CPDC Developments Newsletter - 03.05.19

Office Sector News

Decline in local lawyers in Philadelphia's Largest Law Firms

Philadelphia’s largest law firms have increased lawyer head count by 24% over the past decade but the number of lawyers in their local offices have declined by 10% during that time, as many firms expand their national and global reach and contract their local presence, according to an annual survey by the Philadelphia Business Journal. The data are consistent with Philadelphia’s slow overall growth in professional and business services jobs, one of Philadelphia’s largest sources of demand for commercial office space.

There appears to be a recent uptick in the past year or so, as firm-wide head counts increased by 5% and Philadelphia head counts ticked up by 2%, perhaps driven by the strong upsurge in education and health care growth in the last three years.

Coworking Firm 1776 To Open In Brewerytown Apartment Complex

Coworking operator 1776 is opening its next location in an apartment complex that Westrum Development Co. is building in the Brewerytown neighborhood. Called The HUB at 31, it will total 8,000 square feet in the 31 Brewerytown apartment complex at 1410 N. 31st St. The overall development involves a total of 500 apartments and 31 Brewerytown is the last phase of the project.  

It marks the first time 1776 has opened in a residential development and gives 1776 a presence in a neighborhood that lacks an abundance of other office space^. The space will be accessible to residents of the complex and the surrounding neighborhood.

Eds & Meds News

Roche Agrees To Buy Spark Therapeutics For $4.3B

Spark Therapeutics Inc., founded by researchers from Children’s Hospital of Philadelphia (CHOP), has agreed to be sold to Switzerland-based Roche Holding AG for $4.3 billion. The CHOP Foundation will collect about $430 million of that total for its Spark shares – a huge return for the hospital’s $33 million investment since 2013.

Spark said it will continue operating in Philadelphia as an independent company within Roche, a $57 billion (yearly sales) multinational that sells treatments for diseases from acne to cancer. Spark has about 370 employees, with nearly 300 in Philadelphia.

Jefferson Gets $20M For First-Of-Its-Kind Academic Department

Thomas Jefferson University has received a $20 million grant to launch what it says will be the country’s first academic department of integrative medicine, an approach to wellness that combines elements of conventional and alternative medicine.

Jefferson’s Department of Integrative Medicine and Nutritional Sciences will be part of the Sidney Kimmel Medical College. Dr. Daniel Monti, a Jefferson senior vice-president and director of its Marcus Institute of Integrative Health, will serve as chairman.

Penn Nursing Names First Director Of Innovation

The University of Pennsylvania School of Nursing has named Marion Leary as its first director of innovation. Leary previously served as an innovation specialist at Penn Nursing's Office of Nursing Research. Since 2007, she has been a researcher with Penn's Center for Resuscitation Science.

Leary said that one of the main tenets of the newly created position is to engage the entrepreneurship community at Penn and throughout the region “in order to amplify nursing science and innovation more broadly.”

Drexel, Tower Health Sign 20-Year Academic Agreement

Drexel University and Tower Health, having obtained approval for a new four-year regional campus of Drexel University College of Medicine in West Reading near Reading Hospital, have signed a 20-year academic agreement to formalize their partnership.

In October, Tower Health signed a deal with Equus Capital Partners to erect a medical school building at what is known as The Knitting Mills redevelopment project. The medical school building is slated to open in 2021. Reading Hospital's School of Health Sciences will be used as a temporary training site until it is finished.

Retail News

PREIT Predicts 2020 Retail Resurgence, 2021 Continued Growth

After a wave of retail closures both nationwide and regionally, PREIT officials are confident and optimistic about the retail landscape in the years ahead. PREIT Chief Financial Officer Bob McCadden said in the company's Q4 earnings call that the upcoming Fashion District Philadelphia and other projects coming online in the third and fourth quarter of this year will provide “the springboard for growth in 2020 and further growth in 2021."

CEO Joe Coradino stated that Fashion District Philadelphia, which he called the company's "marquee project," will open on September 19. While 85% of the Center City mall redevelopment has been spoken for, about 65% will be online when the center's doors open. The 100,000-square-foot top floor, consisting of an AMC movie theater and a Round 1 bowling alley/arcade, will take slightly longer to deliver.

Bryce Harper-led barbershop-speakeasy mashup, the Blind Barber, to open in Hale Building

The Blind Barber, a barber shop-cocktail lounge hybrid, plans to open its first location outside New York, Chicago and Los Angeles in Center City’s historic Hale Building. The 4,000-square-foot drinking-and-grooming salon will span parts of two floors of the 1887 building at 1326 Chestnut Street, with drink orders from the second-story speakeasy-inspired restaurant available to patrons getting cuts and shaves on the ground-floor barbershop.

