Office Sector News
Class A Office Space Continues to Tighten
In the second quarter of 2012, 151,178 square feet of Class A office space was occupied in the CBD, bringing the total positive absorption for the year to 230,640 square feet, a trend expected to continue through 2013, according to three new reports from Jones Lang LaSalle.
Their Office Insight Philadelphia CBD Q2 2012 notes that several new tenants are migrating to Class A office space in the Central Business District from the suburbs, joining with other firms that are moving into smaller, higher-grade space. Bentley Systems, based in Malvern, opened its first downtown office at Three Parkway Plaza, ABM Janitorial Services signed for 10,814 square feet at 1650 Arch Street, consolidating its Center City and King of Prussia offices; and Fiberlink is moving its Blue Bell operations to the CBD. Among other leasing activities in the second quarter: ACE Group renewed its lease at Penn Mutual Towers; however, it reduced its footprint from 156,150 to140,585 square feet; Berwind Corporation consolidated its Centre Square lease into 33,000 square feet; and attorneys Feldman Shepherd signed a renewal for 17,779 square feet at 1845 Market Street.
To read Office Statistics Philadelphia, Q2 2012, please go to http://bit.ly/M4gkem. Office Insight Philadelphia CBD, Q2 2012 can be found at http://bit.ly/Mcuq8L and Office Highlights Philadelphia, Q2 2012 at http://bit.ly/OBYmgE.
Class B Office Space Conversions Continue
Class A office rental rates at mid-year averaged $25.60 and are expected to remain stable through the end of the year, though the developing trend of converting Class B buildings into apartments is expected to drive Class A rental prices higher longer-term, according to SSH Real Estate's 2012 Greater Philadelphia Mid-Year Office Market Report and Outlook. In addition, the Class B conversions would drive down the overall office vacancy rate, calculated by SSH at midyear at 10.25%.
Among the Class B buildings being converted are 1616 Walnut Street; the former Robert Morris Building at 1701 Arch Street; and 2040 Market Street, as well as 260 South Broad Street that was reported in the last issue of Developments. SSH is tracking 15 new apartment projects, which would add approximately 2,700 new units to the existing 40,000 units, the report noted.
To read the entire midyear report, please go to http://bit.ly/NWtKaN.
CBD Vacancy Rate Lowest on the East Coast
Counting a slightly different inventory than other firms, Integra Realty Resources, Inc.'s Viewpoint Q2 2012 reports Philadelphia�s Central Business District (CBD) to have the lowest office vacancy rate, 8.9%, of 13 major cities on the East Coast. New York City's CBD had a 9.8% vacancy rate; Washington, D.C.'s was 11% and Boston's was 12.50%. (Nationally, only Raleigh, N.C.(6.20%), and Portland, Oregon (7.60%), had lower office vacancy rates.
Philadelphia's CBD, however, had the lowest average asking rent of the four East Coast peer cities at $24.75 per square foot, compared to New York's, $56; Washington, D.C.'s, $53; and Boston's, $46.
The Philadelphia suburbs had a higher vacancy rate than the CBD at 12.7%, the fourth-lowest of the 13 major cities, with an average asking rate of $22.53, substantially below the downtown's.
To read the entire report, please go to http://bit.ly/MROrYn.
1515 Market Street Note for Sale
A Commercial Backed Mortgage Securities (CMBS) note for $70 million on 1515 Market Street, home of Temple University's Center City campus, is up for sale, the Philadelphia Business Journal reported on July 26.
Stockton Real Estate Advisors bought the building in January 2007, in a joint venture with Hartford-based CBRE Realty Finance. Stockton paid about $75 million for the 20-story, 510,000-square-foot office building, the article noted. Stockton's website said the company has completed extensive renovations on the building.
Nonmanufacturing Sluggish but Stronger Than in 2011
Nonmanufacturing general activity indexes for the region and at the company level decreased to -8.8 and 2.9 in July, according to the Federal Reserve Bank of Philadelphia's Business Outlook Survey Nonmanufacturing.
