Friday, May 1, 2015

5 Reasons to Believe in Philly CRE

by Steve Lubetkin,

There are at least five reasons to believe in Philadelphia. They include: the rising number of companies locating in Center City; growth in the professional/business services segment; the changing demographics of Center City residents; rising office rents and a shortage of trophy office space; and the positive impact of university expansion and the presence of cable giant Comcast on the city.

“We do think Philadelphia is undergoing a resurgence. It’s been a little later to the game than other metro areas, but we think Philadelphia is beginning to turn the corner. Philadelphia offers some of the lowest commercial rents compared to some of its major metropolitan area cohorts.”

Among companies relocating or expanding in Philadelphia recently are: The American Bible Society (100,000 square feet, 200 jobs); EisnerAmper (42,000 square feet, 130 jobs); Hill International (60,000 square feet, 290 jobs); Axalta (38,000 square feet, 100 jobs); and Independence Blue Cross/Blue Shield (112,000 square feet, jobs to be determined).

Philadelphia also provides tax credits of up to $25,000 per job created or two percent of the annual wages paid for firms that create at least 25 new full-time jobs or increase their Philadelphia full-time workforce by 20 percent within five years, Learner says.

“That’s an added benefit to companies that may be looking whether to stay put or look at other areas,” she says.

Professional and business services firms are growing faster than other commercial sectors, research shows. Much of that growth in 2014 vs 2013 was in “computer systems design,” which grew 13 percent. Advertising and public relations firms were second in growth in that period, rising 6.9 percent.

The percentage of the Philadelphia County population in the 20-34 age demographic increased by 5.9 percent from 2007 to 2013, the research indicated, compared to a 5.1 percent increase in New York County, NY. The younger population living in the urban environment is driving some of the office relocation, as companies vie to attract Millennials with “live-work-play” models.

Trophy office space is at a premium in Philadelphia, with just under a dozen buildings regarded as “trophy” properties. The low vacancy is leading to some firming of office rents, but still at levels below other comparable metropolitan areas, Learner says.

Expansion of Philadelphia’s universities also encourages growth of the office sector, she says.

“Particularly as each of these universities continues to grow their incubation and innovation centers, that certainly will allow emerging companies to develop a presence and maintain a presence over time."

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