report

State of Center City

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Foreword

Sixty years ago, business, civic and political leaders came together to form Central Philadelphia Development Corporation (CPDC), one of the nation’s first public-private partnerships. While suburbanization and job loss were undermining all American cities in the mid-20th century, Philadelphia responded early, becoming a national leader in renewal with innovative efforts that blended public and private, preservation with new development. Starting with the revitalization of historic Society Hill in 1956, CPDC has been committed to restoring and repositioning Philadelphia’s downtown: transforming Market Street East, rethinking and redesigning highways for an urban setting, advocating for transit investment, planning the Avenue of the Arts and creating the Center City District (CCD) in 1990.
With the launch of CCD services in 1991, Philadelphia once again demonstrated the willingness of business and civic leaders to confront challenges, take risks and create innovative new ways to solve problems. From an initial focus on clean and safe, the CCD has evolved into a multi-faceted, downtown place-manager, place-marketer and service provider, supporting and facilitating the diversification of the downtown office economy with arts, entertainment, hospitality, housing and quality retail.

A mid-1990s financing of $26 million in streetscape enhancements by the CCD brought new lighting, landscaping and a comprehensive pedestrian, transit and vehicular wayfinding sign system to downtown walkways. CCD’s ability to move quickly and strategically, manage construction cost-effectively and maintain improvements in a first-class manner, has enabled it to take $46.2 million in CCD capital resources and leverage another $89.4 million in foundation, federal, state, city and private funds to make a total of $135.6 million in public space enhancements since 1997.

Office occupancy has increased, healthcare and educational institutions have expanded and the population of Greater Center City has grown by 17% since 2000 to 185,000. The CCD has been transformed from an organization with a $6.5 million operating budget into a $23.5 million enterprise that keeps sidewalks clean, safe and well-lit, manages a large inventory of streetscape enhancements, and maintains and programs four civic spaces – Cret, John F. Collins, Sister Cities and Dilworth Parks. 

Business, investor and resident confidence is at an all-time high: 84% of respondents to the CCD’s annual customer satisfaction survey are convinced that downtown is heading in the right direction, 18 percentage points higher than their perceptions of Philadelphia as a whole. The annual State of Center City report seeks to highlight our extraordinary strengths, provide detailed information about all aspects of the downtown marketplace, combining data from many diverse industry reports with an exceptional range of original research, analysis and survey work. But it is also a candid look at what we can and must do better for Philadelphia to thrive with an expanding economy that provides more opportunity and choice for residents of all its neighborhoods.

As we celebrate the 60th anniversary of CPDC and the 25th anniversary of the CCD, remarkable progress is visible on every street in Center City. We have come a very long way since 1956 and 1991. But now, as then, the status quo is unacceptable - with high unemployment and chronic poverty in too many communities. Once again, it takes committed leadership willing to acknowledge challenges and take risks. At a time when cities across the country are leading the economic recovery, Philadelphia must capitalize on its extraordinary strengths and favorable geographic position, improve its public schools and reform its tax structure to unleash growth across all neighborhoods while creating opportunity for residents, new immigrants and graduates of our colleges and universities.

The entire document, individual sections can be downloaded from this page. Additional reports we produce throughout the year can be downloaded from the Research & Reports page.

Office

Forty percent (40%) of downtown jobs are concentrated in 40.4 million square feet (sf) of high-rise office space. Well-served by transit, office buildings hold the greatest density of jobs and provide the most diverse employment opportunities: high-skilled positions requiring at least a college degree, technical, support and clerical jobs, as well as building engineers, security personnel and janitors. Every time tenants turn over, construction trades renovate space. Office workers are also prime customers for retail, restaurant and entertainment venues and drive over $221 million in retail demand each year. Business travelers accounted for almost one-third of all hotel room nights in 2015.

Center City’s office occupancy rate rose from 86.7% in 2014 to 88.5% in 2015, surpassing suburban occupancy levels of 85.2%. Trophy building occupancy held steady at 95%, while Class A and B rose to 90.3% and 92.3%, respectively. But the average asking rent of $27.44/sf, while slightly above 2014’s $27.19/sf, is far lower than the leading markets nationally – approximately a third of asking rents in Midtown Manhattan ($80.97), half of asking rates in Boston ($55.60) and Washington, D.C. ($51.35). The highest rents in Center City ($29.18) can be found on West Market Street and JFK Boulevard, where the occupancy rate reached 89.3% in 2015.