While the survey indicates slight weakness in the local economy, July's results were much stronger than last year's July report, when the readings were -26.3 for the region and -36.8 at the company level.
Employment was a bright spot, as 32.4% of the firms reported increasing employment, while only 17.6% indicated they were decreasing the number of employees.
Respondents were optimistic about activity in the next six months.
Philadelphia Vital Statistics
For a snapshot of Philadelphia's static employment situation as well as other trend data, please see this month's Vital Statistics, compiled by CCD/CPDC staff:
Eds and Meds News
Analyses and Recommendations for City Schools
Over the next five years, personnel costs are predicted to increase by 25% for the School District of Philadelphia (SDP), while revenues are expected to rise by only 8%, according to the Boston Consulting Group's (BCG)120-page report issued on August 2 to the SDP and the School Reform Commission.
While the District's per-pupil spending is in line with that of other urban, unionized districts, the report noted, the schools remain among the worst performing in the nation and are facing a $200 million deficit in 2013 alone.
BCG recommended that SDP close about 50 schools, which would save about $40 million a year, launch its own virtual school, divide the SDP into three sections, grow the number of seats in high-performing schools, provide greater oversight of charter schools, improve its IT and human resources departments, and engage outside stakeholders, among many other suggestions.
To read the entire report, please go to http://bit.ly/QJHuaA.
Residential Market News
City Housing Prices Surge in Second Quarter
The typical Philadelphia home increased in value by 7.6% on a quality- and seasonally-adjusted basis during the second quarter of 2012, according to the latest data from the City's Recorder of Deeds analyzed in a report issued on July 30 by Kevin Gillen of Econsult Corporation. The robust turnaround is the single largest quarterly gain in house prices since mid-2007, the report noted.
In Center City/Fairmount, houses increased in value an average of 6.5%, in Lower Northeast Philadelphia, the increase was 5.7%, and in South Philadelphia, prices were up 12.4%.
The inventory of houses for sale in the city is down 25% from its peak. The report cautions, however, that spring sales were at their lowest level since 1995.
Philadelphia has consistently continued to out-perform most U.S. cities during the economic downturn and is behind only Dallas and Denver of major U.S. cities with the least amount of housing-value decline. To read the entire report, please go to www.econsult.com/2012_Q2.htm.
The Philadelphia Collection Set for September
Mayor Nutter on August 1 announced that the annual weeklong series of fashion and style events, The Philadelphia Collection, will take place Thursday, September 13 through Thursday, September 20. In addition, Philadelphia will participate in Fashion's Night Out, celebrated in 250 cities nationwide and more than 18 countries, on September 6. This will serve as a �preview� to the weeklong Philadelphia Collection and will include designer appearances, celebrity guests, fashion shows, and musical performances.
The Philadelphia Collection was founded in 2010 by the City of Philadelphia, Center City District, and the Philadelphia Retail Marketing Alliance. Nearly 75 events encourage consumers to shop and embrace fall fashion in Philadelphia. To read the entire press release, please go to http://on.mktw.net/NJWsy9.
Big Box Retailers Moving Into Downtowns
With a resurgence of city downtown populations (Philadelphia's has grown more than 10% in the last decade), more retailers in search of growth are eager to bring their big-box stores to the downtown, albeit in scaled-down versions more suitable to the more expensive, tighter city spaces. Target, for example, has opened its first CityTargets, in Chicago, Los Angeles and Seattle. The New York Times explores this phenomenon at length in an article that ran on the front page on July 26. To read the online version, please go to http://nyti.ms/OGInMv.
Arts and Culture News
Bankruptcy Over for Orchestra
The Philadelphia Orchestra announced July 31 that it had formally exited Chapter 11 bankruptcy, under which it had been operating since it filed on April 16, 2011. The orchestra will open its fall season at Verizon Hall on October 18.
In related news, Philly Pops artistic director Peter Nero will step down in 2013, after more than three decades as the group's leader, The Philadelphia Inquirer reported Friday. The Philly Pops was operated by the Philadelphia Orchestra Association at the time of the bankruptcy, but later was split off during the legal proceedings.
