Philadelphia 2019 An in-depth review of the key issues facing the Bucks, Chester, Delaware, Montgomery and Philadelphia counties’ economies featuring the exclusive insights of prominent industry leaders
Contents:
59 Market voices: Retail
60 I nterview: Lauren Gilchrist, Senior Vice President, Senior Director of Research, JLL
63 Construction:
11 Economy:
12 Economy in numbers
35 Legal:
13 Interview: Tom Wolf, Governor, Commonwealth of Pennsylvania
14 History of firsts: Greater Philadelphia has made major contributions to human civilization throughout history and continues to drive innovation
36 Law and order: From the nation’s founding documents and oldest law firm to eight modern firms making the AmLaw 100 list, law is in Philadelphia’s bones
37 Interview: William Sasso, Chairman, Stradley Ronan
15 Interview: Jim Kenney, Mayor, City of Philadelphia
38 Interview: Matthew Taylor, Chairman & CEO, Duane Morris, LLP
17 Viewpoint: John Grady, President, PIDC
19 Interview: Patty Elkis, Director of Planning, Delaware Valley Regional Planning Commission
40 Interview: Mathieu Shapiro, Managing Partner, Obermayer Rebmann Maxwell and Hippel LLP
45 Interview: Ray Williams, Partner, DLA Piper
20 Market voices: Startups
46 Market voices: Local strength
22 Viewpoint: Ajay Raju, Chairman & CEO, Dilworth Paxson
25 Tax:
26 Tax overhaul: 2018 was the first year the country felt some effects from the federal tax reform, and Philadelphia businesses are still adjusting
29 Interview: Denise McKnight,
49 Real Estate:
50 Real Estate in numbers
51 Dynamic and diverse: Philadelphia’s real estate market is heating up, offering a more affordable alternative to overheated markets like New York and D.C.
53 Interview: Allan Domb, Broker & Owner, Allan Domb Real Estate; Councilman-at-Large, City of Philadelphia
56 I nterview: David Binswanger, CEO, Binswanger
57 Viewpoint: Bart Blatstein, President & CEO, Tower Investments Inc.
Partner, Friedman LLP
30 Interview: Barry Berkowitz, Managing Director, CBIZ MHM, LLC 32 Interview: Brian Clouse, Partner, Insurance Practice Leader, MAZARS USA LLP
64 Boomtown: Philadelphia’s skyline is peppered with cranes, indicating the construction boom the city has been enjoying for several years
65 Interview: Brett Pastorius, Vice President of Project Management, Clemens Construction Company
66 Interview: Jerry Sweeney, President & CEO, Brandywine Realty Trust
68 Interview: Joe Forkin, President, Delaware River Water Corporation
71 Interview: Angelo Perryman, CEO, Perryman Building & Construction
75 City of Philadelphia:
76 City of Brotherly Love: Built on the foundation of tolerance, Philadelphia has grown into a powerful urban center with a diverse economy and population
79 Interview: Pamela Henshall, President, Greater Northeast Philadelphia Chamber of Commerce
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Contents:
80 Interview: Matt Bergheiser, President, University City District
82 Interview: Dennis Davin, Secretary, Department of Community and Economic Development, Commonwealth of Pennsylvania
83
Aviation & Transportation:
84 Aviation & Transportation in numbers
85 Revolutionizing transit: With a fast-growing airport and serious investment in the region’s roads and rail, Philadelphia is quickly becoming a hub of connectivity
86 Interview: Chellie Cameron, CEO, Philadelphia International Airport
88 Interview: Olympia Colasante, Former Vice President, American Airlines
91 Interview: Natalie Shieh, Director, Major Stations Planning & Development, Amtrak
93 Interview: Jeffrey Kneuppel, General Manager, Southeastern Pennsylvania Transportation Authority (SEPTA)
94 Viewpoint: Michael Carroll, Deputy Managing Director, Department of Transportation, Infrastructure and Sustainability
97
Infrastructure, Utilities & Environment:
98 Modern energy: Philadelphia’s rich history means it is faced with aging infrastructure, which the city is working tirelessly to bring up to date responsibly 99 Interview: David Cohen, Senior Executive Vice President & Chief Diversity Officer, Comcast Corporation
100 Interview: Mark Starck, Vice President, NRG Retail
101 Viewpoint: Debra McCarty, Commissioner, Philadelphia Water Department
6 | Invest: Philadelphia 2019 | CONTENTS
102 Interview: Craig White, CEO, Philadelphia Gas Works (PGW)
104 Interview: Mike Innocenzo, CEO, Philadelphia Electric Company (PECO)
114 Viewpoint: Samuel Menaged, Founder & President, The Renfrew Center
118 Interview: Ralph Muller, CEO, University of Pennsylvania Health System
119 Interview: Remy Richman, VP Executive Director, Southeastern Pennsylvania and Delaware Markets, Aetna
121 Interview: Madeline Bell, President & CEO, Children’s Hospital of Philadelphia (CHOP)
107 Interview: Tricia Marts, Director of Account Management, Veolia Energy
109 Healthcare: 110 Heart of health: Building on its roots as home to the country’s first hospital and medical school, Philadelphia continues to be a hub for innovative healthcare
111 I nterview: Daniel Hilferty, President & CEO, Independence Blue Cross
Life Sciences & Biotechnology:
113 Interview: Daniel Tropeano, CEO, UnitedHealthcare
124 Cellicon valley: Life sciences and biotechnology are quickly
123
132 Interview: Jeffrey Theobald, Executive Director & CEO, PhilaPort 136 Viewpoint: Linda Mysliwy Conlin, President, World Trade Center of Greater Philadelphia
139 Interview: Don Lewis, President, Essity Professional Hygiene
141 City of Chester: 142 Phoenix rising: Once an industrial powerhouse, Chester faced years of economic decline but today is rising from the ashes with a strong sense of community
143 Interview: Thaddeus Kirkland, Mayor, City of Chester
144 Interview: Julie Wollman, President, Widener University
147 Interview: Brian Zidek, Councilman, Delaware County
148 Interview: Tom Shoemaker, Chair, Riverfront Alliance of Delaware County; Pennsylvania Market President, TD Bank 149 Viewpoint: Tim McDermott, Chief Business Officer, Philadelphia Union
becoming major economic drivers for the Greater Philadelphia region
125 Interview: David Payne, Vice President, Infectious Disease, GSK
127 Viewpoint: Dario Altieri, CEO, The Wistar Institute 128 Interview: Mike Kelly, President of U.S. Operations, Adapt Pharma
129
Manufacturing, Trade & Logistics: 130 Ports and plants: Philadelphia was the nation’s first industrial center, and its manufacturing heritage has helped turn it into a modern-day logistics hub
153 B anking & Finance: 154 S olid coffers: The banking industry remains strong in the wake of tax reform and deregulation, and Philadelphia’s financial sector is riding the wave
155 Interview: Daniel Fitzpatrick, President, Mid-Atlantic Region & Head of National Industry Verticals, Citizens Bank
156 Interview: Robert Kane, Jr., Market President, Eastern Pennsylvania & Southern Jersey, KeyBank
157 Interview: Suzanne Svizeny, Executive Vice President, Middle Market Banking, Wells Fargo
163 Market voices: Small business lending
162 Interview: James Dever, Philadelphia Market President, Bank of America
165 Education: 166 Talent hub: Philadelphia’s world-class education sector has withstood recessions and industry crashes and continues to be a pillar of the local economy 168 Roundtable: Business schools Joseph DiAngelo, Jr., Dean, Erivan K. Haub School of Business, St. Joseph’s University MarySheila McDonald, Dean, La Salle University School of Business Paul Jensen, Dean, Drexel LeBow College of Business Joyce Russell, The Helen and William O’Toole Dean, Villanova School of Business 170 Viewpoint: Richard Englert, President, Temple University
172 Interview: Craig Carnanoli, Executive Vice President, University of Pennsylvania
174 Interview: John Fry, President, Drexel University 176 Viewpoint: Geoffrey Garrett, Dean, The Wharton School of the University of Pennsylvania 177 Interview: Father Peter Donohue, President, Villanova University 179 Interview: Christopher Fiorentino, President, West Chester University 180 Roundtable: Meds in eds Jay Feldstein, President, Philadelphia College of Osteopathic Medicine Dr. Michael Mittelman, President, Salus University Dr. Larry Kaiser, President & CEO, Temple University Health System
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Contents:
ECONOMY OVERVIEW
Philadelphia 2019 ISBN 978-0-9988966-1-8 President: Abby Melone Chief Financial Officer: Albert Lindenberg Managing Editor: Jaime Muehl Executive Director: Josh Greenberg Editorial Manager: Erin Browne Contributing Writer: Sean O’Toole Contributing Designer: Md Shahidullah Production Liaison and Sales Administrator: Nisha Cunningham Interns: Meagan Harmon, James Woo Cover Photo: University of Pennsylvania
185 Tourism, Arts & Culture:
201 Sports:
186 Tourism, Arts & Culture in numbers
202 City of Champions: Perhaps best punctuated by the Eagles’ Super Bowl win, the recent success of Philadelphia’s sports is a huge boon to the local economy
188 Unique offerings: Philadelphia’s tourism industry, bolstered by the city’s rich history, diversity and creativity, continues to break records and wow visitors 190 Interview: Larry Korman, President, AKA Hotel Residences 193 Interview: Julie Coker Graham, CEO, Philadelphia Convention and Visitors Bureau
203 Viewpoint: Jay Wright, Head Basketball Coach, Villanova University Men’s Basketball 204 Interview: Scott O’Neil, CEO, Harris Biltzer Sports and Entertainment
194 Market voices: Tourism
206 Interview: David Buck, Executive Vice President, The Philadelphia Phillies
197 Viewpoint: Sean Kelley, Senior Vice President, Eastern State Penitentiary
207 Interview: Shawn Tilger, Executive Vice President & COO, Philadelphia Flyers
Invest: Philadelphia is published once a year by Capital Analytics Associates, LLC. For all editorial and advertising questions, please e-mail: contact@capitalaa.com To order a copy of Invest: Philadelphia 2019, please e-mail: contact@capitalaa.com All rights reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means, without the express written consent of the publisher, Capital Analytics Associates, LLC. Whilst every effort has been made to ensure the accuracy of the information contained in this book, the authors and publisher accept no responsibility for any errors it may contain, or for any loss, financial or otherwise, sustained by any person using this publication. Capital Analytics Associates, LLC accepts no responsibility for the return of unsolicited manuscripts and/or photographs, and assumes no liability for products and services advertised herein. Capital Analytics Associates, LLC reserves the right to edit, rewrite, or refuse material.
Photo Credits: Contents: pg 5 – Bottom right – G. Widman for Visit Philadelphia pg 6 – Eagles pg 9 – Eastern State Penitentiary Economy: pg 11 – Small photo – J. Fusco for TIANYU pg 14 – A. Ricketts for Visit Philadelphia pg 18 – J. Fusco for Visit Philadelphia pg 23 – Visit Philadelphia Tax: pg 32 – University of Pennsylvania Legal: pg 42 – University of Pennsylvania Real Estate: pg 49 – Small photo: M. Fischetti for Visit Philadelphia pg 51 – Allan Domb Real Estate pg 54 – A. Ricketts for Visit Philadelphia Construction: pg 63 – Small photo: Clemens Construction pg 64, 68 – Brandywine Realty Trust pg 72 – Clemens Construction
City of Philadelphia: pg 75 – Large photo: University of Pennsylvania pg 75 – Small photo: Visit Philadelphia
City of Chester: pg 141 – Small photo: Harrah’s Casino pg 142, 145 – City of Chester
Aviation & Transportation: pg 83 – Large photo: SEPTA pg 83 – Small photo: Philadelphia International Airport pg 85 – Philadelphia International Airport
Banking & Finance: pg 154 – M. Kennedy for Visit Philadelphia
Infrastructure, Utilities & Environment: pg 97 – Large photo: Philadelphia Water Department pg 97 – Small photo: Brandywine Realty Trust pg 98 – Delaware Regional Planning Commission Healthcare: pg 109 – Large photo: Temple Health pg 110 – Temple Health Life Sciences: pg 123 – Large photo: Salus University pg 124 – Halkin Mason Photography Manufacturing, Trade & Logistics: pg 129 – Small photo: Kimberly Clark pg 130 – PhilaPort
Education: pg 167 – Large photo: Temple University pg 167 – Small photo: University of Pennsylvania pg 168, 174 – University of Pennsylvania pg 177 – Drexel University Tourism: pg 185 – Large photo: J. Smith for Visit Philadelphia pg 185 – Small photo: J. Verney for Visit Philadelphia pg 188 – Eastern State Penitentiary pg 196 – J. Fusco for Visit Philadelphia Sports: pg 201 – Large photo: 76ers pg 202 – Eagles pg 205 – Fusion pg 208 – Phillies pg 209 – Flyers
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Economy: As the largest city in the commonwealth, Philadelphia is the center of economic activity for Pennsylvania. It was also ranked the eighthlargest metropolitan economy in the United States by the Bureau of Economic Analysis. Once a hotbed for manufacturing, Philadelphia has transitioned to an information and technology-based economy with pillars in healthcare and education. Home to major corporations like Comcast, Aramark, URBN and more, Philadelphia is a global powerhouse that will continue to see growth in 2019.
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Economy in numbers: Greater Phliadelphia (including Camden/Delaware) employment change by sector, November 2018 (year-on-year percent change): Source: U.S. Bureau of Labor Statistics
1.9
2.3
1.2
1.3
0.6
1
0.6
2
1.5
2.1
3
-2.9 Information
Leisure & hospitality
Manufacturing
Other services
Trade, transportation & utilitiess
Financial activities
Government
Professional & business service
Education & health services
-3
Total non-farm
-0.2
0
Greater Philadelphia (including Camden/Delaware) employment by sector, November 2018:
349,300 Government
181,500 Manufacturing
120,600 Other services
122,900 Mining, logging & construction
540,300 261,900 Leisure & hospitality
Trade, transportation & utilities
2,998,900 TOTAL
43,700 Information
486,400
219,000
Professional & business services
Financial activities
673,300 Education & health services
12 | Invest: Philadelphia 2019 | ECONOMY
ECONOMY INTERVIEW
Shared vision How Philadelphia continues to be a major driver of Pennslyvania’s economy as the commonwealth works to attract investment and transform its communities
Tom Wolf Governor – Commonwealth of Pennsylvania
How does Philadelphia act as an economic driver for the Commonwealth of Pennsylvania? Pennsylvania’s ports are vital to the economic success of Pennsylvania. My administration is working hard to invest critical dollars in improvements at PhilaPort so we can create thousands of jobs and grow the economy of this region and the entire commonwealth. This critical infrastructure allows Pennsylvania businesses to reliably and quickly move goods and products to market and compete globally via Philadelphia. In November 2016, I announced a $300 million investment into PhilaPort’s infrastructure, warehousing and equipment to expand its container-handling capacity. Since implementing the infrastructure improvement plan, the port realized record-breaking cargo volumes and nearly 20 percent container growth in 2017 and recently welcomed the arrival of the largest container vessel to ever call at the port. In 2018, we also celebrated a significant milestone with the arrival of new large-capacity cranes. What strategies are being put in place to attract more foreign investment to Pennsylvania? We actively market the commonwealth through a variety of tools, including relationship-building efforts through programs that serve as “boots on the ground,” including the Governor’s Action Team and the Office of International Business Development. We regularly engage with site selectors and business leaders across the county and world for in-depth conversations on why Pennsylvania is the best place to do business. Similarly, we hold site selector familiarization tours that bring site consultants from across the nation to Pennsylvania to learn more about the opportunities and the business climate in various regions of the state. These types of tours typically focus on company growth, new technology
and innovation, workforce development business expansions or job announcements.
and
How do the public and private sectors work together to advance growth in Pennsylvania? A shared voice and vision on the local level is what truly encourages real economic opportunity. Positive changes happen when the public and private sectors partner in a strategic way with a shared goal of building vibrant, dynamic, livable communities. Economic and community development is done best through active public-private partnerships. Since I became governor, I have worked hard to ensure that when state government is investing in our local communities, we are directing our resources towards projects that transform our cities, municipalities and counties into more livable places to work and live.
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History of firsts: Greater Philadelphia has made major contributions to human civilization throughout history and continues to drive innovation Philadelphia is the economic and cultural heart of the Delaware Valley, situated along the lower Delaware and Schuylkill Rivers. With a population of 7.2 million, the Delaware Valley ranks as the eighth-largest combined statistical area in the United States. The area’s GDP is close to $388 billion, making it ninth in the world and fourth in the nation. With major contributions to human civilization in the realm of higher education and medical institutions, as well as unparalleled influence on American history and industry, today the region is a hub for higher education, biotechnology, medicine, tourism and much, much more. The five-county Greater Philadelphia region (including Bucks, Chester, Delaware, Montgomery and Philadelphia counties) is home to more than 4 million people. With a booming local economy bolstered by strong job growth, solid population gains and a formidable housing market, Greater Philadelphia is poised to enjoy continued economic prosperity in 2019. Rapid growth Philadelphia is located in the southeastern part of the commonwealth of Pennsylvania. According to a 14 | Invest: Philadelphia 2019 | ECONOMY
2017 U.S. Census report, the city has a population of 1,580,863, making it the largest city in Pennsylvania and the sixth largest in the country. With its lowest elevation at sea level and its highest elevation on Chestnut Hill (446 feet), Philadelphia sits on the Fall Line that separates the Atlantic coastal plain from the Piedmont. Of the city’s 142.71 square miles, 8.53 — or 6 percent — are water. Philadelphia takes its name from the Greek terms philos (beloved, dear) and adelphos (brother, brotherly). William Penn, who as a Quaker was no stranger to religious persecution, chose the name to promote tolerance, or “brotherly love.” This sentiment helped to foster the city’s rapid growth into America’s most important urban center. From its inception, Philadelphia was ripe for development, and despite Penn’s efforts to keep it rural, it quickly blossomed into an important trading center. By the 1750s, it had surpassed Boston to become the largest and busiest port in the colonies. Serving alternately as a center for revolutionaries, as the temporary capital of the newly created United States of America and as the young country’s first ( )
ECONOMY INTERVIEW
Quality of life How Philadelphia stands out among east coast cities for its talent, diversity, connectivity and high quality of life, all offered at an affordable cost
Jim Kenney Mayor – City of Philadelphia
What is helping to drive Philadelphia’s economy? Philadelphia is in the midst of a unique moment. After decades of decline, we are seeing people and businesses flocking to our city. The driving force behind our economy right now is our talent. We have a highly educated and diverse regional workforce. The region’s 100-plus colleges and universities graduate an estimated 90,000 students a year, and more of them are staying in and around the city. This abundant talent pool is highly attractive to businesses of all sizes and types. Whether entrepreneurs are looking to open a new restaurant or expand a global life science company, we have the people who are ready, willing and able to fill those jobs. We are seeing more and more people coming to or staying in Philadelphia thanks to our superior quality of life and low cost of living. There aren’t many cities — especially on the east coast — where you find that. Our location offers easy access to other urban centers like New York and Washington, D.C., while also bringing extensive regional connectivity to the Pennsylvania suburbs and even the Jersey shore. SEPTA, our regional transit system, averages a weekday ridership of approximately 1.1 million, and Philadelphia is ranked among the top five cities in the country for walkability and bikeability. As a diverse city that prides itself on inclusion, Philadelphia draws immigrants from around the world and continues to be a leader on issues of LGBTQ equality. The city provides unmatched recreation, culture and dining experiences. And the best part of all of this is that it comes at a much lower cost than our peer cities. How are Philadelphia’s unemployment levels improving? Like many cities and towns across the country, Philadelphia saw its unemployment numbers spike during the Great Recession, but our 2017 unemployment rate (6.2 percent) was the lowest it’s
been in a decade. The numbers in 2018 were promising, and we are on track to keep these improvements going as more companies move to Philadelphia or expand their current employee base here. How can the city foster and support its urban core innovation boom? Unlike our brick and mortar businesses, it can often be challenging for government to make direct investments in companies that are focused on innovation — especially those that operate online. What we can do is invest further in our workforce so there is a pipeline of local talent for these companies to pull from. We can also continue to support programs like the state’s Keystone Innovation Zones, which provide tax credits to tech and life science companies in distinct areas of the city.
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ECONOMY OVERVIEW
( ) major industrial city, Philadelphia morphed with the changing times. Throughout the 19th century it hosted a diverse array of businesses and industries, culminating in the country’s first official World’s Fair — the Centennial Exposition held in Philadelphia in 1876 — to celebrate the region’s industrial strength. Following the 1854 Act of Consolidation, the city has shared its name with Philadelphia County, the most populous in the state and the urban core of the country’s eighth-largest metropolitan statistical area. Today’s Center City comprises the neighborhoods that made up the city prior to 1854, including the historic Old City and Society Hill. It is the second most populous downtown area in the country, after Midtown Manhattan.
and 75 percent of the region’s workforce growth. Of the nearly $1 billion SBEs generate for the local economy every year, immigrant business owners contribute $295 million to these earnings. “Latinos are about two to three times more likely to start a business,” Jennifer Rodriguez, president and CEO of the Greater Philadelphia Hispanic Chamber of Commerce, told Invest:. “We are very entrepreneurial. These businesses, however, tend to be smaller than their non-Latino counterparts, and we think we have a significant role to play in helping these businesses grow.” In addition to increasing revenue and creating jobs, Philadelphia’s immigrant population has helped to reverse 50 years of population loss following the exodus of many manufacturing companies in the 20th century. In some parts of the city, immigrants have helped mitigate blight, improve public schools and spark growth along commercial corridors.
Today, nearly 15 percent of Philadelphians were born outside of the U.S.
Foreign strength Immigrants have been an important contributor to the region’s growth, beginning with the Dutch, Swedish and English in the 1600s and continuing into modern times. From 1990 to 2016, Philadelphia’s immigrant population nearly doubled, reaching 232,000. Today, nearly 15 percent of Philadelphians were born outside of the U.S. The fastest-growing group of immigrants from 2000 to 2016 came from Africa, while the largest groups were from Asia and the Americas (primarily from Latin America and the Caribbean). European immigration is currently at its lowest level in Philadelphia’s recorded history. The economic impact of the area’s immigrant population cannot be understated. From 2000 to 2013, immigrants were responsible for 96 percent of neighborhood small business enterprise (SBE) growth
Dreamers According to the Pew Research Center, an estimated 50,000 undocumented immigrants live in Philadelphia today, equivalent to about one in four foreign-born residents. This number is higher than any other large city in the Northeast, except New York. Across the 11-county metropolitan region (including Philadelphia), undocumented immigrants number about 160,000, an estimated 4,700 of whom are between the ages of 15 and 34 and were brought to the U.S. as children. They were granted temporary legal status under the Obama-era’s Deferred Action for Childhood Arrivals (DACA) program.
Harold Epps Director of Commerce – City of Philadelphia
‘Meds and eds’ is a primary employment driver for the city. Tech is as well. In the last 10 years we have seen more collaboration across sectors than we did in the past. Healthcare and education are a great example of that. One of the most important things that the Amazon shortlist has given us is raised visibility of the consciousness and confidence that Philadelphia has as a city. The Super Bowl win helped, too. Not only did it show the world that we have so much to offer, but it showed Philadelphians that as well. Philadelphia is becoming competitive on all fronts.
16 | Invest: Philadelphia 2019 | ECONOMY
ECONOMY OVERVIEW
DACA was set to expire in March 2018, but a Supreme Court ruling deferred that date by possibly as much as a year. At the time of print, there was still no plan for granting DACA recipients — or Dreamers — permanent protection. With the nation’s focus on the Trump administration’s “zero tolerance” policy, which led to thousands of families being separated along the southern border with Mexico in the summer of 2018, DACA seemed to be relegated to the backburner. However, in July the Center for Immigration Studies filed a lawsuit that would require the government to turn over data — much of it focused on criminal history — on those enrolled in DACA. With such a large number of Dreamers living in Greater Philadelphia, an end to DACA could mean a substantial economic hit to the region. Foreign investment From 2015 to 2016, the commonwealth of Pennsylvania saw an 18 percent increase in foreign direct investment (FDI). The state ranked 13th in the United States for FDI projects between 2003 and 2017, 16th for FDI job creation (generating 35,468 jobs during that time period) and 11th for attracting FDI company headquarters. Europe remained the top investor in Pennsylvania in 2018 — led by the U.K., Germany and France — accounting for more than 50 percent of the individual FDI projects statewide. Asia was the number two source region, led by Japan. Interestingly, Philadelphia experienced a 516 percent increase in FDI investment in commercial real estate from Germany and China in the first three quarters of 2018, indicating a strong interest from those countries in U.S. secondary markets. The majority of FDI capital coming into Pennsylvania today is going to business services, industrial manufacturing, information technology, plastics/chemicals and pharmaceuticals. The majority — about 67 percent — of the FDI projects statewide are new investments. Trade tensions Though the U.S. economy is strong right now, businesses and investors are growing increasingly concerned about the Trump administration’s trade crackdown. The first round of tariffs levied on China — 25 percent on $34 billion in goods (mostly industrial goods and intermediate parts) — took effect in July 2018, and a second round took effect on another $16 billion in late August. These followed tariffs imposed on U.S. allies Canada, Mexico and the European Union
John Grady President PIDC
PIDC is an organization that is focused on the idea of driving growth to all sectors and neighborhoods of the city. Philadelphia is continuing to see an increase in population after decades of decline. Since 2017 we have seen our highest job numbers in the last 30 years, meaning there are more people working in the city than there have been since the 1980s. We are seeing the continued revitalization at both the commercial and neighborhood corridor levels. We’re seeing great activity in many neighborhoods around the city with small businesses and commercial districts, and we’re seeing lots of activity on the big scale. We’re seeing Comcast opening its new building, we’re seeing expansion at the airport and we’re seeing investment, particularly in retail in our downtown where they’re redoing the gallery in the Market East project. Our anchor institutions in education and medicine continue to drive activity. Philadelphia continues to hit on all cylinders. Education and healthcare are the the biggest drivers of job growth in terms of volume, but we are also seeing a lot of activity in our startup sector, particularly with regards to technology. This is an exciting time to be in Philadelphia. We’re continuing to see the mix of downtown businesses, financial services, real estate and banking grow as well. So the story in Philadelphia is that we’re not a one-trick pony. We have a diverse economy here. Over the last 50 years we have transitioned from a city that was heavily dependent on manufacturing to a city that has a great diversity of activity and balance in the city’s economy. PIDC as an organization has quite a few attributes that distinguish it. We have been in business for over 60 years, so that has allowed us to take on both shortterm and long-term initiatives to make sure that that diversification in the economy continues to move forward and, more recently, to make sure that that growth that we’re seeing extends into as many parts of the city as possible. Neighborhood-level growth, community development and making sure that the growth of our downtown and our jobs sector produces benefits in the city is our ultimate focus.
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ECONOMY OVERVIEW
— to which the allies swiftly responded in kind. In September, a third round of tariffs on $200 billion worth of Chinese goods went into effect, and for the first time consumer goods (items like fruit juice, furniture, air conditioners and more) were directly hit by the new 10 percent tax, increasing prices for U.S. shoppers. These duties are set to rise to 25 percent in January 2019. U.S.-based retail container ports — including PhilaPort — have been seeing a marked uptick in activity in anticipation of these rising prices. According to a 2018 Port Tracker report by the National Retail Federation, in September U.S. ports handled 1.87 million 20-foot equivalent units (TEU), down 1.3 percent from August but up 4.6 percent year-over-year. With Trump’s “phase 3” of tariffs expected in 2019 and a full-blown global trade war looming, some fear an economic slowdown could be just over the horizon. Positive indicators Despite escalating global trade tensions and rising interest rates portending a potential slowdown on the horizon, Philadelphia’s economic indicators are positive moving into 2019. By the end of 2018, job gains in the region had reached a rate of 1.4 percent yearover-year, largely bolstered by healthcare, information technology and distribution, as well as December 2017’s major tax overhaul. “Philadelphia has seen population growth over the last decade or so, and over the last few years we have been seeing job growth,” Anne Fadullon, director of the Department of Planning and Development,
18 | Invest: Philadelphia 2019 | CHAPTER
Philadelphia’s Old City neighborhood is known as America’s most historic square mile.
CONSTRUCTION REAL ESTATE OVERVIEW
Patty Elkis Director of Planning Delaware Valley Regional Planning Committee
What improvement plans are in place currently for Philadelphia? In October 2017, we adopted our long-range plan: Connections 2045 – Plan for Greater Philadelphia. This is a big deal for the region because it shows a unified vision for the growth and development of the metro area, and it’s a blueprint for prioritizing over $65 billion in expected transportation funding over the next 25 years. We are federally mandated to update this plan every four years because things on the ground are changing constantly. While $65 billion over 25 years may sound like a lot, it’s actually only half the $130 billion that we’ve identified as needed to keep our transportation infrastructure in a state of good repair and to enhance how the network functions and accommodates our growing population and economy, while also contributing to a high quality of life in the region.
told Invest:. “For the last two years, Philadelphia has outpaced the national economy. It is an amazing time to be in Philadelphia, as we are seeing ourselves in a pattern of sustained growth.” At the time of print, Penn Medicine was finishing its 540,000-square-foot Center for Healthcare Technology and continuing work on its largest capital project ever: the 1.5-million-square-foot Pavilion Hospital, with targeted completion in 2021. Along with powerhouse companies like AmeriHealth Caritas, AmerisourceBergen and Spark Therapeutics recently announcing major Philadelphia-area expansion plans, these projects will bring thousands of direct and indirect healthcare industry jobs to the region. In the world of information technology, Comcast is in the process of hiring about 1,500 new employees to staff its recently completed, $1.5 billion, 60-story ( )
How does expanding the Delaware Valley’s trail systems improve the region? Building the infrastructure of trails, sidewalks, paths and bike lanes gives people safe places to walk, bike, run and be social, setting the stage for residents and employees to be more active and mentally and physically healthier. Getting people out of their cars reduces congestion and improves air quality, too. With that in mind, DVRPC inspired and shaped a vision for a network of trails to form the backbone of a regional active transportation system. We facilitate this by steering certain pots of transportation funding to support these projects, as well as managing over $23 million from the William Penn Foundation to re-grant to sponsors to close gaps in the regional trail network. The Circuit is an interconnected network of over 800 miles of trails throughout the region, with nearly 350 miles built and an additional 80 miles in progress. By investing in closing the gaps in this amazing network, the Delaware Valley can boast of an impressive trail system that people love, and it’s a tremendous selling point for our region.
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Market voices: Startups
Rafael Ilishayev
Co-founder & Co-CEO goPuff
Philadelphia does a good job of encouraging people to start companies. goPuff was started while we were students at Drexel University. Because of the affordability of Philadelphia, the rent prices and the potential for working with vendors, it really fostered us and encouraged us to grow. The challenges here are predominantly political, and the tax structure is a huge challenge. The way businesses are taxed can be daunting for a new company. However the city has nurtured us and allowed us to expand across the country, and I will always be grateful to the city of Philadelphia. I could not have started this company in a place like New York.