More than half of leasing activity downtown was driven by Philadelphia’s historical pattern of renewals and movement within the market. But rent appreciation occurred downtown as existing firms took more space in an expanding national economy, led by 377,000 sf of growth by Comcast. In a very positive trend, the downtown office market in 2015 also saw increased demand from suburban and out-of-market tenants accounting for 770,000 sf (23%) of leasing activity. But a simple measure of success is the premium businesses are willing to pay to be in the employee- and amenity-rich CBD, as opposed to the suburbs. A sampling of major CBD markets nationwide by Newmark Grubb Knight Frank showed an average CBD premium of 25% in 2015 – rising to 112% in Boston and 75% in Washington, D.C. In Philadelphia, the premium on downtown space was just 4%, comparable to many sprawling Sunbelt metros. 

Philadelphia’s unique reliance on wage and business taxes, accounting for 63% of municipal tax revenues, creates a significant burden on local businesses, weakens demand and depresses local rents. Philadelphia’s wage tax is four times the average of surrounding suburbs; business taxes add a 20% to 30% premium to the cost of doing business, while real estate taxes are two-thirds of the regional average. 

The Philadelphia Growth Coalition’s tax reform plan, endorsed by Mayor Jim Kenney and a broad cross-section of business, labor and civic leaders, was introduced in the State Legislature by Representatives John Taylor and William Keller as HB 1871 with broad bi-partisan support. It builds on the recommendations of the 2003 and 2009 City Tax Commissions and the 2011 Philadelphia Jobs Commission. It will enable the city to reduce its dependency on taxes on highly mobile wages and business revenues and rely more on a growing real estate tax base, also a primary source of funding for schools. It creates the platform for Philadelphia to capitalize on all its inherent competitive advantages.

To read the full chapter, click on the link below.

Healthcare & Higher Education

While healthcare and educational institutions provide the largest portion of citywide jobs (37%), in Center City they are second only to the office sector and account for 20% of downtown employment. By contrast, “Eds & Meds” together supply 77% of salaried jobs in University City.

In 2015, the expansion of University City education and healthcare institutions into Center City locations accelerated. Penn Medicine, Drexel University and Children’s Hospital of Philadelphia (CHOP) increased to 7,953 the number of jobs they have located in Center City.  Most significantly, CHOP is developing approximately 8.4 acres of land just below the South Street bridge on the Center City side of the Schuylkill River. The first phase of this multi-year development, 466,000 square feet of clinical research and office space, will open in 2017.

The largest private employer in Center City remains Thomas Jefferson. Together the University, its hospitals and Urgent Care center at Washington Square provided 12,021 jobs in Center City in 2015. Jefferson Health was created in May 2015, when Thomas Jefferson University Hospitals merged with Abington Health of Montgomery County. In October, officials from Jefferson and Aria Health signed a letter of intent that initiates the process for Aria to become part of Jefferson Health, which would create the biggest health system in the five-county metropolitan area. Jefferson also recently announced its merger with Philadelphia University, which will make it the fifth largest university in Philadelphia.   

To read the full chapter, click on the link below.

Conventions, Hotels & Tourism

The restructuring of the labor-management agreement at the Pennsylvania Convention Center in 2014 changed the trajectory for the 1 million-square-foot-facility, as it hosted 19 conventions and trade shows of 3,000 attendees or more in 2015, pushing attendance up to 1,050,047. Twenty-one conventions of 2,000 or more are slated for 2016, driving anticipated attendance to 1,075,000.

One of the highest profile events is the July 2016 Democratic National Convention, expected to draw 40,000 people. Other large conventions include the American Association for Clinical Chemistry (20,000) and the American Insitute of Architects (16,000). With eight citywide conventions taking place between June and September and the COPA America Soccer Tournament scheduled for June, Philadelphia’s hotels are anticipating the strongest summer season to date.Leisure room nights totaled 983,000 in 2015, up 35,000 (3.7%) from 2014.

Leisure travel now accounts for 32% of the downtown’s occupied hotel room nights, matching commercial (31%) and group and convention (33%). Saturday night has become the busiest night of the week at Center City hotels, with the occupancy rate hitting 88.7%. Reflecting this trend, the New York Times put Philadelphia at the top of its North American rankings for the “52 Places to Go in 2015.” In November, Philadelphia was honored as America’s first UNESCO World Heritage City, while Lonely Planet named Philadelphia the number one place to visit in the U.S. in 2016.

To read the full chapter, click on the link below.  

Arts, Culture & Civic Life

Center City is enriched by an extraordinary variety of 426 arts and culture organizations, up from 403 in 2013. Philadelphia is second only to Midtown Manhattan in the total number of downtown arts and cultural organizations, surpassing Washington, D.C., Chicago, San Francisco and Boston.