Art in the Air Returns
Breadboard and PECO on July 30 launched its third Art in the Air program with an international call for submissions.
Art in the Air utilizes the PECO Crown Lights system to display digital artwork and animation and was developed via a partnership with Breadboard.
Every two months, three digital artworks will be selected for an Art in the Air exhibit on the Crown Lights and will be screened on Fridays.
Artists can submit their work at www.breadboardphilly.org/programs/art-in-the-air-2, or to email@example.com. The deadline is August 21.
To read the press release, please go to http://on.mktw.net/Pm3cNH.
Transportation & Infrastructure News
Majority of Americans Would Use High-Speed Rail
A recent survey conducted by the American Public Transportation Association showed that a majority of the people surveyed in the United States would be willing to choose high-speed rail over air or car travel if it were available. Nearly two-thirds, 62%, said they were likely to use high-speed trains � 35% were "Very Likely" to use them and 27% were "Somewhat Likely" to use them.
A majority, 59%, said that it was "Very Important" that the cost of travel by high-speed train be cheaper than flying in order for them to favor the option, and 52% believed it was "Very Important" that the high-speed trains should be economical compared to driving.
To read the complete results of the survey, please go http://bit.ly/L9hf7Y.
NJ Transit Awarded Funds for Link to Philadelphia
NJ Transit will get $2.6 million to begin implementing a Bus Rapid Transit (BRT) route along Routes 55, 42, and Interstate 676 to link South Jersey and Philadelphia, it was announced on July 23. The BRT system would allow rush-hour buses to travel on highway shoulder lanes and medians for part of the trip to Philadelphia and would provide 1,800 new parking spaces for commuters in Winslow and Deptford Townships, The Philadelphia Inquirer reported.
Construction could begin in two years and the new route fully operating by 2020, the article noted.
One Lane of Walnut Street Closed for Repairs
As part of the Pennsylvania Department of Transportation's (PENNDOT) $12.1 million project to repair and resurface 27 miles of worn state highways in Philadelphia, one lane will be closed on Walnut Street between Broad Street (Route 611) and Front Street from 6:00 p.m. to 5:00 a.m. today, August 9, and tomorrow, August 10, for milling and readjustment of manholes and storm sewers. The work is weather-dependent. For latest updates, please go to www.511pa.com, or call 511 from any phone to check traffic conditions. Additional information can be obtained from www.dot.state.pa.us.
SEPTA Takes Honors for Best Transit
On July 26, the American Public Transportation Association named SEPTA the best large transit system in North America.
The Association cited SEPTA�s consolidated control center, environmentally friendly construction programs, large fleet of hybrid buses, and financial management as models for the public-transit industry. SEPTA was chosen from among 64 transit agencies, each of which provide more than 20 million trips a day. SEPTA�s ridership in Fiscal Year 2012 was 339.3 million passengers, the highest since 1989.
To read the press release, please go to http://tinyurl.com/d9cowda.
For a commentary on this award and on SEPTA�s performance, see Diana Lind's article in Next American City at http://bit.ly/Ni3Vyz.
Traffic Down on Bridges
Vehicle traffic on Delaware River toll bridges, which has been declining, is on pace in 2012 to be the lightest in 17 years, The Philadelphia Inquirer reported on July 27.
Traffic on the four spans operated by the Delaware River Port Authority (DRPA), the Benjamin Franklin, Walt Whitman, Commodore Barry, and Betsy Ross Bridges, is down about 13% from its peak in 2007, the article noted. Tolls have risen 67% on the DRPA bridges since September 2008, from $3 to the current $5 for autos.
In other DRPA news, Governor Corbett on August 1 announced he would step down later this month as chairman of the DRPA Board of Commissioners and would name Andrew J. Reilly of Middletown Township, Pennsylvania, to succeed him on the board. The governor also will recommend that sitting Commissioner David F. Simon of Gwynedd Valley, Pennsylvania, become chairman. The election of the chairman will take place at the next scheduled meeting on August 15. To read the press release, please go to tinyurl.com/c3w4ysy.