Shortly after we raised our first round of capital, some investors asked us to relocate to Silicon Valley. We declined. As a startup, it is advantageous to be closer to your customers than to your investors. Many more companies, especially brands and retailers, have ties to New York. With our proximity to New York, we are able to maintain and grow those connections without having to relocate. We, along with many other startups, would not have that same proximity to the numbers of clients that we do if we were located in California. At the end of the day, it is so important to be able to meet someone and shake his or her hand. Philadelphia allows us to do that with so many more people.
Bill Marvin
President & CEO InstaMed
Apu Gupta
Co-founder & CEO Curalate
Philadelphia has always had a strong history in healthcare, which made it the most logical place for us to start this business. There isn’t just one big client to sell to. People in this part of the country understand the language and the economy of healthcare, which is incredibly beneficial to us, especially when hiring a workforce. Our business involves a lot of travel, which is something we can do easily from Philadelphia both by train and by air. While Philadelphia was our home when we started InstaMed, it really had everything we needed to be successful.
Philadelphia is a great place to start a business. There is an amazing amount of talent in this city, and that is something that isn’t going to go away. Boston is praised for having Harvard and MIT, but we have the University of Pennsylvania, Drexel, Villanova and so many other top-tier universities. We are also attracting young talent that has already graduated. People want to be in Philadelphia, and people want to start businesses where the talent is. The city is affordable, it is walkable and we have an international airport. All of these things make for a good place for entrepreneurs. It is a great incubator.
20 | Invest: Philadelphia 2019 | ECONOMY
Brian Powell
CEO Junto Bicycle Works Ltd.
ECONOMY OVERVIEW
Nicole Tranchitella Managing Director – Philadelphia Office Lead – Accenture
I view our industry as having a lot of opportunity in Philadelphia, whether it is because of the diversity of the industries or the fact that there’s such a strong desire to bring Philadelphia into the larger innovation economy and truly reinvent itself and maximize our potential. It does not matter what sector of the market you are looking at; any leader in Philadelphia wants this to be a place where people come and where business thrives and for Philadelphia to be seen as a place of innovation. From a business perspective, Philadelphia has a very healthy market. People and businesses are coming in, so that really presents incredible opportunity for consulting.
( ) Comcast Technology Center. Similarly, in distribution news, retailers and e-commerce companies are rapidly building new facilities in the region in order to better serve their East Coast customers. In June 2018, Amazon announced that it would be opening a 1-million-square-foot distribution center in Philadelphia suburb Burlington, New Jersey, creating about 600 new jobs for local residents. When completed in 2019, it will be the fifth massive distribution center to open in the Philadelphia metro area since 2013. The 2017 Tax Cuts and Jobs Act, which cut corporate tax rates nearly in half, has left many of Philadelphia’s largest publicly traded companies flush with cash. Top regional employers like AmerisourceBergen, Aramark, Comcast and FMC all reported all-time highs in net operating incomes in the last four quarters. In fact, they more than doubled their net incomes from the previous four quarters. While according to the Congressional Budget Office the tax overhaul will add $1.9 trillion to federal debt by 2028, there is no denying that it has inspired Philadelphia’s major corporations to expand their payrolls.
rate in the region, at 5.2 percent, while Chester County had the lowest rate, at 3 percent. The region’s largest job gains by August 2018 came in education and health services, which added 20,200 jobs year-over-year, for 3.2 percent growth. This outpaced the nationwide increase of 2.1 percent in those sectors. Professional and business services also experienced significant growth at 3 percent (gaining 14,000 jobs), compared to 2.6 percent nationwide. Leisure and hospitality added 6,900 jobs for 2.5 percent growth, while both trade, transportation and utilities and mining, logging and construction gained 3,000 jobs each. The information sector was the only industry that saw job losses over 1,000, declining by 1,800 jobs year-over-year. The arts and culture industry continues to be a huge economic driver for the Philadelphia region. According to a 2017 report by the Greater Philadelphia Cultural Alliance, the arts and culture sector is a $4.1 billion industry that creates the equivalent of 55,225 full-time jobs every year. This figure is up from $3.3 billion in the alliance’s 2012 economic impact study. A number of organizations have invested millions of dollars to support local arts groups. These include the Philadelphia Cultural Fund, which distributed more than $3 million to 302 arts organizations and programs in the city in 2017, and the Knight Foundation, which announced in March 2018 that it would invest nearly $1 million into nine local arts organizations.
The arts and culture sector in Philadelphia is a $4.1 billion industry.
Job gains As of August 2018, the Greater Philadelphia metropolitan area had added 47,800 non-farm jobs year-over-year, a 1.7 percent increase from August 2017. During that same period, the national job count also increased 1.7 percent. Philadelphia County had the highest unemployment
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ECONOMY OVERVIEW
Ajay Raju Chairman & CEO Dilworth Paxson
Dilworth Paxson is more than just a storied whiteshoe Philadelphia law firm (though it is that); it is also an organization of counsel, committed to sharing a stake in its clients’ challenges, ambitions and visions of the future. In Dilworth’s early days, this meant looking beyond the immediate business landscape to play an active and affirmative role in advancing the societal transformation that was reshaping this country at the middle of the last century. Among the hallmarks of that commitment was the pivotal work the firm contributed to the briefing in Brown v. Board of Education. The spirit that motivated Dilworth’s participation in a landmark civil rights case is the same that today underpins the firm’s mission to leverage the intersection of relationships, value and judgment for the benefit of its clients and the industries and regions in which they operate; catalyze and promote entrepreneurship; and foster innovation and the ideas its clients hope to bring to market, whatever and wherever that market may be. Philadelphia in the early 21st century is a city with a singular history now looking to reestablish itself on the global stage. With ample stores of talent, an insatiable appetite for innovation and the energy to do big things — from medical breakthroughs to eco-technology — there is so much happening in Philadelphia with so much potential to change the world. The challenge is that the world doesn’t know it yet. Dilworth Paxson seeks to remedy that problem with an arsenal of its own innovations, providing its established and disruptor clients alike with a bespoke suite of consulting, management and strategic planning services that go far beyond the traditional law firm offering. In Dilworth Ventures and the Exchange, captive teams of lawyers and financiers find creative ways to improve capital accessibility in Philadelphia. Prioritizing minority- and woman-owned businesses, 215 Capital strives to create an environment in the city for underserved communities to make an impact of their own, honoring the firm’s legacy as a civil rights pioneer and all those who have made it more than just a law firm but an organization of counsel. 22 | Invest: Philadelphia 2019 | ECONOMY
Business of attraction Philadelphia entered 2018 excited to be one of the 20 finalists for Amazon’s HQ2 and the expected 50,000 jobs and $5 billion economic impact that would come with it. While the city ultimately lost out to northern Virginia and New York City for the coveted second headquarters, it did put forth a valiant effort that cost about $500,000. As part of its proposal, the City of Philadelphia offered up to $1.1 billion in tax incentives over 20 years to entice the e-commerce giant to its bounds. It also offered a full-time team, headed by Director of Commerce Harold Epps, to help the company navigate the complicated landscape of local government, regulatory agencies and labor organizations. The bid wasn’t a total loss, however, as it provided local and regional leaders an opportunity to develop new tools and reusable assets to promote Philadelphia on both a national and global stage. Establishing a global identity has been an important focus for Philadelphia since its announcement in January 2018 that it was selected as one of four U.S cities to test ways to define and communicate a global brand by increasing the international visibility of its economic assets. These efforts will build on the city’s participation in the Global Cities Initiative (GCI), a joint project by Brookings and JPMorgan Chase, through which Philadelphia created a three-year plan to target markets and adapt models for establishing economic partnerships with international counterparts. In the spring of 2018, the city launched efforts to put together a plan for more effective and cohesive marketing to increase business and talent attraction. Promotional materials created during the bidding process for Amazon’s HQ2 will be incorporated into this initiative. Marketing Philadelphia with a strong global identity will not only benefit the city but the entire region. “Philadelphia’s increasing visibility is incredibly important to Upper Merion Township,” Greg Waks, chair of the Board of Supervisors of Upper Merion Township/ King of Prussia, told Invest:. “Our economy would not be what it is without Philadelphia. With the accessibility of the airport, many people who come visit the city come visit us as well. We also see incredible reverse traffic during rush hour. A lot of younger workers are living in Philadelphia, but they are working here.” Another incentive to economic investment and business attraction in the region comes in the form of Low Tax Opportunity Zones (LTOZs). In March 2018 Governor Tom Wolf announced the recommended designation of 300 census tracts in Pennsylvania as LTOZs. These zones were established under the 2017
ECONOMY OVERVIEW
federal Tax Cuts and Jobs Act in order to encourage long-term investment and job creation in targeted communities by lowering taxes for job creators. 82 tracts throughout Philadelphia are now designated as LTOZs. Counties in the region are also stepping up their incentive game to attract new business to the area. “We are one of the first counties in the country to have our own venture capital fund,” Robert Loughery, commissioner of Bucks County, told Invest:. “It is called VC for BC and is overseen by the Ben Franklin Technology partners. We have allocated $2 million from our pension fund to be allocated by Ben Franklin to invest in new companies in Bucks County. The county also work closely with our Business Industrial Authority to build incentives, which culminate under the moniker ‘Bucks to Invest.’ Through that program we offer funding for redevelopment projects, machinery loans and infield development. We put a lot of emphasis on making sure we are helping businesses in Bucks County grow and thrive because when they thrive, we do too.” Battling poverty While overall Philadelphia’s economy is thriving — fueled by a growing population, a steady stream of new investment and rising household incomes — more than a quarter of the city’s residents (about 400,000 people) live below the poverty line. According to U.S. Census data, 30 percent of poor Philadelphians ages 16 and older worked in 2016, but only one in five had year-round, fulltime jobs. 61 percent of the city’s working-age poor were unemployed and were not seeking employment in 2016. This marked the highest rate among the country’s 10
Philadelphia’s most iconic sandwich, the cheesesteak, has been around since 1930.
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ECONOMY OVERVIEW
Matt Cabrey Executive Director – Select Greater Philadelphia
Select Greater Philadelphia is focused on attracting new businesses and new jobs to our community by marketing the dynamic assets of northern Delaware, southern New Jersey and southeastern Pennsylvania to national and global audiences. Our 11-county neighborhood has a compelling story – from access and proximity, to an exceptional transportation and utility infrastructure, to a talent pool of highly skilled workers across industry sectors.
most populous and poorest large cities. Compounding the poverty issue, a recent study by the Pew Charitable Trusts found that poor Philadelphians were twice as likely to categorize their general health as poor and had higher levels of chronic illness than other residents. Unsurprisingly, life expectancy was lower in poor zip codes than in wealthier ones. Additionally, twice as many poor children reported experiencing neglect or abuse compared to children living in better financial conditions, and only 2 percent of all poor students in public schools attended elementary or middle schools with high achievement ratings. In 2016, 76 percent of violent crimes reported in Philadelphia occurred in neighborhoods where at least 20 percent of the population was poor. When the percentage of residents living in poverty rose to 40 percent and above, violent crimes were nearly three times more prevalent. Breaking the cycle of poverty requires institutional, systemic and innovative change. “There is a lot of energy around the discussion of problems and challenges but not the same amount of energy being put into discussions around solutions and opportunity,” Michael Banks, president and CEO of the African American Chamber of Commerce PA/NJ/DE, told Invest:. “People know the data, and they understand the problems, but the energy put into solving them isn’t equal. We know the poverty rate is 26 percent, but what are we doing differently? Innovation needs to be looked at as a verb not a noun. By fostering small businesses and
encouraging discourse with minority-owned businesses and bringing these people into the conversation, we can help achieve the goals we have both socially and economically as a city.” Bright future Things in Philadelphia are looking good moving into 2019. Philadelphia’s housing market is one of the hottest in the country, its population and job growth are soaring, investment is strong and local and regional leaders are committed to moving the city onto the global stage, facing challenges head-on with modern, innovative solutions. “Confidence in the economy has really grown, and that has been huge for us and our clients,” Patrick Riley, vice president for Property and Casualty at USI, told Invest:, echoing the sentiment of many local business leaders. “We have seen a lot of our clients and prospective clients starting to invest more, whether that be in people, new construction or new acquisitions — investments that, until recently, they might have held back on.” The city of Philadelphia was a vision before it became a city, and that legacy of innovation and inclusion is built into its bones. From revolutionary ideas like religious freedom and political democracy to modern innovations like biotech patents, cancer research and delivery apps, Philadelphia promises to continue to be a city of firsts.
In 2016, 76 percent of the city’s violent crimes occurred in neighborhoods where at least 20 percent of the population was poor.
24 | Invest: Philadelphia 2019 | ECONOMY
Tax: Following December 2017’s federal tax overhaul known as the Tax Cuts and Jobs Act, business owners and investors are just starting to figure out how the legislation affects them. While Philadelphia’s local tax structure has posed challenges in the past, taxes are an ever-changing beast. Fortunately, experts in the region are prepared for anything.
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Tax overhaul: 2018 was the first year the country felt some effects from the federal tax reform, and Philadelphia businesses are still adjusting The Tax Cuts and Jobs Act (TCJA) of 2017, passed on December 22, 2017, was the most comprehensive overhaul of the tax code since the Tax Reform Act was passed more than 31 years prior. The TCJA provides a series of reductions to the income tax rate for most income tax brackets and drastically lowers the corporate tax rate. In addition to traditional corporations, the owners of pass-through entities also receive large deductions, and new individual alternative minimum tax and estate tax reductions were introduced. Moreover, the filing process has been streamlined and simplified, reducing confusion for the many taxpayers who file their own returns. However, there are a few downsides to the TCJA for taxpayers, including the elimination of many tax breaks and itemized deductions and the fact that many of the tax relief that remains is only temporary. All of this leaves many Philadelphia residents and businesses wondering how they will be affected. Individual takeaways Individuals in Philadelphia will be affected by the TCJA in a variety of ways. First, the TCJA will maintain 26 | Invest: Philadelphia 2019 | TAX
seven distinct income tax brackets, but individuals in most brackets will pay a reduced rate. In particular, the seven brackets for 2018 are 10 percent, 12 percent, 22 percent, 24 percent, 32 percent, 35 percent and 37 percent compared to respective 2017 rates of 10 percent, 15 percent, 25 percent, 28 percent, 33 percent, 35 percent and 39.6 percent. This means that many Philadelphians — and American taxpayers in general — will be paying lower taxes and keeping more of their hard-earned income. However, this benefit carries an important caveat: the TCJA will make annual inflation adjustments based on the chained consumer price index (C-CPI-U) on a permanent basis. Using the C-CPI-U to adjust for inflation means that tax bracket thresholds will ramp up at a slower rate than they did under the consumer price index used in the past, which could push taxpayers into higher tax brackets more quickly. By shepherding individuals into higher tax brackets at an accelerated rate, the TCJA will lead to many tax breaks being worth far less over time. “Many of the middle market companies are using entity structures that are ‘flow-through’ in nature,” Lori Reiner, chief people officer at EisnerAmper
TAX OVERVIEW
LLP, told Invest:. “This means that the companies themselves don’t pay taxes; rather, the individuals who own the companies pay the taxes on behalf of the companies. These people are likely going to see little effect of the tax reform. Individual tax rates are only going to go down slightly, and individuals are losing important deductions they may be unable to replace.” This approach to deductions and exemptions is another double-edged element of the TCJA. The new tax law will approximately double the standard deduction — from $6,350 for single taxpayers, $9,350 for heads of household and $12,700 for married couples filing jointly in 2017 to $12,000 for single taxpayers, $18,000 for heads of household and $24,000 for joint filers in 2018. This will be a boon to Philadelphians, 75 percent of whom took the standardized deduction in 2015, as well as to the residents of the seven Pennsylvania and New Jersey counties surrounding Philadelphia, where approximately half of residents opted for the standard deduction in the same year. However, the TCJA will also suspend personal exemptions entirely, which could hurt taxpayers with many dependents (such as Philadelphia families with children). The TCJA also eliminates many
itemized deductions, which in conjunction with the boost to the standard deduction could severely limit the benefit of itemizing. Given that more than 40 percent of Philadelphia suburbanites itemized their deductions in 2015, the TCJA may have a disruptive effect on how they go about their taxes. Beyond pure tax reform, the TCJA also made some significant changes to federal healthcare law and sought to reverse many of the provisions of the Affordable Care Act. One of the biggest changes the TCJA made in the healthcare arena is the elimination of the individual mandate. The individual mandate was a component of the Affordable Care Act that required individuals to carry a minimum level of health insurance or pay a steep tax penalty. This penalty incentivized many previously uninsured Americans to acquire coverage, including 166,000 low-income Philadelphia residents who obtained insurance thanks to an expansion of Medicaid, as well as many Philadelphians who could no longer justify remaining uninsured as a way to save money. However, with the individual mandate eliminated, as many as 13 million Americans are estimated to drop their insurance, including thousands of people in Philadelphia.
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TAX OVERVIEW
$24,000
$12,000 $6,000 $0
$6,500
$18,000
Single filter
$18,000 $12,000
$24,000
$24,000
$13,000
$30,000
$9,550
$30,000
$18,000
2018 standard deduction:
$12,000
2017 standard deduction:
$6,000
Head of household
Joint filers
$0
Single filter
Head of household
Joint filers
Source: CNBC
Real estate The TCJA will also impact real estate in Philadelphia. Although existing mortgages remain unaffected by the new legislation, new homeowners might feel a sting when purchasing a home because as little as one in seven homes will remain eligible for the mortgage interest deduction. The mortgage interest deduction, which is one of the many itemized deductions reduced by the TCJA, is now capped at $750,000. Philadelphiaarea homes are expected to be significantly affected by the change, particularly in Chester, Bucks, Montgomery and Delaware counties. For example, in Chester County, 79 percent of homeowners stood to save money by taking the mortgage interest deduction (rather than the standard deduction) before the passage of the TCJA. That figure falls to 22 percent under the TCJA. Similarly drastic shifts are seen throughout much of eastern Pennsylvania and New Jersey. This will likely drive many Philadelphians to opt for the standardized deduction instead.
Also affecting real estate in the Philadelphia area is the TCJA’s $10,000 limit on state and local tax (SALT) deductions. Specifically, the new rules place a $10,000 cap on the aggregate of state and local property taxes and either income or sales taxes. This drastically reduces the efficacy of the previously useful SALT deduction and will especially hurt those who are living in Philadelphia and subject to the city’s wage tax. Affordable housing Homebuyers aren’t the only ones affected by the TCJA. Many in Philadelphia rely on low-income housing developed with the help of tax credits like the low income housing tax credit (LIHTC). However, the TCJA reduced the corporate tax rate from 35 percent to 21 percent — the lowest tax on corporations since 1939 — which significantly reduces the tax liability of banks and investors. The upshot of this is that the traditional investors of low-income housing will have a reduced incentive to obtain tax credits like
Sean Denham Office Managing Partner – Grant Thornton
As the country’s economy goes, Philadelphia’s economy tends to go. A lot of companies are focusing on tax reform and wondering what is going to happen. Firms like ours are helping CEOs figure out how the reform is going to impact them. If their blended tax rate was 39 percent and is now going down to 32 percent, I don’t view that as a tax break; rather, I view it as an investment opportunity. We are helping the companies we work with figure out how they can invest that money back into their businesses and determine truly what the reform will mean for them and their companies.
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CONSTRUCTION REAL ESTATE OVERVIEW
the LIHTC, and the tax credit market will become less competitive overall. Ultimately, this means less investment for affordable housing projects and fewer affordable homes for people who need them. In a city where 24,650 residents already live in units financed by the LIHTC, the future of low-income families is extremely uncertain. Banking win After passage of December 2017’s Tax Cuts and Jobs Act, companies like Wells Fargo — the Philadelphia region’s largest bank by deposits — were praised for promising bonuses and higher wages to their employees in a true show of trickle-down economics. Wells Fargo reaped a $3.35 billion benefit from the legislation, mostly due to deferred tax liabilities it had on its books. The bank reported that it would be raising its minimum wage to $15 an hour and that about 70,000 of its employees would see some sort of benefit from the reform. After the bill passed, more than 70 financial institutions announced they would increase wages or offer bonuses. Despite taking one-time $2.4 billion and $22 billion hits, respectively, from the tax law — largely due to recalibration of their tax-deferred assets — JP Morgan and Citigroup both expect higher net income and increased returns in the long run. Wilmington-based WSFS Financial took actions following the TCJA’s passage that resulted in a reduction of income between $22.8 million and $23.8 million in Q4 2017. However, the bank expects that its business will boom in the coming months and years. In the years preceding the new tax law, U.S. economic growth hovered at around 2 percent annually, which discouraged many businesses from borrowing. However, WSFS is anticipating that the TCJA will boost annual economic growth to 3.5 percent, which — along with the massive cut to the corporate tax rate — should make businesses more confident about investing, leading to more lending and more deposits. U.S. banks are among the highest-taxed industries, which also makes them some of the biggest winners in the tax bill game. Larger banks will reap the benefits of lowered corporate tax rates, while smaller banks will benefit from pass-through deductions. Wells Fargo and JPMorgan reported that they expected their 2018 effective tax rates to be around 19 percent, nearly onethird lower than what they paid in 2016. Philadelphiabased Beneficial Bancorp reported an effective tax rate decrease to 24.2 percent by the end of September 2018, significantly lower than the 33.5 percent rate in September 2017. In Q3 2018, Bank of America ( )
Denise McKnight Partner Friedman LLP
How do you see the Tax Cuts and Jobs Act affecting businesses in Philadelphia? Tax reform is still in its early stages, and new information is continually unfolding from the Internal Revenue Service (IRS), so it is challenging to predict exactly how businesses will be affected. Since this is a federal-level reform, the idea is to save businesses federal tax dollars to ideally reinvest into their businesses. The businesses I have spoken to hope to use that money to invest in the capital improvements they were unable to make before the overhaul, whereas the banks I have talked to are ready to lend so they can help businesses finance those expansion transactions. Overall the reform seems positive. I think we will see businesses make technology upgrades, implement capital improvements and hopefully give back to their employees. Businesses are looking long term. Where do you see the tax reform posing the biggest challenges? The federal tax reform has increased the standard deduction and removed the state and local tax deduction, so more people might end up utilizing the standard deduction on their personal tax returns instead of itemizing their tax deductions. This will change charitable giving decisions, which might pose challenges for nonprofits. When you itemize, you receive a deduction for charitable contributions. Opting for the standard deduction might deter people from charitable giving because they will no longer receive a tax deduction if they don’t itemize. As a result, nonprofits might begin to see a reduction in the smaller one-off donations. However, exploring other opportunities — such as collaborations, consolidations or seeking capital in other ways — could help nonprofits navigate this tax reform.
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TAX INTERVIEW
Unique impact How 2017’s sweeping tax overhaul is affecting Philadelphia businesses in a unique way as local experts continue to navigate the ambiguity surrounding the reform
Barry Berkowitz Managing Director – CBIZ MHM, LLC
actually has an income tax that is lower compared to the surrounding states, so that is another way the city is different, not just from the other markets surrounding it, but from the state as well.
What unique characteristics does Philadelphia have from a tax perspective? Philadelphia has a business privilege tax, the BIRT tax, which means the more income a business leaves within the entity, the more tax the business is subjected to. The city bases the calculation of that income, or that tax, on allocation of where the sales are located. So if a company is located in Philadelphia, but its shipping or its sales are to companies or customers who are outside the city, then that potentially could be excluded from the city tax. Philadelphia also has a fairly high wage tax compared to the rest of the state. Pennsylvania 30 | Invest: Philadelphia 2019 | TAX
How do you foresee the federal tax reform affecting businesses in the region? Taxes can be a significant burden to businesses, especially small businesses, which CBIZ does quite a lot of work with. With the new federal tax reform, businesses are not paying as much in taxes so they are sharing that extra income with their employees and investing back into the company. They are also able to repatriate cash at a lower tax rate than they were before, so businesses are bringing their investments back to the U.S. The big thing with businesses is: if there’s an opportunity to save taxes by buying new equipment, then they go out and buy new equipment. When companies start spending money on infrastructure, it spurs investment and regrowth within that geographic area, and that is what we’re seeing a lot of. There has been a positive response from the business community because of these new significant advantages that have been created as far as reinvesting in your company. Where do you think the federal tax reform will present challenges? At this point one of the biggest challenges is they are just now issuing the regulations on what they presented back in December 2017. Everything was put together so quickly that they didn’t take the time to define what some of the meanings were. We won’t know if it’s going to have a tremendous effect on the general public until they start truly defining what they meant with this reform.
TAX OVERVIEW
( ) reported its income taxes totaled $1.83 billion — $360 million less than it paid in Q3 2017. Legal Philadelphia is a major legal market with several AmLaw 100 firms, which has led to the TCJA having a special impact on the city. The crux of the TCJA’s effect on law firms is that it will change the way pass-through entities offering personal services are taxed. As mentioned earlier, the corporate tax rate is getting a huge reduction, and even pass-through businesses such as sole proprietorships, LLCs and S corporations are entitled to a 20 percent deduction for business income until 2025. Law firms, however, are typically organized as partnerships, a kind of personal service pass-through entity, which means that law firms would not be eligible for the 20 percent deduction. This leaves many Philadelphia-area firms contemplating whether to reorganize. “Tax structuring, while traditionally always a concern, is seeing heightened importance due to federal tax reform,” Fred Massanova, partner at Baker Tilly Virchow Krause LLP, told Invest:. “As the details emerge, companies have strategic decisions to make in regards to their structure, and our team has the depth and knowledge to guide those decisions.” One of the key elements in making the decision to reorganize is income — the 20 percent deduction is
limited to the first $157,500 earned by single filers ($315,000 for married couples filing jointly), so firms with partners earning more than that amount wouldn’t be eligible for the deduction regardless. However, firms that make less might want to restructure to capitalize on the deduction. Many firms in Philadelphia have already restructured in the wake of the TCJA. Economic impact One of the reforms under the TCJA with the biggest impact will be the new flat 21 percent corporate tax rate. Given the fact that, pre TCJA, C corporations were taxed at 15 percent on taxable income of $0 to $50,000; 25 percent on taxable income of $50,001 to $75,000; 34 percent on taxable income of $75,001 to $10 million; and 35 percent on taxable income in excess of $10 million, the new flat rate is going to cause considerable ripples throughout the economy. Many such ripples are being felt in the Philadelphia region as companies plan to pay fewer taxes and make more money. For example, Beneficial Bancorp has raised its company-wide minimum wage to $14 per hour and has provided a $1,000 bonus to all of its employees. Similarly, Comcast has granted $1,000 bonuses to eligible frontline and non-executive employees and has pledged to invest $50 billion per year for the next five years in its infrastructure. In nearby Lancaster, Fulton Financial Corporation has raised its minimum
One of the reforms under the TCJA with the biggest impact will be the new flat 21 percent corporate tax rate.
Brian Clouse Partner, Insurance Practice Leader MAZARS USA LLP
How is the tax overhaul affecting Philadelphia businesses? The new tax reform, while there is still some uncertainty surrounding it, is allowing companies to grow. It is putting money back into companies’ pockets, and they are able to reinvest it in themselves and their people. Many of our clients from day one have started planning how they are going to grow by using this new capital that they have access to. We have not seen a single company that is just going to pocket that money and not use it for reinvestment. What are some of the challenges of doing business in an increasingly global economy? The global economy is a challenge and an opportunity at the same time. Digitization and digital distribution of goods and services have helped widen everyone’s client base because now with the push of a button you can be global. That is an amazing opportunity. However, the challenge is there is more competition than ever before, and the financial services sector is not immune to this either. The internet is the true leveling of the playing field for many industries. If you can compete and you can be nimble enough, which Mazars has become, you can have a far wider distribution of your products and services than you could 10 years ago. How is MAZARS responding to a changing world? We are changing and adapting the way we do our work — from flexibility surrounding working remotely to our total compensation packages — because as the younger generations enter the workforce, it becomes a gig economy and retaining talent becomes a challenge. We are mostly paperless now, especially from our tax and audit sides. Everything we do is in the cloud because that is how our clients are functioning. The way we do business is constantly changing, and we have to keep up with our clients’ demands.
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wage to $12 per hour, paid all employees a bonus equivalent to one week of pay and donated $2 million to local charities. In addition to bonuses and higher wages, citizens in Philadelphia and throughout Pennsylvania will see their utility bills go down, resulting in nearly $350 million in savings. The main source of utility savings is the 7 percent reduction in Pennsylvania American Water’s rates, as well as an $8 decrease in wastewater bills, amounting to $100 and $500 in savings per residential customer and commercial customer, respectively. Finally, the TCJA is expected to have rather broad effects on the economy overall. In particular, it is expected to promote employment growth, resulting in 8,700 new jobs across the commonwealth. The IFO also estimates that $6 to $7 billion will be injected directly into Pennsylvania’s economy thanks to the TCJA, which — despite the many tax cuts in the legislation — will actually result in an increase in state tax revenue. This allows Pennsylvania lawmakers to pass balanced budgets on time and fund important initiatives without raising taxes, benefiting each and every citizen of the commonwealth. Looking ahead The Tax Cuts and Jobs Act is the most sweeping tax overhaul in over three decades. It is anticipated to have drastic effects on business income and
TAX OVERVIEW
The Tax Cuts and Jobs Act is expected to have a positive impact on the economy, promoting job growth and increasing state revenue.
individual tax liability across the country, and Philadelphia is no exception. Many in the region traditionally itemized their deductions and will now face a severely reduced incentive to do so, but most will fare much the same, if not better, thanks to a nearly doubled standard deduction. Businesses in Philadelphia will benefit from the slashed corporate tax, and their employees will in turn receive trickledown benefits like higher wages and bonuses. Still, the TCJA was only passed in December 2017, and much of its impact remains to be seen. Some charitable organizations worry that the loss of incentive to itemize deductions and the increased draw of the standard deduction will result in
fewer donations. The TCJA has also forced many partnerships, especially law firms, to consider new ways to structure themselves in order to minimize their tax liability and maximize profits, upsetting a status quo that had functioned well for many years. Tax professionals in Philadelphia, and across the country, are experiencing an uptick in demand. “With the tax law changes, there’s a huge need for tax professionals, especially in the Northeast of Philadelphia, which is one of those markets that’s pretty heavily taxed,” Eric Strauss, partner at Withum, told Invest:. “Unfortunately, a lot of folks in this region are losing their write-offs with the new federal tax laws, so there’s a lot of tax planning that
George Kotridis Principal – CLA
2018 is the first tax year affected by the recent federal tax reform act. The tax law changes are far reaching and will be extremely powerful and significant to U.S. businesses. We at CLA see these changes creating significant opportunities for our clients, as well as for our firm and our people. There are many provisions included that are designed to stimulate investment — that’s really what it’s about. We have clients that are incredibly excited, and as a company we are, too.