While cultural institutions are strongly clustered along the Avenue of the Arts, the Benjamin Franklin Parkway and in the historic area and Old City, the map on page 28 of the report clearly shows how many blocks in Philadelphia’s walkable downtown are enriched with arts, cultural and civic attractions.

More than 10.5 million people visited entertainment, cultural and arts destinations in Center City in 2014, with about 60% enjoying free admission. The percentage of children 18 and under attending events continues to rise, from 17% in 2012, to 24% in 2014, reflecting both visitation by school groups and the growing appeal of Center City as a family-friendly destination.

Several destinations experienced dramatic growth. The Kimmel Center for the Performing Arts, home to several resident companies, including the Philadelphia Orchestra, enjoyed a 25% increase in attendance from 738,485 in 2014 to 919,674 in 2015, after they expanded programming to include more Broadway shows, pop stars, comedians and gospel groups. The Pennsylvania Ballet, Opera Philadelphia and the Curtis Institute of Music also enjoyed increases in attendance.

Destinations around Independence Mall experienced significant increases, driven both by overall growth in tourism and by Pope Francis’s visit in September. The Liberty Bell Center welcomed 2,227,793 visitors in 2015, a 23% increase over the prior year. Attendance also increased at the National Museum of American Jewish History and the African American Museum in Philadelphia.

To read the full chapter, click on the link below.

Retail

Center City’s burgeoning retail scene has been built on strong employment, institutional, residential and hospitality growth: 286,000 workers, 185,000 residents, 117,000 college students in or immediately adjacent to the downtown and 3.1 million occupied hotel room nights have transformed Center City into a vibrant, 24-hour destination. More than $1 billion in retail demand for goods and services is now generated from the downtown core and its surrounding neighborhoods.

Key components include the steady expansion in tourism, a rise in convention and trade show attendees with ample disposable incomes and a downtown population up 17% since 2000. Young renters and first-time home buyers, empty-nesters relocating from the suburbs, and families with children have all chosen to live in Center City to be close to work and take advantage of the broad array of educational, cultural, entertainment and dining options. Household incomes now average more than $111,000 and 77% of residents in the core of the downtown hold at least a bachelor’s degree. They are joined each day by 108,000 suburban residents and 114,000 non-Center City Philadelphians who also work downtown. On weekends, visitors to cultural institutions, theaters and concert halls spill out onto the sidewalks after the show.

CBRE’s “Surging Demand for Urban Retail” reported that Center City’s retail rents have grown the second fastest of 10 major U.S. cities since 2008. More than 36 national retailers have opened downtown since 2013, diversifying the existing base of local boutiques and independents.

To read the full chapter, click on the link below.

Employment

Center City holds the largest concentration of jobs in the city and region. With 286,427 wage and salaried positions and another 8,500 individuals compensated as partners, self-employed, or working freelance, downtown is the setting for 42% of all jobs in Philadelphia. Located at the center of the region’s transit and highway network, 49% of downtown jobs are held by commuters from outside the city, while 51% are held by Philadelphia residents.

Diversification is a defining strength of the downtown economy. Professional, business and financial services, real estate and information – the prime office-using industries – comprise 40% of downtown jobs. Education and health services, the largest sector citywide, is second largest downtown with 20% of all jobs. Entertainment, leisure, hospitality and retail hold a 16% share, while federal, state and local government employment provides 13% of all Center City jobs.

Downtown employers provide diverse opportunities. While 38% of Center City jobs require at least a college education, 30% are accessible to those with an associate degree, while another 32% require no more than a high school diploma. As a consequence, downtown provides opportunities for 23% of the working residents in neighborhoods outside the downtown area. 

To read the full chapter, click on the link below.

Transportation & Access

Center City is well-positioned at the center of an extensive, multi-modal transportation system. It is located just seven miles from Philadelphia International Airport (PHL), putting 50% of the American population within two hours’ flying time of the city. The downtown is served by two interstate highways, Amtrak’s Northeast Corridor, 13 regional rail lines, four major interstate bus operators, 29 urban bus routes, five trolley lines, two subway lines, and a large-scale bicycle share network.

In 2015, PHL served 31.4 million passengers, a 2.3% increase from 2014 and the highest level since 2008. This included 4.56 million international passengers, the highest number in 25 years. PHL now offers direct flights to 93 domestic and 37 international destinations. In fall 2015, American Airlines and US Airways completed their $17 billion merger, maintaining the American name and Philadelphia as a major hub, with downtown just 20 minutes away on SEPTA’s Airport Line.

