Philadelphia
continues to prove that it is a destination for companies, tourists,
conventions and real estate investment, but the positive trajectory the city is
on is a tenuous one and may not last if some long-standing issues continue to
go unaddressed, according to Center City District’s newly issued annual State
of Center City report.
“...The
status quo is unacceptable— with high unemployment and chronic poverty in too
many communities,” said Paul R. Levy, president and CEO of the special
services district in the forward to the report. “Once again, it takes committed
leadership willing to acknowledge challenges and take risks.”
The
inroads Philadelphia made in the last year and the culmination of the last
decade is remarkable and CCD’s annual report highlights many of those
achievements. Among the most notable is the extraordinary and unprecedented
investment in real estate, much of which is driven by demographic and
re-urbanization trends. More than $8.5 billion in major developments were
either completed last year or now in the pipeline. Those developments combined
to total 27.8 million square feet of new space.
When
broken down, it shows:
·
Eleven
projects totaling $200 million were completed in Center City last year;
·
Forty-two
projects valued at $5.2 billion were under construction; and
·
Twenty-nine
projects totaling $3 billion have been announced.
·
Residential
projects account for the bulk of the developments. Half of the 82 projects that
the annual report has tallied are mixed-use with a large residential component
and 11 are solely residential. There are 10,721 residential units that have
been completed or in the works. A lingering question continues to be whether
demand will keep up with supply.
Other
sectors are also getting an infusion of new construction such as lodging. There
are 2,772 rooms being added to the city. More than 3.5 million square feet of
commercial space — Comcast's new skyscraper is 1.5 million square feet of that
— and more than 2.8 million square feet of retail space are also being added to
the city.
Much
of the new development is being driven by the city’s population growing by 17
percent since 2000, which is a notable reversal of a decades-long trend of
Philadelphia losing residents mostly to surrounding suburbs. Tourists and
conventioneers visiting the city, the growth in eds and meds, and the modest
expansion of the private jobs sector also have contributed to the onslaught of
new construction but therein lies the fissures that threaten the progress that
has been made.
“Job
growth remains uneven,” Levy said.
While
some areas, such as health services and education, are up, professional and
business jobs are down with finance, real estate and communications showing
sharp declines.
That
lack of job growth has essentially depressed average office rents. While office
space in Midtown Manhattan goes for $80.97 a square foot, $55.60 a square foot
in Boston and $51.35 in Washington D.C., the highest rents in Center City are
$29.18 a square foot.
That's
the way it has been for decades.
While
some will argue that stagnate rent growth is what makes Philadelphia so
affordable, it actually highlights the city's shortcomings. In other words,
it's not a compliment to be so affordable. The city has 28 percent fewer jobs
than it did in 1970 and remains 5 percent below levels from the 1990s.
“Since 2010, large cities have outperformed
the overall economy,” the CCD report said. “Nationally, while private-sector
jobs have grown annually at 2.1 percent, the 25 most populous cities grew at
2.7 percent per year. Philadelphia has lagged at 0.9 percent per year.”
While
the hospitality sector also appears to be thriving, there are cracks there.
Even though the city’s hotel occupancy rate last year stood at a record 76.7
percent with 3.1 million occupied hotel rooms, the average daily room rate of
$182 declined when adjusted for inflation. Why? A lack of business travelers
and the departure of corporate headquarters from the city.
Other
worries include the poor public schools and the high rate of poverty.
“It’s
time,” as Levy said, “to stop settling for second-rate growth and create many
more opportunities for all city residents, new immigrants and for graduates of
our colleges and universities.”
Source: Philadelphia
Business Journal
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