CPDC Developments Newsletter - 08.20.19

Office Sector News

CBD Easily Absorbed Space From Comcast Move

The office district around the Comcast Technology Center has easily absorbed the 1.3 million square feet of space comprising the new 60-story tower, alleviating concerns that large blocks of vacancy would result from the company’s relocation of employees from surrounding buildings, The Philadelphia Inquirer reports.

“If anything, the tech tower has made its corner of Center City a more inviting place for companies to set up shop by displacing what had long been a streetscape-deadening parking lot, and encouraging the arrival of new retail operators to serve the surge of new employees in the area,” the paper said, citing interviews with brokers, analysts, and landlords.

How Much Coworking Is Too Much?

Ahead of an estimated $3.5 billion initial public offering of WeWork, which has grown from a single one-floor lease in Manhattan to a nationwide coworking giant in just nine years, the commercial real estate community continues to consider how to respond to the exploding coworking and flexible workspace sector – and how to capitalize on it. Some developers have simply outsourced the leasing of office space in smaller new projects to coworking companies. Others have integrated the short-term flexibility offered by coworking space into their leasing strategies in more traditional office buildings – offering prospective tenants both long term and short-term options within the same building.

While some say an IPO could quell lingering anxieties, concerns remain about landlords’ growing reliance on coworking providers, both with direct leases and revenue-sharing agreements. Craig Deitelzweig of New York’s Marx Realty said he is concerned that a heavy reliance on coworking could – if or when a downturn hits – lead to a similar situation after the dot-com bubble burst in the early 2000s.

Irish Software Firm Opens Its U.S. Headquarters In Center City

A B2B software company based in Ireland has opened its U.S. headquarters in Center City. Phorest plans to have at least 30 employees by year’s end in its new base of U.S. operations at 100 South Juniper Street.

Phorest sells office management software for hair and beauty salons for bookings, appointments, staff, stock, and marketing campaigns. The company has more than 7,000 clients in the United Kingdom, Ireland, Finland, Germany, and the U.S. and employs about 200 people overseas.

Eds & Meds News

Local Health Systems’ $55M Bid Wins Hahnemann Residency Program

A $55 million bid submitted by a coalition of local health systems emerged as the winner in an auction for Hahnemann University Hospital's residency program assets.

Joining forces to submit the top bid were Jefferson Health, Temple University Health System and the Einstein Healthcare Network, all based in Philadelphia; Main Line Health, Camden-based Cooper University Health Care and Wilmington-based Christiana Care Health System. A hearing is set for today, August 19, at U.S. Bankruptcy Court in Wilmington to approve the sale.

Carisma Therapeutics Raises $60M, Looks To Expand

A Philadelphia biotech company working on a cellular therapy to fight tumors is looking to hire about 10 more employees by the end of the year after raising $60 million. Carisma Therapeutics, formerly known as CARMA Therapeutics, is putting the funding toward research and development capabilities, as well as hiring to reach about 30 employees total.

Carisma relocated from Princeton, N.J. and was among the first to move into University City’s BioLabs@CIC when it opened in December 2018. Biolabs said all of its lab spaces are now occupied, and there is a waiting list for open spaces.

Hospitality News

Hyatt Centric Tops Out In Philadelphia 

A $125 million Hyatt Centric under development at 17th and Chancellor streets has marked a construction milestone with a topping out. The final steel beam was raised for the 13-story, 190,000-square-foot building that is one of 11 new hotels scheduled to open in between now and 2020 in Center City.

Hyatt Centric will have 322 hotel rooms is scheduled to open in summer 2020. The brand caters to millennials and is deliberately located in the heart of the city where restaurants and attractions are within walking distance. The structure extends the length of Chancellor Street and will include a fitness center, event, lounge and meeting spaces as well as below-grade parking for 220 vehicles.

Aramark Buys Competitor With App-Based Delivery Service

Aramark, one of the largest providers of food and other services to businesses, has acquired Good Uncle, a campus dining competitor founded in 2016. The price was not disclosed. Center City-based Aramark described Good Uncle as app-based on-demand food delivery service that brings freshly prepared meals to pick-up points around college campuses.

Good Uncle will operate independently and maintain its own brand identity. Aramark said the acquisition complements its position in campus food service, which includes more than 400 campuses nationwide.