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TAX OVERVIEW
Christopher Bruner Managing Partner – EY
Going forward the Tax Cuts and Jobs Act is going to offer significant planning opportunities, especially for international and multinational companies to minimize their effective tax rates. The biggest change that our clients will see is that the new legislation allows companies that have a lot of cash overseas to repatriate their funds and invest back in the U.S.
has to happen. I would say the tax area is definitely seeing a huge amount of demand.” Still, some experts are concerned that without change at the local level, these macro changes might be overshadowed. “The Tax Cuts and Jobs Act is a federal tax reform, and what Philadelphia needs right now is local and state tax reform,” John Mitchell, partner in charge of the Philadelphia office for Marks Paneth, told Invest:. “I don’t see the federal tax reform affecting
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Philadelphia as much as other markets because of the issues already presented by our local tax structure. As an economic center, our local tax structure is archaic and expensive. Philadelphia needs to find a way to make it more enticing for businesses to come here. That could come from local tax reform.” In time, the positive and negative effects of the TCJA will become apparent, but for now it looks like America’s tax overhaul will have a primarily positive effect on Greater Philadelphia.
Legal: The first known usage of the term “Philadelphia Lawyer� dates back to 1788 and describes someone who knows the most detailed and minute points of the law or is an exceptionally competent lawyer. Today Philadelphia is rated a top 10 law city, so the term’s original usage still holds true, especially as more and more firms start calling the city home.
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Law and order: From the nation’s founding documents and oldest law firm to eight modern firms making the Am Law 100 list, law is in Philadelphia’s bones When the Great Recession broke out in 2008, the legal industry was one of the hardest hit among a host of ailing industries. Law firm hiring stalled, and young people were cautioned against pursuing their dream of going to law school, sometimes by law schools themselves. If you ask many JDs who entered the workforce in 2008 and a few years after, they will have no shortage of horror stories. 10 years later, however, things are looking better, and most of those JDs are doing just fine. Still, the positive outlook for the legal industry nationwide remains qualified. There was job and wage growth in the industry in 2017, but in the modest amount of 0.6 percent, and much of that growth was concentrated in large, elite firms. A lot of legal work is being siphoned off by alternative legal service providers and in-house legal departments, which can undercut law firm prices for many less sophisticated services. Meanwhile, smaller firms are being forced to merge to keep up, and hanging out one’s own shingle remains a path fraught with stress and peril. Additionally, the growth rate of equity partners remains at a flat line, which presents a very real problem as many existing 36 | Invest: Philadelphia 2019 | LEGAL
partners skirt retirement age and threaten to leave firms without senior leadership. The legal industry is resilient, however, and it has recovered from downtrends like this in the past. This is especially true in Philadelphia. Legal landscape Philadelphia has a well-established corporate legal market that thrives on the presence of the 20 Fortune 500 companies that call the city home and the more than 75 Fortune 1000 companies that operate in the area. The slower growth of the legal market in nearby Wilmington, Delaware, also leads to Philly’s firms attracting even more attention. “Philadelphia is in an amazing location,” Judy Leone, managing partner for Philadelphia at Dechert LLP, told Invest:. “Our lawyers can be on a train and in front of the Supreme Court within two hours. We can take a train to the New York office or be connected to our global offices through the airport. It is a great hub for connectivity, and it is affordable.” Among the firms headquartered in Philadelphia are Rawle and Henderson LLP, the oldest law firm in ( )
LEGAL INTERVIEW
Second to none How Philadelphia stands out as a legal powerhouse thanks to the city’s wealth of talent, opportunities for lawyers, educational investment and quality of life
William Sasso Chairman – Stradley Ronon
How does the Philadelphia legal sector compare to others nationally? Regardless of what city you are focusing on — whether it be New York, Chicago or D.C., cities in which we have other offices — the lawyering in Philadelphia is second to none. That means that the talent is here. One of the hidden secrets of Philadelphia’s legal sector is the breadth of services we are able to offer because of the talent that is housed here. We do virtually everything here, and a lot of national and international companies don’t realize that. They think you have to go to New York or D.C. for expertise in certain areas, but we have that expertise in Philadelphia. We just have to get the word out. There are tremendous resources in this city across all sectors, whether it be healthcare, education or legal. In what ways is Stradley Ronon seeing growth? In the last five years we have opened up offices in both New York and Chicago, and both are doing incredibly well. Across the board we are seeing more and more proposals for new representation, which means more opportunities for our lawyers as well. Businesses are attracted to us because they see us as entrepreneurial in our approach. We are on the cutting edge of a lot of issues and offer mentorship and business advice alongside our legal services. In terms of practice areas, investment management is the fastest growing for us. That practice group is spearheaded by Bruce Leto, who is internationally recognized for the work he does. Business and litigation are both seeing growth as well. We are getting more involved in sophisticated securities litigation, including opt-out litigation for our mutual fund clients. Also our insurance and healthcare clients are heavily involved with our experts in cyber security. That is a developing area for us. Our business group is also getting much more involved with private equity and
startups. The educational institutions in Philadelphia are investing and creating more opportunities for startups, and that will generate additional work for the business and legal communities. As the business community grows, the legal community grows. What are the advantages to being headquartered here? Philadelphia is an extremely livable city. Housing costs are reasonable, especially when compared to other cities up and down the east coast. Philadelphia is attracting huge amounts of millennials and members of generation z, and that is important not just for law firms but also for businesses in general because they want to be where the talent is. The city is attractive for people looking to start their careers, and that is important for businesses focused on retaining top talent and growing their companies.
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Matthew Taylor Chairman & CEO Duane Morris, LLP
What opportunities does Philadelphia offer for law firms? Let’s give the city some credit for what is happening in the business community. Philadelphia as a region has many well-respected, established companies, and the city is attracting a lot of emerging companies as well. Talent in Philadelphia is incredible and has never been stronger, and we are seeing a lot of that talent stay. Those ingredients are going to create a lot of opportunities for law firms, and we are definitely going to take advantage of that. Every industry has disruptors, but strong law firms are always going to do well. How does Duane Morris give back to the community? We encourage our lawyers to participate in pro-bono matters, and the younger lawyers really love that. Last year we had a 99 percent participation rate among our lawyers in pro-bono work. Along with some other law firms, we have taken the lead in helping Mayor Kenney with the New American Campaign on a pro-bono basis. We are one of the top immigration firms, so it made sense for us to participate and give back, which is good for the city, as well as our lawyers. We are a country of immigrants. Some of the best and brightest come to the U.S. and to Philadelphia, and we want to help them become naturalized citizens. You are who you are as a law firm, and when it comes to programs like pro-bono, diversity and inclusion or the Women’s Impact Network for Success (WINS), if you don’t live them they are not going to benefit anyone. A great example of that is former Duane Morris lawyer Nolan Atkinson Jr., who now works for Mayor Kenney as the city’s first chief of diversity and inclusion. As a firm we put a lot of emphasis on the importance of equality and inclusion, and that is a similar mindset to the city of Philadelphia.
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( ) continuous practice in the U.S.; Ballard Spahr LLP; Cozen O’Connor; Dechert LLP; Duane Morris LLP; DLA Piper; Fox Rothschild LLP; Morgan, Lewis & Bockius LLP; and Pepper Hamilton LLP. As the legal niches of intellectual property, insurance and healthcare, labor and employment, antitrust, real estate and municipal and bond work continue to boom in Philadelphia, the market promises to remain strong. Brief history The history of the legal industry in Philadelphia is nearly as rich as that of the city itself. Philadelphia has needed lawyers since the colonial period, when they served in the colonial government and administered its laws, settled disputes between citizens and generally upheld the rule of law. By the American Revolution, Philadelphia’s legal industry had already begun to establish its focus on the commerce and banking industries, as the city was solidifying its place as a business and shipping hub. Philadelphia’s lawyers also played a key role in the monumental undertaking of creating the new nation, penning both its original governing rules and the lasting Constitution. Among these founding fathers was the first associate justice of the Supreme Court, James Wilson, who signed both the Declaration of Independence and the Constitution. After the Revolution, Philadelphia served as the nation’s capital while Washington, D.C., was under construction and as its second-largest city, maintaining its prominence as a hotspot for business, manufacturing, shipping and finance. This provided for a thriving legal market but one dominated more by solo practitioners than by multi-lawyer firms. Most of the firms in Philadelphia that did exist comprised fathers and sons or other close family connections, with the modern legal partnership not appearing until the late 1800s. At this early stage, Philadelphia continued the tradition of law as a trade consisting of a long apprenticeship, and it was only much later that the more modern paradigm of legal education and licensing appeared. Other distinctions attributable to the Philadelphia legal community are the founding of the Law Library Company of Philadelphia in 1802, one of the first entities to offer shared access to law books in the county; the first bar association in America and the Law Association of Philadelphia, founded in 1821. The appellation “Philadelphia Lawyer” has also been used to describe a lawyer who is wellversed in the most esoteric nuances of the law due
LEGAL OVERVIEW
to the reputation of the city to produce extremely competent lawyers, including Andrew Hamilton, who successfully defended newspaper publisher John Peter Zenger from a libel charge and cemented the American principle of free press. Later, after the mid-20th century, when lawyers were held in particularly low esteem by the general public, the term was used to disparage lawyers viewed as crooked and exploitative. Today’s legal sector in Philadelphia has been shaped to a considerable degree by its history. The city is still a large commercial and shipping center with a strategic location in the Northeast, and this has helped to maintain a healthy market for corporate, financial and insurance attorneys over the centuries. The city is also home to several law schools, many of them highly reputable and one Ivy League, so its reputation for producing erudite practitioners persists. As it has proven through the explosive birth of the United States and the vagaries of time and economics, the Philadelphia legal market will continue to remain strong. Solid growth When looking at the specifics of the present-day Philadelphia legal market, it is unquestionably a time of growth, both from without and within. Although managing partners and major legal recruiting firms in Philadelphia report increased competition from alternative legal services providers and in-house legal departments, a common refrain in legal markets across the country, they also report increased local demand for talent and a growth in business, which seems to herald continued recovery from the dark days of the last recession.
Both the Declaration of Independence and the U.S. Constitution were debated and signed in Independence Hall.
Stephanie Resnick Office Managing Partner – Fox Rothschild
A challenge that is facing the Philadelphia legal sector is the saturation of the market. There are many top firms in this city, some that have been here for significant amounts of time — Fox Rothschild being one of them. The market is competitive, so we have to be at the top of our game and we strive to be performing the best we can. We are very comfortable with where we are in terms of the market and that competition. A saturated market makes you work harder to be responsive to your clients and make sure you are delivering the best practice you can. That is what makes Philadelphia a top law city.
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LEGAL INTERVIEW
Shifting culture How Obermayer continues to innovate and adapt to meet the legal needs of Philadelphia businesses and to attract top-of-the-line talent
Mathieu Shapiro Managing Partner – Obermayer Rebmann Maxwell and Hippel LLP more confidently predict their legal expenses. We are constantly trying to come up with new ways to serve our clients’ needs. Forming an official GC practice group is one way we are trying to accomplish that, though we always wait to hear our clients’ reactions to refine our approach to solutions.
What are some challenges facing the legal sector in Philadelphia as we begin 2019? As with other major city hubs, we are seeing increased competition from alternative legal providers and corporate law departments. This competition forces us to constantly reexamine our client-service delivery models and think of new ways to offer the most value to our clients. For example, we are formally establishing a GC practice group whose focus will be to provide solutions to companies’ day-to-day legal needs, much like an in-house lawyer would. As a full-service law firm, we are already leveraging our resources across multiple disciplines to get the optimal results for our clients. Moreover, our cost-saving strategies and lean staffing enable us to offer these services using flexible pricing arrangements, thereby allowing our clients to 40 | Invest: Philadelphia 2019 | LEGAL
How does Philadelphia compare to surrounding markets? Philadelphia is an astoundingly small town for such a big city. If you live here and are active, engaged and connected, you really can know almost the entire community. If you are the kind of connectors we believe we are, you can know everybody in the city across spheres and industries. I think it’s both a challenge and an advantage. If you are getting the right advice on how to navigate Philadelphia, it’s a wonderful place. If, on the other hand, you don’t have access to the right advice, and you don’t figure out how to navigate it, Philadelphia can be a very challenging and frustrating place. We’ve had clients come to Obermayer who have been spinning their wheels for the last year or two, and we wonder if they’ve talked to A, B, C and D. It turns out they don’t even know who A, B, C and D are. That’s why the client is having trouble in Philadelphia, and that is one of the most valuable services we provide. Additionally, the workforce throughout the U.S., and certainly here in Philadelphia, is changing. We have the region’s highest concentration of talented workers, who want to work, live and play in a vibrant urban setting — and who can — at a more affordable cost. At Obermayer in particular, with a newer generation taking the reins of the workforce, our culture is shifting. We are doing things differently to attract and retain new and diverse talent, ranging from how much we invest in training and professional development to reevaluating our parental leave policies.
LEGAL OVERVIEW
Our Founding Fathers laid the legal foundation of our country when they penned the U.S. Constitution.
In addition to the revenue growth of local firms, Philadelphia has experienced a significant uptick in the presence of non-Pennsylvania firms in the city. Interestingly, however, newcomers cite talent, rather than geography, as the impetus for their decision to open up shop in Philadelphia. For example, Akin Gump Strauss Hauer & Feld brought over a five-partner class action team from Drinker Biddle & Reath, four of whom are based out of Akin Gump’s 20-year-old Philadelphia office. However, Akin Gump stated that it was all about the talent and profitability of the group and that they would have been hired wherever they were located. 42 | Invest: Philadelphia 2019 | LEGAL
Other notable acquisitions in Philadelphia in 2018 echo this sentiment, such as Florida-based Holland and Knight hiring 12 attorneys from Reed Smith’s Philadelphia office, Long Island’s Milber Makris Plousadis & Seiden opening a Philadelphia office based around six lawyers from the now closed Powell Trachtman and St. Louis-based Armstrong Teasdale establishing a Philadelphia office with seven lawyers from Montgomery McCracken Walker & Rhoads. These three firms made their decisions based primarily on the value of the talent acquired but also admitted that the continued growth of the city and its core industries reflected probable growth
LEGAL OVERVIEW
of their target practice areas in the near future. It seems, therefore, that the original definition of the Philadelphia Lawyer holds true: they are talented attorneys that attract the attention of prominent firms. In other exciting news coming out of the local legal market, the Philadelphia litigation boutique of Goldberg, Miller & Rubin is continuing to grow. In particular, the firm made waves by electing its first female CEO in its 34-year history. Lori Miller is also the firm’s first female named partner. The firm’s continued development makes it one to keep an eye on. In addition the continued growth of e-commerce and the ubiquity of the Internet in all areas of business have prompted many of the top Philadelphia firms — including Cozen O’Connor, Morgan Lewis & Bockius and Duane Morris — to
develop cybersecurity practices. Several boutique cybersecurity firms and solo practitioners have also proliferated in the city recently. Consolidation trends Another interesting trend in Philadelphia’s legal market is the rash of mergers and acquisitions. Smaller-scale acquisitions of attorneys from Philadelphia firms are occurring all over the city, including the previously mentioned acquisitions by Holland and Knight, Milber Makris Plousadis & Seiden and Armstrong Teasdale. In addition, Cozen O’Connor has picked up a team of 14 lawyers from Drinker Biddle & Reath that consists of specialists in the niche areas of finance and software. The group has already accrued a substantial book of business spanning the entire country and has numerous precedent-setting
The ubiquity of the Internet has prompted many top Philadelphia firms to develop cybersecurity practices.
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LEGAL OVERVIEW
victories under its belt. Due to this acquisition and several others over the past couple of years, Cozen O’Connor has outgrown its existing space at One Liberty Place in Center City just three years after moving in and has had to exercise an option in its lease to occupy another floor. The firm will now operate on floors 21 to 29. In addition to the acquisition of individual lawyers and teams of lawyers, there have also been a few highprofile complete mergers of Philadelphia firms. For example, Ballard Spahr merged with the Minneapolis firm of Lindquist and Vennum on January 1, 2018. The merged firms will operate under the Ballard and Spahr name, meaning that the Philadelphia firm now employs more than 650 attorneys in 15 offices across the country, 170 of whom came from the merger. The merger not only signals growth for Ballard Spahr but also a trend of consolidation in the legal services market. As competition stiffens, it is the large, elite firms that continue to thrive, while smaller shops are forced to merge to survive. In addition, in September 2017 the Philadelphia firm of Saul Ewing merged with Arnstein and Lehr, a firm with offices in Illinois and Florida. This merger resulted in a 400-attorney practice spanning 15 offices along the eastern seaboard and Chicago. Finally, Fox Rothschild merged with Smith Moore Leatherwood on November 1, 2018. This was the biggest combination for Philadelphia-based Fox Rothschild, adding 130 attorneys and its first offices in the Southeast, including some in Georgia and the Carolinas.
Philadelphia City Hall is the largest municipal building in the country and an iconic landmark in the city skyline.
Jeffrey Kolansky Co-Managing Partner – Archer and Greiner, PC Philadelphia Office
A challenge that the legal sector in Philadelphia is seeing is the way the public views the law. We are a nimble firm, and we are able to adjust our rates and work with our clients to offer them representation that works for them, as well as us, financially. We are able to be creative with the rates we charge based on what our clients are able to pay. We are nimble in other ways as well, and I believe that is how law firms will continue to be successful: by being nimble and both willing and able to adapt to the changes in the sector and the community.
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CONSTRUCTION REAL ESTATE OVERVIEW
Ray Williams Partner DLA Piper
How has DLA Piper evolved over the years? For an office of about 60 lawyers, we have a lot of fire power. We have been in Philadelphia since 1992, and we have always been a monetary surplus to the firm. Our litigation practice has, historically, driven this office. However, over the years we added an IP practice with a patent prosecution focus and a corporate practice group focused on emerging and mid-market clients. Both of those practices have joined the litigation practice in driving this office. We are seeing growth in the office across all industry sectors compatible with the firm’s goals.
Tax reform The 2017 Tax Cuts and Jobs Act represents a substantial realignment of taxation, and passthrough structures received specific focus, including the structure employed by law firms. Consequently, law firm leadership across the country, including in Philadelphia, will need to reassess their tax structure in order to ensure compliance with the new law. However, the exact extent to which the new tax law affects law firms — and the individual attorneys working for them — depends on a variety of factors. The key factor is income. The new restrictions on deductions for state income tax could lead to more attorneys’ income being subjected to federal income tax. However, for married attorneys with an adjusted gross income below $315,000, or single attorneys earning less than $157,500, the new business income ( )
What makes Philadelphia an attractive market? As a global firm, Philadelphia is a great place to have an office. This city has become the place where you want to find lawyers. New firms are entering the market, especially international firms. They are not necessarily opening up these firms because of the city per se but because of the abundance of talent that is here. Our lawyers have national and international practices at this office. This is not to say that we don’t practice in Philadelphia; in fact, we represent quite a few clients and companies in the city. However, we tend to represent these companies on a much larger scale. Philadelphia makes it very easy to do this through its proximity to other large markets and connectivity via the rail system and airport. Why is diversity and inclusion so important? There are business reasons to push diversity and inclusion initiatives. Clients are requiring it, which is a very good thing. However, it is something that we require and focus on because it is the right thing to do. We are committed to these initiatives. They are a part of the fabric of our firm. In our firm, diversity sets the framework for our firm culture and how we want our attorneys to feel in the workplace. We want this to a be a place where people want to work and be their authentic selves.
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Market voices: Local strength
Richard Scheff
Partner & Leader Eastern U.S. Armstrong Teasdale LLP
Philadelphia is seeing amazing growth. You can see it when you walk down the street or drive through the neighborhoods. I believe that will continue to be the future for Philadelphia. Philadelphia’s economic growth is slow and steady, which I see as a very good thing. We are not seeing meteoric growth one year followed by a meteoric fall the next. The type of growth we are seeing in the market is more stable, and it is easier to maintain. It also allows you to plan. That stability is important and is attractive for companies looking to conduct business in the area.
Philadelphia has one of the largest millennial populations in the country, and the talent pool is incredible. We don’t struggle hiring from the talent pool, but our focus is on retention. We have been going through a culture change and making our firm a place where people want to stay. All of the partners at our firm started their careers here. Retention is really important to us. We pride ourselves on being a place where people start and end their careers. It is hard to be a lawyer, so we are always trying to think of ways to make the job a little easier.
Andrew Kassner CEO & Chairman Drinker Biddle and Reath
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Lori Miller
CEO & Partner Goldberg, Miller & Rubin
Our firm is 50 percent business and regulatory, and 50 percent litigation. Although we are a national firm, we were founded in Philadelphia and continue to serve a strong base of clients locally and elsewhere in matters venued here in the Mid-Atlantic region. We have a diverse practice across a number of business, regulatory, and litigation areas. Philadelphia is a significant venue for litigation. Our strategic location in Philadelphia, combined with our other U.S. offices located in key markets across the country, provides an ideal platform to serve our clients well.
LEGAL OVERVIEW
( ) tax deduction will probably make up for the loss with money to spare. It is important to note that this new deduction is not available for married attorneys making more than $415,000 or single ones earning $207,500. At the firm level, income level and the decision to operate as a flow-through enterprise will also determine how much the new law affects law firms. Partners of flow-through firms who earn under a certain income level will qualify for a new pass-through deduction on their flow-through earnings, whereas partners earning income beyond a particular threshold will be disqualified. There are also several aspects of the law that affect businesses generally, including law firms, of which attorneys should be aware. Deductions for meals and entertainment expenses are out under the
new law, which is a big deal for the many law firms accustomed to pricey business lunches with clients and colleagues. Transportation benefits, routinely paid for by firms in large cities like Philadelphia, are also no longer deductible. On the positive side, wages paid to employees out on family and medical leave are now deductible by law firms; the deduction of business interest expenses is now limited, which will not heavily impact firms taxed as partnerships but could impact firms taxed as corporations; and finally, firms taxed as corporations benefit from a newly reduced corporate tax rate, down from 35 percent to 21 percent. However, the personal service corporation exception might prevent many firms from capitalizing on the tactic of organizing as a corporation to pay lower taxes, with potential savings for law firms maxing out at 2 percent.
Transportation benefits, routinely paid for by firms in large cities, are no longer deductible.
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LEGAL OVERVIEW
Diversity and inclusion A recent trend in the legal world has been a focus on inclusion and diversity. Many firms are creating new C-level positions to manage inclusion efforts, and some firms that are lagging in this area are losing prominent partners as they move on to launch their own diversity ventures. For example, in September 2018 Miamibased Greenberg Traurig Co-President Hilarie Bass announced she would be stepping away from the firm to launch the Bass Institute on Diversity and Inclusion, and she is not alone. Considering women accounted for only 19 percent of equity partners in U.S. law firms in 2017, compared to 16 percent a decade earlier, these efforts are attracting a new urgency among legal firms across the country — and particularly in Philadelphia. “Overall, office culture and diversity are incredibly important to us,” Marc Tepper, managing shareholder for the Philadelphia Office of Buchanan Ingersoll and Rooney, told Invest:. “Diversity is a significant part of the overall business fabric in Philadelphia. Today, firms need clear policies and a culture of inclusiveness.”
finally returning to growth after the Great Recession, but that growth remains modest and below the level of 1 percent. Philadelphia, specifically, has always been a hub for corporate and finance law thanks to its advantageous position and regional industries, and that has continued to help insulate the city’s legal market to external shocks and ensure a continually strong market. This is evidenced by eight Philadelphia firms making the Am Law 100 list and showing positive growth in gross revenue, revenue per lawyer and profits per equity partner. However, continued competition for limited legal business, exacerbated by the growth of alternative legal services and in-house counsel offices, has forced many smaller firms to merge with larger ones or risk disappearing altogether. Several high-profile mergers in Philadelphia in the last couple of years have proven that the city is feeling the effects of this trend. There is also no doubt that the city’s firms will have to review their tax structure in the wake of the 2017 Tax Cuts and Jobs Act to determine to what extent they will be affected by the sweeping reform and what they need to do to comply. In short, the legal market in Philadelphia remains dynamic and complicated but is looking positive overall as we move into 2019.
Philadelphia has been a hub for corporate and finance law thanks to its advantageous position and regional industries.
Looking ahead The legal sector in Philadelphia is in a period of qualified optimism. The legal industry in general is
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Real Estate: With an increasing population of millennials, Philadelphia is seeing continued demand for multifamily projects. However, that’s not the only vertical booming right now. Single-family homes are in high demand, and so is industrial space. Thanks to the new Comcast and Aramark buildings, the city saw an influx of office space in 2018, and experiential retail is keeping commerce afloat in Philadelphia and across the country. The city’s real estate market has been heating up for years now, and experts don’t expect it to cool down in 2019.
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Real Estate in numbers:
Luxury Sales
Over the past 10 years there has been a significant increase in the number of condominium sales that have transacted above $1 million in Philadelphia
SDC developed over 51 percent of luxe condominiums over the past 10 years (based on gross sales)
Ultra-Luxe Sales
Number of Ultra-Luxe Condo Sales (> $5M)
SDC developed over 65 percent of ultra-luxe condominiums over the past 10 years (based on gross sales)
Source: Public records data through the end of July 2018, data pulled September 14, 2018. Excludes buildings with two or fewer condominium sales over the 10-year period. Includes all other residential condominium sales in Philadelphia County.
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Dynamic and diverse: Philadelphia’s real estate market is heating up, offering a more affordable alternative to overheated markets like New York and D.C. Past and future intersect daily in Philadelphia’s quaint cobblestone streets, iconic historic monuments and ever-evolving skyline of concrete and glass. While its real estate market might not be investors’ obvious choice when compared to other more glamorous markets like nearby New York City, there’s no denying that its steady growth creates low-risk investment opportunities with excellent potential for appreciation. According to Zillow, housing prices in the City of Brotherly Love have risen 11.3 percent since 2017 and an astonishing 31 percent since 2016. Residential real estate is heating up, and some experts predict Philly might just be one of the best cities for capital appreciation by 2020. On the industrial side, the Lehigh Valley, which sits to the northwest of Philadelphia, is a hotbed of activity, and Philadelphia-based companies are capitalizing on this trend. With the retail market morphing from traditional brick and mortar to more experiential offerings and office inventory being built sparingly, Philadelphia is primed and ready to emerge as the next hotspot for innovation and talent.
Solid foundation According to the World Population Review, Philadelphia is the fifth most populous metro area in the U.S., trailing closely behind Houston, Texas, and Phoenix, Arizona, and the second-fastest growing county in the region. Philadelphia’s Center City population grew 27 percent between 2000 and 2016, according to Kleinbard LLC. From 2005 to 2016, the city saw a 41 percent increase in millennials moving in — the largest percentage of any of the top 10 most populous cities in the U.S. These younger residents are better educated and wealthier than the region as a whole, making Philadelphia’s real estate market even more desirable. This influx of millennials has ignited a veritable multifamily boom; by the end of 2019, the city expects to see more than 5,000 new residential units come on line. Philadelphia is a tale of two renters: millennials and baby boomers. While the younger generation is coming to the city to start careers and potentially families, baby boomers are coming back to the city after their children leave the nest. This is helping to boost the luxury and ultra-lux markets, as baby boomers are
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REAL ESTATE OVERVIEW
selling their suburban mansions and purchasing Center City equivalents. With more shopping and dining options emerging every day, Philadelphia’s Center City Business District is becoming a place where residents are looking to live, work and play. 20 years ago, Center City shut down at 5:00 p.m. when everyone left the office; today, its nightlife is bustling thanks in part to the growing safety of the neighborhood and surrounding areas. Along with the millennial influx into the city, Philadelphia is seeing a decrease in “brain drain.” Retention is up, with over 50 percent of graduates staying in the city post-graduation as opposed to the 30 percent Philly was keeping just a few years ago. “One of the reasons we have been successful in finding talent for Argosy Capital is that we have hired many individuals who grew up in the area or attended college or graduate school in the area and want to return because they enjoyed living and working here,” John Kirwin, co-founding partner and CEO of Argosy Capital told Invest:. “We have been able to build our asset division teams successfully with highly talented individuals who are also a great cultural fit. The Philadelphia area is a wonderful place to live, work and raise a family.” The city’s walkability and abundance of green space are some drivers for that retention, and with projects like the Reading Viaduct Park, phase one of which opened in June 2018, and Drexel Square, a 1.3-acre park that opened in the fall of 2018, even more green space is available. With its leading museums and cultural institutions, Philadelphia is not just a great place to visit; it is also a great place to live.
homes and starting families in the city, as opposed to migrating out to the suburbs like the generations before them. While these patterns are important to developers focused on apartments and multifamily projects, they are also important to those who are developing single-family homes. JLL predicts that the next few years will show where millennials will decide to stay permanently. Philadelphia’s housing market has seen considerable growth over the last several years. By the summer of 2017, annual price growth had jumped by 22.2 percent from 2016 and by 44 percent from 2015. The number of homes sold in the eight-county metro area in 2017 was the highest in the last decade, and over the past three years the number of days houses stayed on market dropped by 20 percent. All of this has been driven by a strong job market in the urban metro area, as well as the increased desire from residents to live in urban areas. However, due to this surge there are fewer houses available, and supply is not meeting demand. By Q4 2017, housing inventories had declined to an all-time low — something that is great for sellers but does not bode well for buyers. Q4 2017 also saw the first decline in housing prices for the year. Average prices dropped 0.5 percent, while median housing prices dropped 6.2 percent, back down to $150,000. The cause was said to be normal seasonal transitions, something from which the market could easily bounce back. However, seeing a decline in both price and inventory posed a contradiction, as historically prices are lowered when they feel pressure from inventory that isn’t moving as quickly. Overall, industry leaders in the residential market attributed this to the type of buyer looking for houses as opposed to the economic standard of supply and demand. Philadelphia’s residential housing market still saw prices up almost 13 percent over 2016. Depending on the neighborhood, compared to 10 years ago home prices were up as much as 32 percent or even 75 percent in some areas. Suburban median home prices have seen the slowest growth, up only 9 percent from a decade ago. Industry leaders are positive about the state of the housing market in the city and expect that positivity to continue into 2019. A correction in the market is expected, but it’s uncertain when it will come. The consensus in the industry is that a correction should not lead to another crash; rather, it will balance out the market so the cycle can begin again.
In Q4 2017, average housing prices dropped 6.2 percent, back down to $150,000.