The venue, which will be the Blind Barber’s seventh location, is slated to open in the fall. Its entrance will be on the Hale Building’s Sansom Street-facing side. The Blind Barber was founded in Manhattan’s East Village in 2010. New Philadelphia Phillies outfielder Bryce Harper, who recently signed a record-breaking $330 million contract with the team, is a partner in the chain.

Aldi Announces Expansion Plans For South Philadelphia Market

Discount grocer Aldi is set to expand its South Philadelphia store into a neighboring space currently occupied by a Goodwill Industries International Inc. thrift shop, which plans to move into the nearby Whitman Plaza shopping center. This is part of a larger trend of grocery stores following the surge in residential construction in Center City, reported in CPDC’s recent report, Building Out From the Core at

The German-based grocery chain, which owns the Front Street and Oregon Avenue building that it shares with Goodwill, notified the shop last year that it would have to depart its 8,500-square-foot space when its lease expires in March. The Aldi renovations are part of a $1.9 billion company initiative to remodel and expand more than 1,300 stores nationwide by the end of 2020. Remodeled stores feature open ceilings to let in natural light and additional space for fresh produce and other perishable items.

Brandywine Realty's New University City Venture Opens

Brandywine Realty Trust has opened a new venue called The Post, described as a combination game parlor and beer hall, at Cira Garage at 129 S. 30th Street. The Post's executive chef is Richard Cusack, whose previous credits include Le Bec-Fin and Parc.

Transportation News

Op-Ed: Potholes Should Be Seen As A Quality-Of-Life Issue

A commentary essay in this morning’s Inquirer, by a former state and federal transportation professional, suggests that filling potholes is a basic task that government should make a priority. Unlike fighting crime, improving education and eradicating poverty, it is relatively easy to achieve, its “results are measurable, and constituents see and feel the benefits immediately.”

But fixing potholes is not simply an act of will, it is a result of budget priorities. In Philadelphia, pension costs have risen since 2006 from $331.8 million annually to $720 million in FY19, from 9.5% of the City’s budget to 17%. By contrast the entire budget streets and sanitation expenses is currently $143 million and, as noted in CPDC’s report, Keep Philadelphia Moving (page 13), the amount of money devoted to street resurfacing in Philadelphia has been trending downward since 1999.

Almost 40 SEPTA Projects Delayed by Pa. Turnpike Lawsuit

SEPTA officials put almost 40 improvement projects on hold pending the outcome of a lawsuit that could slash a third of its capital budget by this summer. Construction already underway is continuing, but design work on 21 projects has stopped. Those stalled include high-profile projects such as the $1 billion plan to modernize the trolley network with new vehicles and a $59 million renovation of the transit hub beneath City Hall.

In March, a truckers’ trade association and a drivers’ advocacy group filed a federal lawsuit arguing that turnpike tolls are at least 200% more expensive than they should be. The suit also contends that using toll revenue to fund transit violates the Constitution’s commerce clause, which regulates interstate commerce.

City Announces Results of Market/JFK Vision Zero Pilot Project

Over just nine months, a bike lane pilot project on West Market Street and John F. Kennedy Boulevard has reduced the number of speeding vehicles by 12% and increased the number of people biking along Market and JFK by 21%. The information is part of a new progress report on the program from the city’s Office of Transportation, Infrastructure, and Sustainability (OTIS).

A survey by CPDC subsidiary, Central Philadelphia Transportation Management Association (CPTMA), found that 37% of survey respondents feel crossing the street is safer with the pilot improvements. Another 37% said they have the same level of comfort. The report also notes that 76% of area residents surveyed are in favor of the idea of making the pilot program permanent.

Safety Worries Could Delay Electric Scooter Rollout Into Philadelphia

Some Philadelphia officials are calling for a delay in the rollout of a dockless e-scooter program. Noting that four people have died in scooter crashes in the U.S. over the past year, compared to just two using bike share programs over the past nine years, Chris Pulchasky of the Office of Transportation, Infrastructure and Sustainability (OTIS) called for a “more thorough analysis of the benefits and risk to public safety.”