Development News

Chinatown’s New Tower Being Marketed As $67M Luxury Property

The Philadelphia Chinatown Development Corporation (PCDC) is marketing the neighborhood’s largest residential tower, which will be completing construction soon. For more than a decade, PCDC has criticized the development of the Rail Park and related development in the Callowhill area as lacking in options for affordable housing. But PlanPhilly reports that The Crane, a 20-story tower and community center, which was initially planned with a substantial affordable housing component, is now being pitched to potential investors as a luxury property that could fetch monthly rents from $1,900 to $3,500.

PCDC has begun showing the 150-unit apartment component to real estate interests with an asking price of $67 million, PlanPhilly reported. PCDC Director John Chin suggested the project, which benefited from a $5 million state development grant, could be a home for Chinatown’s upwardly mobile residents. The community center and retail component built as part of the project are separate properties and would not be included in a sale.

Developer Revises Proposal For Mixed-Use Project

A Philadelphia-based developer has downsized plans that initially called for a 19-story condo and hotel tower at the southwest corner of 2nd and Race streets. Revolution Development Group, established by father-and-son development team Marc and Andy Kaplin, now proposes a six-story, 49-unit rental building that will need no zoning variances.

Rather than risk a potentially lengthy permitting process, the Kaplins worked with Philadelphia-based architects Ambit Inc. to create the revised plans, which call for a six-story brick building with large industrial-style windows and ground-floor retail space. The Historical Commission’s architecture committee is slated to review the project this month, with the full panel taking up the proposal in September.

Parkway Corp. Purchases Lot Next To Walnut Street Theatre 

Parkway Corporation has purchased a lot next to the Walnut Street Theatre and is beginning to explore development opportunities for the site. The roughly 10,000-square-foot surface parking lot at 805-813 Walnut Street runs from Walnut Street to Sansom Street, creating a rectangular site that could accommodate a 40- to 50-story structure that could total about 500,000 square feet.

Robert Zuritsky, president and CEO of Parkway, believes the parcel would work well for the development of a residential building, hotel or even a medical office building. Parkway purchased the site from the historic theater for $7.5 million.

Economic News

Pennsylvania Lags Peers In Funding Its 'Innovation Economy'

Pennsylvania has the infrastructure and resources to fuel a vibrant innovation economy, but the state’s lack of investment is holding it back at a crucial time, according to a new report from the Brookings Institution's Metropolitan Policy Program

The report authors said that while Philadelphia has seen encouraging growth in its tech sector, state support for economic development programs like Ben Franklin Technology Partners (BFTP) is critical for leveraging innovation for economic growth. Since 2008, Pennsylvania lawmakers have cut the BFTP budget from $28 million to $14.5 million.

The report examined funding policies implemented nationwide, both in markets comparable to Philadelphia and in places with more established innovation ecosystems like Massachusetts and the San Francisco Bay Area. A common factor among the most successful locations is strong state support, the researchers found.

Residential Market News

Philadelphia Housing Market Is 5th Most Competitive In U.S.

Philadelphia was the nation’s fifth most competitive housing market in July, based on the number of offers received for listed properties, according to a report from Redfin. The four other major real estate markets that remained more competitive than Philadelphia last month were: San Francisco, San Diego, Boston and Los Angeles.

Retail News

Giant Is Opening A Two-Level Flagship Store In Center City

Giant Food Stores will be opening a two-level flagship store in Center City. The 65,000-square-foot store, with an outdoor terrace and parking, will open in PMC Property Group’s River Walk development project. The store at 60 North 23rd Street will be in River Walk’s Tower 1, the first of the project’s two towers under development.

Giant expects the store to open by fall 2020, creating an estimated 200 new jobs. The Carlisle, Pa.-based company is in the process of opening a series of smaller-format Giant Heirloom Market stores in the city: locations recently opened at 2303 Bainbridge Street and 3401 Chestnut Street, and two more locations are coming soon to 1002 North 2nd Street and 201 South Street.

Bryn & Dane’s Opening New Location In Center City

Bryn & Dane’s, the suburban restaurant chain focusing on healthy fast-casual fare, is set to open in Center City on August 29. The new outpost at 834 Chestnut Street will be the Plymouth Meeting-based company’s fifth location and the first in Philadelphia. Hours will be 6:30 a.m. to 9 p.m. daily.

Founder Bryn Davis started Bryn & Dane’s 10 years ago in a Horsham office park selling smoothies and popcorn. The menu has expanded as new locations were added.

Center City Building Housing Irish Pub Sells, New Concept Planned

The 120-year-old building at 1123 Walnut Street, which for 35 years housed the recently shuttered Irish Pub, has sold for $2.3 million. Tod Wentz, a Philadelphia restaurateur who runs three establishments including Oloroso, located next door to the Irish Pub, bought the business, building and liquor license for $2.5 million.  