Hot housing Millennials are a primary indicator in the residential market. When a city fills with a younger population, it is marked as a cool place to be, which in turn spurs the local economy. The median age range of first-time home buyers in the U.S. is 25 to 34, and in the year 2020 more people will enter that age range than ever before. This bodes well for Philadelphia’s real estate market, where 84 percent of the housing inventory is affordable to people making $60,000 annually. The influx of millennials into Philadelphia has slowed in recent years but shows no signs of stopping. The younger generation is also choosing to stay in the urban metro area, buying their first 52 | Invest: Philadelphia 2019 | REAL ESTATE
REAL ESTATE INTERVIEW
High value How Philadelphia offers an affordable housing market that is steadily increasing in value despite challenges of income inequality and a shortage of high-paying jobs
Allan Domb Broker & Owner – Allan Domb Real Estate Councilman-at-Large – City of Philadelphia
How does Philadelphia’s housing market compare to the rest of the country? Of the top 20 major cities in the country, Philadelphia has the most affordable housing market. The average price for homes in Philadelphia is $141,000, and that is across all neighborhoods. Millennials are moving here in droves because our housing stock is so affordable. 84 percent of the housing inventory is affordable for people making $60,000 annually. That’s an incredible number. This also demonstrates that we don’t actually have an affordable housing issue in Philadelphia. The challenge here is a shortage of high-paying jobs. We need more jobs in general. One of my goals as a councilman is to bring 100,000 new jobs to the city. What changes have you seen in Philadelphia’s residential real estate market over the last decade? If you think of real estate like a dart board, then the red for Philadelphia is the core of Center City: Rittenhouse Square, Washington Square, Society Hill. When you play darts, if you don’t hit the center but you hit an outer ring, your points go down. In real estate, it is essentially the same; the farther you go out from that epicenter, the more property value goes down. In a booming market, all those rings increase based on the core increase. The core goes up first, then the second ring increases and then the third, etc. The most outer ring can’t increase in value if the inner rings don’t increase first. When I bought The Barclay in 1999, the combined value of the real estate around Rittenhouse Square was about $700 to $800 million. Today it’s probably over $2.5 billion. Granted that is a 20-year span, but it is a good indicator of how the rest of the city has increased in value over that 20 years as well.
Where are the challenges and opportunities facing Philadelphia’s residential real estate market? The challenges that face us in terms of real estate are the same challenges that face us as a city. We do not operate in a vacuum here. Philadelphia has a population of a little over 1.5 million people, and about 26 percent are living in poverty. Poverty is a national issue, not a Philadelphiaspecific issue, but it is something we need to address. As for opportunities, people are going to continue to want to live in urban areas. Millennials aren’t seeking out large homes, and they want the amenities that the city offers. We have a huge benefit in Philadelphia: the transit system. We have subway lines, high-speed lines and extensive regional rail, and you can go to 30th Street and be on your way to New York, D.C. or Boston. We have tremendous transportation.
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Development Corporation and Keystone Property Group both broke leasing records for their properties in Old City in 2017 and 2018.
Elfreth’s Alley is the nation’s oldest continuously inhabited residential street.
“Right now we are in a very competitive market for homebuyers,” Noah Ostroff, founder of Keller Williams Philly, Philly Living, told Invest:. “Inventory is low, so homes do not stay on the market for long. The average inventory for single-family homes at the moment is about 3.1 months, meaning if no new homes come onto the market, it would take 3.1 months to sell off all of that inventory. That number is decreasing as well. It is a hot market right now; this is the lowest it has been in 15 years.” Going into 2018, Philadelphia saw the same sort of trends that were seen in 2017. The desire to live in the downtown area of the city is still strong, and Center City continues to see an influx of people moving in. The luxury market, while out of the price range for the average Philadelphia resident, nevertheless has found ways to break records. Scannapieco 54 | Invest: Philadelphia 2019 | REAL ESTATE
For rent 2017 was a record year for construction completions in the city of Philadelphia. A total of 4,040 new housing units were brought online in 2017, and 2018 is slated to see almost 3,900 new units. This influx of new inventory caused vacancy rates outside of Center City to go up to almost 4 percent. Absorption rates were positive, however, according to a report by Cushman and Wakefield. “The Philadelphia market is one of the only markets today where you can buy property, rent it out and have positive cash flow,” Gaurav Gambhir, principal for the Condo Shop - Keller Williams Philadelphia, told Invest:. “It is very difficult in many of the competing markets to get a positive cap rate. Today you can find a new construction, off-market deal; have the construction done; rent it out to tenants; and have positive cash flow between 5 and 8 percent and achieve long-term growth in the market.” While Philadelphia rents are rising, they are still relatively affordable compared to other markets. However, despite this relative affordability, prices are considered high for the Philadelphia renter. The average price for a one-bedroom rental is $1,000 for 700 square feet. According to data collected by rentcafe, 44 percent of Philadelphia’s rental inventory is between $1,000 and $1,500. The national average for a one-bedroom apartment is $1,420. Renting in the city could change as council members, developers and members of different neighborhoods weigh a mixed-income housing bill that would require more inclusionary offerings in certain neighborhoods. This was passed in October 2018 by legislators, but at the time of print it was under amendment. Center City, which does not have an affordability requirement, is seeing continued growth, and asking rates for rent are expected to increase by the end of 2018. Airbnb has had an interesting impact on rental trends. Philadelphia legalized and began taxing the homeshare rentals in 2015, which made it the largest city in the country where residents can legally rent out their homes. The company is also affecting the hotel industry; in Philadelphia, Airbnb listings account for 14 percent of guest room supply. While hotels are certainly feeling the pressure, more inventory is being added to the city, hopefully to counteract the effects of Airbnb.
REAL ESTATE OVERVIEW
Renting remains a popular option in the city, especially downtown. Even as millennials start to buy homes, renting is still their main source of housing. Growing inventory Commercial real estate operates on a cycle — one that has been seeing growth for so long in Philadelphia that the city is not sure what part of the cycle it is currently in. 2017 and 2018 were predicted to be the apex, with a tipping point looming on the horizon. However, this doesn’t necessarily mean the city is headed into a decline; it’s more likely the market will simply slow down.
experience, a movie theater or a grocery store,” John Adderly, executive vice president and managing director of NAI Mertz, told Invest:. “People don’t want to sit in their houses all day; even if it is just walking around Costco, people want to do something. Take a look at the Gallery Project in the Market East neighborhood of Philadelphia. They are changing a mall-like space and bringing the focus back to the street.” Restaurants, movie theaters, bars, bowling alleys and other activities and services that cannot be ordered online are becoming anchors for retail development spaces across the region. The $325 million Gallery project, codeveloped by PREIT and Macerich, is a good example of this. What once was a mall-like collection of clothing retailers is now being transformed into the next stage of retail. A new movie theater will anchor the project, which is being rebranded as the Fashion District and is expected to reopen for business at the end of 2018.
As the e-commerce trend grows in popularity, most of the retail inventory coming into the city is experiential.
Retail experience Retail real estate in Philadelphia is seeing growth. While the four-block corridors on Walnut and Chestnut streets in Center City have traditionally been the main shopping hubs, that area is now expanding to other parts of Center City. Major Philly developer Tower Investments is turning a section of land near its Tower Place apartment into a two-story retail plaza along Spring Garden Street that will include a CVS and a bank. The development is planned for early 2019. Tower also has plans to bring a massive retail and apartment complex next to the Piazza in Northern Liberties. As the e-commerce trend grows in popularity, most of the retail inventory coming into the city is experiential. “De-malling in retail is a trend that we are seeing: demolishing a mall in part or in whole and creating experiential retail spaces, whether that is a dining
Office space The office side of the industry has seen moderate improvement. Center City saw growth in 2017 and the first half of 2018 due in part to the construction of the Comcast Technology Tower and Five Below leasing new office space. University City is also seeing growth in office space. According to a report by JLL, University City’s asking rents for office space are up 10.8 percent, even with full occupancy in the new FMC Tower, from its opening in 2016. The FMC Tower is a 47-story Brandywine Realty Trust project that houses AKA Residences, a luxury long-term-stay hospitality
Charley McGrath Managing Director – MRP Realty
We are continuing our expansive renovation of the historic Bourse building in Old City. It was built in the late 1890s as the country’s first commodities exchange, and in 1988 it was converted into a food court with a retail design that had become outdated. Thus, when it came back on the market I saw it as a beautiful old relic on the edge of Independence Mall that was being undervalued and underutilized. Understanding that Independence Mall has 5 million visitors a year, we saw the opportunity to create something that was missing in Philadelphia.
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David Binswanger CEO Binswanger
What are some big projects Binswanger is a part of in the region? We were a part of the new Comcast Tower, which was very exciting. The Comcast Technology Center is going to transform what “workplace” means in the city, and to be a part of that is incredible. We have also worked with Keystone Property Group on the AmeriSource Bergen headquarters, which is going to take Conshohocken to the next level in terms of public-private entertainment spaces. That is a 425,000-square-foot deal that will have restaurants, bars, offices, a hotel and public space. We have seen a lot of activity on the industrial side with some major distribution centers coming into the city. The world is changing in terms of how it is going to supply its consumers, and Philadelphia is going to play a huge part in that due to the geographic location of the city. How does being located in Philadelphia benefit Binswanger as a global company? Philadelphia is a more cosmopolitan city than people first think. With our culture, history and amenities, we are becoming more visible on an international level, and because of our airport we are an international hub. Philadelphia is a very livable city, and it attracts international companies. 30 years ago the city had a large concentration of bank headquarters; today we have international headquarters with GSK and Teva. Especially in the pharma sector, we have become a hub for the American headquarters of large international companies. As an international company ourselves, we are able to have direct access to these companies. What are some challenges facing Philadelphia’s real estate market? We have gone through a boom, mostly in residential, and it is hard for us to say where we are in the cycle exactly. We don’t know when this boom will end, so we are at an interesting point in the market right now. 56 | Invest: Philadelphia 2019 || REAL ESTATE
project owned by AKA Hotel Residence, as well as other businesses. This was the first high-rise on the west bank of the Schuylkill River; the tower complements Brandywine’s Cira Centre project on the north side of 30th Street Station. JLL anticipates that University City will continue to grow over the next few years. The construction of the 60-story, 1,121-foottall Comcast Technology Tower designed by Fosters+Partners; Aramark’s new 60,000-square-foot headquarters at 2400 Market, spearheaded by PMC Property Group and Lubert-Adler Real Estate and set to open in the fall of 2018; One Franklin Tower, a 24-story residential building being renovated by PMC Property Group; and the completion of the University City Science Center bring the city’s inventory up to over 2 million square feet. All of these projects are expected to see 80 percent occupancy before 2019. Occupancy is key when it comes to new office construction, which is feeling pressure from the growing trend of co-working spaces. Places like WeWork, 1776 and Regus are changing the way companies use office space. The industry is combatting this pressure by creating more mixed-use spaces so that revenue is not dependent on leasing offices. “Keystone’s overall strategy is to create town center environments,” Richard Gottlieb, president and COO of Keystone Property Group, told Invest:. “We have embraced the mixed-use development philosophy. Historically, people would go to work and nothing else was intertwined with that environment. Now people are looking for places where they can work, shop and eat. Those worlds are more flexible now, and those are the communities we look to create.” Even with rents per square foot for Class A assets at a record-breaking high for the city, Center City office rents are still significantly less expensive than those in other major U.S. markets. “Philadelphia has changed over the last few years in the sense that we are seeing an influx of ownership and capital from outside of the region. This has led to new owners coming into the market,” Greg Soffian, executive vice president and branch manager for Savills Studley, told Invest:. “In our central business district, we have seen a larger portion of the Class A office buildings trade hands in the last three or four years and with that new players from the landlord side entering the market.” Philadelphia’s average office rental rate is $26 per square foot, with the most expensive submarkets like University City seeing some go for $46 per square foot. This will hopefully open the door for new companies moving into the city when looking for major market presence.
REAL ESTATE OVERVIEW
Low vacancy While e-commerce is putting pressure on the retail industry, industrial is benefitting from it. As e-commerce grows in popularity, companies are looking for warehouse space to accommodate shipments. The Greater Philadelphia region has seen a decline in vacancy, but the surrounding areas have seen an even larger decline, with vacancy rates across the region at an all-time low. South Jersey and Lehigh Valley, in particular, have become hotbeds for e-commerce warehouses. Despite some concerns that too much capital is moving into industrial space, the outlook remains positive. Industrial absorption rates for the Greater Philadelphia area in 2017 and 2018 have been positive — with 4.9 million square feet absorbed — and that is expected to remain the case moving into 2019. Tenant demand saw an all-time high in Q1 2018. The increase in demand is not just due to more tenants in the market looking for space; rather, the average amount of space per tenant is also increasing. Due to this demand, as well as the quality of offerings on the market, the JLL report expects that leasing momentum should match the pace of other recordbreaking years in the market. According to a report produced by Colliers International for Q2 2018, investment in industrial real estate in suburban Philadelphia saw a sharp increase after a relatively slow start to the year. There is a pent-up demand for new space from developers and national players looking for land in the region. “At present our clients have substantial demand for industrial, not just in the local market but in the regional and national markets as well,” Sean Beuche, regional manager for Marcus and Millichap, told Invest:. “We are seeing this demand for warehousing and distribution space, and with the increasing popularity of grocery delivery services, we are also seeing more demand for refrigerated and cold storage facilities.” The same Colliers report states that federal acquisition regulation (FAR) prices in Philadelphia and the surrounding four counties (Montgomery, Chester, Delaware and Bucks) have increased dramatically, creating more competition for existing spaces to retrofit or rebuild as opposed to constructing completely new assets. Colliers predicts that rental rates, construction and net absorption will all increase in the Greater Philadelphia region in the later half of 2018. As the life sciences and pharmaceutical sectors grow in the Philadelphia region, so does the need for cold storage.
Bart Blatstein President & CEO Tower Investments Inc.
My company, Tower Investments, Inc., entered Atlantic City three years ago with the purchase of the former Showboat Casino Hotel. We are currently in a five-year process of transforming this once-grand property — which consists of over 2 million square feet on 30 acres — into Atlantic City’s first truly mixed-use development. The community that we are developing will include a hotel, market-rate apartments, student housing, office space, entertainment uses and large exhibition space. The development plan is based on our success in the Northern Liberties, Philadelphia. Our Piazza project breathed new life into the neighborhood by adding a fitness center, spa, restaurants, over 500 apartment units, a retail center including a grocery store and entertainment venues. This is what we plan to continue in Atlantic City. We were fortunate to time the bottom of the cycle in 2014 and purchase amazing properties in Atlantic City, including the former Showboat Casino Hotel. With two new casinos, sports betting, Stockton University’s island campus and opportunity zone designation, Atlantic City’s future is amazing. In Philadelphia, Tower Investments Inc., currently has over $350 million in development, including the historic renovation of the former home of the Philadelphia Inquirer into the City of Philadelphia’s new police headquarters. Additionally, Tower has plans for over $500 million of mixed-use development right in Center City. Philadelphia is currently in the midst of the greatest development surge in my lifetime, and there is no end in sight. With its diversified economy and wonderful cultural and culinary scene, Philadelphia — nestled between New York and Washington, D.C. — is pound for pound the best town in America.
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Refrigerated storage is paramount in the transportation process of temperature-sensitive goods, a lot of which come through the Philadelphia port system. Whether to store pharmaceuticals, produce, meat or alcohol, cold and dry warehouse space is in demand in the region as the port continues to grow and expand. Southern New Jersey is a leading submarket at the moment, with 500,000 square feet of new activity in Q1 2018, according to a report put together by Cushman and Wakefield. The key tenant in the area is Amazon, which leased a 1,016-million-square-foot warehouse in Florence, New Jersey, just 30 miles from Philadelphia. Out-of-towners 2018 was a promising year for real estate investment in numerous markets across the country, and Philadelphia was among them. Historically, Philadelphia hasn’t been able to attract the kind of institutional investment that other markets do, but the tides are starting to turn as more investors are getting priced out of the New York, D.C. and Boston markets. “Philadelphia is seeing a lot of investment coming in from New York and New Jersey,” Jason Wolf, principal of WCRE/CORFAC International, told Invest:. “Buildings that trade for $100 or $150 per square foot in our market are an opportunity to make an investment at almost half the cost of what someone would spend in the New York market. This makes us an attractive market for investment, which is why we are seeing so much capital come in from these neighboring, more expensive markets.” New capital is trickling into the city, particularly into the office market. “The city is now on the radar
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screen of most of the capital from around the world that is looking to invest in the United States,” Leo Addimando, managing partner at Alterra Property Group, told Invest:. “10 years ago, most of the capital in Philadelphia was coming from New York and a fraction from D.C. Presently, we are seeing capital from all over the world, which is a huge step forward. While Philadelphia may never be on the same level as New York, Los Angeles or other gateway markets, we have really increased our visibility, and people are starting to take investing in the region seriously.” In 2015, San Francisco-based Shorenstein Properties acquired 1818 Beneficial Bank Place, a 37-story, 940-000-square-foot office building, for $185 million. Since that time it has been snapping up office property across the city. D.C.-based MRP purchased (and is currently renovating) The Bourse, along with other properties in the urban core. Smaller private equity groups are following suit, sniffing around the Philadelphia market in search of high-yield investment opportunities. New construction projects are also attracting investment from across the country, especially New York City. “There have been a lot of new buyers in Philadelphia, which has been interesting,” Mark Thomson, senior managing director/co-office head, Philadelphia, for HFF Brokers, told Invest:. “I have been saying for years that Philly gets a lot of interest from New York and D.C. when they get priced out of those markets. It is actually happening now. Somewhere between 30 and 40 percent of our multifamily trades last year traded to new people who don’t own in this market yet. That is a big percentage, and it’s really exciting to see.”
Market voices: Retail
Douglas Green
Managing Principal MSC Retail
A trend that we are seeing that is very important to the city is the expansion of viable retail and restaurant corridors in the neighborhoods. For decades, any store or restaurant that wanted to come to Philadelphia had essentially only one option, that being Rittenhouse Square: Walnut Street between Broad and 18th, which is only four blocks. That was great for Center City and drove up rents on Walnut Street, but that doesn’t create a robust dining and shopping experience in the city. Over the last 10 years, demand has started moving north to Chestnut Street.
Suburban Square is a project that we will continue to work on, and right now our focus is not only to serve Philadelphia and Main Line customers but to also bring people from other parts of the suburbs to Ardmore to experience what Suburban Square has to offer. Suburban Square is a hip and trendy offering that is away from the hectic pace of the city, and we feel that it is a unique asset that we would love more people to enjoy, especially since we are right off a SEPTA regional rail station. We believe there is a lot to offer here, and we would love for people in Center City, especially the younger residents, to experience it along with our Main Line customers.
Thomas Londres
CEO Metro Commercial Real Estate
Tom Simmons
President, Mid-Atlantic Region KIMCO Realty
Philadelphia has been a ‘poster child’ market for Target’s urban format. We have been involved in that expansion initiative from the first location to their newest, and they are truly on fire right now. A lot of the success here has to do with availability of real estate but also pricing. This market is unlike Boston, D.C. or New York, where pricing is much more expensive, yet has similar or stronger demographics pulls. These factors make Philadelphia attractive, combined with the infrastructure that allows for the ease of getting merchandise in and out of the city and larger region. It just works.
The nature of brick and mortar retail is changing tremendously, due largely in part to e-commerce trends. This is a global trend that we are seeing here in Philadelphia. This is not to say that retail as an asset class isn’t doing well, but there has been a shift. Food and beverage in Philadelphia is alive and well, and that is considered retail. With all of the dining options and breweries the city has to offer, that is helping retail as an asset class over all. There is a synergy between retail and industrial as well. More people are shopping online, but that means stores need more warehouses and distribution centers, causing a huge demand on the industrial front.
Mike McCurdy
Managing Principal Cushman and Wakefield
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Brand-building How Philadelphia has been building its brand and solidifying its place on the world stage, which translates to a hot market, diversification and increased construction
Lauren Gilchrist Senior Vice President, Senior Director of Research - Philadelphia – JLL
do and there are great places to eat. We need to be more conscious of telling that story to the rest of the world. My team and I did an analysis recently of the top 25 metro areas in the country, and we looked at the growth in bachelor’s degree-holding individuals. We found that Philadelphia grew its percentage of bachelor’s degree holders by the fastest rate of those 25 metros: 56 percent. Both companies and people are responding. Now we need to be cognizant of telling that story.
How has Philadelphia’s growing visibility led to more economic and real estate development? A brand-building exercise has been happening in Philadelphia as a result of the region taking a place on the national stage. Events like the papal visit, the Democratic National Convention (DNC) and the NFL Draft — and our ability to successfully execute them — have really solidified Philadelphia as a place where you can host an international event, for example, and be successful. Those of us who live and work here know what the city has to offer, but people on the outside looking in are just now starting to realize it. Philadelphia is affordable, it is walkable, there’s great stuff to 60 | Invest: Philadelphia 2019 | REAL ESTATE
What type of projects is Philadelphia seeing the most of right now? Center City is leading the regional commercial real estate market. 2018 was on track to be the biggest year on record for deliveries of new projects across all asset classes that we’ve seen this market cycle (from 2008 through the present). Take Comcast, for example. The building delivered in the third quarter of 2018, so we are going to see net absorption numbers that are around 1.5 million, which is largely a function of Comcast occupying that space. Beyond Comcast, there are a number of other major renovation projects in the office space. Part of the market’s history downtown has been that we had a lot of obsolete office space that was dragging down rental rates. Over the past 25 years, the city has converted 8 million square feet of office space into apartments, hotels and condos. That has had the dual effect of diversifying downtown to give us our live, work, play environment. It has also stabilized the market from an office perspective. Once those conversion targets disappeared, the rents started climbing up for office and spurred the ground-up construction of institutional-quality multifamily.
REAL ESTATE OVERVIEW
New York investors acquired three massive assets in the city in 2017, including Centre Square, office and condo space above the Fashion District at the Gallery and a stretch of property along the Delaware River. Other assets in Center City went to investors from Singapore (Evo at Cira Centre South), Los Angeles (Duane Morris Plaza) and Virginia (1600 Market). Liberty Property Trust sold the Navy Yard building that houses GSK to Korean Investment Management Co. LTD, adding one more international investment to the city’s docket. The building sold for $628 per square foot, for a total of $130.5 million. The EB-5 investment program, which offers foreign investors a pathway to citizenship if they create jobs in the U.S., was extended until September 2018 and then again through December 7. It will hopefully bring more foreign capital to Philadelphia. Philadelphia is modernizing and becoming competitive with other metropolitan areas across the U.S. Out of all of the major metropolitan areas in the Northeast Corridor, Philadelphia is by far the most affordable, making it a good place to move and a good place to invest. Construction is a huge driver for investment in Philadelphia. 2018 is expected to see almost 8 million new square feet focused in the Market East, University City and Navy Yard areas. There was also an increase in applications for construction permits, which is exciting news for investors looking for new properties. Like most other trends in the Philadelphia real estate market, investment inevitably circles back to millennials. In 2017 Philadelphia was rated the sixthbest city for millennials, according to a report from Mashvisor. While only 36 percent of millennials are reported to own homes, that number is expected to increase as the generation ages. The fact that millennials are attracted to the city is appealing to investors, who see this as a sign that the city is safe, hip and desirable. More and more neighborhoods are growing and changing, attracting people outside of Center City and expanding the areas where capital is being invested.
the country. While Center City is seeing increased prices both for construction and housing, developers and buyers have started expanding outward. A good example of this are the Graduate Hospital, Grays Ferry and Point Breeze neighborhoods that sit to the west of Broad Street and south of Rittenhouse Square. What used to be an area of little development is now seeing an increase in high-end homes and both buyers and renters. Q2 2017 was the strongest quarter the city has seen in the 10 years since the recession. The migration to neighborhoods outside of the traditional city center has had a lot to do with this increase and has had only positive impacts on the market. “Millennials are starting to get priced out of Center City, so we are seeing them go to the peripheral neighborhoods like South Philly or Fishtown,” Chris Decaro, vice president of Berkshire Hathaway Home Services and Fox and Roach, Realtors, told Invest:. “In South Philly in particular we are seeing a lot of movement into Point Breeze, Passyunk and Grays Ferry. Grays Ferry is one of the most affordable neighborhoods in South Philadelphia right now. It’s not just millennials who are moving to these places, however. Philadelphia is seeing a huge trend of older generations who are looking to move back into the city.” Fishtown and Northern Liberties are also experiencing significant growth. According to Forbes, Fishtown has become one of the nation’s hottest neighborhoods. Linked directly to Center City by the Market-Frankford Line, Fishtown is a popular neighborhood for people who work in Center City but do not want to pay Center City prices. The popularity of Fishtown and Northern Liberties has led to growth in Kensington and Port Richmond. While once considered unsafe and untouchable, these neighborhoods are now up-and-coming. The East Passyunk neighborhood is also seeing quite a bit of investment due to the number of restaurants and bars in the neighborhood. A hotspot for local eateries and unique food offerings, this area has transformed into a must-stop in South Philly and a popular destination for people looking for a booming neighborhood south of South Street. According to developers, the idea of “Center City” is expanding outward, and that trend is only expected to continue as these other neighborhoods continue to grow.
In 2017, Philadelphia was rated the sixthbest city for millennials.
Heating up Neighborhoods that were not seeing much growth 10 to 15 years ago are now some of the hottest neighborhoods, not just in Philadelphia, but also in
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Michael Barmash Principal – Colliers International
Retail is changing not just in Philadelphia but also across the country. Philadelphia is a good reflection of what is happening nationwide. Residential is growing, so there is a need for retail surrounding the city to support all of the residential projects under construction and planned. We are seeing online retailers like Warby Parker and UNTUCKit opening up brick and mortar stores. Target has opened four locations in Center City. The Fashion District and East Market are game-changing retail projects that are going to open a new retail corridor east of City Hall. The city is expanding and the neighborhoods are joining together.
Accessible homes Affordable housing opportunities are a constant topic of discussion in Philadelphia. 80 percent of Philadelphia’s housing market is affordable to those who make $60,000 annually, but that raises the question: what about those with lower incomes or who live in poverty? The city is working to make housing more readily available to people below the poverty line. One recent change that has started to make an impact is the Small Area Fair Rent federal housing policy enacted in early 2018. This allows people enrolled in the Housing Choice Voucher Program to access opportunities in higher-income neighborhoods and is envisioned as a pathway out of poverty. The Philadelphia Housing Authority wants to make sure that it is offering those enrolled in the voucher program assistance that is competitive with market rates. Since Philadelphia is seeing so much growth, it is important that this barrier is removed and all residents are afforded the opportunity to live in strong communities that they were otherwise kept out of. Another project that is helping with affordable housing in the city is the Tioga Family Center. What used to be a parking lot is now an affordable housing community that offers support to low-income women recovering from addiction and their families. Rent is based on a certain percentage of income. The project is owned and operated by Gaudenzia, an organization that has numerous facilities across the city with similar missions. Tioga Family Center was designed by Cecil Baker + Partners out of mixed materials and a ranging color palette to reflect the other architecture in the 62 | Invest: Philadelphia 2019 | REAL ESTATE
neighborhood and is highly energy efficient. The facility opened in January 2018. Bright future Despite some challenges, investors are bullish about the real estate market outlook for Philadelphia. “Philadelphia is a dynamic market,” Harris Heller, managing director at Hunt Mortgage Group, told Invest:. “It’s also a diverse economy; we don’t depend on just one thing. We’re a slower and steadier economy than most. How dynamic this area is and the cost of living are two things that are unique. A lot of dynamic places are extremely costly to live in, but here you can live affordably, and that helps people have a nice work-life balance. Philadelphia is a city on the rise. People want to be here, and because of that the city will continue to grow.” The city might just have the brightest housing market in the U.S., with one report predicting 16.6 percent price growth through 2019. With job growth remaining steady in the Greater Philadelphia area — rising about 1.4 percent year-over-year since 2017 — demand for homes remains strong. To supply that demand, Philadelphia is among the U.S. markets expected to see the quickest recovery from last year’s inventory declines, with the majority in the mid- to upper-tier price points. Overall market trends are on a strong upward growth cycle without any signs of tipping the scale, and the city’s real estate remains a solid value proposition for investors seeking to enter the Northeast market. These trends will likely continue through next year and beyond, signifying a bright future for many years to come.
Construction: Cranes can be seen in almost every part of the city — a sign that development is happening and the city is growing. From new construction to historical renovation, Philadelphia is changing quickly. The newest addition to the skyline, the Comcast Technology Center, is just one of many steps in Philadelphia’s evolving landscape. West Philadelphia is seeing new development with the Schuylkill Yards project, and the waterfront is growing rapidly. While skilled labor and global trade tensions continue to be challenges, the city’s construction sector remains strong.
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Boomtown: Philadelphia’s skyline is peppered with cranes, indicating the construction boom the city has been enjoying for several years Philadelphia has been riding the wave of a major construction boom for the last couple of years. More construction permits were issued in 2017 than in 2016, and at the beginning of 2018 there were 29 highrises under construction in the city. These projects were a mix of renovation and new construction, including Philadelphia’s first supertall building, the Comcast Technology Center, spearheaded by Liberty Property Trust; DAS Architects’ Cambria Hotel in Center City; Chinatown’s first community center, the Eastern Tower Community Center, by Hunter Roberts Construction; and The Ludlow, East Market’s first high-rise. These and other developments, totaling 8 million square feet of new construction, are quickly altering Philadelphia’s skyline. They are also changing the various industries they are intended for, whether it is housing, retail, innovation or hospitality. In 2017, Philadelphia saw almost a 9 percent increase from 2016 in new construction, with a record 4,461 new units delivered, according to a report by Cushman & Wakefield. Vacancy rates beyond Center City increased by 3.9 percent due to an influx of apartments, but net absorption remained positive, with 3,516 units 64 | Invest: Philadelphia 2019 | CONSTRUCTION
absorbed. In 2018, 3,836 new units are expected to deliver by year’s end, indicating a slight slowdown. Construction is expected to drop off even more in 2019 and 2020. One factor that might be contributing to this slackening is the increased consideration developers and city planners are giving to climate change. In June 2018, the City of Philadelphia officially adopted a new building code in an effort to improve building efficiency and address the future effects of climate change. The code will take effect in October. Places like the Philadelphia International Airport and other areas in South and Southwest Philadelphia could be partially submerged by 2040, which is something developers need to think about before breaking ground on new projects. Laying groundwork Infrastructure projects play a critical role in Philadelphia’s construction economy. In May 2018, the city announced that it would move ahead with the Rebuilding Community Infrastructure initiative, slated to be funded by the new sweetened beverage
CONSTRUCTION REAL ESTATE OVERVIEW
tax. While the fate of the tax was uncertain in the early summer months, it was upheld by the Pennsylvania Supreme Court in July 2018. The Rebuild initiative is a $500 million investment to rehabilitate city parks, recreation centers, playgrounds and libraries. In August 2018, SEPTA began construction on the first phase of its Southwest Connection Improvement Program, designed to improve aging infrastructure and ensure passenger safety. The city is also turning to green investments in order to combat a long-standing problem with stormwater runoff. Philadelphia is seven years into a 25-year project that will reduce the city’s combined sewer overflows by 85 percent under an agreement with the Environmental Protection Agency (EPA). It is investing $2.4 billion in public funds, which will be enhanced by large contributions from the private sector, in order to create a citywide patchwork of green stormwater infrastructure. So far the city has built 1,100 greened acres and plans to build another 1,300 over the next three years. In the zone From July 2016 to June 2017, 1,869 acres of Philadelphia’s land were rezoned. As part of the Philadelphia2035 plan, the Philadelphia City Planning Commission has been creating plans for each of the city’s 18 districts that include recommendations for proposed physical improvements, zoning and land use. Citizens, community leaders and elected officials guide the priorities outlined in Philadelphia2035. Zoning continues to be a battleground for new development in the city. In April 2018, City Planning voted down a remapping bill that would rezone 600 South University Avenue from industrial to CMX-5 — the densest allowable district in the city’s code. City Planning also rejected a resurrected two-year-old bill that would require developers to provide more parking spaces with new residential construction. At the time of print, one city official had his eye on rewriting the city’s zoning code to make room for more rooming or boarding houses in residential neighborhoods where these types of dwellings are typically banned. Taxing times The Commonwealth of Pennsylvania has a large steel-manufacturing industry, with the region just northwest of Philadelphia hosting the country’s only domestic keg-manufacturing company. The Trump administration’s 25 percent tariff on steel and 10 percent tariff on aluminum have caused a divide in the state, and the construction industry is feeling the ( )
Brett Pastorius Vice President of Project Management Clemens Construction Company
How is Clemens Construction Companygrowing? This is an exciting time at Clemens to be witnessing and part of the construction and development growth in and around the Philadelphia area. In 2019 we will be celebrating our 40th anniversary in Philadelphia, where we have developed a strong reputation for construction excellence. As investors and developers have chosen to invest here, our volume has increased significantly, as we have taken on larger and more complex projects. Currently, we are building a 335-room Hyatt Centric hotel in the Rittenhouse Square neighborhood, along with several other transformative projects. A unique aspect of Clemens’ growth is our significant ability to self-perform all carpentry-related trades. Philadelphia’s booming construction industry results in a greater demand for experienced project managers and skilled labor. Through our strong hiring efforts, relationships with the building trades and subcontractors in Philadelphia, we continue to complete and deliver projects on time and budget for our clients. What are some ways Clemens Construction Company is incorporating technology? Technology can be a disruptor, although at Clemens we have found that it has fueled our ability to manage and execute projects. We have embraced many forms of construction-oriented technologies. For example, with Building Information Modeling (BIM), we are working more collaboratively with our subcontractors, design team and owners to ensure constructability, detecting clashes ahead of installation, which minimizes the need for late changes and disruption to schedule. Clemens is also utilizing drones as an important part of how we present projects. Drones provide us with the capability to investigate, document and gain perspective on project planning and process. Finally, cloud-based project management tools allow for transparency with our owners and architects.