Annual Amtrak ridership at 30th Street Station increased from 4 million in 2014 to 4.1 million in 2015. Average weekday Amtrak ridership grew by 1.4%, from 12,420 in 2014 to 12,590 in 2015. Regional commuting for work and leisure remained strong with SEPTA, PATCO, and NJ Transit bringing an average of 290,665 riders into Center City each workday in 2015. SEPTA regional rail served more than 39,000 passengers, a 3.4% increase over 2014, while subways and buses continued to account for the majority of public transit users, bringing 208,403 riders into downtown each weekday. PATCO ridership was up 2% from 2014, as the agency is almost finished with a $103 million project to upgrade the tracks on the Benjamin Franklin Bridge. A $194 million refurbishment of its 120-car fleet is expected by 2017.  

To read the full chapter, click on the link below.

Downtown Living

The population of Greater Center City has been steadily increasing for three decades, reaching 184,998 residents in 2015 — up 17% since 2000. As one of the nation’s most walkable downtowns, Center City is the location of choice for millennials, families with children, empty-nesters and anyone who values convenient access to the broadest range of arts, cultural, dining, education, employment, healthcare and shopping options.

Fifty-eight percent (58%) of Greater Center City residents hold at least a bachelor’s degree and nearly 30% have advanced degrees, providing employers one of the largest concentrations of highly educated workers in the region. Forty percent (40%) of Greater Center City residents work downtown, while another 12% work in adjacent University City. 

Since the 1980s, Center City has successfully retained recent college graduates as residents. The national demographic millennial bulge has dramatically accentuated this trend. While this cohort comprises 26% of the citywide population, it makes up 40% of Greater Center City and 46% of the downtown core. While 60% of households in the Core are single person, the number of families with children is steadily rising in the Extended neighborhoods that surround downtown. 

To read the full chapter, click on the link below.

Developments

Construction cranes are visible everywhere. Eleven major development projects, totaling almost $200 million, were completed in 2015 between Fairmount and Washington Avenues, river to river. Another 42 projects of all types, totaling $5.2 billion in new investment were under construction at the end of December 2015, while 29 more, totaling $3 billion, have been announced.

Residential developments are setting the pace. Half of the 82 projects counted in this chapter are residential/mixed-use; another 11 are strictly residential. Remaining projects include hotels, commercial/mixed-use, public space improvements, retail, healthcare and education, government and non-profit, and cultural developments. All are categorized by type and are mapped on the report on page 62.

Still, the largest development in the city’s history is Liberty Property Trust’s $1.5 billion Comcast Innovation and Technology Center. The new tower, rising at 18th and Arch Streets, will add more than 1.3 million square feet of trophy office space downtown; all will be leased by Comcast. A much smaller cluster of creative office space is under construction east of Broad Street signaling a new interest in more flexible workspace in the rapidly improving East Market corridor.

To read the full chapter, click on the link below.

Center City District

Sixty years ago, Central Philadelphia Development Corporation (CPDC) was formed as one of the nation’s first public-private partnerships with the mission of reversing decentralizing trends that were undermining all American cities in the mid-20th century. Starting with the revitalization of Society Hill in 1956, CPDC
has been a vehicle for business and civic leadership committed to restoring and repositioning Philadelphia’s downtown: transforming Market Street East, planning the Avenue of the Arts and creating the Center City District (CCD) in 1991.   

In 2016, the CCD marks 25 years of success, keeping Center City clean, safe, and attractive with a well-managed, uniformed and highly-visible presence of 128 sidewalk cleaners and 45 community service representatives.  Eighty-percent (80%) of the 3,300 respondents to CCD’s 2015 Customer Satisfaction Survey who live or work in Center City reported seeing CCD’s personnel “most of the time” or “every time” they are downtown. Sixty-six percent (66%) described Center City as “much cleaner” than other areas of the city, while 83% said they “always feel safe” or “feel safe most of the time.”

Improved perceptions reflect the success of CCD’s partnership with the Philadelphia police. Serious crimes have decreased by 41% in the last two decades, even as the volume of people has dramatically increased. During the same period, theft from auto was cut by 85%, retail theft by 45% and all theft in Center City by 40%.

As downtown became cleaner and safer, and as arts, entertainment and hospitality venues dramatically grew, the CCD expanded its core services in the mid-1990s, initially with a $26 million streetscape improvement program. Public space investments have continued for 18 years and now include 2,189 pedestrian-scale light fixtures, 748 street trees, planters, and the largest comprehensive sign system in North America with a total inventory of 1,348 signs that helps make Center City customer and visitor friendly.

The CCD routinely cleans and updates with new destinations the inventory of 434 pedestrian directional signs, 258 disk maps, 240 vehicular directional signs, 93 bus shelter maps, 268 signs at 84 transit portal locations, and 55 interpretative signs on the Benjamin Franklin Parkway. 

To read the full chapter, click on the link below.