CPDC Developments Newsletter - 01-23-18
Philadelphia Advances In Contest For Amazon HQ2
Philadelphia has made the top-20 list of potential locations for Amazon's second headquarters. In all, 238 locations submitted proposals for the e-commerce giant's so-called HQ2.
The other finalists are Atlanta, suburban Virginia (D.C. area), Washington, D.C.; suburban Maryland (D.C. area), Boston, Newark (N.Y.C. area), New York, Chicago, Denver, Austin, Dallas, Pittsburgh, Raleigh, Toronto, Nashville, Miami, Los Angeles, Indianapolis and Columbus. Amazon's selection process is expected to play out over much of the balance of 2018.
For more, go to planphilly.com/articles/2018/01/18/philadelphia-is-a-finalist-for-amazon-hq2.
Parkway Corp. Buys Broad & Callowhill Garage For N. Broad Project
Parkway Corp. has paid $6.53 million to buy a 220-space garage from Hanover Co., a Houston real estate company that it partnered with to construct its Hanover North mixed-use development at Broad and Callowhill streets.
The Hanover North project includes a pair of six-story apartment buildings with a combined total of 339 units, 330 parking spaces in garages under each building and 17,500 square feet of retail space that will include a French café from the restaurateurs behind Le Peg and Bistrot La Minette as well as the fifth and largest store from Palm Tree Gourmet.
For more, go to bizjournals.com/philadelphia/news/2018/01/19/parkway-corp-buys-garage-at-north-broad-project.html.
Office Sector News
Year End Reports: Rising Rents, Negative Absorption
Three major commercial brokerage firms released year-end reports that largely told the same story.
Colliers International's year-end report counts CBD inventory at 42.3 million square feet, with average class A rents at $30.35 per square foot with a vacancy rate of 10.1% following a year with a negative net absorption of 293,345 square feet.
colliers.com/-/media/files/marketresearch/unitedstates/markets/philadelphia/marketreports/2017-q4-office-philadelphia-report.pdf.
Newmark Knight Frank's office market overview counts 41.2 million square feet in the downtown (not counting University City) with average rents reaching $31.78 on West Market and JFK with a vacancy rate in that district of 12.8% with an overall negative absorption of 292,148 square feet in the downtown. In their January 17, 2018 presentation they highlighted the growing trend of office buildings to offer shared on site amenities like gyms, conference rooms, training facilities and informal social gathering spaces. They predicted 2018 vacancy rates of 13.1%, negative net absorption and moderate growth in rents.
CBRE counted 43.4 million square feet of inventory, with average rents at $29.98 per square foot ($31.55 for class A), and calculated negative net absorption of 363,118 square feet in the downtown for Q4 2017 despite significant new leases from Jefferson, Comcast and the First Judicial District of Pennsylvania.
They note this is partially a by-product of the continuing densification of space-use by office users (more workers bumping elbows in open-plan space). CBRE notes that Philadelphia suburbs saw positive absorption in Q4.
Suburban Office Sales Exceed CBD Sales for 2017
In 2017, $839.45 million in office sales were recorded within the Central Business District (CBD) and $852.23 million in the suburbs, according to CBRE. In part this reflects the larger market share of space with the counties and a larger percentage of inventory sold within the CBD compared with the suburbs. Philadelphia suburbs exceeded the CBD in 2017 with investment sales in every property category except hotels - $3.12 billion in sales in 2017, compared with $1.12 billion in the CBD -according to CBRE year-end data.
Hotel sales in Center City outstripped those in the suburbs, however, with $135 million in 2017 compared to $73.48 million.
For more, go to bizjournals.com/philadelphia/news/2018/01/11/suburbs-reel-in-more-sales-than-central-business.html.
Comcast Technology Center Getting High-Tech Newsstands
A high-tech version of the traditional sidewalk newsstand will be a feature of the Comcast Technology Center building that is set to open later this year.
A pair of 16- by-7.6-foot kiosks will sell newspapers, magazines, coffee and grab-and-go food items. They were designed by London-based architects Foster & Partners, which also designed Comcast's technology tower, and are being built for $1.6 million.
For more, go to philly.com/philly/business/real_estate/commercial/comcast-tower-newsstands-kiosks-foster-20180105.html.