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CONSTRUCTION INTERVIEW
Meaningful work How Brandywine Realty Trust is both transforming Philadelphia and telling its story to outside investors with its forward-thinking Schuylkill Yards development
Jerry Sweeney President & CEO – Brandywine Realty Trust
Our first development for the project is Drexel Square, a 1.3-acre park that will open in early 2019 and will deliver a green public gathering space where the community can connect, interact and share experiences. Phase one also includes the preservation and renovation of the Bulletin Building, which was one of the last commissioned works by the revered architect George Howe. We want to bring more businesses and jobs to Philadelphia, and this part of the city has so much potential that we want to capitalize on. We believe that not only will Schuylkill Yards expand Philadelphia’s skyline and change University City, but it will also be an incredible economic driver for the city as a whole. We believe it is going to change the trajectory of the city, not just from an economic standpoint but from a philosophical and psychological standpoint as well.
How do you foresee the Schuylkill Yards project impacting the city? Schuylkill Yards is our premier development project in the market. Helping to tell the Philadelphia story to companies outside of the city and region has been a large part of our business plan over the last year, and Schuylkill Yards is at the forefront of that. This is a project on a scale that the city hasn’t seen before. Brandywine has invested about $1 billion on the riverfront between Cira Centre, which was a partnership with Amtrak; Cira Centre South, which was a partnership with the University of Pennsylvania; and now with Drexel University at Schuylkill Yards. From a tenant perspective, Schuylkill Yards creates a product and an integrated experience for forward-thinking companies that are demanding nextgeneration, transit-oriented hubs designed to cater to today’s ever-changing workplace and lifestyle habits. 66 | Invest: Philadelphia 2019 | CONSTRUCTION
What is your role in the Neighborhood Engagement Initiative? As a large investor in Philadelphia, we viewed the Neighborhood Engagement Initiative as a way to take a multi-phase project like Schuylkill Yards and ensure that during its 20-year build-out there were solid connection points between what we are doing in University City and how it can positively impact the rest of West Philadelphia. We wanted to create job growth from our projects in West Philadelphia, so we worked with a nonprofit to start an apprenticeship program that is now in its second class. We bring in men and women, predominantly of color, who live in West Philadelphia for a training course that prepares them to take the apprenticeship exams for all of the trade unions in the city. If they pass the program and the exam, then we work with our local contracting base to get them into the trade union and, if need be, guarantee them a job on a Brandywine project. It is important to us to make sure that the people who live in this neighborhood are benefitting from the work we are doing here.
CONSTRUCTION OVERVIEW
Tom Scannapieco President and CEO – Scannapieco Development Corp.
We bring the highest segment of the market into Center City Philadelphia. There is a trend internationally where people want an urban experience instead of a suburban experience. The American dream has changed from owning a piece of property out in the woods, where you can’t see your neighbor, to living in a vibrant urban environment. That shift is continuing to build momentum. We recognized that trend, and we have stayed at the forefront of it.
( ) heat. While the tariffs help to keep the purchasing of supplies domestic, they do little to mitigate rising construction costs in Philadelphia and nationwide. Single-family home construction, which consists of structures that are mostly wood, is not as directly affected as construction of mixed-use, multifamily and high-rise buildings, which constitute the majority of development in Philadelphia. On a local level, in June 2018 the Philadelphia City Council narrowly passed new legislation that includes a 1 percent tax on all new construction projects eligible for the city’s 10-year abatement (this includes renovations and additions). Revenue raised by this tax will support the Housing Trust Fund, which develops new affordable and workforce housing, preserves existing housing and works to prevent homelessness. Also included in the legislation is a zoning change that would allow developers to increase the height and density of their buildings as long as they make 10 percent of their rental and condo units affordable. Opting into the zoning bonus does not preclude payment of the 1 percent construction tax. Critics argue that the construction tax will hinder development. While 1 percent might not seem like much, consider that a 1 percent tax on a $1 billion new technology center would elicit $10 million in tax dollars. In September 2018, this bill was killed; however, Mayor Kenney made a proposal in its place. He
suggested that the city use the money generated by the real estate taxes from properties with expiring 10year abatements for affordable housing. This would commit nearly $71 million to affordable housing over the next five years — a number that some critics deem not enough. An affordable housing deal was reached in favor of the previously proposed construction tax bill. City council introduced an ordinance that would dedicate $71 million over five years to the Housing Trust Fund, starting with $21 million in fiscal year 2019. The remaining four years would break out to be less than $20 million per year, which was city council’s original fundraising goal. City council is committed to raising the remaining funds that this ordinance does not provide. Philadelphia’s 10-year abatement program has long been a divisive issue. The program was originally implemented in the 1970s and allowed for a 30-month tax abatement on new construction. In 2000, the program evolved to include a 10-year abatement for all qualified improvements to real property. According to the Building Industry Association of Philadelphia (BIA), the program has been responsible for a 376 percent increase in homebuilding activity since its inception. In 2010, the first properties to benefit from the 10-year abatement began paying taxes. Since that time, the annual tax revenue from abated properties has increased every year as more
In June 2018, city council passed new legislation that includes a 1 percent tax on all new construction projects eligible for the city’s 10year abatement.
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Joe Forkin President Delaware River Water Corporation
How has the DRWC worked to make the waterfront a cultural destination? Philadelphia’s cultural economy is a rapidly growing sector, and it is something that we embrace on the waterfront. Cherry Street Pier is a good of example of how DRWC has purposefully worked to make the waterfront a cultural destination. We recently completed and opened the adaptive reuse of a historic shipping pier into a cultural destination called Cherry Street Pier. We wanted to create a space where artists could have their own space for undermarket rent, and now it is an amazing multi-use space that combines art, food and the public as a gathering space along the waterfront. Both the BluCross Riverrink and Spruce Street Harbor Park sustained by Univest are also great cultural destinations for people to come and gather. How does the DRWC develop public infrastructure? Our design area is approximately 1,300 acres, or about six miles of waterfront from Allegheny Avenue in Port Richmond to Oregon Avenue in South Philadelphia. An important tenet of our Master Plan for the Central Delaware is that significant investment in public infrastructure — such as a park every half mile, improvement of streets that connect the city to the waterfront and a six-mile multi-use trail — will leverage private interest and investment along the waterfront. What plans are there to continue to connect the city with the waterfront? A large project we are working on is the Penn’s Landing cap and civic space. The project is in preliminary engineering now and moving into final design. It is a $225 million project that will cap over both I-95 and Columbus Boulevard and create a 12-acre open civic space and park-like feature. Our goal there is to reconnect the city to the historic core at the waterfront. With the building of I-95, the waterfront was cut off from the city, and we are working to create that connectivity again,
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The massive Schuylkill Yards projects calls for 6.9 million square feet of new construction.
properties age out, and revenues are expected to reach $169.4 million by 2026. However, critics argue that the program mostly benefits wealthy residents living in Center City, takes money away from an already struggling school district and exempts new construction from paying taxes while other properties see them rise. Tax structure is not a challenge that is unique to Philadelphia, but it is something that industry leaders widely agree is holding the city back. While there is optimism surrounding December 2017’s federal tax reform, which is designed to encourage more internal investment and repatriation of foreign cash, the local tax structure is something market leaders think needs to be addressed. Despite these challenges, however, positivity still reigns throughout the city.
CONSTRUCTION OVERVIEW
Lending landscape In 2017, banks provided 71 percent of all construction financing in the U.S., according to data from Real Capital Analytics. In fact, Bank of the Ozarks was the busiest construction lender in the country that year. However, in Philadelphia, while banks remain among the most reliable sources of debt, life companies and private equity (PE) funds have been gaining traction in the lending world. In addition, the commercial mortgage-backed security (CMBS), which used to be the chief driver of commercial real estate financing, is on the rise again after it fell out of favor during the financial crisis. This time around it promises to be better serviced and regulated. All of this translates to hot competition in the city’s loan market. In fact, from 2016 to 2018, the number of PE funds in the Philadelphia market grew from 60 to 100. Deep-pocketed life companies are also putting pressure on banks and other traditional lending sources. This, combined with a general reluctance among lenders to provide construction loans due to the amount of time they have to wait to see a return, could lead to an increased interest in refinancing in 2019. This might be particularly resonant in Philadelphia, where construction prices rival those in New York City but returns on investment do not. Despite these challenges, Philadelphia developers are still securing new loans for major projects. In March 2018, Bank of the Ozarks provided a $38.5 million construction loan, while a Connecticut-based private equity fund contributed $15 million in mezzanine financing, to Modus Hotels and Parkway Corporation for construction of the 11-story, 252-room Pod Hotel in Center City. In July 2018, EB Realty secured $70 million in financing
CONSTRUCTION OVERVIEW
John Chin Executive Director – Philadelphia Chinatown Development Corporation
The Eastern Tower Community Center has been on our project board for over a decade, and we finally broke ground on it in August 2017. This was huge for us and for the Chinatown neighborhood. Chinatown is one of few neighborhoods in the city without a city-owned and operated community center, so we are building it for Chinatown. The Philadelphia Chinatown Development Corporation, in its understanding of the neighborhoods’ needs, identified this project as a priority, so we put a development team together in 2012 and put it into motion.
from Guggenheim CREF, Susquehanna Investment Group and the Philadelphia Redevelopment Authority for three of its projects on North Broad Street. Earlier in 2018, the company landed a $56 million loan, arranged by D2 Capital, to redevelop the Metropolitan Opera House on that same street. Construction efforts are being spearheaded by DOMUS. It’s not all mega projects and multimillion-dollar loans in the City of Brotherly Love, however. The Grow Philadelphia Fund provides low-interest loans up to $50,000 to minority-owned construction companies in Greater Philadelphia. There’s also assistance on the way for the nearly three out of five — almost twice the national average — Philadelphia residents whose applications for home repair loans are regularly denied. In an effort to make repairs more affordable, the city and the Philadelphia Redevelopment Authority, using a portion of the funds raised by the 0.1 percent hike in the city’s real estate transfer tax, plan to launch a new program for low- to middle-income homeowners that will offer up to $25,000 in loans for home repairs.
projects. However, despite the city handing out so many residential permits, Philadelphia’s housing inventory still hit an all-time low in 2017, and that low carried into 2018. Today new construction is popping up in popular neighborhoods like Center City — with projects like Walnut Estates, Northern Liberties, New Market and Laurel Court delivering in 2018 — but housing inventory continues to spend little time on the market before it is bought or rented. With millennials flocking to the city, more neighborhoods are seeing both revitalization and new construction. In 2017 and into 2018, construction showed no signs of slowing down in places like Brewerytown, a North Philadelphia neighborhood that borders Fairmount Park and has seen intense transformation over the last decade. Francisville, a neighborhood directly north of Fairmount, and East Kensington, a lower Northeast Philadelphia neighborhood that borders the popular and hip neighborhood of Fishtown, have also seen heightened construction. Other neighborhoods growing in popularity are Grays Ferry, Strawberry Mansion and Greenwich. As these neighborhoods become safer, more people — especially millennials — are eyeing them as attractive options, increasing demand for housing in those areas. Scannapieco Development Corporation is credited with bringing the ultra-luxury market to Philadelphia. While this market has a smaller need in the city, it is still seeing great success. Scannapieco’s towers at 1706 Rittenhouse ( )
2017 saw more construction permits issued than 2016, but the increase was only a little over 8 percent.
Housing matters While 2017 saw more construction permits issued than 2016, the increase was only a little over 8 percent. By comparison, the jump from 2015 to 2016 was 25 percent. In 2017 the majority of permits issued — more than 800 — were for “light residential” projects. This was followed by permits for “medium residential” 70 | Invest: Philadelphia 2019 | CONSTRUCTION
CONSTRUCTION INTERVIEW
Staying power How Perryman Building and Construction works on transformative projects that fuel Philadelphia’s economic growth and add value to the city
Angelo Perryman CEO – Perryman Building and Construction
What projects you have been involved with have had the biggest impact on the city? A lot of the projects we are involved with are magnet projects. These projects are a chance to reaffirm existing residency, as well attract potential residents who are looking for a new place to live. We were involved in the building of Lincoln Financial Field in South Philly. The building of the new stadiums transformed that area and gave it an attraction. It brought energy back to that space. We were involved in the Kimmel Center project, which was part of a desire to transform Broad Street into an Avenue of the Arts. The Pennsylvania Convention Center was another draw for people to come to the city, and we were a part of that. We pride ourselves on being a part of transformative projects that draw people to the city and fuel economic growth. We did the renovation of Love Park, an iconic destination in Center City, along with the South Philadelphia Health & Literacy Center. The center is a 96,000-square-foot LEED-certified, firstof-its-kind public-private partnership, including a CHOP pediatric primary care center, Philadelphia Department of Public Health Community center, state-of-the-art Free Library of Philadelphia South Philadelphia Library and DiSilvestro Playground and Recreation Center. We want to create commerce for the city. How do you preserve Philadelphia’s history and integrity with your projects? We bring a personal integrity to projects by taking a step back and looking at buildings that have stood the test of time. My favorite building in Philadelphia, and one that we worked on, is the Reading Terminal Train Shed. When we started working on it, there were only two buildings like that in the whole world. Reading Terminal represents the last bastion of structure of its type. That is really important, not just for the city, but also for history. When
it comes to renovating buildings, it is important to keep the heart of the building intact. Because Philadelphia is a historical city, renovation and restoration are important. They add value to the city by preserving the historical structures that have staying power. What is your outlook for development in Philadelphia? Since 2008, the industry in Philadelphia has grown 400 percent. Now we have to make a much more concerted effort to keep the construction industry strong while still building growth. From my vantage point that means taking a look at the cost of development and the safety of development, which are critical to continuing to build on our underdeveloped spaces. We have to find ways to understand what specific communities need so we can further incentivize the development. Overall I think Philadelphia is in a good place to continue to grow.
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CONSTRUCTION OVERVIEW
( ) and 500 Walnut had record-breaking leases, and it is already planning its third tower. 500 Walnut, a 35-condo residence with the lowest price tag a cool $3 million, caused some controversy, as it sits across the street from Independence Hall, a UNESCO World Heritage Site. Designer Cecil Baker + Partners, Scannapieco and the Independence National Park team were able to come to an agreement by designing the slim luxury tower so that when one faces Independence Hall head on, it can’t be seen. The tower broke ground in March 2015 and was completed in March 2017 at a total cost of about $140 million. Scannapieco’s first tower, 1706 Rittenhouse, is a 31-condo unit that also cost $140 million to complete. Construction started in 2006 and was completed in 2010. The city sold its first million-dollar condo in the 1980s, and the luxury market has continued to grow since that time.
Despite rising costs, a skilled labor shortage and tax uncertainty, construction in Philadelphia continues to boom.
Commercial trends E-commerce doesn’t just affect the real estate sector; it affects the construction sector in the city as well. As agencies figure out how to combat the changing landscape of how people shop, developers are having to build out these new ideas. Most of the retail construction in the Center City area, the city’s main destination for retail, is renovation projects that are turning existing spaces into new inventory. The East Market neighborhood of Philadelphia is seeing the revitalization of The Gallery, led by Perryman Construction, into a shopping destination called the Fashion District, anchored by a brand-new movie theater, something that the east side of Broad in Center City is currently lacking. The Fashion District will be the first retail hub east of Broad. Construction began in 2016 and is slated to finish in late 2018. The 1,400,000-square-foot renovation project is being co-
Scott Zuckerman Principal – Domus Inc.
Our original focus as a company was affordable housing, and it is something that we still have our hand in today. There is a tremendous need for housing in general, but especially affordable housing in Philadelphia. We built the second LGTBQfriendly affordable housing project in the country: John C. Anderson Apartments in Center City. From a projects perspective, affordable housing is 70 percent of what we do. We work on six or seven affordable housing projects a year.
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CONSTRUCTION OVERVIEW
Blane Stoddart CEO – BFW Group LLC, Construction Project Managers
Industry leaders and economists are expecting the market to continue to boom until around 2020. After that, we are expecting some kind of correction in the market or slower period of growth. Part of this is due to cost. Philadelphia has a pricing problem, and our construction labor rates are very high. In the last 10 years, few unions have had sizable apprenticeships programs, meaning new people are not being trained, passing the exams and being accepted into these unions en masse like they used to be. The industry is facing a labor shortage, which is something that the unions and the city need to focus on if we want the industry to continue to thrive.
spearheaded by Shoemaker and Skanska. Shoemaker built the first iteration of The Gallery in 1977, while Skanska did the second iteration in the late 1980s. The Fashion District is a $575 million project and will turn the East Market neighborhood into a retail destination thanks to its experiential nature. Another popular renovation trend is turning existing warehouses into spaces with other uses. The Beury Building on North Broad is a good example of this trend. After 40 years of abandonment, the building is being revamped into a mixed-use property with both residential and commercial uses. The Art Deco masterpiece was originally the National Bank of North Philadelphia and is now being taken over by Shift Capital, a Philadelphiabased developer. The Independence Press Building on North 11th, which was once a factory and warehouse for paper box production companies, is now being turned into an apartment building by PA Ridge Associates, which bought the building for $5 million in 2015. Looking ahead While demand remains strong thanks to the influx of young entrepreneurs to the city, there’s no denying the labor pool for construction companies is continuously shrinking. A majority of companies in the Greater Philadelphia area claim that recruiting and training qualified individuals is their biggest business challenge. However, the number of companies reporting a labor shortage seems to be decreasing, perhaps due to a new trend in which companies hire non-skilled workers and invest in training them themselves. “Like most of the country, Philadelphia has been experiencing a bit of labor shortage in the construction
sector,” Ben Connors, president of the General Building Contractors Association, told Invest:. “But compared to other markets it is a relatively small one. We have noticed in the professional service side an increased demand for jobs. On the labor side, while the market has tightened, one of the benefits of having a stable workforce through the union trades is the market has a more predictive flow of labor.” Between January 2017 and January 2018, the Philadelphia region was one of the worst-performing areas for construction employment in the country, ranking 337th out of the 358 measured, according to analysis of federal labor data by the Associated General Contractors of America. Philadelphia’s construction employment was down by 600 jobs, or 5 percent, during that time period. One reason for this poor performance could be the industry’s extended success. While Philadelphia saw a lot of construction activity in 2017 and 2018 — up to $9.12 billion through November 2017, a major increase from 2016 — things are beginning to slow down as big projects wrap up and fewer new projects come online. Still, despite rising costs, labor challenges and an uncertain tax landscape, construction will continue on the west bank of the Schuylkill River as Brandywine Realty Trust’s Schuylkill Yards project wraps up phase one and breaks ground on phase two. The project is slated to be completed over the course of the next 20 years, so while activity in Center City might slow, other parts of the city will still see at least moderate activity. And Philadelphia remains one of the brightest housing markets in the nation, which will help to drive construction moving forward into 2019.
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CONSTRUCTION OVERVIEW
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City of Philadelphia: Philadelphia has become a hub for innovation. Communities citywide are seeing growth and attracting businesses. This city of neighborhoods is as walkable as ever, and residents and tourists alike are attracted to the history and cultural offerings. Philadelphia is no longer being overlooked as people pass from Washington, D.C., to New York City. It is now a destination in its own right.
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City of Brotherly Love: Built on the foundation of tolerance, Philadelphia has grown into a powerful urban center with a diverse economy and population The city of Philadelphia encompasses 142.71 square miles, 8.53 square miles of which are water. It sits along the Delaware River to the east, with the Schuylkill River running through the city to the west. Known for its tasty cheesesteaks, passionate sports fans and the Declaration of Independence, the City of Brotherly Love has a lot to offer residents and businesses alike. With a growing food and beverage scene that boasts some of the best restaurants in the country, housing prices that are more affordable than most other major cities on the Northeast corridor and plenty of museums, walking trails and transportation options, Philadelphia is proving itself to be a city that has it all. Rich history While Philadelphia is renowned for being the site where our founding fathers signed the Declaration of Independence and for serving as the nation’s first capital, its history started much earlier than that. Philadelphia was originally home to the Lenape (Delaware) Indians, but with the Europeans’ arrival in the early 17th century, they were forced to move west and north. 76 | Invest: Philadelphia 2019 | CITY OF PHILADELPHIA
The Dutch settled the Delaware Valley in 1623 and considered the entire area part of their New Netherland colony. In 1638, Swedish settlers arrived and built a fort in present-day Wilmington, Delaware. Soon they spread throughout the entire Delaware Valley. In 1664, the valley fell under English rule and remained there until 1682, when William Penn established Philadelphia as a city through the Charter of 1701. Penn hoped that Philadelphia would be a rural town, but with its accessibility by river and growing population, there was no stopping it from becoming a bustling city. It became an important trading center in the 1750s. Benjamin Franklin is credited with leading Philadelphia to the high standards it is still known for today, introducing new industries and growing its economy. From 1790 to 1800, Philadelphia served as the temporary capital of the United States while the District of Columbia was under construction. In 1793, it saw the largest yellow fever epidemic in U.S. history. This epidemic killed between 4,000 and 5,000 people, or 10 percent of the population. At the time, Philadelphia was the largest city in the U.S.
CITY OF PHILADELPHIA OVERVIEW
Greg DeShields Executive Director – PHL Diversity, A Business Development Division of the Philadelphia Convention and Visitor’s Bureau Philadelphia has continued to evolve in its development as a city. The city values and supports the significance of its diversity and multiculturalism. We are a city of neighborhoods, and we are easily accessible. As a visitor you can walk from Chinatown to South Philly and have multiple cultural experiences along the way. The city, uniquely, has a chief diversity and inclusion officer, which allows us to prioritize the significance and importance of that as an economic engine.
The 1800s saw an increase in industrial jobs and manufacturing companies in Philadelphia. These industries dominated the economy for much of the later half of the century and into the 1900s, as they did in much of the Northeast. From 1880 to about 1920, the industrial districts in Philadelphia enjoyed a diversity in activity that was unparalleled in the history of manufacturing. Counting all the plants, mills and factories in Philadelphia, there were upwards of 300 categories of industrial activity happening in the city. The population continued to grow as these industries boomed. Philadelphia was dubbed the “Workshop of the World,” as a little bit of everything was made in the city and surrounding suburbs. The city’s port system played an integral role in the success of these industries. By the 1980s, most of the factories and manufacturing had left the city. Philadelphia struggled with finding jobs and industries to replace those lost. Today, Philadelphia has a strong, diversified economy that is particularly robust in healthcare and education but boasts offerings across all sectors.
In November 2018, legislation was introduced to city council that would enable the city to enter a purchasing power agreement with a renewable energy developer to purchase solar power. The city has a commitment to have 100 percent of its energy come from renewable sources by 2030 — a lofty goal that would be easier to reach with this agreement. If approved (at the time of print, it had not yet been voted on), a 70-megawatt solar facility would be built in Adams County. This facility would be the largest in Pennsylvania by a wide margin, and the city would be able to purchase energy at a fixed, competitive price for 20 years. Also in November 2018, Philadelphia was a winning city in the Bloomberg American Cities Climate Challenge spearheaded by Bloomberg Philanthropies. This challenge is a $70 million program that helps 20 cities in their climate change and sustainability efforts. Philadelphia was chosen because of the city’s ambitious clean action plans to reduce carbon emissions and air pollution. As a winning city, Philadelphia is accepted into a twoyear acceleration program that will provide new resources to put initiatives into effect.
Sustainability Sustainability is a huge focus for the city of Philadelphia. Recently, the Office of Transportation and Infrastructure Systems (OTIS) went through a name change; now OTIS stands for Office of Transportation, Infrastructure and Sustainability. Philadelphia’s sustainability efforts focus largely on accessible food and drinking water, healthy air indoors and outdoors, clean and efficient energy, climateprepared communities, zero waste solutions, access to safe and efficient public transportation and more.
Innovation hub University City is the easternmost neighborhood in West Philadelphia. Situated directly across from Center City over the Schuylkill River, this neighborhood is home to some of the city’s — and the country’s — leading academic institutions and medical centers. A hotbed for development, University City is becoming an extension of the downtown area on the other side of the river. With a diverse demographic of residents and with job opportunities increasing, this is a neighborhood to watch.
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CITY OF PHILADELPHIA OVERVIEW
Saul Behar Vice President and General Counsel – University City Science Center
The University City Science Center has been undergoing a process of transformation over the last few years. We have been around for about 55 years, and historically we have been known for the real estate side of what we do. The Science Center was established in 1963 as part of an urban redevelopment project, and over those 55 years we have had a mandate to oversee the development of Market Street between 34th and 39th Streets. To date, we have overseen the development of 15 buildings along that corridor. According to U.S. Census data, University City’s population grew almost 3 percent between 2000 and 2014. The 2.4-square-mile neighborhood has become known for not only its outstanding “meds and eds” population but also its emerging science and innovation spheres. Approximately 79,692 jobs are supported by the neighborhood, spanning a wide range of industries. University City is considered one of the leading employment hubs in the region, with over 33,000 jobs per square mile. According to a report by the University City District (UCD), in 2018 the neighborhood counted 53,884 residents with a median age between 22 and 24. There were five universities and colleges and four hospitals, with 43,267 college and university students and 85,048 hospital inpatient admissions as well. Since 2016 there has been almost 1.5 million square feet of real estate development completed. Philadelphia as a whole is attracting millennials in droves, and University City is no exception. According to the same report by UCD, the number of millenials is up 13 percent since 2000. The population in the neighborhood in general has increased by 11 percent since 2010. Innovation is a huge focus for Philadelphia as a whole. “Philadelphia has a growing innovation movement, and we wanted to be a part of that,” Lisha Davis, head of Vanguard’s Innovation Studio, told Invest:. “It made sense for us to open our
Innovation Studio in Center City because it’s an economic hub for the region and is in proximity to academic institutions, the entrepreneurial community and transportation hubs, among other attributes. We are excited to be a part of the city in the innovation space.” University City is a particularly bustling innovation hub. With places like Pennovation, uCity Science Center and Cambridge Innovation Center, University City is exporting innovation in a variety of industries and is considered a pacesetter across the country. “We are seeing opportunities come from places like Pennovation and other incubators that are helping to foster new companies in the city,” Ken Wellar, managing partner at Rittenhouse Realty Advisors, told Invest:. “We have an active involvement in University City, so we are seeing that growth firsthand. As these startups begin to grow and create more jobs, they attract more people, which can only benefit the area. It is something that will draw more international investors.” Development is happening in droves in University City, as well. The $3.5 billion Schuylkill Yards project, overseen by Brandywine Realty Trust in conjunction with Drexel University, is one of the largest development projects the city has seen in years. Drexel Square — the first phase, which broke ground in 2017 — is a 1.3-acre park near 30th Street Station. ( )
Since 2016, there has been almost 1.5 million square feet of real estate development completed.
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CITY OF PHILADELPHIA INTERVIEW
Resurgence How the Greater Northeast Philadelphia Chamber of Commerce is promoting Northeast Philadelphia as a great place to do business and experience history, art and culture
Pamela Henshall President – Greater Northeast Philadelphia Chamber of Commerce What role does the chamber play in representing the Greater Northeast area? The Greater Northeast Philadelphia Chamber of Commerce is focused on representing the region and is the single voice for business. Our goal is to serve our region positively with a focus on marketing, programming and events to strengthen the engagement among all industries. We lead our regional businesses and community by establishing relationships to create competitive advantages for sustainable economic development, provide advocacy by representing our members in city and state political affairs and connect leaders, developing a coalition to execute the community’s vision. What makes Northeast Philadelphia unique? Economically Northeast Philadelphia has the highest concentration of multigenerational family-owned businesses, manufacturing and companies selling their products and services locally, nationally and internationally within the city. To support these companies and their leaders, we offer a Harvard University Leadership Academy Development Program offered through Holy Family University, and our Executive Alliance Council provides roundtable discussions and a network for CEOs facing similar regional challenges. What is one of the biggest challenges the chamber is combating today? As baby boomers continue to face the challenges of caring for their aging parents, the healthcare industry is grappling with the problem of developing a stable workforce to support the increasing senior population. Our chamber is working with the State of Pennsylvania to offer a grant program to train entry-level healthcare
support staff. In 2019, we will launch our apprenticeship program focusing on healthcare with the goal of expanding into additional industries and professions. What is your outlook for Northeast Philadelphia in 2019? Northeast Philadelphia has seen a resurgence in recognition of our rich history, arts and culture. The region has a deep history, and efforts are underway to promote tourism. Activities and events include a bus tour of the Kings Highway (otherwise known as Frankford Avenue, the road that the British used to get into Philadelphia), Northeast Philly Art on the Avenue in Mayfair, pop-up beer gardens and food truck festivals and a Deco on the Delaware (a 1920s-inspired event located at Glen Foerd each summer). Also new for 2018, Welcome America selected Pennypack on the Delaware as its first Northeast Philadelphia celebration location.