Industry representatives, transportation advocates and some City Council members have said they want to see dockless electric scooters on the city’s streets by summer. Puchalsky said the city wants to work out rules for dockless bike-share companies and learn from the rollout of those programs before moving on to scooters. OTIS will put out proposed dockless bike regulations within the next few months. Dockless electric scooters offer lots of flexibility, but in Atlanta where they are deployed, they can also be found lying on sidewalks and along park trails.

Development News

SEI CEO Planning Contemporary Art Museum In Philadelphia

A group of century-old Philadelphia warehouses is slated to become the home of the West Collection, a 3,100-piece collection of contemporary art assembled by SEI Investments CEO Alfred West Jr. and his daughter Angela West. A construction permit pulled by a company called Frankford Investment LLC details a proposed five-story addition to a property at 1115-27 Frankford Avenue, near Girard Avenue.

The permit also calls for the creation of several floors of “libraries and cultural exhibits,” as well as office space. The West Collection is currently split between multiple locations, including the Kimmel Center and the Montgomery County headquarters of SEI, a financial services firm.

Building Proposal Unveiled For ‘North Station District’

A nearly block-long mid-rise with gridlike windows and a concrete-panel façade is proposed as the first building to rise as part of a development plan for the blighted area around Amtrak’s North Philadelphia station. The project’s backers, which include HFZ Capital Group of New York, acquired the project site for $2.1 million in mid-2016 from Amtrak and SEPTA.

The 10 North Station building, which would run along the south side of Indiana Avenue from Broad Street until close to 15th Street, would be the first project of what could be 1.7 million square feet of new homes, research labs, and offices on now vacant warehouse and empty lots. North Station District LLC, the consortium of real estate investors behind the planned development, is scheduled to present its plan for the seven-story building with 135 dwelling units and ground-floor retail to the Civic Design Review board tomorrow, March 5.

Preservation Alliance Seeks Historic Designation For Jewelers' Row 

The Preservation Alliance for Greater Philadelphia is seeking to have Jewelers’ Row designated as a historic district. If the Philadelphia Historical Commission approves the designation, the commission would potentially have jurisdiction over the final design of a planned 24-story condominium tower by Toll Brothers on the 700 block of Samson Street.

In 2017, Toll received a permit to raze six buildings along Jewelers’ Row for the tower. Property owners in support of the Toll development view the Preservation Alliance’s request for historic designation as overreach and plan to contest it.

Residential Market News

City Expands Program for Middle-Income Residential Construction

The Philadelphia Redevelopment Authority is expanding a program designed to encourage more private investment in development projects that serve people who earn between 100% and 120% of area median income — or $87,400 to $104,880 for a family of four. The program, called the Workforce Housing Credit Enhancement, acts as a loan guarantee for income-restricted housing projects that utilize public land.

For qualifying projects, the PRA will secure up to 25% of construction loans up to $3 million, capping the guarantee at $750,000 per project. The Redevelopment Authority said the goal is to reduce the risk that private lenders take on when they finance income-restricted projects, with the hope of encouraging them to make more financing for workforce housing available overall.

Plans Revealed For Smaller Dilworth House Condo Tower

After about a decade of court battles with neighborhood associations, a developer has released revised plans for a smaller condo tower on the site of the Dilworth House on Washington Square. In 2001, developer John Turchi purchased the historically protected home and later unveiled plans for a 16-story condo tower.

The project was stalled amid opposition from the Society Hill Civic Association. Now, Turchi and Cope Linder Architects have a new plan for a shorter tower, 12 stories in height, on the property. It would sit on a narrow parcel between the existing historic house and a two-story parking garage. The proposal goes before Philadelphia's Art Commission on Wednesday. The Preservation Alliance has said it will not oppose this iteration of the condo tower plans.

60 Rowhouses Planned For Waterfront Parcel Near SugarHouse

A real estate investment group based in Northern Liberties is seeking permits to build 60 four-story rowhouses on the Delaware River waterfront parcel to the immediate north of the SugarHouse Casino. Shovel Ready Projects LLC is scheduled to present its plans for the 1.5 acre property at 1121 N. Delaware Avenue, currently home to the Henry Stewart Co. wire rope warehouse, to the Civic Design Review board on Tuesday.

Shovel Ready, whose principals include former Electric Factory Concerts co-owner Adam Spivak, has the warehouse property under contract. The city seized an easement to a waterfront section of the property through a condemnation process in 2017 for part of the bicycling and walking trail under construction along the Delaware River from Fishtown to South Philadelphia.

