Office Sector News
Penn Medicine Building In Center City Sells At Record Valuation
University of Pennsylvania Health System has purchased the 800 Walnut Street medical tower for the equivalent of $648 per square foot. Penn Medicine, as the hospital network is known, acquired the 12-story, 153,242-square-foot building from Liberty Property Trust for $99.25 million.
Liberty developed the 800 Walnut Street medical office building in 2013 for Penn Medicine to occupy as a tenant. The building’s retail and parking garage sections are under separate ownership and not part of the transaction.
Neighborhood Group Supports Center City Tower
Parkway Corporation is receiving positive reviews from the Center City Residents Association (CCRA) on its proposed tower at 23rd and Market streets for law firm Morgan, Lewis & Bockius. The firm is looking to anchor the 18-story tower, planned to occupy most of the southern side of the 2200 block of Market Street at a cost of $175.9 million. The law firm is currently located at 1701 Market Street.
Members of CCRA met with the developer last month and are “encouraged by the general outlook” of the proposal, The Philadelphia Inquirer reports. Architectural renderings by design firm Gensler show a glass-and-brick building divided into six horizontal sections offset over one another to form terraces and overhangs.
Cira Centre’s “State Of Flux”
An article in the Philadelphia Business Journal examines the “coming of age” of the Cira Centre, which opened in 2005 and is facing the lease expirations for its largest tenants at the same time as Keystone Opportunity Improvement Zone tax exemptions have expired.
The story noted that about 150,000 square feet will be turning over “at a time when trophy and Class A office space is scarce, there’s plenty of demand and downtown rents are hitting a zenith.”
Eds & Meds News
Temple Examining Options For Developing Podiatric School Location
Temple University is gauging developer interest in its School of Podiatric Medicine in Center City. The school has issued a request for information from real estate firms seeking to redevelop the two buildings occupied by the podiatric school campus at 8th and Cherry streets, the Philadelphia Business Journal reports. Proposals are due to Temple by mid-July.
Temple owns the 148 N. 8th Street and 801 Cherry Street buildings, with a combined total of 89,429 square feet. A large portion of the site is located in a Federal Opportunity Zone. The school said its goals are to create new or renovated facilities to attract and retain students, and to generate a new revenue stream to help finance the school's mission. Under any scenario, Temple noted that it must continue to be operational and meet certain basic requirements, such as providing student housing.
Philadelphia Location Is Fueling Jazz Pharmaceuticals' Job Growth
Less than a year after Jazz Pharmaceuticals predicted that its Center City staff would top 200 by 2020, the company has already surpassed that mark. The Philadelphia Business Journal reports that Jazz currently has 220 people in its recently expanded offices at 2005 Market Street and another 20 open positions.
Most of the new hires for the Philadelphia office work in research and development, an area that Jazz is looking to grow, or in commercial operations. Jazz, which has its headquarters in Dublin, Ireland, is in the process of taking over much of a third floor at Commerce Square to handle its growth. This is part of a broader trend in which educational and medical institutions are accounting for a growing share of Class A office occupancy.
Cell Therapy Startup Launches With $250M In Commitments
Corporate and venture capital investors have committed $250 million into Philadelphia cell therapy startup Century Therapeutics LLC to finance an effort to cure cancers through a new type of cellular therapy.
Versant Ventures of San Francisco, Tokyo-based Fujifilm Cellular Dynamics Inc. and Bayer AG in Germany are investing in Century Therapeutics, which seeks to engineer immune cells to attack cancer. Century, which is based in University City, said its foundational technology is built on stem cells that can be generated from adult stem cells and have "unlimited self-renewing capacity."
Hahnemann University Hospital Slated To Close By Year’s End
Hahnemann University Hospital is seeking to close by the end of the year, according to bankruptcy filings from American Academic Health System (AAHS), which bought the Hahnemann and St. Christopher’s Hospital for Children last year for $170 million. St. Christopher’s is not slated for closure.
The 496-bed hospital in the heart of Center City employs about 2,500 people and is the primary teaching hospital for Drexel University’s medical school. If the Hahnemann campus is redeveloped, it would join a growing number of financially troubled hospitals to be shuttered in Philadelphia, only to reopen with a new identity. The property’s large size – seven medical buildings and a parking garage covering nearly six acres – and its central location will likely give its potential redevelopment a much higher profile than similar cases.
Philadelphia Announces Push To Be 2026 World Cup Host City
Philadelphia is vying with 23 cities to become one of 16 to host World Cup soccer matches in 2026. The matches will be held in the United States, Canada and Mexico. Philadelphia leaders have unveiled components of a marketing campaign for attracting the event that includes a website and social media campaign touting the city, its sports culture and its experience in hosting large events.