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Matt Bergheiser President University City District
How does University City District contribute to the growth of the neighborhood? Our work in the University City District parallels the growth and transformation of this neighborhood. We are a partner of the anchor institutions here in the academic and medical fields, as well as developers, businesses and residential communities. What we are most proud of is the investment in public space and civic infrastructure. We create value horizontally so that developers can create value vertically. We’re builders of public spaces, taking spaces that were once concrete super blocks and instead creating parks and walkable spaces. We want to shape welcoming and creative spaces in West Philadelphia for residents, commuters and visitors to enjoy. Philadelphia is all about neighborhoods. University City is a neighborhood where people come to work and learn, and we are now adding more places for them to live and play. All of these aspects are important to the growth of the neighborhood and ultimately the city. How does University City impact the rest of the city? The economic future of the region can be shaped here in University City. If Philadelphia is going to continue to grow, to reverse old trends and private sector job loss, a lot of that progress is going to happen in this neighborhood. This growth is going to happen because of the intellectual assets of our universities and health systems, and it takes talent to fuel that. Talent has choices, so we are working hard to make sure that the exceptional talent Philadelphia needs chooses to be in University City. We are setting the stage. The next phase for us is to take the intellectual discoveries and the research that is happening here, to take the knowledge being generated at our academic and medical institutions and translate that into jobgenerating commercial ventures. Commercial ventures need space to grow. That is what Schuylkill Yards is about, and that is what uCity Square is about. University City has room for growth.
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( ) Overall, Schuylkill Yards will be a 14-acre project that will transform University City. The project consists of open space, retail, residential, office, lab and innovation space. The idea is to connect University City with the rest of Philadelphia while making West Philly a destination for travelers and visitors. Drexel Square opened in the fall of 2018, and the estimated completion date for the entire project is 2036. “We have a big project in the works that we are calling One uCity Square, which is on the site of the old University City High School,” Joseph Reagan, Jr., Northeast Region executive senior vice president at Wexford Science and Technology, told Invest:. “We are bringing in North South connectivity that was lost previously and adding new streets in, as well as a park. The idea is to connect the residential community to the retail and office community that it was previously cut off from. That is a project that we are very excited about.” Living monument Philadelphia’s original Navy Yard was not where it stands today. Originally on Front Street at Federal Street in what is now the Pennsport neighborhood, it was the first naval shipyard in the United States. Now an industrial park, the current Navy Yard is a hub for business and industry. The United States Navy ceased most of its operations at the Philadelphia Navy Yard in the 1990s. Today, this historic living monument sits below the stadiums on the water and is home to about 150 companies with nearly 13,000 people employed there. Companies include Urban Outfitters, Tasty Baking Company, GlaxoSmithKline, Adaptimmune, WuXi, FS Investments, Philly Shipyard and more. Since 2000, more than $1 billion has been invested into the Navy Yard, which has the reputation of being the region’s most dynamic business campus. PIDC is the master developer for the campus and has overseen the transformation of the Navy Yard from active naval ship base to innovation hotbed. With 6.3 miles of waterfront space, the Navy Yard is a unique part of the city. The whole living monument contains about 20 acres of space that includes historical buildings, new construction, 13 LEED-certified buildings and industrial spaces. Currently the Navy Yard lacks a residential element; however, there are hotels on the campus. The city’s ever-expanding sustainability initiatives do not stop at the blue gates that welcome employees
CITY OF PHILADELPHIA OVERVIEW
and visitors to the Navy Yard. Due to the subway line stopping at the stadiums and not continuing to the yard, there is a shuttle that brings employees to the business campus so they don’t have to drive. According to a report by PIDC, 10 percent of employees take the shuttle to the campus instead of driving. Green energies were used during the construction and renovation of many buildings, and adaptive reuse has been the trend for the navy-built buildings that have been converted into office space. Currently, the big development project happening in the Navy Yard is the redesign of the Broad Street Entrance and Langley Avenue. The three-phase project addresses a huge focus for the Navy Yard: maintaining the safety and efficiency of access to the Navy Yard by bicycles, pedestrians and vehicles. The first phase was completed in 2017 and consisted of relocating utilities — some that were over 100 years old — along Broad Street. In the summer of 2018 phase two was completed, which included moving the entrance to Broad Street where it meets Langley Avenue from its former location at the River Basin Wall intersection at League Island Boulevard, as well as the reconstruction of Langley Avenue. Phase two was a $13.4 million project in conjunction with PennDOT. The third phase will see a reconstruction of Broad Street from Langley Avenue to Intrepid Avenue. The improvements are supposed to be dramatic, as the 130-year-old timber platform that supports a majority of Broad Street in that area will be replaced, in addition to all four vehicle lanes being restored, as well as a two-lane bike path and an elevated walkway. At the time of print, construction had not yet started.
Philadelphia is well known as the birthplace of democracy, but it is also the birthplace of the U.S. Navy.
The Northeast While still very much a part of the city of Philadelphia, the Northeast can seem like a different city at times. This neighborhood holds a sizeable percentage of the city’s overall population, with over 425,000 people calling the area home. The Northeast covers about 50.8 square miles, making it almost half of the city in terms
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Dennis Davin Secretary, Department of Community and Economic Development Commonwealth of Pennsylvania
What advantages does Philadelphia offer to residents and businesses? When you take the four major cities along the Northeast Corridor — Boston, New York, Philadelphia and Washington, D.C .— Philadelphia is set up perfectly. The cost of living is so low compared to these other places. What that means is those making $50,000 or $60,000 have more disposable income so they can live better. They can go out to eat more, they frequent brew pubs and shops more and they’re in a better position to fuel the local economy. Philadelphia has an abundance of those offerings for its residents and visitors, which makes it an ideal city in which to live. That is why we are seeing more and more people relocate from places like New York. It’s a vibrant and affordable place for people to live. Another significant advantage that Philadelphia has over many other cities is its port infrastructure, which ensures the city can reliably and quickly move goods and products to market to give our businesses a global competitive advantage. Why is community development so important to this administration? Part of what the Wolf administration and our department get involved in is things like looking at downtown centers and main street opportunities and funding those opportunities. Some of these are projects that happen outside of Philadelphia in some of the suburban communities, and some are in the city itself. We are involved with street-face opportunities, helping with façade improvements for businesses so an area is attractive, distinctive and a place where workers and customers want to be. We help develop trail systems. We help with accessibility and infrastructure improvements. We do this because Governor Wolf and this administration understand that community development and economic development go hand in hand.
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of area, and is home to companies like Parx Casino and auto parts manufacturer Cordone. Until 2017, when it was demolished after ceasing production in 2015, the Nabisco Biscuit Company factory was an iconic landmark for the region. In the 1980s, due to demographic differences, the Northeast section of Philadelphia wanted to be considered a separate county. The secessionist movement was led by State Senator Frank Salvatore. He introduced a bill that, if passed, would have made the Northeast its own county. Many residents in the Northeast did not agree with paying the same high city taxes that the rest of the residents paid, especially since the Northeast was split fairly evenly between Republican and Democrats, while Center City and the surrounding area tended to swing blue. The bill was never passed. As the overall economy of the city began to stabilize under Governor Ed Rendell’s leadership, the discontent in the Northeast subsided. Some of the city’s largest real estate for office space lies in the Northeast. In March 2018, the former site of the Budd Co. railcar plant sold for $18 million. The 138acre vacant warehouse property was sold to Commercial Development Corp., a developer from St. Louis, Missouri, that specializes in the adaptive reuse of industrial sites. Like the rest of Philadelphia, the Northeast had a large manufacturing and industrial industry that migrated away from the city in the 1980s. With that departure, there were vacant warehouses and unused spaces that have yet to be transformed. In the Northeast, Commercial plans to develop three warehouse spaces, totalling 1.6 million square feet, that will be used for office space. That is an area larger than the Comcast Tower and Liberty One, two of the dominating towers in the Philadelphia skyline. The city has worked to make the Northeast more accessible by public transportation, with one of the main projects discussed in the Aviation and Transportation chapter (see page 83). By making the Northeast more accessible by public transit, the Boulevard becomes safer for pedestrians and the neighborhood opens up to more jobs to residents. Looking ahead With its diversified economy and rich history, Philadelphia keeps attracting residents and visitors in droves. Areas like Fishtown, Northern Liberties and Grays Ferry continue to see both new residents and new development. America’s first capital city still stands strong today, with major companies and startups thriving across the region. From river to river, one can find a little bit of everything in Philadelphia.
Aviation & Transportation: Philadelphia is a 24-hour drive from 80 percent of the country’s population. With a major international airport adding new flights and as a prime stop on Amtrak’s Northeast Corridor, Philadelphia is both easy to get to and offers convenient access to almost anywhere. Its accessibility is one of the major reasons so many new residents and businesses are attracted to the region, and local leaders are committed to keeping its air and ground transit systems running smoothly.
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Aviation & Transportation in numbers: PHL top airlines by carrier (September 2018):
16,741,679
7,530,482
American Airlines
Other
29,585,754 TOTAL PASSENGERS
1,654,749 Southwest Airlines
1,262,652 Frontier Airlines
987,539 United Airlines
1,408,653
Source: PHL
Delta Airlines
SEPTA ridership update (November 2018)
400
Ridership average: 324.9 million
100 50 0
FY12
FY13
FY14
FY15
FY16
FY17
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FY18
-3.4%
November YTD:
-1.9 %
-2.4%
Budget: 303.6
302.7
2018
150
vs. Last year
-1.2 %
2019
200
Highest total in 23 years
250
308.3
326.1
330.1
330.2
337.3
300
339.3
350
vs. Budget
November 2018:
FY19
Source: SEPTA Revenue & Ridership Report
AVIATION & TRANSPORTATION OVERVIEW
Revolutionizing transit: With a fast-growing airport and serious investment in the region’s roads and rail, Philadelphia is quickly becoming a hub of connectivity Philadelphia is known for its longstanding history as the birthplace of America, but along with age comes aging infrastructure. Deteriorating infrastructure has been an issue across the country, impacting the way people commute and causing residents of some areas to decrease their use of public transportation. While the Trump administration is pushing for $1.5 trillion in new spending on infrastructure, as of March 2018 Congress had allocated just $21 billion, slightly more than 1 percent of the president’s goal. Though infrastructure might be the area where the current administration has accomplished the least in terms of its top economic plans, there’s no doubt Philadelphia is on the move. While significant infrastructure upgrades are needed, many important projects are currently underway, and the state of transportation in the City of Brotherly Love is much better than it is in some other leading U.S. markets. As Philadelphia continues to attract more residents and visitors, the Philadelphia International Airport (PHL) is becoming the hub of connectivity for the region. With a booming restaurant scene and leading industries such as healthcare, life sciences
and higher education, Philadelphia is preparing itself to be the next American hotspot. Fast, modern and convenient transportation options are a critical part of that transformation. Safe and efficient In June 2018, the Southeastern Pennsylvania Transportation Authority (SEPTA) issued a blueprint that would revitalize its bus network. The blueprint was put together by Jarrett Walker, a transportation specialist from Portland, Oregon. The revitalization would include fewer stops, no transfer fees, boarding from all doors and moving stops located after traffic lights instead of before them. The idea is to increase ridership and make the network more efficient. This blueprint demonstrates Philadelphia’s increasing commitment to reaching its sustainability goals, as well as ensuring the city is accessible to all residents and visitors. In 2017 Philadelphia also joined Vision Zero, a policy started in Sweden in 1997 whose goal is to eliminate all traffic-related deaths and severe injuries while increasing safety, health and mobility for all residents ( )
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AVIATION & TRANSPORTATION INTERVIEW
Flying high How Philadelphia International Airport is improving customer experience, reinventing cargo and increasing connectivity as it looks toward a lofty future
Chellie Cameron CEO – Philadelphia International Airport
is going to seem refreshed, and especially in Terminal B we are really bringing back the wow factor.
How are the ongoing upgrades at the airport improving passenger experience? A major focus for us is the passenger experience today. Terminal B has gone through a major overhaul. Every seat has an iPad, and every seat has outlets. If you are sitting there, you can order food from any of the restaurants in the concourse, and it will be delivered right to your seat. Passengers have been responding amazingly, and there aren’t many other airports that are doing this on the level that we are. But these upgrades aren’t just about iPads and outlets; we have put $31 million into a program we call “Touch Every Surface,” meaning we are adding new roofs and HVAC systems and upgrading electrical centers to handle the new tech and outlets. There are bathroom upgrades, and we have just built a new USO. Everything 86 | Invest: Philadelphia 2019 | AVIATION & TRANSPORTATION
How is the Philadelphia airport working to seize a portion of the nearly $50 million regional air cargo business? When it comes to cargo, you first have to define the demand. What things are being shipped, and what specific requirements does that entail? Philadelphia has a focus on medicine and healthcare, so if some of the cargo coming in is pharmaceuticals that need to be refrigerated, those needs will help define demand. Right now we have an agreement that allows UPS to operate here alongside our already established cargo operations. As for the future of cargo, we are taking a multi-pronged approach. We only capture 9 percent of the cargo that comes through the area, but if we could double that, the possibilities would be endless. We are constantly talking about how we can reinvent cargo for ourselves, and a lot of that will come with an eventual relocation of UPS and acquiring more land and building more facilities. The key with cargo right now is to look ahead to the next 6 to 12 months to see what will drive development to the area. What are the airport’s strengths in terms of global connectivity? Philadelphia is a transatlantic hub. When you look at American Airlines, we have more direct flights from the East Coast to Europe than any other hub. We have over 130 direct flights out of Philadelphia International Airport, and that is only going to grow. Budapest, Prague, Zurich and Mexico City are all international destinations that are coming to Philadelphia, and these international destinations not only help us as a transatlantic hub but domestically as well. We are connecting people to cities all over the world. Connectivity is huge for us.
AVIATION & TRANSPORTATION OVERVIEW
( ) and visitors. The program has been successful in Sweden, which has seen a 30 percent decrease in traffic-related deaths and severe injuries since it was implemented. Vision Zero Philadelphia is backed by the bike coalition, and the success of the policy is rooted in the concept of safety in numbers as proponents strive to increase the number of people biking and walking in the city. On November 2, 2016, Mayor Jim Kenney signed an executive order that calls for a target of zero traffic-related deaths by 2030. A number of projects and initiatives correlate with the “Complete Streets” executive order signed by former Mayor Michael Nutter. The order promises that all streets will be accessible by all people using any means of transportation and that streets will be designed, maintained and built to be “complete streets.” Some of Philadelphia’s streets were created in the 1600s, while some were built in the 1950s. What once was friendly to horse and buggy is not necessarily friendly to bikes and cars. Complete Streets shows Philadelphia’s ongoing commitment to preserving the city’s walkability and top-rated accessibility.
undergoing major changes in order to make the best first impression possible. The airport is a huge economic driver for the region, supporting more than 96,000 jobs in the 11-county region it services. The airport sees about 81,000 people come through daily, while 29,585,754 passengers pass through annually, according to a report put out by the airport in 2017. As part of the Master Plan, which was implemented a few decades ago, the airport has undergone more than $2 billion in capital improvements since 2000. The major completed projects have been Terminal A-East Improvements, Runway 9L/27R Rehabilitation, Taxiway K Expansion and the Terminal F Expansion. In 2017 the major ongoing projects were Terminal D/E Improvements, Runway 9R/27L extension and associated taxiway and infrastructure work, the Passenger Loading Bridge Program, the Rooftop HVAC Unit Replacement Program and the Roof Replacement Program, with the Terminal B OTG Concession Development project completed in the first half of 2018. These improvements have added new dining options, technology upgrades in terminals, new HVAC equipment and more. Many of the improvements have been customer facing in order to improve the customer experience at the airport. The improvements to Terminal B was a $32.8 million redesign that the airlines agreed to in their $900 million lease agreement with the city.
From renovations of Terminal B to the new routes added in 2018, PHL has been undergoing major changes.
Massive makeover For most people visiting the Greater Philadelphia area, Philadelphia International Airport (PHL) is their first stop. From renovations of Terminal B to the new routes added in 2018, PHL has been
Scott Petri Executive Director – Philadelphia Parking Authority
We are modernizing our facilities and on-street operations. MeterUp allows customers to pay for on-street parking or to add to a meter from their smartphones. Soon customers will be able to make reservations at our garages. At the airport we are planning on installing a vastly improved way-finding system in the garages and in the economy lot that will lead customers to available spots. These technologies enhance customers’ parking experiences. We also maintain a website and communicate daily with customers through Facebook, Twitter and Instagram.
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Olympia Colasante Former Vice President American Airlines
What makes Philadelphia a top-performing hub? Already American’s largest transatlantic hub, PHL is primed for expansion. And we’re taking full advantage — with new European destinations having just launched this summer, including new service to Prague and Budapest and a resumption of service to Zurich. Additionally, we inaugurated service to Mexico City and several domestic destinations. While our network is important, it’s really our people who make PHL our premier global gateway in the Northeast. We have 8,700 team members in PHL, and it’s their cooperation and dedication to our customers that makes us successful. What are American Airlines’ plans for growth in Philadelphia? While we’re not ready to announce any new destinations for 2019, we’re encouraged by the performance of the routes we inaugurated this summer, so expect to see at least one new dot on the map from PHL in 2019. The new domestic destinations are important to us, as those smaller flights help fill the big planes that head across the Atlantic. The more people who connect through PHL, the stronger the hub. Additionally, we’re encouraged that the airport community has come together to invest hundreds of millions of dollars into renovation and modernization. This level of commitment reinforces our belief that PHL will be customers’ global gateway of choice for years to come. What kind of work does American Airlines do in the PHL community? For our PHL team, family and community are hallmarks. Service might begin locally, but it doesn’t end there. Whether it’s arts, culture, human services or the military, our PHL team members support numerous organizations across the metro area. Additionally, our PHL team played a huge role in our Puerto Rico recovery efforts after last year’s hurricanes ravaged the islands.
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These updates have helped Philadelphia International Airport remain one of the top 20 busiest airports in the country. The addition of new routes both domestically and internationally is also a major contributor to this traffic. In March 2018, Aer Lingus began its direct flight service to Dublin, Ireland, making it the sixth foreign airline to service PHL. The route will connect passengers to 21 destinations through Dublin and is transformational for both the airline and PHL. American Airlines launched international routes to Budapest, Prague and Mexico City, as well as various domestic routes, including those to Oklahoma City and Worcester, Massachusetts. Finding funds Federal, state and regional funding is important when it comes to improving Philadelphia’s multimodal transportation infrastructure. From road repairs to improving SEPTA, sources of capital are crucial to making these improvements possible. In February 2018, Governor Wolf announced that $7 million from a $41.5 million statewide investment by the Pennsylvania Department of Transportation (PennDOT) would go toward fixing and improving Philadelphia’s streets, trails and other infrastructure. Six projects in the Philadelphia area are beneficiaries of these funds, including a $1.1 million improvement of the southwestern corner of Adams and Summerdale avenues and Roosevelt Boulevard, construction of a $1.5 million new street at uCity Square, $1 million improvements to the Logan Point Roadway, $3 million improvements to Anne d’Harnoncourt Drive as part of the Philadelphia Museum of Art’s ongoing renovations, improvements to Bartram’s Mile and the addition of more bike-share stations. In early 2018, the Delaware Valley Regional Planning Commission (DVRPC) announced that it had awarded $7.9 million to 10 local projects in southeastern Pennsylvania through the Transportation Alternatives Set-Aside Program. It also dedicated an additional $4 million to future projects over the next three years. In Philadelphia, the DVRPC-funded projects include construction of medians and pedestrian safety improvements along North Broad Street, improvements and full restoration of Thomas Paine Place and the restoration of Shawmont Station, the oldest rail station in the U.S. In May 2018, Philadelphia’s Office of Transportation, Infrastructure and Sustainability (OTIS) announced that it had received more than $8 million in state funding for improving transportation
AVIATION & TRANSPORTATION OVERVIEW
Andrew Woolf General Manager, Pennsylvania and Delaware – Lyft
One of the ways we are continuing to invest in the driver experience is through a program called Express Drive. Express Drive provides access to rental vehicles for drivers who either do not have a vehicle or don’t want to use their own car and still want to drive with Lyft. We recently launched this program in Philadelphia, and we’re excited to see it continue to grow and allow more drivers to access the flexible earning opportunity that driving with Lyft provides.
and infrastructure in the city. These funds will be allocated to support Vision Zero efforts, improve access to public transportation, enhance pedestrian and bicycle facilities and preserve the city’s historic transportation infrastructure. I SEPTA Philly For those who live and work in and around Philadelphia, SEPTA is a part of everyday life. In 2017 SEPTA saw over 284 million riders across regional rail, subways and buses and employed over 9,000 people throughout the region. It is the nation’s sixth-largest transportation system. Not only is SEPTA the largest form of public transportation in the Greater Philadelphia area, but it is also a massive economic driver for southeastern Pennsylvania. The economic impact of the system is $3 billion contributed annually to the Greater Philadelphia region. All of this has been accomplished without adding additional tracks or cars in almost 20 years; however, upgrades are sorely needed. SEPTA is running at near capacity almost every day, which causes a lot of wear and tear on the equipment. In 2018, SEPTA presented a case to the Commonwealth of Pennsylvania requesting $6 billion in funding over the next 15 years. The organization has a history of putting funding toward projects that have a positive economic impact on the commonwealth as a whole, and it believes further improvements to its infrastructure will be a tremendous economic benefit statewide.
On the road In May 2017, Governor Wolf, in conjunction with PennDOT, announced that over $550 million in bridge and highway improvements would break ground or be bid on in the 2017 construction season. These projects were slated to improve southeastern Pennsylvania’s mobility and roadway safety, with over 230 miles of paving and repair or replacement of more than 30 bridges. PennDOT is the entity in charge of the planning, design and construction of all of Pennsylvania’s modes of transportation. This includes road construction — which sometimes seems to be omnipresent in the city. In June 2018, PennDOT announced that it would begin road work on about 12 miles of expressway I-76 between Philadelphia and King of Prussia, a well-traveled stretch that brings commuters to and from the city on a daily basis. The road work, which is intended to alleviate congestion, is scheduled to be completed in the summer of 2019, with a six-month testing period to follow. Governor Wolf announced that the project would cost about $8.6 million, with 80 percent of those funds coming from federal sources. The road sees more than 300,000 vehicles daily in Philadelphia and Montgomery counties combined. Repairs on Lincoln Drive are part of another large road improvement project in 2018. In April it was announced that construction would begin to fix the road, which is notorious for its potholes. The improvement project focuses on resurfacing the road,
In 2017, SEPTA saw over 284 million riders across regional rail, subways and buses.
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CONSTRUCTION REAL ESTATE OVERVIEW
replacing the guard rail and median and improving drainage. These improvements are expected to benefit not just commuters but pedestrians as well, with safety upgrades making Lincoln Drive friendlier to those who choose not to travel by car. The project is expected to take 18 months to complete. Partnering up A new Federal Transit Administration (FTA) rule went into effect on June 29, 2018, that encourages greater use of public-private partnership (P3) funding in capital projects. The FTA hopes this new regulation will “accelerate the project development process, attract private investment and lead to increased project management flexibility, more innovation, improved efficiency, and/or new revenue streams.” With states carrying larger and larger transportation funding burdens as infrastructure ages and maintenance costs rise, P3s provide additional financing opportunities and help to create efficiencies that in turn lead to cost savings. While they’re not a cure for all transportation funding woes, they offer one innovative alternative to carrying the burden alone. According to its website, PennDOT operates one of the most ambitious and comprehensive P3 programs in the U.S. Its Pennsylvania Transportation P3 Office works diligently to develop innovative delivery and financing models for a variety of projects designed to improve the commonwealth’s transportation network, enhance safety for motorists, accelerate project delivery and generate revenue. The state’s $889 million Rapid Bridge Replacement (RBR) Project was the largest P3 of its kind in the country, replacing 558 structurally unsound bridges over a three-year period. Perhaps one of the most noteworthy P3s in Philadelphia today is the 30th Street Station District Plan, a massive project by key stakeholders Amtrak, Brandywine Realty Trust, Drexel University, PennDOT and SEPTA. This project has been years in the making with an end goal of transforming 30th Street Station and its surroundings into a vibrant, mixed-use transportation hub with a multitude of public spaces. Local initiatives While PennDOT oversees statewide initiatives, municipalities oversee more localized initiatives. Pennsylvania is sectioned into 67 counties, which in turn are subdivided into 2,561 municipalities. More than 78,000 of Pennsylvania’s 120,000 total roadways and nearly 6,500 of its bridges are owned by municipalities.
Natalie Shieh Director, Major Stations Planning and Development Amtrak
How important is 30th Street Station to the Northeast Corridor? 30th Street Station is Amtrak’s third-busiest station. Because of Philadelphia’s central location on the Northeast Corridor — between New York and Washington, D.C. — Philadelphia is primed for a lot of transportation-driven growth. There was also amazing foresight from the Pennsylvania Railroad back when the station and track were built. 30th Street Station is one of the only stations in the United States where trains leave in all four directions. It is certainly one of the best intermodal hubs you can have. I think 30th Street is a true gem on the Northeast Corridor that has a lot going for it. What changes are coming to the Northeast Corridor in the near future? We are in a major period of refresh at the moment, restoring and upgrading customer amenities at the station. Right now, 30th Street Station is undergoing a restoration of the historic facade. Additionally, we are also working on refreshing our trains with new seats, upgrading bathrooms, providing charging stations and revitalizing our ClubAcela lounge. We are about to begin the process of identifying a master developer for Philadelphia, which will lead to a lot of amazing changes to deliver a stellar customer experience, including a complete revitalization of our retail, new concourses and a dynamic station plaza. We expect to have a master developer on board by 2021 — a big year for us. In 2021, we are going to be releasing a new fleet of Acela Express trains that will feature higher speeds and more frequency. There are many exciting improvements happening in Philadelphia and along the Northeast Corridor at the moment.
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30th Street Station is Philadelphia’s main railroad station and is a major stop on Amtrak’s Northeast and Keystone corridor.
In February 2018 Governor Wolf, in conjunction with PennDOT, announced that over $11 million in Automated Red Light Enforcement funding would be allocated to 35 municipalities, including Philadelphia, across the state to fund more than 40 safety projects. The funding comes from the fines levied by 30 red-light cameras placed throughout the cities, as mandated by state law. The grant funding will help these municipalities improve traffic
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conditions, repair bridges and roads and cover other multimodal transportation projects. In Chester County, connectivity and transportation are important projects. Mayor Dianne Herrin of West Chester is excited about the county’s increased connectivity. “One big thing that has happened is there is now an express bus service from West Chester to New York City,” Mayor Herrin told Invest:. “That is huge connectivity for us, and we believe it will be ( )
AVIATION & TRANSPORTATION INTERVIEW
Efficient transit How SEPTA keeps Philadelphia running smoothly with innovations like its new SEPTA Key and a commitment to keeping the city’s infrastructure safe and up-to-date
Jeffrey Knueppel General Manager – Southeastern Pennsylvania Transportation Authority (SEPTA) What were some highlights SEPTA has seen recently? The Eagles parade in February 2018 was a big highlight for us because it was well handled from a transportation standpoint. For four straight years, Philadelphia has been host to several big events, some on national and even international scales. We had the papal visit, the Democratic National Convention, the NFL Draft and then the Eagles parade, and we were able to handle those events efficiently and successfully. The papal visit helped us develop measures to make sure that we could cater to these events and be successful. During that event we came up with a plan of not having all our stations open so we could better control safety and crowds. We are tasked with making sure the day-today operations are done right, but we’ve been able to help the city really grow its image as both a national and international host. How has the implementation of the SEPTA Key Card benefitted riders? At the beginning of this year, we phased out tokens and magnetic strip passes and introduced the SEPTA Key Card. By using the SEPTA Key, riders no longer have to wait in long lines to buy tickets or passes. The cards are also protected if riders register them, so if they’re lost or stolen, riders won’t lose funds. We are trying to make public transportation easy and convenient and encourage more people to take SEPTA. Everything is connected; it is a seamless pass. Whether you are taking trolleys, buses, the subway or regional rail, you will only need one card to get where you need to go. We have also been working on expanding where riders can purchase cards to make it more convenient. We have over 500 retailers, which makes it very easy to acquire a Key Card. The Key Card makes riding SEPTA much faster and easier than it ever has been.
What challenges are facing SEPTA and public transportation in Philadelphia? One of our greatest challenges is updating infrastructure that in some places dates back to the late 1800s. Thanks to the leadership of SEPTA Board Chairman Pat Deon and the efforts of lawmakers in Harrisburg to pass Act 89 in 2013, there is now a dedicated source to fund transportation infrastructure and vehicle replacements statewide. This led SEPTA to launch its Rebuilding the System initiative, and while we’ve made great progress fixing and replacing bridges, tracks, power substations and other critical infrastructure, there is still much to be done.
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Michael Carroll Deputy Managing Director Department of Transportation, Infrastructure & Sustainability One project we are excited about is Direct Bus, which is an express bus service on Roosevelt Boulevard. It is a great model for how to get meaningful projects done quickly and on a budget. We are focused on safety, accessibility and reliability in all of our projects, and the Boulevard has a bad reputation. We have just cut the ribbons on the first pair of modified intersections we will be placing along Broad Street. This is an aesthetic upgrade, but safety is a huge part of this as well. These intersections were first created with z-bricks, which is a very tough system to maintain. This new system will be able to be maintained much better. With easier maintenance there is less chance for accidents like people tripping and falling. The ramps are much better, which makes it much safer for people who use wheelchairs and other devices and will decrease the amount of curb-related injuries we see. We added a protected bike lane on Chestnut Street that runs through University City, which is something the bike coalition was excited about, as well as the Penn community. We still have work to do in conjunction with PennDOT to implement this throughout other areas in the city and make it an overall safer place for bikers. However, this was a significant project that underscores the benefits of doing higher-quality bike-related projects whenever and wherever we can. There is still a lot of work to do to bring these projects to completion but we have funding and we are pushing these projects forward. We have smaller pilot versions of these projects that run on JFK and Market, but we would like to continue to do them on a larger scale. We are also rolling out a series of efforts to step up traffic safety enforcement. This is something the public has told us they want, so we are coordinating with partners within the city and outside of it to combine resources and find opportunities to rely more on innovation and technology. 94 | Invest: Philadelphia 2019 | AVIATION & TRANSPORTATION
( ) game changing and should really help protect our economic vitality.� Local leaders have been asking themselves how they can improve the aging infrastructure while maintaining the safety and health of residents and moving forward with sustainability efforts. Philadelphia is especially focused on climate change and how it can make preventative improvements to reduce the impact of future threats. This includes changes like LED street lighting in order to use less energy across the city, sourcing energy from renewable options and transitioning the city’s power grid away from fossil-fueled energy sources. Sharing economy While almost 300 million riders a year use SEPTA, ride sharing is growing in popularity among residents of Philadelphia. Traffic is an issue in and around the city, and younger people are less inclined to have cars in the city, both out of environmental consciousness and as a way to cut down expenses. Ride-sharing services like Uber and Lyft have changed the way Philadelphia gets around. Studies like one done by the University of California-Davis Institute of Transportation Studies show that use of ride-sharing services skews toward a younger, better-educated and richer population, with more use in urban areas than in suburban neighborhoods. According to an economic impact report conducted by Lyft for Philadelphia, 27 percent of riders used Lyft to access public transportation. The growing popularity of ride sharing has had a direct impact on taxi cabs nationwide. While a correlation between an increase in ride sharing and a decrease in public transportation use has been found, Philadelphia and SEPTA remain unsure how much of an effect it has had on SEPTA ridership. However, the study by the Institute of Transportation Studies showed that people who use ride sharing would have walked, biked or used public transportation if an Uber or Lyft had not been available. Lyft in particular is looking to expand its services in Philadelphia and is in the process of working with local health systems to offer people rides to and from appointments and the emergency room, saving patients the cost of an ambulance when it is not needed. The company also has various partnerships around the city, including with the stadiums, to make getting home after events safer and easier. Uber is also focused on expanding its reach in the city and has continued to do this by adding Uber Express Pool to the Philadelphia market. The service,
AVIATION & TRANSPORTATION OVERVIEW
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which is the cheapest of all of Uber’s offerings, was brought to the market in February 2018 and is seen as competition to SEPTA’s bus service. Uber Express Pool picks up multiple passengers from different locations and drops them off at various locations, but where it differs from Uber Pool is that it typically makes riders walk a few blocks to be picked up, and then they are dropped off a few blocks from their destination. The service acts more like a bus as opposed to a door-todoor service. At the beginning of 2018, the Philadelphia Parking Authority proposed a 50-cent surcharge on every Uber and Lyft ride taken in the city in order to generate revenue from the service. This money would then be rerouted to the city school district. At the time of print, this had not yet gone into effect.
bike-share program, has seen rapid growth across the city. In June 2018 the company announced that its expansion would continue with three docks going in at the Navy Yard and two at the stadium complex. The Navy Yard isn’t accessible by the Broad Street Line, so the idea is to add more mobility for the 13,000 people who work there. The Pennsylvania House of Representatives was encouraged by environmental groups to pass HB 1446, which would push for more charging infrastructure for electric vehicles, another technology that is helping to reduce emissions. However, the bill was removed from the table in June 2018. While electric vehicles are becoming a more popular option for people, especially those who need a vehicle but are trying to reduce their carbon footprint, the lack of places to charge them makes them impractical, especially in the city. Scannapieco Development Corporation took this into consideration when building its latest ultra-luxe highrise on Fifth and Walnut, offering wireless charging docks for electric cars owned by residents of the building.
