Investing in downtown during downturn

April 14

By Kellie Patrick Gates
For PlanPhilly

There’s no doubt the recession has hit home, said Center City District President and CEO Paul Levy – but Philadelphia hasn’t been walloped nearly as hard as other urban centers.

“Not as bad is the new good,” he said as he summed up his organization’s annual report on the state of Center City.

Take residential real estate, for example. A recent media report on a Fort Myers, Fla. suburb said that community’s home values had dropped 80 percent since the peak. By comparison, Center City homes and condos lost 1 percent of their value from 2006 to 2008, Levy said – and they are still worth 34 percent more than they were in 2003.

While the national employment rate declined by 3.1 percent between February 2008 and February 2009, the Philadelphia metro region’s number fell by 1.8 percent, and the drop was even lower – 1.4 percent – in the city itself, Levy said.

“Walkable, transit-oriented places nationally have fared better than car-dependent exurbs; economies accustomed to slow and steady performance have been more sustainable than those that rode the roller coaster of boom and bust,” Levy said. “Places like Philadelphia, whose economies are built on high-skilled jobs and around health care and education have so far endured better than most.”

But that does not mean there isn’t plenty of room for improvement, said Levy and the other presenters who spoke to the crowd gathered at The Union League Tuesday afternoon: Wayne Fisher, senior vice president at Grubb & Ellis; Joanne Davidow, vice president at Prudential Fox & Roach; Anne Papageorge, vice president of facilities and real estate services at the University of Pennsylvania, and John Gattuso, senior vice president at Liberty Property Trust.

In the past, Philadelphia’s economic recoveries have failed to bring jobs back to pre-recession levels, Levy said. As a result, the total number of private sector jobs in the city has slipped from more than 750,000 in the 1970s to about 557,000 today, he said.

Levy and the four experts said they did not know how much longer the current economic storm will wage, nor whether Philadelphia will continue to withstand it as well as the city has so far.

But all agreed the city should make plans and investments now so that it is ready for new growth – and smart growth – when the economy turns around.

Levy said after his presentation that some of Philadelphia’s lost jobs aren’t far away – they’re in the suburbs. On average, 33 percent of a U.S. metropolitan area’s office space is in its downtown area, he said. In Philadelphia, it’s 28 percent.

“My ambition in life is just to get to be average,” he said. “That 5 percent is about eight million square feet, and that’s a significant number of jobs, taxes and ridership on transit,” he said.

Speaking of taxes, Levy said Philadelphia must reduce the business privilege and wage taxes if it is to reach its full growth potential. The preponderance of property taxes now come from residents, he said. But if the city were to reduce the business privilege and wage taxes, it would attract more businesses and broaden the tax base. And those businesses would pay property taxes, bringing more revenue to the city.

Levy also suggested mass transit improvements. The Center City District is already working with the city and SEPTA to improve signage, he said. A new subway station at 21st Street could foster transit-oriented development in underused sites between Center City and University City.

Fisher also called for more investment in transit.

He said that there seems to be a call to rein in growth and preserve green space in the suburbs, and that means when the economy recovers, “the city would have the opportunity to steal development from our suburban competition, and bring development downtown, where it belongs.”

But if Center City adds as much office space over the next 20 years as was added during the past 20, and the percentage of commuters who drive stays the same, about 17,000 additional cars would come into the city each day. “Therein lies the problem,” he said.

Fisher said it is unrealistic to think that transit investment alone can prevent gridlock, because some workers use their cars throughout working hours. The city must also practice “grid management,” he said – looking at ways to better manage traffic flow through things like signal timing.

Papageorge spoke of Penn’s ongoing efforts to connect the university to Center City. There are building projects at the former post office and growth around the university’s medical center. And Penn is adding a huge amount of recreational space – 24 acres of ball fields and open space, which will be connected to Walnut Street.

The university has also set sustainability goals. Among them: It wants to shift 15 percent of the trips made to and from the university by private vehicle to another mode of transportation.

Papageorge said that right now, the routes to Penn one can take on a bicycle have significant gaps, where there are potentially “unsafe conflicts between vehicles and bicycles, and bicycles and pedestrians.”

A park-and-ride amenity near the stadiums for people driving to campus from the south could reduce private vehicle traffic in Center City and University City, she said.

Gattuso said that his company believes five future trends will guide life after the recession in the city and nation: A move from the information age to the synthesis age, where people are combining ideas to form new products and systems. An increased degree of “creative destruction” where some businesses are absorbed by others. Dominance of the Creative Class – people who excel in arts, culture, research and sciences. Cultural diversity. And a permanent increase in the cost of energy.

To make the most of this predicted future, Gattuso said, Philadelphia should pay attention to four areas: The city must have high-quality living and work environments. “We need to pay attention to recreational amenities,” he said. “Fairmount Park is underutilized.”

The city should create a lower tax environment for businesses, Gattuso said, to create a platform for entrepreneurship.
A stronger bond must be built between the city’s universities and the private sector, he said, and the city must take steps to see that more of its citizens are well-educated.

Philadelphia also needs to invest more in infrastructure. Improvements are needed at the airport, he said. And a high speed rail line would improve connections between the city and the airport, the Navy Yard, and the suburbs. It would also help Philadelphia capitalize on its prime location between Washington and New York, he said.

The report can be downloaded from the Center City District’s website.

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