OFFICE SECTOR NEWS
CBD Closes 2018 With 2.4M SF Of Additional Office Space; Most Leased
The delivery of new supply brought vacancy in the Philadelphia CBD in Market West and University City up to 11.4% and 11.2% respectively, JLL noted in its recent Q4 highlights overview. But this uptick is likely to be temporary as leases are signed that will occupy most new space by 2019’s end. Philadelphia’s CBD closed out 2018 with 2.4 million square feet of additional office space, most of it leased, with the asking rental rate at $31.79, up 4.1% year-over-year.
The end of 2018 saw 2400 Market Street and 3675 Market Street both open for business, with anchor tenants already moving in and additional leases set to all but fill up both buildings. JLL noted that the successful lease-up of these buildings returns the CBD to a familiar place: few large block options for tenants seeking newer or renovated spaces. This may compel renewals-in-place in the near-term.
Phila.-based fintech startup sets up at Center City co-working space
Blockchain fintech startup Nth Round has a new Center City home. Nth Round, which offers a liquidity platform to private companies interested in marketing to a pool of approved, potential shareholders, is now operating out of one of The We Company's WeWork location at 1900 Market Street.
Nth Round, which formed last year following venture funding from New Enterprise Associates, says its platform gives private firms a chance to raise money while keeping control with the original shareholders. The company currently has eight full- and part-time employees.
EDS & MEDS NEWS
Temple University is in talks with Thomas Jefferson University about a potential sale of Fox Chase Cancer Center to Jefferson. Officials from Jefferson, home to the Sidney Kimmel Cancer Center, and Temple, home of Fox Chase, have agreed to exclusively negotiate the possibility of a deal over the next 90 days.
The intent is to determine if the acquisition of Fox Chase will better serve the needs of cancer patients, the community and each organization’s strategic goals. The due diligence period will also include evaluation of the sale of Temple’s interest in Health Partners Plans, a Philadelphia-based managed care health insurer.
Group K Diagnostics Moves To Larger HQ In Center City
Group K Diagnostics has moved its headquarters to a combined 3,000-square-foot laboratory, manufacturing and office space in Center City. The biotech startup’s combined office and lab space is near the corner of 10th and Chestnut streets. The company previously had its offices at 16th and Market streets and its lab space in University City.
Last month, Group K completed clinical trials at Penn that showed its liver function test was highly accurate while also returning results more quickly and affordably than traditional testing methods. The company plans to submit its findings to the FDA when the federal government reopens.
Group plans 14-story hotel on North 15th Street
A 14-story high rise with a hotel, café, and lounge is being proposed at 127 North 15th Street, replacing a series of townhouses on the east side of the street, just north of the Metropolitan residential tower. A zoning permit was issued last month for the hotel, dubbed the Revival. The hotel would include 64 guest rooms, a roof deck, a lobby cafe and a fitness center.
Property owners and New York-based developers Cherry Orchard LLC are overseeing the project, with assistance from Philadelphia-based DAS Architects.
Lokal Opens Second Boutique Hotel In Philadelphia
The Philadelphia-based parent company of "invisible service" boutique hotel Lokal will open its newest property in the city today, January 21. The Philadelphia hospitality company in 2017 opened its first hotel in Old City, reusing a historic property on North 3rd Street into a hotel with six apartment-style suites.
Designed by Philadelphia-based True Hand Society, the new five-unit Lokal Hotel on the 1400 block of Front Street includes fixtures made or supplied by over 20 small businesses based in the city. The hotel also adds to Greater Philadelphia lodging market, for which demand outstripped supply in 2018.
North Broad Street’s Historic Blue Horizon To Become Hotel
The historic facade of the Blue Horizon building on North Broad Street is to become the face of a new “micro-hotel” under Marriott’s millennial-focused Moxy brand, opening a new chapter for the storied North Philadelphia boxing venue site.
Plans call for a five-story building that would rise behind the facade of the 154-year-old building at 1314-16 North Broad Street. The Philadelphia hotel will comprise 140 guest rooms. The $22 million project is being developed by a partnership between Orens Bros. Real Estate Inc. and Mosaic Capital Partners, both of Philadelphia.
New Retail Concept Coming To Fashion District Philadelphia
This year, Fashion District Philadelphia will incorporate a new retailing concept that will bring brands conceived and nurtured online into a brick-and-mortar space. Developed by Macerich Co. and called BrandBox, the concept first rolled out last November at Tysons Corner Center in Virginia. Macerich now plans to bring it to additional locations including Philadelphia.
BrandBox differs from pop-up stores in that the retailers will have an actual store space that is fit out to support the brand’s aesthetic. Pop-up stores are temporary spaces that can come and go seasonally or be maintained for a short-term as a fledgling retailer experiments with introducing a product to a market.