Eds and Meds News
Penn Medicine, Princeton HealthCare System complete Merger
The University of Pennsylvania Health System has completed its acquisition of Princeton HealthCare System (PHCS) after receiving the required regulatory approvals. The deal, first announced in December 2016, gives Penn about $7 billion in annual revenue and strengthens ties that Penn already has to the Princeton, N.J. area, said Ralph W. Muller, CEO of Penn's health system.
The PHCS name will change to Penn Medicine Princeton Health and its affiliated University Medical Center of Princeton will be Penn Medicine Princeton Medical Center.
For more, go to pennmedicine.org/news/news-releases/2018/january/princeton-healthcare-system-joins-penn-medicine.
Tenet Sells Its Last Two Philadelphia Hospitals For $170M
Tenet Healthcare Corp. has completed its sale of Hahnemann University Hospital and St. Christopher's Hospital for Children for $170 million to California-based American Academic Health System.
The hospitals were the last two in the Philadelphia region owned by Dallas-based Tenet, which in 1998 purchased eight area hospitals that were part of Allegheny Health Education and Research Foundation's $1.3 billion bankruptcy. As part of the deal, American Academic and Harrison Street Real Estate Capital partnered to buy four medical office buildings on Hahnemann's Center City campus and the parking facilities at St. Christopher's.
For more, go to businesswire.com/news/home/20180111006129/en/Tenet-Completes-Sale-Philadelphia-Area-Hospitals-Related-Operations.
Temple Online MBA Tops U.S. News & World Report Rankings
Temple University's online MBA program took the top spot in U.S. News & World Report's annual school rankings. Temple's No. 1 ranking was driven by what the magazine called a strong showing in student engagement, faculty credentials and training, and admission selectivity.
In addition to those categories, U.S. News ranked the programs based on peer reputation, student services and technology. This year's report evaluated nearly 1,500 programs, up from about 1,300 last year.
For more, go to usnews.com/info/blogs/press-room/articles/2018-01-09/us-news-releases-2018-best-online-programs-rankings.
Residential Market News
Early Learning Center Signs On At 34-Story Alexander Tower
The Learning Experience will open one of its early education academies in late 2018 on the ground floor of the new 34-story Alexander apartment tower at 16th and Vine streets. The early childhood education center has locations across the U.S. for children six weeks to six years old.
The 11,000-square-foot center will have private access from the residential portion of the building. In addition to classroom space, there will be playgrounds with several areas designed for different age groups. The Alexander has started leasing its 277 luxury apartments, with move-ins starting in February.
For more, go to philly.curbed.com/2018/1/10/16873244/alexander-apartments-learning-experience-daycare-lease.
Report: Most Philadelphia Neighborhoods Haven't Recovered From Recession
Despite the recent building boom in Greater Center City, Philadelphia's housing market in many other neighborhoods has not recovered from the Great Recession, according to a Reinvestment Fund analysis of mortgage data. The report found that while new high-rises are going up in Center City and a handful of neighborhoods like Fishtown and Point Breeze are gentrifying, the market in many other areas of the city remains sluggish.
The report found that conventional mortgage lending remains strong in Greater Center City, but residents of both lower-income and middle-income neighborhoods throughout much of the rest of the city are experiencing difficulty getting conventional mortgages. The weak mortgage market often coincides with elevated rates of foreclosure, eviction and stagnating home prices, the report said.
For more, go to reinvestment.com/wp-content/uploads/2018/01/ReinvestmentFund_HMDA_Final_W-Covers_2018.pdf.
This data confirms trends highlighted in the fall Center City Digest, centercityphila.org/news/center-city-digest-fall-2017, noting how job and population trends are still following older patterns within many portions of the city outside of downtown and University City.
Philadelphia Inquirer Examines Center City Traffic Dangers
An article in The Philadelphia Inquirer about traffic in Center City examined how the downtown's successful growth has led to a negative side effect: increasingly chaotic traffic that creates hazards for pedestrians, bicyclists and drivers.
City officials are in talks with agencies including the Philadelphia Parking Authority and Philadelphia Police Department to develop a plan for street safety enforcement that will likely mean more police devoted to traffic enforcement, The Inquirer reported in a front-page story on Sunday, January 21.