Parks and Open Space News
'Pairings on the Parkway'
On Thursday, August 2, the Center City District began its new Thursday evening program at Sister Cities Park, 18th Street and the Benjamin Franklin Parkway. Each Thursday through October 25, Milk & Honey Caf� in the park will prepare special cheese platters to pair with a suggested BYO wine. Pairings on the Parkway runs from 5:00 p.m. to 8:00 p.m., and each week there will be live entertainment. Seats are available at tables inside or outside the caf�, or you can bring a blanket or grab a brand-new lawn cushion with a custom-made street banner cover from the Center City District�s street banner program, and find a favorite spot under a tree or on the grass.
Find out about the weekly cheese offerings and suggested wine pairings by following Twitter @CCDParks and @milkandhoneymkt. For more information, please visit SisterCitiesPark.org, or milkandhoneymarket.com/sister-cities-park.
City Tax Revenues Show Increase
City tax revenues for June totaled $176.2 million, a 3.2% increase over June 2011, according to the Office of the Controller's Financial Forecast & Snapshot for June 2012, the last month of Fiscal Year 2012 (FY12). Tax revenue collections for the entire fiscal-year totaled $2.9 billion, about $47 million or 2% more than was collected in FY11.
Wage, earnings and net profits tax collections for June totaled $122.6 million, a 4% increase over the previous June. Yearly collections in FY12 were almost 3% above the FY11 collection amount.
Monthly sales tax collections totaled $20.97 million, a 2.5% increase over June of last year. The FY12 sales tax collection totaled $250.2 million, less than 1% more than the previous fiscal year's collection.
This month's economic report reviewed the average cost of spending a night out in the 10 most-populated U.S. cities. Using the prices of meals, taxis, cocktails and hotels, the report calculated that the average cost for an overnight visit to Philadelphia was $273, compared to $342 in New York City, $324 in Chicago and $311 in Los Angeles.
To read the entire report, please go to http://bit.ly/MQ0RzY.
21 Years of Improving Center City and the Challenges Ahead
On Wednesday, September 19, from noon to 1:00 p.m., The College of Physicians of Philadelphia, 19 South 22nd Street, will present Food & Thought: "Litter, Lighting, Parks and Promotions: The Multiple Roles of Business Improvement Districts."
Paul R. Levy, Ph.D, founding CEO and President of Philadelphia's Center City District, will reflect upon 21 years of experience transforming downtown Philadelphia and will discuss the challenges that still remain to enhance the competitiveness and attractiveness of Center City. Pre-registration for all programs and events is strongly encouraged. Cost is $12.50 and includes a box lunch. To register, please go to paullevy-eorg.eventbrite.com.
ULI Forum Will Focus on Transportation Issues
On Wednesday, September 19, from 7:30 a.m. to 10:00 a.m., at the Union League, 140 South Broad Street, the Urban Land Institute (ULI) will present "21st Century Mobility, Connections & Development."
To compete in the 21st century economy, Philadelphia must have a transportation network that is convenient, dependable, accessible, and connected.
This forum will focus on how we can make Philadelphia a 21st century city for ease of mobility, connections between transportation modes, and how high-speed rail, pedestrian and bicycle plans, waterfront connections, highways, airports and more are impacting and driving land-use decisions.
Keynote Speaker will be Jeffrey M. Zupan, Senior Fellow for Transportation, Regional Plan Association. Panel speakers will include Andrew Wood, Chief, Next Generation Integration, AMTRAK Northeast Corridor Infrastructure and Investment Development;
Sallye Perrin, Senior Vice President, Strategic Pursuit Manager, Parsons Brinckerhoff; Tom Corcoran, President, Delaware River Waterfront Corporation; and Patrick Starr, Executive Vice President, Pennsylvania Environmental Coalition. The moderator will be Councilman Bill Green.
Cost ranges from $20 to $80, with an increase of $20 after September 12. To register, please go to http://bit.ly/MyIdYS.