German Grocer Lidl Moves Forward On Purchase Of Waterfront Site
Lidl, the German discount grocer, could begin work in as soon as five months on its supermarket planned for part of the Delaware River site where a Foxwoods Casino was once proposed. A representative from Lidl’s U.S. operations said the company hoped to begin work as soon as it completes its purchase of the property, east of Christopher Columbus Boulevard between Reed and Dickinson streets.
The acquisition is contingent on Lidl’s getting all the permits it needs for the project, a process expected to take five to nine months. The market planned for the site will have around 36,000 square feet, among Lidl’s largest store formats for the U.S.
Giant's first Heirloom Market opening in Center City
Giant Food's first small-market concept grocery store in the U.S. will be opening in Philadelphia on Jan. 25. The specialty Giant Heirloom Market at 2303 Bainbridge Street is the supermarket chain’s first effort to shift toward an urban shopping model. The trend is most visibly led by Target, which has opened several small-format stores in Center City over the past few years.
The Heirloom Market’s selection of products is based in part on feedback from local residents and will include a range of products from local purveyors, including High Street on Market, Isgro Pastries, One Village Coffee, and Sarcone’s Bakery.
Building at 23rd & South Redeveloped As Amazon Pick-Up Center
Amazon has opened a new pick-up center where neighbors can pick up online orders, rather than having unattended packages left on their doorsteps.
The 10,000-square-foot facility and adjacent parking lot – located at the convergence of 23rd Street, South Street, and Grays Ferry Avenue – is the second staffed Amazon pickup spot in Philadelphia, the other one being on the University of Pennsylvania campus. The historic two-story building at 2300 South Street was originally a silent movie theater.
SEPTA Fears Serious Budget Woes If Motorists' Lawsuit Succeeds
SEPTA is bracing for a possible $63 million shortfall in its capital budget in 2019, pending the outcome of a federal lawsuit lodged by two motorists’ groups. The lawsuit imperils funding set aside by Act 44, 2007 legislation that diverts some toll revenues from the Pennsylvania Turnpike Authority to PennDOT for multimodal projects.
The Owner Operator Independent Drivers Association and the National Motorists Association sued the state, holding that it was illegal for Turnpike revenues to pay for anything but highway maintenance. The suit seeks to refund Act 44 payments to transit agencies since the bill took effect.
Frontier Airlines Adds Five New Flights From PHL
Frontier Airlines will add five new routes in late spring to from Philadelphia International Airport to Raleigh-Durham N.C.; Atlanta, Las Vegas; Myrtle Beach, S.C.; and Pensacola, Fla. With the moves, the low-cost airline will reinforce its position as PHL’s second-largest carrier by the number of nonstop destinations, next to the region’s top carrier, American Airlines.
The Denver-based airline expects to employ between 400 and 500 people in Philadelphia by the end of the year. Frontier already has a flight attendant base in Philadelphia, and will soon open a pilot base as well.
Sun Country Airlines To Start Nonstop Flights From PHL
Budget carrier Sun Country Airlines plans to begin nonstop service between Philadelphia International Airport and Minneapolis-St. Paul International Airport starting April 18. The Minnesota-based carrier flies to more than 80 destinations in the United States, Mexico, Central America, and the Caribbean.
RESIDENTIAL MARKET NEWS
Historic Mixed-Use Property In Old City Sells For $3.7M
Rittenhouse Realty Advisors has sold 248 Market Street for $3.7 million. The property, which consists of six residential apartments and two ground floor commercial units, traded for over $450,000 per unit.
Rittenhouse Realty said the property, located on the corner of 3rd and Market streets, sold to an overseas investment group with local ties.
Chinatown Lot Where Greyhound Parks Buses Is Sold
A surface lot in Chinatown, for decades controlled by the same owner and used by Greyhound Lines to park its buses, has sold. The Philadelphia Business Journal reports that the 12,400-square-foot paved lot at 1018 Arch Street, along with a 1,485-square-foot building 44 N. 10th Street currently leased by Discover Travel, sold together for $8.4 million.
The parcel is zoned CMX-5, which allows for dense development, and the Business Journal reported that the buyer plans to begin the pre-development process during the next year. The site is a short walk from Fashion District Philadelphia, Reading Terminal Market, the Pennsylvania Convention Center and Jefferson Station.
REIT Plans Mixed-Use Redevelopment Of Riverview Plaza
Cedar Realty Trust wants to transform its aging Riverview Plaza strip mall in South Philadelphia into a waterfront development of luxury apartments, shops and restaurants, anchored by the center’s soon-to-be-reborn movie theater. The real estate investment trust, based in Port Washington, N.Y., plans to begin work this year on its first phases of redevelopment at the shopping center on South Columbus Boulevard.