The Boston Consulting Group has estimated that individual 2026 World Cup host cities can expect to see up to 450,000 visitors who could generate approximately $70 million in direct visitor spending and an estimated $190 million in direct impact. The final cities are expected to be named by 2021.
Hotel Association Seeks To Extend Hospitality Levy
Discussions are underway to extend a hotel fee that was established to attract major events and conventions, and is set to expire in 2022. The Philadelphia Hospitality Improvement Levy neighborhood improvement district is funded by a 0.75% assessment rate on top of a hotel's daily rate.
The Greater Philadelphia Hotel Association said the initiative has funded about 100 events with an economic impact of $1.7 billion since it took effect in January 2018. The total five-year budget amounts to just over $32.1 million. Funding is authorized through 2022, but officials are already in talks with City Council in an effort to extend it.
The hotel industry in Center City is lagging from its performance in 2018, when hotels hit all-time highs in occupancy, average daily rate and revenue per available room. Hotel demand grew in each month of 2018 from the previous year, but demand and occupancy in 2019 have dropped every month in year-over-year comparisons.
Report: Congestion Costs Philadelphia $152M A Year
Congestion in Philadelphia has cost the city and its residents $152 million in annual time and revenue lost to traffic and transit delays, according to a new study commissioned by SEPTA and conducted by EConsult Solutions.
According to the report, 9.7 million hours are lost each year due to bus and car passengers sitting in traffic. Additionally, 15,700 potential jobs and $1.08 billion potential earnings are associated with lost productivity from congestion in the city. These delays, according to the report, also cost SEPTA more than $15 million in additional operational and overhead costs.
As noted in CCD/CPDC’s 2018 congestion report, Keep Philadelphia Moving, the increase in jobs and residents, new tourist destinations, hotels, retail and restaurants has led to an increase in car, bus and truck traffic and a 30% increase in pedestrians since the end of the recession. CPDC, along with the Philadelphia Police Department, expressed support for the addition of traffic enforcement officers to relieve downtown’s worsening congestion, as did 69% of Philadelphians who voted in the May primary election.
Amtrak Seeking To Raise SEPTA’s Yearly Rent From $1 To $1.5M
Amtrak is seeking to revise the 32-year rent agreement in which SEPTA pays $1 annually for use of the rail carrier’s tracks for three Regional Rail lines used by 11,000 SEPTA customers a day. A lawsuit filed by Amtrak is asking a federal judge to raise the rent to $1.5 million.
The disagreement is over the lease of the land alongside the tracks, not SEPTA’s use of the tracks themselves. SEPTA currently pays a $50 million annual operating fee to Amtrak and covers maintenance of the sites and any upgrades. The transit agency estimates that it has spent $4 million in three years keeping up properties on the land and $228 million in capital improvements over the last 15 years.
Residential Market News
New Project Designed For Seniors To Rise In Center City
A 24-story residential tower designed with aging baby boomers in mind is coming to the heart of Center City. A building permit filed by Brickstone Realty Trust details a 300-unit structure, including 60 assisted-living beds, and an 84-car underground garage. The project will rise at 12th and Sansom streets, replacing a two-story parking garage that will be demolished.
The building, to be owned and operated by Benchmark Senior Living, will also include 80 bike parking spots and retail space on the ground floor. The complex would be age-restricted to residents 62 years or older, tapping a growing demographic of retirees leaving the suburbs for Center City’s walkable downtown and its ease of access to shops, restaurants and cultural institutions.
30-Story Mixed-Use Tower Planned On North Broad Street
A 30-story mixed-use apartment building, dubbed Mural West, is planned for a site that is now a parking lot at 523 North Broad Street on the north side of Spring Garden Street. Plans call for ground-floor retail and 290 residential units on the upper stories. Also included on the lot is a separate, one-story restaurant and 24 on-site parking spaces.
Designed by AOS Architects and developed by EBRM, the group behind the Divine Lorraine renovation, Mural West is the latest proposal in a recent boom of development along North Broad.
Mixed-Use Development Planned For Passyunk & Washington
A six-story mixed-use development has been announced for a long-vacant triangular lot at Passyunk and Washington avenues. The 1100 East Passyunk project, called Market House, will have 39 residential units – ranging from one to two-bed apartments –with ground-floor retail and 15 bike spaces.
The project from developers 8th and Passyunk Development, and designers Ambit Architecture said the proposed design is reminiscent of the area’s industrial history, with gray brick, tall windows, and a first floor with an overhang and wall-to-wall glass.
“What’s The Right Balance Between Density And Preservation?”
