Dranoff, real estate experts say market depends on Millennials

The Millennial generation will drive the momentum of Philadelphia's real estate market forward, playing a major role in the decision-making of real estate experts such as Carl Dranoff, Angelo Perryman, John Connors, Doug Rodio, Larry Steinberg and Pete Soens. They offered their insight on the region's real estate future Thursday morning during a Philadelphia Business Journal panel at the Hard Rock Café.

The rising population of Millennials in Philadelphia, coupled with the stagnating population of Baby Boomers, is drawing companies to buy real estate in the city's more central locations, despite higher taxes.

"The turnover in tenancy is dramatic," said Larry Steinberg, senior vice president at CBRE. "The new tenants showing up on the street on these blocks — Timberland, New Balance, Under Armour — are all in response to the Millennial power that our city is seeing. The retailers are reacting and they are paying record rents for the privilege of being here."

Soens, a partner of SSH Real Estate, added that Philadelphia's quality of life and its amenities are keeping talented job-seekers around, so companies are inclined to open their wallets for prime office space.

"Paying these taxes, companies are more willing to do it. When I started 20 years ago, why would you pay more to be in the city? The city was dead. That's not the case now," Soens said.

Companies, hungry for the best young talent, are purchasing office space, while the retail industry is also expanding, especially east of Broad Street.

The trending popularity of the city has created a healthy marketplace, but the outlook two or three years down the road is slightly less certain.

"What will our job creating look like?" said Dranoff, founder of Dranoff Properties. "If you compare Philadelphia to Boston, New York and Washington, our job pace in 1970 went down by about one-third before we started to climb back up again. We only have about 70 percent of the jobs we had in 1970. Boston has surpassed the amount in 1970. They had the same decline."

Dranoff said the issue will be keeping Millennials and Baby Boomers in the city. Boomers are closer to retirement and seeking one-floor residences. Millennials are mostly renting, but soon they'll be starting families. With high taxes, a poor school system, a tight job market and rising poverty level, factors exist that could drive this generation away.

Businesses must also battle these issues if they're to decide an investment in Philadelphia is the right one. For this reason, the future of Philadelphia real estate will then largely depend on the future of Philadelphia politics.

Dranoff implored the audience to vote for a business-friendly mayor and City Council members next November.

"Our legislative body in Philadelphia is anything but pro-business," he said. "Let's incentivize developers to go into neighborhoods that need investment. And let's collect some of our back taxes. Is there anything wrong with selling PGW? It would put half a billion dollars into our pension funds and would lower our taxes because our taxes go into unfunded mandates on our pension fund."

Source: Philadelphia Business Journal