Cedar Realty Trust plans to redevelop the center over seven to 10 years in three phases, the first two of which will consist of about 260 apartments and 125,000 square feet of retail. The updates are set to begin with a $12 million renovation of the UA Riverview Plaza movie theater by owner Regal Cinemas.
City Controller Report Criticizes OPA Methods, Urges Tax Reform
A wide-ranging new report from City Controller Rebecca Rhynhart calls on the Office of Property Assessment (OPA) to overhaul its methods for determining land values, and suggests Adminstration officials use increasing real estate tax revenues to reduce the city’s dependency on business and wage taxes.
The report calls for OPA to address its assessment shortcomings in the places where it performs the worst -- often poor neighborhoods where declining values cause properties to be overassessed. It also urges the OPA to undertake annual reassessments “that would mirror annual market trends – rather than dramatic single-year increases like tax year 2019,” to make public its exact methodology for setting land values, and to resolve the “lack of uniformity and the arbitrary nature of land valuations.”
Specifically, the analysis found in tax year 2017, rather than using the long-held policy of relying on an outside expert to calculate land value based on location and lot size, “it appears that the OPA often applies a fixed percentage, typically 15% or 30%, of total (property) value to determine land value.” The analysis also found systematic differences in land assessments for properties with and without the 10-year tax abatement, a difference of about $23 per square foot in up-charge for abated properties compared to non-abated properties.
The report concludes by urging the Kenney administration and City Council to engage in broader conversations about tax reform. Noting the connection between Philadelphia’s high wage tax and the weak job creation, Rhynhart concludes that “(e)armarking a portion of property tax revenue to implement more significant wage tax reductions would address a long-standing problem with the city’s tax structure while stimulating job growth.”
PICA: FY2019 Revenues Still Below City’s Projections
The City collected approximately $212.3 million in General Fund tax revenue in December, compared to $203.1 million in December of last year an increase of 4.6%, according to the Pennsylvania Intergovernmental Cooperation Authority (PICA).
Strong wage, earnings, and net profits and business income and receipts (“BIRT”) tax collections for that month resulted in an overall increase in December collections of almost five percent. Through the first half of the fiscal year, there was only one month (November) where total collections decreased over FY2018, ensuring year-to-date collections also increased over the previous year. However, a considerable decrease in real estate tax collections kept year-to-date collections below what the city projected in its most recent quarterly report.
Through December, the business income and receipts tax (BIRT) decreased by -4.3%, compared to a projected growth of 12.9%; the real estate tax decreased by -15.9%, compared to a projected growth of 3.5%; the realty transfer tax decreased by -0.3%, compared to a projected 6.5% growth rate; and the city sales tax collections decreased by -0.7%, compared to a projected growth of 3.0%.
Philadelphia Halts Most Public Land Sales, Pending Reforms
The Philadelphia Redevelopment Authority has put the brakes on a large portion of public land sales, in the wake of a Philadelphia Inquirer report that revealed political interference and ongoing undervaluation in the land dispensation process. The city owns about 8,500 properties, of which 93% are vacant lots.
All land held by the city's property department is sold through an opaque process that requires approval of the Vacant Property Review Committee. Staffed by City Council and mayoral appointees, the committee has become a symbol of the city’s informal tradition of “councilmanic prerogative,” wherein Council members can influence real estate transactions and land use decisions in their districts.
Help CCD’s Homeless Outreach Effort
Center City District is asking for your assistance with expanding a public information campaign developed in partnership with Project Home. The first ads (titled, “Your Story Doesn’t End Here”) are now running on 70 transit shelters in Center City and on many SEPTA transit lines. Formerly homeless individuals speak to those still living on the street, encouraging them to accept help and services.
The second part of the campaign features counter cards and postcards, for display inside hotels, office buildings and retail establishments, and featuring photo portraits and success stories of the same five formerly homeless people explaining: “My Story Didn’t End on Philly’s Streets. Help Others Find a Way Home.” The ads outline how members of the public can help by distributing to people living or panhandling on the street information cards, which provide the locations where those in need can get meals, services and access to housing. The materials also provide the public with a list of organizations to which they can direct their charitable donations to help fund this effort.
This spring will be restarting and significantly expanding our combined outreach program that helped get 137 individuals off the street in 2018. This ad campaign is designed to complement and reinforce the outreach effort.
We welcome members of the business community to join in our efforts to make progress on this major challenge. Please contact JoAnn Loviglio at email@example.com or 215-440-5546 to request counter cards (with tear-off pads) and/or postcards for distribution to your members in Center City. Deliveries can be arranged to individual business locations to maximize the visibility of this effort.