As of May 2018, there were more than 23,000 dieselpowered transit and school buses statewide.
Driving green Sustainability is important to Philadelphia across all sectors of industry. From stormwater recapture to LEED-certified buildings, it is something that the city takes very seriously. From a transportation standpoint, technology is a way to make getting around Philadelphia more environmentally friendly. Emissions from cars and buses not only have a negative effect on air quality and the environment, but they also make everyday life harder for people with asthma and contribute to other health issues. Environmental advocates across the commonwealth are pushing transportation agencies to make the switch to electric buses — a change that is being made slowly. According to a State Impact Report done in conjunction with NPR, as of May 2018, there were more than 23,000 diesel-powered transit and school buses statewide. Environmental groups have pushed for these vehicles to be retrofitted with filters to help reduce emissions; however, with the availability of electric technology, filters simply aren’t a good enough option for those who want to see fast and quantifiable changes in vehicular emissions across the state. SEPTA is in the process of rolling out 25 electric buses, but cost remains a massive barrier that transportation agencies will need to figure out how to overcome. Bike sharing is another way cities across the world are trying to reduce emissions and promote healthier lifestyles for their residents. IndeGo, Philadelphia’s 96 | Invest: Philadelphia 2019 | AVIATION & TRANSPORTATION
Bright future For Philadelphia the challenges for transportation come from an aging infrastructure and a growing population. With parts of the city being built in the 17th century, it can be hard to update the roads and walkways while still maintaining the integrity of the city’s history. However, residents, visitors and government officials alike agree that change needs to happen and repairs need to be made. With some of the massive improvement projects to the Schuylkill Expressway and Lincoln Drive and potential changes to SEPTA’s bus network, Philadelphia is revolutionizing its infrastructure and increasing its visibility as a prime place to live, work and play. The Philadelphia International Airport is putting Philadelphia on the map as the premier place to get you where you need to go. With more and more direct flights being added across numerous airlines, Philadelphia is a true hub of connectivity. As the airport continues its capital improvements and upgrading the amenities offered to travelers, it will not be long before business and leisure travelers alike are flying through Philadelphia asking: New York who?
Infrastructure, Utilities & Environment: Philadelphia’s infrastructure is aging, and with that comes both challenges and opportunities. From road and railways to water pipes and drains, the infrastructure is constantly being replaced and refreshed. In the city’s push for more sustainable energy alternatives, utility companies are major players in helping Philadelphia meet those goals.
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Modern energy: Philadelphia’s rich history means it is faced with aging infrastructure, which the city is working tirelessly to bring up to date responsibly William Penn founded Philadelphia in 1682, and with that came many firsts, including the country’s first brick house, first botanic garden, first volunteer firehouse and first fire insurance company. Some of these are still around today. However, such a long history also means that much of the infrastructure is aging rapidly, and today the city is working hard to bring things up to date. The Philadelphia Water Department is the main source of water for the city, while Aqua America is the leading supplier in the suburbs. Philadelphia Energy Company is the leading energy supplier; however, since Pennsylvania is a deregulated market, residents have the option of picking their own supplier. Philadelphia Gas Works (PGW) is the leading gas company in the city. All of these companies work together to bring Philadelphians their daily utilities and to move the city’s infrastructure into the 21st century. There’s no question that infrastructure projects create jobs. According to a report by ICF, a global consultancy firm, U.S. energy infrastructure development will create more than 1 million jobs by 2035, 100,000 of 98 | Invest: Philadelphia 2019 | INFRASTRUCTURE, UTILITIES & ENVIRONMENT
those in Pennsylvania alone. In the Philadelphia area, employment in trade, transportation and utilities increased by 5,500 — or 1.1 percent compared to 0.9 percent nationally — since February 2017, the secondlargest gain in the region. Going green Philadelphia is a sustainability focused city, which is proven by the push for green infrastructure. In 2011, the Philadelphia Water Department (PWD) started the Green City, Clean Water initiative in an effort to reduce stormwater capture entering the city’s combined sewer system through green infrastructure. PWD is pushing the city to focus more on stormwater capture by re-creating the living landscape the city once had and adding more trees and green space to streets, sidewalks, roofs, parking lots and more. Since its inception, Green City, Clean Water has added more than 1,100 stormwater capture tools to the city. While it is a long-term project — 25 years — it is expected that pollution of the combined sewer system due to stormwater will be reduced by ( )
INFRASTRUCTURE, UTILITIES & ENVIRONMENT INTERVIEW
Economic driver How Comcast’s focus on connectivity, innovation and inclusion, along with the new Comcast Technology Center,is a massive economic generator for the city
David Cohen Senior Executive Vice President & Chief Diversity Officer – Comcast Corporation What are the main growth drivers for Comcast today? Comcast NBCUniversal has seen continued significant growth, not just over the last year, but also over the last decade, as we have been diversifying our businesses. We are focused today on our connectivity businesses, including broadband and business services, which are very strong. And we continue to launch new products and services, such as Xfinity Mobile, which is off to a terrific start. We acquired NBCUniversal in 2011, and it has proven to be an incredible investment. For example, since our acquisition, NBC has gone from being the fourth most-viewed broadcast network to number one for the last four consecutive years. Our amusement park business is doing incredibly well, and our film business has had some terrific blockbusters, like Jurassic World: Fallen Kingdom and Fate of the Furious. Our businesses have consistently grown, and if you look at the last 18 months — or even the last 5 years — business across all aspects of the company has been extraordinary. How will the Comcast Technology Center impact Philadelphia? From a visual standpoint, the Comcast Technology Center has already changed the skyline. More importantly, however, it is also an incredible statement about the growth of innovation and technology in Philadelphia. In addition to housing our growing engineering and technology workforce, the Comcast Technology Center will be home to our LIFT Labs Accelerator program, which will house cohorts of 10 startups at a time and give the companies a chance to work with our technologists and engineers. That program is both a direct and indirect investment in the future of innovation and technology in the Philadelphia economy. Outside of innovation and technology, the Comcast Technology Center is also going to be a massive economic generator for the city. We are
a true corporate headquarters in Philadelphia, which is fairly unique. Obviously we have a large presence in New York, Los Angeles and Florida, but our home is here. How is Comcast pushing for diversity? For us, diversity and inclusion is not a program; it is the way we conduct ourselves culturally. We have a longstanding history of hiring on an unbiased basis, not taking into account color, gender, disabilities or sexual orientation, and making sure that we have a comfortable environment for people to work and innovate in. More than half of the people who work for us today report to a woman or person or color, and 61 percent of our 164,000 employees are diverse. It is important to us as a company to be inclusive on all fronts and make sure that this is a place where people want to work and want to use our products.
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Mike Starck Vice President NRG Retail
What are the benefits of being located in the region? Pennsylvania historically has been seen, and continues to be seen, as a great market for retail energy supply. It’s proven to be very true. Pennsylvania is one of the key markets outside of Texas, in the United States. Pennsylvania has a strong public utilities commission that really is looking to bring the industry forward. NRG acquired a small company called Energy Plus in 2011. Energy Plus had an office in the Science Center. NRG maintains that office. One of the most important things for us during the acquisition was remaining here as part of the Philadelphia area and part of Pennsylvania. It’s vital that our organization have a presence in the market itself. How do you spread brand awareness and make connections with residents in Philadelphia? We recently started an agreement with SEPTA that changed the name of ATT station on the Broad Street line to NRG station. What that partnership does for us, aside from name recognition, is gives us a chance to talk to people every day. Being able to connect with SEPTA riders on a daily basis is invaluable for us. We are able to speak with them about retail energy supply and educate them on the competitive market. Most people in Pennsylvania don’t know that they have a choice in who their electricity supplier is. So this SEPTA arrangement, as well as some of the other agreements that we have in box retail stores like Walmart, allow us to meet customers, which is truly what is most important to us. What are some challenges facing the utility sector? Right now, supplier consolidated billing is a big focus for us. Currently, as a retail electricity supplier we do not bill our own customers. Customers are billed from the utility, and we are a line item on that bill. We have a petition in front of the utility commission for supplier consolidated billing, which will help us develop relationships with our consumers. Relationships are important to us.
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( ) 85 percent once the projects are completed. It is also a cost-saving program that will help PWD minimize rate increases and keep clean water affordable for everyone. In June 2018, with help from a $1.6 million stormwater grant from the PWD, the city officially opened a 40-acre facility that will capture 60 million gallons of runoff a year from 20 commercial properties in Northeast Philadelphia. This marks the largest project to date of the Green City, Clean Water initiative. Philadelphia’s ecosystem is important to maintain, and stormwater capture is a huge part of that maintenance, especially in terms of taking pressure off of the city’s aging infrastructure, which is costly to replace. Climate change Climate change is a discussion happening across the globe. Philadelphia is working hard to be as prepared as possible for the changes in climate we are already starting to see, as well as those expected in the future. PWD is one of the leaders in preparing for climate change in Philadelphia, releasing the Climate Change Adaptation Program (CCAP) in 2014. The department is working closely with the Office of Sustainability to prepare for climate change and develop strategies to minimize the impact in a cost-effective way. Philadelphia is predicted to have a warmer and wetter future, with more extreme weather events on the horizon. A lot of the predicted impacts would directly affect the city’s water infrastructure. Rising air temperatures have a direct impact on the temperature of source waters, which also affects aquatic life and could impact the treatment process for drinking water in the Philadelphia region. While Pennsylvania is a landlocked state, it could still see the impact of rising sea levels, especially since the Delaware River, which is tidal, feeds directly into the Atlantic Ocean. PWD worries that if sea levels continue to rise, the mixing zone — or the line where fresh and saltwater meet — could reach its drinking water intakes, which would compromise Philadelphia’s water supply. Increased rain and more extreme storms are also predicted for Philadelphia. Six months into 2018, Philadelphia has already seen four more inches of rainfall than it did during the same period in 2017. This leads to more stormwater runoff, which directly impacts the quality of source waters, adds stress to infrastructure and leads to more flooding, which in turn leads to property damage and damage of critical facilities. This, combined with sea-level rise, could
INFRASTRUCTURE, UTILITIES & ENVIRONMENT OVERVIEW
also lead to increased coastal erosion. While currently Philadelphia sees rainfall year round, with the spring being exceptionally wet, climate change could lead to seasonal drought with increased duration and frequency. This could reduce water supply. A sea-level rise of more than four feet could also directly affect places like the Philadelphia International Airport. Water woes In early July 2018, a broken water main sent 15 million gallons of water surging into Center City streets, bringing the state of Philadelphia’s aging water infrastructure to the forefront of many residents’ minds. While ruptures of this magnitude are uncommon, a vast network of 3,200 miles of pipes runs beneath the city, and on average Philadelphia sees 267 breaks per every 1,000 miles over the course of five years. From July 2016 through June 2017, the city experienced 715 breaks. To completely replace the city’s water system would cost about $7 billion, far beyond the reaches of the PWD’s operating budget, which is entirely funded by local ratepayers. Instead, the water department has been replacing water mains slowly — much like other municipalities all across the U.S. Over the past 23 years, PWD has replaced 438 miles, averaging about 19 miles per year. That rate picked up in the last three years, to 27 miles per year, and starting in 2019 the department hopes to be able to replace more than 1 percent of its lines every year. In March 2018, PWD filed for rate increases — a proposed 10.6 percent over 3 years, raising the typical customer’s bill $7 per month by September 2020 — in order to help pay for this critical infrastructure maintenance. Efficient energy Not only is the second Comcast Tower — the Comcast Technology Center — changing the skyline and earning the title of tallest building in the city, but it is also the most energy-efficient building in Philadelphia. Before the Comcast Technology Center was built, the original Comcast tower was the tallest and greenest building in the city. However, the Comcast Technology Center is aiming for LEED platinum certification and is expected to be 50 percent more energy efficient than its sister tower. The building is covered in glass with a microscopic layer of silver for extra thermal protection, and the panes are filled with a special gas that conducts low amounts of heat. In 2017, Philadelphia ranked 11th in the nation for most green cities, with more and more buildings earning LEED certification from the Office of Sustainability.
Debra McCarty Commissioner Philadelphia Water Department
Our goal — and pledge to our customers as a 21stcentury water, wastewater and stormwater utility — is to continue our 200-year legacy to provide safe, top-quality drinking water and environmentally sensitive wastewater and stormwater collection and management to protect public health and the health of our rivers and streams. This means that we are a utility that works 24 hours a day, seven days a week to provide affordable and reliable service. We do this through our robust infrastructure that is made up of pipes, plants and people. Our mantra is to continually seek opportunities to improve the delivery and cost effectiveness of our service through sound financial management, technology and assistance programs in the constant quest to balance environmental protection, optimal operations and affordability. For instance, we are increasing the number of miles of water main replaced over the next six years, from today’s 28 miles of main per year to 42 miles of main. We are also extending the life of our sewers by relining six to 10 miles of sewer per year while also replacing eight to 10 miles per year. We are expanding the capacity of our wastewater treatment plants to handle more stormwater flow without an impact on treatment quality while maintaining our award-winning status from EPA and national utility organizations on our unblemished drinking water and wastewater records for meeting all safety and pollution prevention requirements. We are in the seventh year of implementing our internationally recognized Green City, Clean Waters (GCCW) Program. In 2017, we launched a model customer assistance program called the Tiered Assistance Program (TAP) — one of the first of its kind in the country for municipal water utilities — to assist thousands of low-income customers with paying their bills in a timely manner by providing predictable payments while maintaining water access. Philadelphia has always held a reputation for innovation and leadership in its management of stewardship of our water resources. We are proud to maintain and cultivate this legacy.
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Craig White CEO Philadelphia Gas Works (PGW)
How is PGW responding to Philadelphia’s changing energy needs? At PGW, we are committed to maintaining the highest standards possible. That’s why we’re updating our infrastructure citywide, retiring and replacing 35 miles of pipe a year. To date, we have replaced almost 400 miles, future-proofing our service, further reducing the potential for leaks and responding to the changing needs of Philadelphia’s neighborhoods. We’re also leading the charge to help companies improve the resiliency of their energy supply with natural gas solutions that reduce dependence on the electricity grid. And we continue to develop new incentives to encourage the installation of higher-efficiency equipment, for both residential and commercial customers, so people can do more but use less. These ongoing innovations, and others, demonstrate our commitment to our customers and our city and will guarantee the value and sustainability of our system well into the future. What is PGW’s role in helping Philadelphia move toward a cleaner environment? PGW will continue to play a major role as the city works toward a more sustainable energy future. Natural gas works in tandem with renewable energies, like solar and wind, to decrease our city’s carbon footprint. Natural gas is greener than oil, gasoline, diesel or coal, and it has an affordable, broadly available supply, supported by an established distribution system. It’s a proven solution for our energy and environmental needs, today and in the future. We are also helping the city use energy more effectively, with rate designs and engineering support services to enable the adoption of technologies like combined heat and power (CHP). In addition, the use of natural gas-powered vehicles is growing. These positive local moves are a significant part of why air quality in America is the best it has been for 25 years.
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Philadelphia residents are allowed to choose their electric supplier much like they are their natural gas supplier. In the deregulated market of electricity suppliers, consumers are shopping for providers at a higher rate than they are for natural gas, making the market more competitive. “For a deregulated market to work, there needs to be a metropolitan area with a demand for competition,” Joel Crouse, director at Stanwich Energy Advisors, told Invest::. “It is a system that is proven to work, and it has been advantageous in the areas where the markets are deregulated. People in metropolitan areas are usually the people who are spending more for their energy, so they are more likely to look for solutions. It is a fairly new industry; New York deregulated in the 1999. However, it opens the doors for a company like us to come in with our technologies and expertise to help businesses find some ease in sourcing and monitoring their energy.” In July 2018 Philadelphia residents were paying an average of 15.5 cents per kilowatt hour (kwh) for electricity. This number was 11.5 percent higher than the national average of 13.9 cents per kwh. In July 2017, it was reported that electricity prices in the city were 7 percent higher than across the nation. This has been an ongoing trend since at least 2014. July is, on average, the hottest month in Philadelphia, which leads to more electricity being consumed to run air-conditioning units. NRG, an energy company based in New Jersey with a Center City office and operations in Philadelphia, has entered the Philadelphia market more aggressively, adding more options for residents and businesses and increasing competition for those suppliers already in the market. NRG is the company behind the renewable energy at Lincoln Financial Field; it maintains, owns and operates the solar panels and wind turbines. The Eagles’ stadium is equipped with over 11,000 solar panels on the south side of the stadium itself, as well as in the parking lot, and 14 wind turbines that provide all of the energy for the entire stadium. For most of the year, the stadium needs only enough energy to power the offices used by the staff, but for summer concerts and the 10 or so Eagles home games, more energy is required. During the slow seasons, the extra energy created by the solar panels and wind turbines are returned to the grid. NRG has also rebranded the stadium stop on the Broad Street subway line; the formerly known AT&T Station is now NRG Station.
INFRASTRUCTURE, UTILITIES & ENVIRONMENT OVERVIEW
Chris Franklin CEO – Aqua America
In recent years, I have seen increased interest from municipalities in partnering with regulated water companies like Aqua. This is partly because of the mounting challenges and increasing regulations but also because of Fair Market Value legislation that allows municipalities to receive the fair market value for their system. I believe we will continue to see this activity in the region, and we look forward to pursuing additional opportunities to partner with water systems to help improve the state of water and wastewater infrastructure in our region and across our footprint for customers and communities.
Solar and wind While deregulation allows residents to choose their suppliers as opposed to being offered only one option from the city or state, it also gives residents space to pursue alternative energy sources like wind and solar, which are more sustainable options. Deregulation
is a fairly new concept, only coming into play at the end of the 1990s and early 2000s. It is most popular in urban markets and has seen increased popularity in places like New York and Los Angeles. In Philadelphia, this directly affects bottom lines for both residential and commercial properties, ( )
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INFRASTRUCTURE, UTILITIES & ENVIRONMENT INTERVIEW
Smart energy How PECO is investing in natural gas and smart infrastructure in order to improve safety and service as it continues to keep the lights on in Philadelphia
Mike Innocenzo CEO – Philadelphia Electric Company (PECO)
communities and customers. Building a robust, redundant infrastructure that enables a quicker recovery is one of our highest priorities. Finally, we are making investments surrounding security. Today, physical and cybersecurity have taken on new meanings. We provide an infrastructure that’s critical to the businesses and the communities, and we have to make sure that it’s reliable, but we also have make sure that it’s safe from attack, whether it’s cyber attack or a physical attack. Keeping our consumers and their information safe is important.
How is PECO working to improve and maintain its infrastructure in the region? We are making significant investments into the both the natural gas and electric infrastructure, and we are doing so in a few different ways. First, we are making sure that everything is safe and reliable. We’re making investments to both the electric and natural gas infrastructure to help us ensure the systems are safe and to keep the lights on and make sure that the gas flow is uninterrupted. The second area is resiliency. With the severity of the storms and other natural events that have occurred over the last couple years, keeping the lights on and keeping the gas flowing is important, but when those types of events do happen, the most important question for us is how quickly can we recover? Every day that you can recover quickly and efficiently is important to businesses, 104 | Invest: Philadelphia 2019 | INFRASTRUCTURE, UTILITIES & ENVIRONMENT
How is PECO leveraging technology to improve the consumer experience? We have made a significant investment in what we call the “smart grid.” We were one of only six companies in the country that received a Department of Energy grant. We received a $200 million grant to aid in that infrastructure. With that money, we replaced all of our electric meters with two-way smart meters that also have built-in controls. We later implemented the same technologies and updated all of our natural gas meters with smart meters. We also built a network that supports that technology, as well as distribution automation, which makes the system more reliable overall. Our new meters enable us to remotely connect or disconnect service for our customers, eliminating the need to send a crew to customer properties for many requests, and providing faster service to customers. We also are able to more quickly support local fire departments and other officials during an emergency. The enhanced outage information provided by our new metering technology significantly aids our response and restoration work during storms. Another advantage of this system is that it provides more communication options for our customers, which is important to both us and our customers as their expectations continue to grow.
INFRASTRUCTURE, UTILITIES & ENVIRONMENT OVERVIEW
Curtis Toll Managing Shareholder - Philadelphia Office – Greenberg Traurig, LLP
We have created a niche for ourselves in two main areas in the Philadelphia market in two key areas. The first is our long-term public finance practice. The second is our broad-based, and fairly unique, environmental practice. Our environmental practice is full service and includes work on both the transactional and litigation sides. The litigation side of the environmental practice has a more local and regional focus; however, we also practice on a national level, especially in terms of brownfield redevelopment and environmental risk mitigation.
( ) as they are able to source energy at lower prices than the standards set by the city. In the early part of 2018, lawmakers in Pennsylvania were asked to set a goal of transitioning 100 percent to renewable energy by 2050. It’s a lofty goal, to be sure, but one that is needed. Pennsylvania is one of the largest producers of carbon emissions, not just in the nation, but also globally, so reducing its output would have a tremendous impact on the health of the planet. On a city level, Philadelphia has committed to a goal of reaching 100 percent renewable energy by 2035 as part of the Mayors for 100% Clean Energy Effort. Mayor Kenney has been a driving force behind reaching these sustainability goals and making Philadelphia a great place to live for generations to come. Back in 2004, Pennsylvania launched the Alternative Energy Portfolio Standard (AEPS), which required utilities in the commonwealth to source 0.5 percent of its electricity from solar energy by 2021. However, nearly 80 percent of the solar credits that are registered to help the commonwealth meet or exceed that goal are from outof-state projects, which means that while other states are benefitting, there is less local investment going toward these goals in Pennsylvania. This is where the Solar Energy Credit Legislation (Act 40) comes in. Act 40 was signed into effect by Governor Wolf in December 2017 and mandates that only in-state solar facilities will qualify toward the state’s solar energy
goals, encouraging more in-state investment and job creation in the commonwealth. Philadelphia’s solar energy projects received a $3.7 million grant in state funding. The push for renewable energy alternatives will not only reduce Philadelphia’s carbon footprint but also create thousands of jobs to build the infrastructure needed to make the transition by 2035. Governor Wolf has been a strong supporter of sustainability and alternative energy projects in Philadelphia, which has been a huge asset to the city.
In 2017 Philadelphia was awarded a grant for ‘smart cities readiness’ from the Smart Cities Council.
Smart moves In 2017 Philadelphia was awarded a grant for “smart cities readiness” from the Smart Cities Council. This included financial support to develop a roadmap for applying smart technologies. Comcast has been an investor in smart city technologies via the machineQ initiative. MachineQ is an Internet of Things (IoT) service and platform that uses Low Power Wide Area Network Technology (LPWAN) based on the LoRaWAN™ protocol, which has been globally adopted. The service was first announced in 2016 and tested in the Philadelphia and San Francisco markets. According to Comcast, “[By] using the service, organizations are empowered to use data collected from their IoT devices, learn from it, and make betterinformed, data-based decisions to improve how they serve customers, tenants, and citizens.” Due to success in the test markets, Comcast is expanding the service to other markets.
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Comcast is one of the only major corporations with headquarters in Philadelphia, which makes it an important figurehead in the Philadelphia community. The company is a huge generator of jobs and acts as a huge economic driver for the city. Happy trails While the infrastructure Philadelphia’s residents use everyday to move from point A to point B usually consists of the roads, sidewalks and highways in and around the city, the trail system is an important part of everyday life in the City of Brotherly Love. In June 2018, two portions of the Circuit Trails opened up following the completion of the first phase of the Frankford Creek Greenway and the completion of phase two of Tacony Creek Trail. The Frankford Creek Greenway is a 1.2-mile section of trail from where Aramingo Avenue meets Wheatsheaf Lane to where Delaware Avenue meets Lewis Street. The portion of trail that
completes phase one cost $1.4 million, and when Frankford Creek Greenway is finished, it will connect the Tacony Creek Trail to the East Coast Greenway, a walking and biking trail that stretches from Maine to Florida. Phase two of the Tacony Creek Trail is a .3-mile stretch that connects two already existing parts of the trail under Roosevelt Boulevard, which previously ran directly through the trail, making it dangerous for the people using it. When the Circuit Trails are completed, they will bring 800 miles of walking, biking and hiking trails to the Greater Philadelphia area. A trail system is important for both exercise and connectivity, and Philadelphia prides itself on the amount of green space available in the city itself. Cities around the world have been trying to add more green space for their residents and visitors, but finding enough space for a new park in an urban area can be tricky. A popular trend
When the Circuit Trails are completed, they will bring 800 miles of walking, biking and hiking trails to the Greater Philadelphia area.
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CONSTRUCTION REAL ESTATE OVERVIEW
to overcome this conundrum is elevated space, like New York City’s High Line and La Promenade Plantée in Paris. Philadelphia has embraced this trend with the Reading Viaduct Rail Park, which opened in June 2018. The quarter mile of elevated trail in North Philadelphia is a combined effort between the Center City District, the City of Philadelphia, Philadelphia Parks and Recreation and the Friends of the Rail Park. The ultimate goal for the project is for the park to run three miles to the downtown area of Philadelphia. While the rail park brings more green space to an area that is lacking a park, it also makes the old viaduct much safer, as it was once a popular place for people to trespass to explore the viaduct. The completed phase one starts at North Broad and Noble Street and runs across 12th and 13th to Callowhill Street. Building up the waterfront on the Delaware River is something that has been happening in the city for quite some time. From Penn’s Landing to the River Rink, there are many activities for people to enjoy along the river that separates Philadelphia from New Jersey. However, the development of the Schuylkill River, which cuts through the city to the west, is a much newer endeavor. While the Schuylkill Yards project, led by Brandywine Realty Trust, is developing the west bank of the river, the east bank is being turned into a trail system that encourages residents and visitors to enjoy the river through walking, biking and other outdoor activities. In January 2018, the city saw the opening of the South to Christian streets extension of the Schuylkill River Trail. This extension is part of a larger plan to eventually extend the trail all the way down to Bartram Gardens, the country’s first botanic garden and one of Philadelphia’s hidden gems. Looking ahead Philadelphia is committed to creating more sustainable and effective infrastructure while taking an active role in preventing and managing environmental issues. The city’s conservation efforts and climate change measures continue to decrease the area’s carbon footprint and lower the risks associated with sea-level rise and storms. Philadelphia is moving toward a bright and modern future, embracing new technology and revamping and expanding its dated infrastructure to make the city a safe, supportive home for its residents for many years to come.
Tricia Marts Director of Account Management Veolia Energy
What role does Veolia Energy play in the region? Veolia Energy is the world’s largest circular economy company, and we have a diverse and strong portfolio in the Philadelphia region. Our mission is to resource the world by helping our customers address their environmental and sustainability challenges in energy, water and waste. Veolia embraces this future by developing access to, preserving and replenshing the world’s resources. We run the Wilmington wastewater plant in Delaware, which is one of the largest municipal wastewater treatment plants in the country. We also own and operate the Philadelphia district energy system in the Grays Ferry neighborhood of the city. The district energy system relies on cogenerated “green steam,” which is a huge sustainability effort for us. Essentially, when the energy system generates electricity, the waste goes up the stacks and into the environment in the form of steam. With co-generation we reuse that waste heat — the steam — which is an extremely efficient form of energy production. We have a 40-mile distribution system under the city through which we send this green steam. Sustainability is important to us, and this is a way we can impact the city without wasting resources. How does Veolia form partnerships in the city? We work closely with the University of Pennsylvania. Penn recently opened up a steam chiller plant, which is driven by the desire to meet sustainability goals. We work with them to provide them with the steam to power the plant and use that energy to power their water chiller plants. Penn is seeing a lot of growth, which is indicative of the growth in the city. Veolia is the world’s largest circular economy company; through our environmental services group, we work hard to reduce landfills and to help dispose of household hazardous waste. Our work in the Philadelphia region has to do with environmental and sustainability drivers, which are important to the city and community, and to Veolia.
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Healthcare: Established in 1751 by Benjamin Franklin and Dr. Thomas Bond, Pennsylvania Hospital was the earliest established public hospital in the United States. From then on, Philadelphia has been a leader in healthcare and medicine, with people coming from all over the world to seek treatment at places like Children’s Hospital of Philadelphia, Penn Medicine, Temple Health and Jefferson. As a medical destination known throughout the world, the Greater Philadelphia area is the place to go if you need top-notch care.