Sharing space in Center City's nearly eight square miles are about 300,000 workers and 188,000 residents, numbers that have grown steadily over the past decade. As noted by CCD President and CEO Paul R. Levy in the article, without adapting enforcement to those realities, the city core becomes a place where aggressive travel behaviors go unchecked.
For more, go to philly.com/philly/business/transportation/philly-safe-streets-vision-zero-police-crash-cops-center-city-20180119.html.
Former Transportation Secretary Decries U.S. Infrastructure Crisis
Former U.S. Transportation Secretary Ray LaHood is urging elected officials from both parties to work together on addressing the country's infrastructure crisis. In an editorial for Newsweek, LaHood said Congress missed an opportunity with its tax reform legislation to inject "much needed revenue into the Highway Trust Fund, which funds highways, bridges and mass transit programs."
LaHood, Transportation Secretary from 2009 to 2013 and currently the co-chair of bipartisan advocacy group Building America's Future, said revenue could come from raising the 18.4-cent gas tax, which has not increased since 1993. He also called for investment in technologies like high-speed rail, and he urged lawmakers in Washington to "work hand-in-hand with mayors and governors to understand what they need for their communities and to grant them the flexibility to achieve those goals."
For more, go to newsweek.com/can-trump-make-infrastructure-plan-bipartisan-reality-768707.
Report outlines SEPTA's $1B plan for new trolleys
A proposed $1 billion overhaul of Philadelphia's six streetcar trolley routes is outlined in a new report detailing plans for larger trolley cars by 2024 and wheelchair-accessible platforms raised above street level that would remake the trolleys into something akin to light rail.
The report from the Delaware Valley Regional Planning Commission notes that the new service would lengthen the distance between stops, instead of the current bus-like system with trolley stops at nearly every intersection. The current 112 trolley cars, which are 53 feet long and as much as 70 years old, would be replaced by 120 cars at least 80 feet long that could hold about twice as many people.
For more, go to philly.com/philly/business/transportation/septa-billion-dollar-plan-to-upgrade-trolleys-make-ada-compliant-20180111.html.
Business Optimistic About 2018
Business conditions improved in 2017 compared with 2016, according to a Federal Reserve Bank of Philadelphia survey of members of the Greater Philadelphia Chamber of Commerce. Respondents also expressed optimism that conditions will continue to improve in 2018.
The annual survey, now in its eighth year, offers a perspective on the region's economic competitiveness and the issues that will affect the business community in the coming year. The survey, which was conducted in December, polled 124 chamber members. When asked about the biggest challenges their businesses currently face, respondents identified domestic competition, labor quality, and the cost of wages and benefits as their top concerns.
For more, go to phil.frb.org/newsroom/press-releases/2018/011918.
PICA: Philadelphia Sees Double-Digit Tax Growth in December
Philadelphia collected $204.5 million in General Fund tax revenue in December 2017, the sixth month of FY2018, compared to $167.1 million in December 2016, a considerable increase of 22.4%, according to the Pennsylvania Intergovernmental Cooperation Authority (PICA).
Increases in all major tax categories except the Business Income and Receipts Tax (BIRT) drove the growth in overall collections for the month. While minor earnings and net profits taxes decreased, a 17.4% increase in the city's portion of total wage, earnings, and net profits taxes ensured the continued double-digit increase in total year-to-date collections. December real estate tax collections totaled $34.3 million -- a 137.9% increase compared to last year.
Through December, BIRT collections fell 3.6%, compared to a projected growth of 8.3%; the real estate tax increased 35.0%, compared to a projected growth of 11.0%; the realty transfer tax increased 36.3%, compared to a projected 3.4% growth rate; and city sales tax collections rose 7.1%, compared to a projected growth of 5.2%.
For more, go to picapa.org/2018/01/just-released-picas-december-tax-revenue-report-2/.
Brookings Picks Philadelphia for Global Identity Project
Philadelphia is one of four U.S. regions selected by the Brookings Institution for a project in which officials will work to create a global identity to help the city tout its economic and competitive strengths to international businesses.