Two Residential High-Rises Planned In North Philadelphia

An affiliate of Philadelphia-based Hightop Real Estate & Development has plans for a pair of residential high-rises in North Philadelphia’s Poplar neighborhood. APOM Holdings LLC is scheduled to present plans for the 388-unit project to the Philadelphia Civic Design Review board on Tuesday.

The plans call for one 11-story structure that would span north from Poplar Street to cover most of the block between Darien and 9th streets. A second, narrower 11-story building would rise at Poplar Street between Darien and 8th streets. Parking for residents would be underground and on the buildings’ first floors, although the first floors also would accommodate some retail spaces.

Opportunity Zone Spurs Kensington Residential Project 

Civetta Property Group is developing a new apartment building on York Street in the Kensington neighborhood that is taking advantage of the new Federal Opportunity Zone program. Civetta bought a former machine factory at 2120 E. York St. and razed the building to make way for a 52,000-square-foot building that will have 56 apartments with 6,000 square feet of retail space. The $12 million project is being funded with $8 million of equity from PNC Bank Opportunity Zone Fund and $2 million in debt. 

Opportunity Zone projects are expected to increase this year as more developers and investors become familiar with the program. Of 8,700 areas nationwide that now have Opportunity Zones, 300 census tracts were designated in Pennsylvania; 82 of those are in Philadelphia.

Government News

Domb Proposes 10-Year Tax Abatement Modification

City Councilman Allan Domb, who is running for re-election, has introduced legislation to shrink Philadelphia’s 10-year property tax abatement. Domb’s bill proposes reducing the size of property tax abatements by diminishing the benefit in 25% increments over its last three years 75% (year 8), 50% (year 9), 25% (year 10), phasing in the tax liability in the closing years and reducing the overall value of abatement by 15%.

Domb noted that he offered this compromise to address the concerns of opponents, but still recognizing that the subsidy is needed to make the numbers work. An April 2018 report by the City Controller noted that Philadelphia union labor costs add a 35% premium to construction costs in Philadelphia and when combined with low income in many areas, the economics of market-rate housing construction don’t work in 70% of the Zip codes in Philadelphia.  LINK to Rebecca’s report

City Council Consider Establishing New Traffic Safety Officers

City Council is hearing testimony today on proposed legislation to establish a new category of employees within the civil service system to be designated as Public Safety Enforcement Officers, whose primary role would be would be to support the Police Department in regulating the flow of traffic during normal business hours.

Among those testifying in support of the measure, which requires an amendment to the City Charter, is CCD President Paul R. Levy, who noted that “traffic congestion is a product of success. It is a good problem to have. However, it’s a problem we need to manage or we will choke on congestion and unravel the gains we have made.”

As noted in CCD/CPDC’s March 2018 congestion report, Keep Philadelphia Moving, the increase in office buildings, the addition of the Pennsylvania Convention Center, new tourist destinations, hotels, apartment buildings, retail and restaurants has led to an increase in car traffic, bus traffic, truck traffic and a 30% increase in pedestrians since the end of the recession.

PICA: General Fund Revenue Collections, Expenditures Rise In Q2

Revenues for FY2019 are projected at $4.6 billion and expenditures are projected at $4.8 billion, according to PICA’s new analysis of the City of Philadelphia’s Quarterly City Managers Report (QCMR) for the second quarter ended December 31. These estimates increased over the projections in the FY2019-FY2023 Five-Year Plan by $20.8 million and $77.9 million, respectively.

The estimated year-end General Fund balance for FY2019 is projected to total $222.7 million, $83.2 million higher than in the Five-Year Plan. As revenue projections decreased in Q2 and expenditure projections increased, PICA said it appears that expenditures may once again outpace revenues in FY2019.


CCD/CPDC’s Annual Housing Report: Building Out From the Core

In 2018, 2,810 new housing units were completed in Greater Center City – the largest number since Center City District began tracking the market almost 20 years ago. Strong growth is continuing at the beginning of 2019 with 3,017 more housing units under construction in Greater Center City, based on a new 20-page report from CCD/CPDC, Building Out From the Core: Housing Report 2019.

The majority of housing built in and around the downtown during the past eight years focuses on renters: 72% of the new housing units added since 2010 are apartments (10,660 units); 4,143 for-sale condominiums and single-family homes were delivered during the same period. New housing development is highly concentrated in limited areas: 46% of new units in Philadelphia are in Greater Center City, and 80% are being built in Greater Center City or its five adjacent ZIP codes – an area comprising just 17% of the city’s geography.