of 13th and Market (on 13th), the northwest corner of Broad and Sansom (on Broad) and the southwest corner of 17th and JFK (on JFK). Newspaper boxes at these locations that are in "corrals" the CCD designed about 12 years ago will be moved into new "condo" boxes (see photo from Broad and Sansom) that will be managed by Titan Outdoor. In return, Titan will have the right to place commercial advertising on the street-facing sides of the "condo box" and will assume the responsibility to clean their condo boxes. We welcome your comments and suggestions; please email Cassie Glinkowski at cassie@centercityphila.org.

The Oval Opens on the Parkway
Philadelphia Parks & Recreation, in partnership with the Fairmount Park Conservancy and the City of Philadelphia, opened The Oval, a 450-foot-long parking lot at Eakins Oval (2601 Benjamin Franklin Parkway) that has been transformed into a public park for the summer.

From July 16 to August 17, The Oval will offer a variety of activities, including music, yoga, movies, ping pong, and a beer garden, among many other things.

This year the park’s theme is the Magic Carpet. The parking lot has been painted lime green, acid yellow, and hues of magenta, fuchsia, and orange, PlanPhilly reported. Large graphic elements break the space into different zones. The Association for Public Art commissioned the work.

If you visit The Oval, also stop in at nearby Sister Cities Park, 18th Street and the Benjamin Franklin Parkway (SisterCitiesPark.org).

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

For more information about The Oval’s activities and hours, please go to theovalphl.org.

Government News
Philadelphia School District News
On July 2, the state House of Representatives passed HB 1177 that would allow Philadelphia to impose a $2-a-pack tax on cigarettes to help fund Philadelphia School District schools. On July 8, the state Senate voted, 43-5, to amend the legislation to, among other things, have the cigarette tax expire after five years, The Philadelphia Inquirer reported. The bill needed to go back to the House to vote on the amendment, but the House had already adjourned for summer recess.

School Superintendent William R. Hite Jr. said that ending the tax after five years created uncertainty now and in the future. Hite 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.

The House leadership later announced that they would return to session on August 4, to vote on the Senate’s version of the amended cigarette tax, expected to yield about $45 million this year, which means the district will still have a gap in its budget.

To read the bill, please go to bit.ly/1pZMhEK (page 25).

To read the Inquirer story, please go to bit.ly/1q26cHI.

In other School District news, more than 300 Philadelphia School District employees received layoff notices on July 10 and 11, The Philadelphia Inquirer reported, and a total of 342 workers are to be laid off effective July 31.

The layoffs were unrelated to the stalled cigarette tax legislation that has imperiled $45 million in state funding.

On the layoff list are 157 special education classroom assistants; 147 noon-time aides; 15 pre-kindergarten teacher assistants; eight assistant principals; four career and technical support assistants; three conflict resolution specialists; two each of library assistants, community relations liaisons, and central office employees; one bilingual counseling assistant; and one sign language interpreter.

The layoffs were based on decisions principals made about individual school budgets, the article noted.

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

Governor Signs Budget Bill, Line-Item Vetoes $72 Million
Governor Corbett on July 10 signed the $29.1 billion spending plan sent to him by the state General Assembly, but he removed $72 million from the legislators' budget.

Corbett said he made the decision because the legislature failed to act on the increasing cost of public employee pensions.

The governor vetoed $65 million in legislative operational spending, and another $7.2 million in legislative-controlled special projects or earmarks.

The GOP-controlled legislature could return to Harrisburg and, with a two-thirds vote, override the governor's vetoes on spending.

To read the Inquirer article, please go to bit.ly/1zs2NDL.

Council Expands Study of PGW Sale
City Council’s contract with Concentric Energy Advisors of Massachusetts to do a feasibility study on the sale of Philadelphia Gas Works (PGW) will cost $522,750, The Philadelphia Inquirer reported on July 14. The original price was $425,000, when council announced a plan in March to commission a study to assess the Nutter administration's proposed $1.86 billion sale of PGW to UIL Holdings Corporation of New Haven, Connecticut.

The added cost came when Council commissioned a second study to determine if there were better alternatives for the City than selling the utility. Council will pay 60% of the contract costs, or $313,650, and the city's general fund will pay the rest, the article noted. Council has not introduced legislation that would enable the sale.

To read the article, please go to bit.ly/1kZil8e.

Meanwhile, UIL Holdings Corporation announced on July 16 that it was not ready to walk away from the $1.86 billion deal and would continue to pursue the purchase, the Philadelphia Daily News reported.

According to its tentative agreement with the Nutter administration, UIL could legally abandon the deal if it wasn't approved by City Council and the state Public Utility Commission by July 15.

To read the Daily News article, please go to bit.ly/1t9QSpX.