Through the pilot project, a group of business, government and civic organizations will undertake a shared strategy to distinguish Philadelphia in the global marketplace — with the end goal of spurring trade, investment, talent and economic relationships.
For more, go to bizjournals.com/philadelphia/news/2018/01/08/brookings-philadelphia-global-identity-amazon-hq2.html.
Amid Uncertainty, States Again Mulling Gross Receipts Taxes
Cities and states are expected to spark renewed interest in Gross Receipts Taxes (GRT) this year, as they struggle to find new ways to grow revenues amid tight budgets and uncertainty over new federal legislation. However, as reported by Law360, many tax experts and economists contend that GRTs often create more problems than they solve.
GRTs have fallen from favor in the last 30 years for being highly regressive or punitive to those least able to pay them. Seven statewide efforts to replace or revise traditional corporate income taxes with these broad-based levies, which tax a business' total revenue, were rejected in 2017.
Tax Foundation senior policy analyst Jared Walczak told the publication that states seeking new revenue sources should consider broadening sales tax bases to include many untaxed transactions, particularly in the service sector. He noted that "we have a predominantly service-oriented economy but sales tax codes are still stuck in the early 20th century and exempt vast swaths of the economy."
For more, go to law360.com/articles/1000384/states-evaluate-gross-receipts-taxes-to-boost-bottom-lines (account required).
New Grant Program Awarding Tech Problem-Solvers
The NBCUniversal Foundation is partnering with NBC- and Telemundo-owned stations nationwide to launch "Project Innovation," a new grant program recognizing local non-profit organizations that are leveraging technology to solve everyday problems.
This year, $225,000 will be granted to non-profit organizations in each of 11 markets including Philadelphia that are addressing local community issues in an innovative way. Through this competitive grant program, nearly $5 million will be awarded over 2018 and 2019.
Through February 2, applications are being accepted for grants in three categories: Igniting Civic Engagement, Skills for the Digital Economy and STEM/STEAM Youth Programming.
For more, go to nbcu.smartsimple.com/welcome/projectinnovation/?u=1.
Report: Tech's New Hotspots Forming Far From Silicon Valley
The most recent data on STEM jobs – science, technology, engineering or mathematics – suggests that many tech jobs are shifting to smaller, more affordable places far from Silicon Valley that have far lower housing costs and typically have less onerous tax and regulatory rules.
Forbes reports that in the last two years, the STEM growth leader has been Orlando, at 8%, three times the national average. Next are San Francisco and Charlotte (each at 7%); Grand Rapids, Michigan (6%); and then Salt Lake City, Tampa, Seattle, Raleigh, Miami and Las Vegas (each at 5%).
The report concludes that growing dispersal, not consolidation, represents the future of the tech industry. As costs rise and the industry itself evolves, competition for jobs will spread and other regions will appear on the nation's high-tech map.
forbes.com/sites/joelkotkin/2018/01/11/techs-new-hotbeds-cities-with-fastest-growth-in-stem-jobs-are-far-from-silicon-valley
Visit Philadelphia CEO Announces Retirement
Meryl Levitz, president and CEO of Visit Philadelphia, is retiring from her position by the end of the year. Levitz is the founding leader of the organization, which was originally called the Greater Philadelphia Tourism Marketing Corp. Since its first campaign launched in 1997, leisure tourism in the region grew to more than 37 million travelers and many political and business leaders credit Levitz's vision for that success.
It will mark the end of a 40-year career promoting the city for Levitz, who previously worked for the Philadelphia Convention and Visitors Bureau and the Center City Proprietors Association, which she co-founded. Visit Philadelphia will conduct a nationwide search to replace Levitz, whose contract is to end in December 2018.
For more, go to press.visitphilly.com/releases/visit-philadelphia-board-of-directors-announces-leadership-transition-as-founding-president-ceo-meryl-levitz-plans-departure-in-2018.
CCD News
Center City District Restaurant Week Continues Through Friday
Through January 26, more than 120 restaurants throughout Center City are offering three-course dinners for only $35 and three-course lunches for $20.
For a list of participating restaurants, information on parking discounts, to make online reservations and more, go to centercityphila.org/explore-center-city/ccd-restaurant-week.