The four-story property was built around 1900 and totals 6,776 square feet. Wentz is planning a light renovation to the structure before reopening it as an American tavern. No date has been set.

Transportation News

Appeals Court Rules Against Truckers Group In Pa. Turnpike Toll Suit

A federal appeals court has rejected motorists' claims that the Pennsylvania Turnpike Commission (PTC) unconstitutionally charged excessive tolls that officials then used to pay for non-highway purposes. In the ruling, the 3rd U.S. Circuit Court of Appeals said that Congress expressly allowed states to use toll revenues for public transit and other transportation projects.

Owner-Operator Independent Drivers Association, based in Missouri, sued the PTC last March, claiming the toll costs on the turnpike violated the Commerce Clause of the Constitution. A federal judge disagreed, shutting down the $6 million class action suit, and the appeals court ruling on August 13 upheld the lower court decision.

DC Testing Pilot To Create “An Air Traffic Control Tower For City Curb Space”

Washington D.C.’s Department of Transportation is entering into a three-month pilot program with a startup called CurbFlow, which aims to coordinate commercial operator pick-up and drop-off activity to available curb space in real-time.

For the pilot, CurbFlow employees stationed at nine of the city’s busiest locations will record when spots are occupied and by whom. Companies participating in the pilot, including restaurants and delivery services, will be able to see where and when spots are occupied and reserve them in advance for 30-minute slots. Eventually, companies could be charged to use the spots, similar to a parking meter.

CCD/CPDC is preparing a new report about Center City’s allocation of curb space, as part of a broader effort to respond to increasing traffic congestion. As noted in our 2018 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.

Chestnut Street Bridge Closed For Yearlong, $103M Rehab

The Chestnut Street Bridge, which carries approximately 18,600 vehicles over the Schuylkill River per day, is closed for the next 12 months as part of a $103.6 million PennDOT project. The work also includes the rehabilitation of seven other structures, including two Schuylkill Avenue viaducts over I-76 between Market Street and Walnut Street; the viaduct under Chestnut Street between 30th and 31st streets; the I-76 west ramp to Chestnut Street; the Walnut Street ramp to I-76 east; and the Chestnut Street stone arch bridges over 24th Street and the CSX rail line west of 24th Street.

The contract also includes repairs to a 900-foot section of a retaining wall between the river and I-76, and to a retaining wall between the Schuylkill River Trail and the river at Chestnut Street. The current bridge was built in 1957.

American Adds First-Ever Flights To Africa; Will Depart From PHL

American Airlines is investing big in its international network, including a new seasonal route from Philadelphia International Airport to Morocco next summer. The nonstop flight from PHL to Casablanca will mark the carrier's first route to the African continent. The service will operate three times per week from June 4 to September 8.

American Airlines in 2018 added seven new PHL domestic routes as well as new international flights to Budapest, Prague and Zurich. PHL saw nearly 31.7 million passengers passed through its gates in 2018, a 7% year-over-year increase.

Government News

Report Outlines Critical Need For City To “Fix Its Broken Tax System”

A recently published article by national real estate news outlet Bisnow focuses on Philadelphia’s urgent need for tax reform, noting that the city’s tax structure runs counter to nearly all other U.S. cities. Stating that “the biggest issue is in what gets taxed, and how much,” the piece states that while most municipalities get a larger share of tax revenue from property taxes, with much smaller shares coming from income and business taxes, Philadelphia operates in the opposite fashion.

CCD President Paul Levy, who was interviewed for the article, notes that the city’s tax structure makes it a less attractive relocation prospect for established companies, and incentivizes growing businesses to move out when they mature. The article outlines ways to reform the city’s tax policy and explains why reform is critically important. 

Upcoming Events

Center City District Foundation Is “Best Of Philly” Beneficiary

Philadelphia magazine’s Best of Philly Soirée returns to Dilworth Park on September 12 to celebrate their annual “Best of Philly” issue. The Center City District Foundation (CCDF) is the beneficiary of this year’s event and a portion of the proceeds from the event will go to CCDF to support public space improvements in Center City.

CCDF will also be on-site with a raffle and silent auction with prizes that include suites to Eagles, Flyers, and Phillies games, signed sports memorabilia, restaurant gift cards and more. All proceeds directly benefit CCDF.

Through August 21, friends of Center City District receive a 20% discount on tickets to the Best of Philly Soirée. Visit the tickets section through the link below and enter promotional code CCDF19 in the ticketing box at the top left corner.

Raffle tickets also are available for purchase in advance. Click below for details.