As remaining parking lots are being filled in with new projects, many developers are capitalizing on the demand for downtown by building up on several low-density sites. Inga Saffron’s latest column in The Philadelphia Inquirer raises the question as to what is appropriate and what’s too much.
“What we know is that cities are about more than the number of people they can cram into every acre. We need old buildings and new buildings, big buildings and small buildings. Most of all, we need a balance between development and the precious heritage that gives Philadelphia its unique identity,” Saffron argues.
Manufacturing Weakens, Service Sector Moderates In June
Manufacturing conditions weakened in the region in June, according to responses to the Manufacturing Business Outlook Survey conducted by the Federal Reserve Bank of Philadelphia, with new orders up for 38.2% of firms, down for 29.9%, and remaining the same for 32.0%. The number of employees increased for 24.8% of the companies, decreased for 9.4%, and was unchanged for 63.8%.
Looking ahead six months, 39.9% of the firms expected conditions to improve, 18.5% anticipated a downturn, and 32.4% predicted no change.
Business indicators suggest a moderation of activity in the region’s service sector in June, according to responses to the Philadelphia Fed’s Nonmanufacturing Business Outlook Survey, with new orders up for 30.4% of firms, down for 16.1%, and remaining the same for 26.5%. The number of full-time permanent employees increased for 30.5% of the companies, decreased for 6.7%, and was unchanged for 61.3%.
Looking ahead six months, 26.5% of the firms expected regional conditions to improve, 15.6% anticipated a downturn, and 52.9% predicted no change.
City Government News
$63M Commercial Property Reassessment Case Goes To Judge
One of the largest assessment appeal cases in Philadelphia’s history is in the hands of a Common Pleas Court judge, who must decide whether the city unconstitutionally reassessed hundreds of commercial properties. About $63 million in tax revenue is at stake and involves office complexes, hotels, and apartment buildings that include One Liberty Place, Centre Square, and the Bellevue Hotel.
An attorney for 700 commercial property owners argued during the two-week trial that assessors intentionally targeted some of the city’s most prominent and valuable commercial real estate in a 2018 revaluation that significantly increased the plaintiffs’ tax bills. The city maintains that its reassessment methodology was legal and appropriate and did not single out commercial properties.
Report: City’s New Affordable Housing Policy Starting To See Results
Nine months after the passage of compromise legislation that ended City Council’s two-year battle over how to finance affordable housing, 12 development projects are on track to use the incentive. The projects will collectively generate more than eight units of affordable housing and deliver $3 million to the city’s Housing Trust Fund, PlanPhilly reported.
The expanded inclusionary zoning bonus allows developers to build denser and taller residential projects if they include affordable units on-site or contribute money to the Trust Fund, which will provide subsidies for affordable projects. The 2018 compromise came with a projection that the inclusionary zoning bonus would bring in $18 million over five years.
City Council Departs For Summer Break, Leaves Raft Of Legislation Undone
Philadelphia Top of Form
Bottom of Form
City Council has adjourned for summer recess with some significant parts of its legislative agenda undone. With the election in November, several bills and resolutions remain parked in committees with no schedule set for when – or if – they will get hearings and progress to a vote. They range from modifying the 10-year tax abatement to modifying Mayor Jim Kenney’s sweetened beverage tax.
The Philadelphia Tribune has created an in-depth summary of what was left undone when Council adjourned and what’s on their agenda for the fall. The body will not meet again until September 12 – just weeks before the general election.
July 10: CPDC Presents: How To Become A Smart City Or Developer
What are the public and private sectors doing in other cities to maximize the use of technology and innovation to solve problems? What are developers and managers doing to integrate new technology into buildings and campuses to make them more competitive and responsive?
Join us on July 10, 8:30 a.m., at Pennoni, 1900 Market Street, Suite 300, and hear Joe Viscuso of Pennoni and Richard Voith of Econsult Solutions discuss innovative projects that they are working on in other cities and about how those projects could be applied in Philadelphia.
CPDC members are encouraged to invite both young professionals and other members of their firms.
July 11: Bisnow University & Center City Summit
Hear from CCD President Paul Levy and other industry leaders about what the future holds for commercial real estate at the Bisnow University & Center City Summit on July 11 at The Westin Philadelphia. Save with discount code UNIVERSITYCENTER25.
Other scheduled speakers include Christophe Terlizzi, KeyBank; Rija Beares, CBRE; Greg Heller, Philadelphia Redevelopment Authority; Anne Papageorge, University of Pennsylvania; Scott Mazo, University Place Associates; Randy Hope, Post Brothers Apartments; Charles Lomax, The Lomax Companies; and Deb Barbour, ZGF.