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Heart of health: Building on its roots as home to the country’s first hospital and medical school, Philadelphia continues to be a hub for innovative healthcare Philadelphia has always been an important city for healthcare, most notably as home to the country’s first hospital, first medical school and a slew of other medical firsts. As a result, Philadelphians have long enjoyed access to premier healthcare services from excellent doctors in world-class facilities. Residents of the city have also enjoyed fantastic job opportunities, with the total individual earnings generated by the healthcare sector tipping the scales at $6.71 billion at the end of 2015. As with any large industry, there are certainly challenges, but healthcare in Philly has a strong pulse. Philadelphia boasts fairly good coverage of primary care physicians, with a recent study finding a ratio of 1,073 adults per primary care physician. Moreover, many of these physicians are associated with one of the many renowned academic medical centers nearby like Penn Medicine, Temple University Health System, Jefferson and more. However, access to healthcare for many racial and ethnic minorities in the city remains an entrenched problem. Rather than the usually cited culprits — i.e. income and insurance coverage — a recent study of Philadelphia neighborhoods indicated a simple, startling truth: many African-American and 110 | Invest: Philadelphia 2019 | HEALTHCARE
Hispanic communities simply lack access to doctors, regardless of other socioeconomic factors. Despite this major challenge, healthcare in Philadelphia is a booming industry that does a lot of good for the city, both in terms of public health and economic outcomes. Performance indicators One measure of the healthcare sector’s performance in Philadelphia is its economic and employment impact on the city. From August 2017 to August 2018, the Greater Philadelphia area saw the largest employment gain in the education and health services industries, adding 20,200 jobs, according to U.S. Bureau of Labor Statistics data. This 3.2 percent growth well outpaced the nationwide increase of 2.1 percent. According to a 2017 survey of the 20 largest hospitals and health systems, healthcare in the city generated a staggering amount of revenue and provides a wealth of jobs, and both figures are likely to continue growing. For example, Jefferson Health generated more than $5 billion in revenue and employs 28,000 people across 13 different hospitals or healthcare facilities. Penn Medicine, which is the massive medical arm ( )
HEALTHCARE INTERVIEW
Building innovation How Independence Blue Cross is focusing on innovation and community health through new partnerships, funding and training programs and policy changes
Daniel Hilferty President & CEO – Independence Blue Cross
How is Independence Blue Cross leading Philadelphia to become an innovation hub? We are one of the main organizations behind the focus on innovation in the region. We have a program through our Independence Center for Health Care Innovation called Dreamit Health, where we fund startup initiatives with the University of Pennsylvania and DreamIt Ventures. This program, which is in its fifth year, has brought dozens of potential companies to Philadelphia. Along with Penn, we give them the data and training they need to think about a startup idea and to develop it into a successful business. Quite a few of them, once they were up and running, stayed right here in Philadelphia, which is exciting for both the program and the region. We’ve been in Philadelphia for 80 years. We are the Blue-branded company here. We do business in 27 states and the District of Columbia; however, through our presence in Philadelphia we’ve come to realize how important it is for us to have a strong focus on innovation. That’s why we launched our partnership with Comcast, which we announced in early 2018. Together, we are exploring how we can best use technology to enhance how consumers access and use healthcare services. I strongly feel that with organizations like ours, Children’s Hospital of Philadelphia, the University of Pennsylvania Health System and all the other incredible universities and healthcare organizations we have, Philadelphia has the ability to become the center of healthcare innovation in this country. As part of my time as chamber chair, I want to build on that realization. How is Independence Blue Cross addressing the opioid crisis? We were one of the first large-scale insurers in the region that looked at the opioid and addiction crisis and said we
need to step in here. Among the many actions we took was restricting first-time, low-dose opioid prescriptions to a five-day supply limit, with an exemption for patients with cancer or terminal illnesses. This policy change resulted in a substantial reduction in opioid use and prescriptions. We also removed as many barriers to helping people with substance abuse get the care they need, such as not requiring prior authorizations for Vivitrol and Suboxone, two of the most common medication-assisted treatments. We also cover methadone. With nearly 100 substance abuse rehabilitation facilities and more than 5,000 behavioral health providers, we have one of the most robust networks for substance abuse treatment. We believe these actions are changing the way healthcare is delivered and will contribute to a healthier community.
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Adrienne Kirby CEO – Cooper University Health Care
Along with cancer care, overall surgical services and cardiac care are two areas that have grown. Over the last few years, we recruited a number of surgeons from prestigious organizations and have been able to improve access to surgical specialists for our patients. In fact, surgical service grew 31 percent from 2012 to 2016 and has grown another 14 percent since 2016. In cardiac services, we developed a cardiac partnership with Inspira Health System that allows us to provide a continuum of care for cardiac patients across the region. Overall, we have seen growth in all our services and an increase in the complexity of the patients we see.
( ) of the University of Pennsylvania, employs 35,273 people across its $6.7 billion healthcare system. Four additional health systems in the region broke $1 billion in annual revenues, with multiple others in the tens or hundreds of millions of dollars. Combined, these top 20 healthcare providers employ 139,824 people. Another indicator of strong growth is the continued expansion of healthcare providers in the region. For example, Penn has unveiled its plans for a $1.5 billion undertaking that it claims will be a “hospital of the future.” Tentatively known as “the Pavilion,” the massive hospital will be located on Penn Medicine’s West Philadelphia campus and should be completed by 2021. Penn officials promise that the hospital will revolutionize the provision of healthcare and set the standard for the next generation of American
medical services. Specifically, the massive 17-story building will house 47 operating rooms and 500 private patient rooms, with the patient rooms being fully adaptable according to the needs of medical professionals and the comfort and care of the patient. The hospital’s operating facilities will also be technologically integrated, allowing for high-tech procedures and telemedicine. Another Penn project, the Center for Healthcare Technology, celebrated its groundbreaking in June 2017. The first phase of the ambitious project includes a 250,000-square-foot, 10-story office building intended to house some of Penn Health System’s corporate organs, including human resources and IT, and will provide a new childcare facility for Penn employees. Phase I will also include the construction
CONSTRUCTION REAL ESTATE OVERVIEW
of an Investigative Drug Services Pharmacy and an expansion of Penn’s Bio Bank Freezer Farm. M&A activity Mergers or acquisitions of healthcare systems are also a good indicator of performance, and the Philadelphia region saw substantial acquisitions in the past year. American Academic Health System purchased Hahnemann University Hospital and St. Christopher’s Hospital for Children from Tenet Healthcare Corp. for $170 million in January 2018. The acquisition comes with shakeups at the chief executive level, including the departure of the CEO, chief medical officer, chief nursing officer and chief business development officer. In March 2018, two of Philadelphia’s most renowned healthcare systems — Einstein Healthcare Network and Thomas Jefferson University — announced their intent to merge, bringing Einstein and Jefferson back under the same name. Einstein Healthcare was formerly part of the Jefferson Health System until the academic medical center decided to branch out on its own in 2008. The merger was finalized in September, when boards from both nonprofits signed a definitive agreement, and at the time of print it was awaiting approval from the attorney general and the Federal Trade Commission. Healthcare policy Beyond its own economic performance, Philadelphia’s healthcare field is also deeply affected by the everevolving field of federal, state and local healthcare policy. 2017 was a particularly eventful year. National health House Republicans passed their version of the American Health Care Act (AHCA) on May 4, 2017. The AHCA aimed to repeal and replace the Affordable Care Act (ACA) passed by President Obama’s administration, as well as defund Planned Parenthood. The Senate responded with its own Better Care Reconciliation Act of 2017 (BCRA), which would replace the text of the House bill if passed. At the time of print, neither the original BCRA nor a pared down version without replacement had passed the Senate, and a clean repeal of the ACA also failed to pass. For now, at least, the AHCA is at a standstill. With Democrats retaking the House in the 2018 midterms, there is a good chance it will stay that way for the foreseeable future. While it has not succeeded in effecting a blanket repeal, the Trump administration has been successful in gradually weakening the ACA. For example, the
Dan Tropeano CEO UnitedHealthcare, Pennsylvania & Delaware
What have been some highlights for you in 2018? Nationally and locally: growth. We continue to grow our presence both locally in the Philadelphia market, nationally across the U.S. and internationally as we expand into places like South America, most recently. Locally, we continue to engage in our mission, which is helping people live healthier lives, and we do that in a lot of ways. One is through offering a full spectrum of health benefit programs for individuals, employers and Medicare and Medicaid beneficiaries. We engage with them from a wellness perspective and from a charitable perspective.This past year, we also began work with Bryn Mawr Hospital and Riddle Hospital on a value-based care program for knee, hip and spine procedures. The program is helping to reduce the number of hospital readmissions and complications after surgery for people in Pennsylvania and nationwide. The program has achieved a 22 percent reduction in hospital readmissions and 17 percent fewer complications for people undergoing knee- and hip-replacement surgeries. How is being located in Philadelphia beneficial? Philadelphia is a meds and eds city, so it puts us at the forefront of medical care and innovation. Innovation is one of our pillars; our culture is focused on integrity, compassion, relationships, innovation and performance. It’s at the heart of our commitment to providing people with a more personalized, convenient, simplified healthcare experience. Philadelphia is a hotbed for innovation and forward thinking, and we partner with a number of local organizations like Penn Medicine and Main Line Health, which gives us access to that innovation and those innovators. It’s these types of collaborations that help to improve healthcare outcomes by addressing patient care and rewarding improvements in that care. Sometimes those of us who live here don’t realize how much cutting-edge work is going on in the medical field right in our own backyard.
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Samuel Menaged Founder and President The Renfrew Center
When I opened The Renfrew Center in 1985, eating disorders were a well-kept secret and specialized treatment facilities were nonexistent. In my work as a practicing healthcare attorney, I consulted frequently with mental health professionals, as well as women who were struggling to recover from the physical and emotional toll of anorexia nervosa and bulimia nervosa. From those conversations, I recognized a need for a treatment facility that addressed the complexity of the underlying issues driving an eating disorder, not just the symptoms. When The Renfrew Center opened its doors in Philadelphia it was the country’s first residential facility exclusively dedicated to the treatment of adolescent girls and women with eating disorders. I had envisioned a home-like environment where women heal through community and empowerment, in stark contrast to most psychiatric and general hospitals. As demands for eating disorders’ services grew, so did Renfrew. Today, Renfrew has facilities throughout the country, both residential and nonresidential. All levels of care are built upon the Renfrew Center Unified Treatment Model for Eating Disorders, and programming consists of: group therapy, family/couples therapy, individual therapy, nutrition counseling, and experiential therapies. From day one I have wanted every adolescent girl and woman to have access to specialized care — no matter their age, race, financial situation, religious affiliation, etc. — and to understand they are not at fault for developing an eating disorder. They have our respect. That is why I have worked tirelessly to partner with insurance providers to allow greater access to treatment. Today, Renfrew accepts more than 430 insurance plans throughout the country and has contracts with hundreds of managed care companies that cover all levels of care. When we deem it necessary, we petition out-of-network carriers for a single case agreement. The Renfrew Center is the only independently, family-owned eating disorder treatment network in the country. We are not, and will never be, a private-pay only facility. 114 | Invest: Philadelphia 2019 | HEALTHCARE
Tax Cuts and Jobs Act, passed in December 2017, repealed the ACA’s tax penalty on individuals who remain uninsured, known as the individual mandate. Although this measure is a relief for healthy, uninsured people who were caught between having to purchase expensive insurance they felt they didn’t need or paying the hefty fine, it could have significant ramifications for healthcare. Young, healthy people are now more likely to forego insurance, which will reduce the pool of people paying premiums to only sick people who will actually file claims, thereby increasing insurance costs. The Trump administration also loosened regulations and allowed insurers to sell cheaper, short-term plans that do not meet the standards of the ACA. This does not repeal the ACA, according to Trump administration officials, but is merely intended to provide additional, affordable options. The short-term plans can last up to 12 months at a time and can be extended for up to three years, up from the ACA’s limit of three months on such plans. Critics of the new rules worry that they will induce healthy individuals to pursue cheaper, non-ACA alternatives that will lead to higher health insurance costs in the long run. Other big moves by the Trump administration include allowing states to impose work requirements on recipients of Medicaid coverage and the unveiling of the American Patients First plan that aims to lower prescription drug prices. The long-term effects of these policies remain to be seen, but in general opponents view them as little more than an attempt to undercut the ACA, while proponents see them as a return to a fairer healthcare market. State matters At the state level, one of the biggest healthcare crises is the opioid epidemic, with more than 2,200 Pennsylvania residents succumbing to opioid overdoses in 2018 — the fourth-highest overdose rate in the entire United States, according to the Centers for Disease Control (CDC). The Pennsylvania Department of Health is working to provide a series of policies and initiatives to combat the further spread of the epidemic, including maintaining an opioid data dashboard that contains information on prevention, rescue and treatment efforts; operating a prescription drug-monitoring program that collects information on all filled prescriptions for controlled substances to ensure the safe prescription of controlled substances; having the secretary of health sign standingorder prescriptions for naloxone, a medication that can reverse opioid overdose; providing a non-opioid directive that patients can use to decline opioids as part
HEALTHCARE OVERVIEW
Jack Lynch President and CEO – Main Line Health
Our communities are looking for access to convenient care that easily intersects with their daily lives. As a provider we are committed to safer, higher-quality, equitable and affordable care. Sometimes access and affordability can bump heads because you can’t put a hospital on every corner. We are trying to make sure we are offering care where it is needed based on the demographics in the area.
of their treatment plan; and publishing prescription guidelines and continuing education for healthcare providers for opioids. Marketplace The health insurance market in Pennsylvania has felt the waves made by changes in federal healthcare policy. While all nine insurers that participated in the federally run Healthcare.gov exchange in 2017 remained in 2018, rates went up dramatically. The 711,000 people enrolled in Pennsylvania’s expanded Medicaid program in 2017 had dropped slightly, to 692,047, by November 2018. The expanded Medicaid program, combined with premium subsidies available in the exchange, provide more than 1 million Pennsylvania residents with healthcare coverage. At the end of 2017, the statewide uninsured rate was 7.3 percent, well below the national average of 12.8 percent. In 2018, only 389,081 Pennsylvanians enrolled in private plans through the exchange, down 9 percent from 426,059 in 2017. Several factors contributed to this dip in enrollment. First, the open enrollment period for 2018 ran only from November 1, 2017, to December 15, 2017 — half as long as in previous years. In addition, part of the Trump administration ACA cutbacks included severe reductions in funding for marketing, outreach and enrollment assistance for the exchange. Finally, there was the announcement that the individual mandate was being repealed, leading many to forego insurance.
On top of flagging enrollment, the Pennsylvania insurance providers participating in the exchange also imposed steep rate hikes in 2018, with an average 31 percent increase. This large rate hike was attributed to the Trump administration’s defunding of cost-sharing reductions (CSR) by the Insurance Department of Pennsylvania. Insurers rely on federal money to defray the expense of CSR, and when that federal money dries up, they are forced to pass the cost on to their insured in the form of rate hikes. Fortunately, things are looking better in 2019. Based on rates filed by insurance providers with the Insurance Department, it appears as though the average rate increase will go down to 4.9 percent. The Insurance Department has credited Governor Wolf’s administration with mitigating the destabilizing effect of CSR de-funding by directing insurers to add the cost of CSR only to on-exchange silver plans in 2018, which protected the greatest number of consumers from increased out-of-pocket costs and prevented a potentially massive decline in exchange enrollment. For businesses, choosing a plan to offer employees can be a major challenge due to the influx of providers and cost. “Right now the market is 11 percent referencebased pricing plans, which is what we do,” Bill Green, CEO of Homestead Smart Health Plans, LLC, told Invest:. “It is predicted that in three to five years, 68 percent of the market share will be reference-based pricing plans. Major providers are starting to come up with plans like the ones we offer because people are
The 711,00 people enrolled in Pennsylvania’s expanded Medicaid program in 2017 had dropped slightly by November 2018.
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starting to realize that there are other ways to offer their employees health benefits.� Cancer Research Philadelphia is home to multiple renowned cancer research institutions, and a tremendous amount of money and talent in the region is dedicated to finally eradicating this disease in all its forms. There are also many cancer research institutions operated independently or by renowned institutions like Penn Medicine, CHOP and Jefferson University Healthcare. All of these organizations conduct research, raise and provide funding and conduct outreach, all with the goal of curing cancer once and for all. American Association for Cancer Research The American Association for Cancer Research (AACR), which celebrated its 110th anniversary in 2017, is an international organization with its headquarters in Philadelphia that fosters research into a cure by spreading the latest knowledge about the causes of, and efforts to eliminate, cancer. The AACR’s efforts include publishing numerous academic journals and magazines, bringing cancer researchers together at scientific conferences and an annual meeting (the latter of which draws more than 21,000 members of the cancer research community), offering fellowships and grants for young researchers and working with cancer survivors to raise public awareness. Fox Chase Cancer Center Another renowned cancer research organization is the Fox Chase Cancer Center, which is affiliated with
Pennsylvania Hospital is the oldest such institution in the country.
Temple Health. Fox Chase was founded in 1926 as one of the four original cancer centers designated comprehensive by the National Cancer Institute. Fox Chase is world renowned for its study of cancer biology, blood cell development and function, cancer epigenetics, molecular therapeutics and cancer prevention and control.
HEALTHCARE INTERVIEW
Advancing care How the University of Pennsylvania Health System is focusing on conditions that affect the largest number of Americans and cultivating a workforce of top talent
Ralph Muller CEO – University of Pennsylvania Health System
form of blindness, are helping the population locally but also nationally and even on a global scale. These developments highlight our ability to innovate at the largest possible scale for maximum impact. Treatment of patients with multiple complex conditions, advanced cardiac care and organ transplantation are some other areas where we excel. We also have an extensive neuroscience program that focuses on Alzheimer’s, Parkinson’s disease and other movement disorders. We also offer a full array of things like physical therapy that we know play a key role in keeping those patients well for as long as possible, as well as a slate of clinical trials exploring new treatments. Those wraparound elements of our program are what set us apart from our peer institutions in the region and nationally.
In what areas of care is University of Pennsylvania Health System a leading institution? We focus a large part of our efforts on the types of conditions that impact the largest number of Americans, such as cancer, heart disease and neurological conditions, and we are leaders in all those areas. In the last two years, the FDA has approved two new breakthrough cell and gene therapy treatments for cancer that were developed here at Penn’s Abramson Cancer Center — including the first CAR T cell therapy, which is eradicating some blood cancers that were previously incurable, including in children. We are the only place in the country that has pushed through the research and development of such novel therapies in such a short span of time. These treatments, including one that restores vision for patients with an inherited 118 | Invest: Philadelphia 2019 | HEALTHCARE
As the country’s first hospital and medical school, how do you maintain those high standards? Every generation is tasked with keeping up the standards set by Benjamin Franklin with the founding of Pennsylvania Hospital in 1751. Our main focus is serving the region within a 100-mile radius of Philadelphia, but we also treat people from all 50 states and across the world. Attracting top talent is one of the main ways we maintain the highest standards of research, care and education. We attract great people because we provide the opportunity to work in a place where translating science into patient care is first and foremost. We are not just a research facility, although that is a large and important part of what we do. We are a place that does research to innovate and improve patient care and the way we train new healthcare providers, so there are ripple effects into every part of our mission. We were proud this year to have been ranked as the sixth best employer and top healthcare employer in the country by Forbes magazine.
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Some specific examples of Fox Chase breakthroughs include the identification of the “Philadelphia chromosome,” the genetic basis for cancer and the impetus for modern targeted leukemia therapy; the discovery of the hepatitis B virus and a corresponding vaccine; and advances in tumor suppression, cellular signaling and radiotherapy. The Wistar Institute The Wistar Institute is yet another world-class cancer research facility founded in Philadelphia in 1892 and was the first independent biomedical research institute in the United States. More than 120 years later, Wistar is at the forefront of cancer and vaccine research, with a special focus on cancer biology, gene expression and epigenetics, immunology, virology and translational research. (See p. 124 for more information.) Public health The Philadelphia Center for Public Health is dedicated to ensuring that all of the city’s residents live happy, healthy lives. This includes developing measures that target youth health, such as partnering with the Mayor’s Office of Education to include health in the Community Schools Initiative, among many others. The Center for Public Health also organized the Food Fit Philly Coalition in 2010 to combat the growing obesity epidemic and promote nutrition. The center also has an AIDS Activities Coordinating Office that funds a variety of programs for preventing and treating HIV and AIDS. These are just a few of the key services offered by the Philadelphia Center for Public Health, which does a great deal to provide services and education to residents to ensure their health. Additionally, AARP continues to advocate for age-inclusive communities. “We work to include stakeholders that will assist us to make the communities in the commonwealth more liveable for people of all ages, but especially those in the 50-andup demographic,” Angela Foreshaw-Rouse, manager of State Operations and Community Outreach for AARP, told Invest:. “We have a focus on spearheading work that fosters innovation surrounding transportation, housing and opportunities for civic engagement.” Medical tourism Medical tourism is a $439 billion industry. 11 million people travel from their homes to other countries for medical treatment each year, and the United States receives between 100,000 and 200,000 visitors for this purpose. With its variety of world-class
Remy Richman VP Executive Director Southeastern Pennsylvania and Delaware Markets Aetna
How does Aetna support small employers? The small employers market is one that, historically, has struggled to find quality – yet affordable – healthcare plan options for their employees. We have developed a program model for small employers that has seen unprecedented growth and support for us in that market and has shown positive outcomes for our small business customers. This group is filled with entrepreneurs and startups, and in Philadelphia these companies are very innovative. We have made this a priority of ours, especially in the shadow of the Affordable Care Act, which left out a lot of small employers when it came to affordable healthcare. What is Aetna doing to help the opioid crisis? As an enterprise we have created a strong and bold national commitment surrounding the opioid crisis. We identified a few high-priority markets where we wanted to make sure had additional investment, but this is a national focus for us. Part of our commitment is that we as an organization are working to help reverse this trend by encouraging reductions in inappropriate opioid prescribing and supporting increased access to non-opioid pain treatment options. Our comprehensive strategy aims to connect providers and give members access to the right support—mind and body—to fight addiction. We have developed a variety of services and outreach programs to be able to do this over the next five years. Because we are an integrated company, we have access to the analytics on a whole host of data. In March 2018 Aetna made a $1 million grant to the Pennsylvania Department of Health to turbocharge the state’s innovative opioid dashboard. The tool will give responders new evidence to inform their decisions, serve as a cross-sector bridge and facilitate a collaborative response to the opioid crisis in the state.
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Rachael Bushey Partner – Pepper Hamilton LLP
Our Health Sciences Department takes an integrated approach to client service. Unlike traditional law firm groups, which are broken down by a type of law, our team is cross-discipline. In our department, we bring together lawyers who handle life sciences transactions, healthcare transactions, IP, white collar, litigation, regulatory matters, and everything in between. There are significant benefits to clients of having all these lawyers working together in one group.
medical facilities staffed by highly skilled healthcare providers, Philadelphia is an obvious destination. In fact, more than 5,000 international medical tourists flock to Philadelphia each year to take advantage of its unparalleled medical services. On top of the amount of revenue these travelers generate for Philadelphia’s healthcare industry, they and their families also contribute to general tourism revenue. “Philadelphia is a medical mecca,” Teddy Thomas, president and executive director of the Ronald McDonald House of Southern New Jersey, told Invest:. “There are a number of great medical schools, as well as fabulous hospitals. Over the whole Delaware Valley, we have so many amazing hospitals clustered together, more so than other parts of the country. They all have their specialties, which attracts people from all over.”
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Philadelphia International Medicine (PIM) connects patients from around the world to doctors and specialists at seven world-class Philadelphiaarea medical centers, including Temple, Fox Chase Cancer Center and Jefferson. It attracts clients from 50 countries, 70 percent of which are in the Middle East. Patients travel to Philadelphia to access more than 100 specialties and subspecialties, including everything from lung and bone-marrow transplants to cancer treatment and neuroscience. “There are challenges to working on an international scale to help people connect to the right treatment,” Leonard Karp, CEO of PIM, told Invest:. “You can’t control a global environment. Global events like 9/11 or the outbreak of avian flu changed the way we had to do business because of the markets we were targeting and the way global travel was affected. You are not always in ( )
HEALTHCARE INTERVIEW
Addressing needs How the Children’s Hospital of Philadelphia is providng aid to children living in poverty and supporting community health through diverse partnerships and programming
Madeline Bell President & CEO – Children’s Hospital of Philadelphia (CHOP) What are some unique challenges and opportunities facing the healthcare sector in Philadelphia? Poverty is a major problem in our city. Philadelphia is the poorest big city in the U.S., and 37 percent of the city’s children live below the poverty line. Many of these children have difficulty accessing basic necessities, like food, shelter and healthcare, and addressing these disparities is one of our most important responsibilities and biggest challenges. We offer many programs that are making a real difference for needy children and families in our community, and our researchers are studying the impact blight, hunger and other concerns have on families and developing evidence-based solutions to keep our most vulnerable children safe and healthy. For example, to help children who are experiencing food insecurity, we recently opened a pediatric food pharmacy — the first food bank in the country based at a pediatric hospital. We are also partnering with Penn Medicine, Jefferson Health, Einstein Healthcare Network, Temple University Health System, Holy Redeemer Health System and Mercy Health on (Collaborative Opportunities to Advance Community Health), which leverages each health system’s expertise to address children’s unmet health needs. How does CHOP’s longstanding history in the city benefit patients and the community? CHOP was founded in 1855, so our roots in this community run very deep. Over the years, we’ve formed strong relationships with many local organizations that share our values, including WaWa, which has been supporting CHOP for more than 160 years. And we’ve been able to build on our relationship with the City of Philadelphia to make many meaningful contributions to children’s health. In 2016, we collaborated with the city to open the South Philadelphia Community Health and Literacy
Center, which provides healthcare, literacy and wellness programming for children and adults under one roof. More than 14,000 children rely on the center for medical care, and we’re exploring new opportunities to leverage the center’s resources to meet the community’s needs. CHOP currently has more than 100 community programs, including the Homeless Health Initiative, which offers medical screenings to children living in shelters, and the Community Asthma Prevention Program (CAPP), which offers education and support for children with asthma. CAPP also partners with other organizations to provide home repairs for families living in unhealthy housing conditions. Another program, Complete Eats, distributed more than 7,400 free meals to patients and their family members last summer at three CHOP locations.
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( ) charge. We service the world, but we are not in charge of it. However, we believe it is important that people from around the world have access to the healthcare leaders in this city, so we adapt to these challenges and continue to serve the world.” Startup activity There is a lot of talk about Philadelphia’s potential to be the Silicon Valley of healthcare (or “Cellicon” Valley), and there seems to be ample evidence to back up this talk. Philadelphia is home to the headquarters of giants like Siemens Healthcare, Independence Blue Cross and Teva Pharmaceuticals. In addition, the presence of Drexel, Penn and several other prestigious universities adds to the area’s brain gain in the medical technology field. Adding on to what is already here, several high-profile investments and funding sources make Philadelphia a great place for tech startups. From Dreamit Health Philadelphia, to the University City Science Center’s Digital Health Accelerator program, to massive investments by Independence Blue Cross, there is no shortage of opportunity for healthcare tech startups like payments network InstaMed in the City of Brotherly Love. A few of the many exciting tech startups that have taken root in Philadelphia to bring better health to the city and the world include Centrak, which produces tools that make healthcare facilities safer and more efficient using real-time tracking of staff, patients and other assets; CPR Connect, which has
developed wearable technology that can reduce emergency response times and thereby improve victims’ chances of survival; Oncora Medical, which employs machine learning to personalize oncology treatments; and NeuroFlow, which analyzes biometric data in real time in order to measure psychological stress objectively. Again, this is just a small taste of the sort of startup ingenuity that Philadelphia is inspiring and supporting.
Philadelphia is home to the headquarters of giants like Siemens Healthcare, Independence Blue Cross and Teva Pharmaceuticals.
Looking ahead If you ask the locals, both longtime residents and newcomers, they’ll tell you that Philadelphia is on the up-and-up. Young, educated, talented people are flocking to the city in pursuit of well-paying jobs in an area with all of the bigcity amenities you could ask for at a far more manageable cost of living than New York or San Francisco. Others are going to one of the excellent schools in the area and settling in after graduation. Many of these skilled millennials will bolster the city’s already formidable healthcare sector, which will continue to grow for the foreseeable future as investments and funding continue to pour in. Of course, the healthcare field is changing rapidly, with massive overhauls being undertaken by the last two presidential administrations that both significantly affected the insurance market. As healthcare tweaks are expected to continue, anyone interested in healthcare will want to keep a close eye on future developments.
Nancy Hesse President & CEO – Cancer Treatment Centers of America®, Philadelphia
Over the next 12 to 18 months, one of our big focus points will be to bring care closer to the patient’s home. When managing cancer, patients don’t want to have to go out of their way for care. With the rise of telehealth we are hoping to diversify our use of that technology to be able to provide more treatment options closer to home at the comfort of the patient.
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Life Sciences & Biotechnology: The Greater Philadelphia area has become a hotbed for research and innovation in the life sciences sector, winning the region the nickname “Cellicon Valley.� From cell and gene therapy to the production of NARCAN, the Greater Philadelphia area is attracting researchers and startups from across the globe to contribute to this booming industry.
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Cellicon Valley: Life sciences and biotechnology are quickly becoming major economic drivers for the Greater Philadelphia region Life sciences refers to a cluster of several industries, including the pharmaceutical, biotechnology, medical devices, diagnostics and health IT industries, as well as academic research. This exciting amalgamation of health-focused sectors provided an economic impact of $88.5 billion for Pennsylvania in 2016 and an economic output of $24.6 billion for the Greater Philadelphia region between 2011 and 2016. In addition to this massive financial output, another $6.3 billion was invested in life sciences companies throughout the region during the same period. Companies like Adapt Pharma, Adaptimmune and Tmunity help to keep Philadelphia on the cutting edge of the life sciences industry. Cellicon Valley Greater Philadelphia’s remarkably advantageous location sits within a one-day drive of 40 percent of the U.S. population, and a less than two-hour train ride from both Washington, D.C., and New York City. Today, more than 80 percent of all companies in the life sciences industry have a presence in the region. Included are six renowned medical schools 124 | Invest: Philadelphia 2019 | LIFE SCIENCES & BIOTECHNOLOGY
and countless other life sciences research and education institutions. “There are more than 2,800 life sciences companies in Pennsylvania, which is the most there has ever been,” Chris Molineaux, president and CEO of Life Sciences PA, told Invest:. “The life sciences sector directly employs more than 112,000 Pennsylvanians. The ripple multiplier effect — jobs that support the industry — brings employment up to about half a million. This is an incredibly large industry for the commonwealth.” Growing industry One prominent indicator of growth in Philadelphia’s life sciences industry in 2017 was the decision by Chinese biotechnology company KBP Biosciences to relocate its global headquarters closer to the Greater Philadelphia area. To prepare for the move, KBP raised approximately $76 million in Series A venture capital financing from investors across the globe. KBP has also hired a new CEO — Brian McVeigh, former vice president of worldwide business development at GlaxoSmithKline — to sit at the helm of its new
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Princeton, New Jersey, headquarters, which is roughly equidistant from New York and Philadelphia. KBP is well aware of the wealth of life sciences talent in the region, and the decision to relocate here was made with that consideration in mind. Another big happening in the region is the acquisition of Cleveland-based pre-clinical contract research organization (CRO) Concord Biosciences by Frontage Laboratories, Inc., which is headquartered in Exton, Pennsylvania. Concord was primarily in the business of supporting the pharmaceutical, agricultural, chemical and animal health industries, and its acquisition brings considerable agrochemical expertise to Frontage. As Frontage continues to grow its reach and its catalogue of services (which already spans from the discovery stage through late-stage development) it will continue to provide a financial impact for Exton and the rest of Greater Philadelphia. In addition to the growth of specific life sciences companies in the area, there are some other exciting indicators of the sector’s growth. For example, Jones Lang LaSalle’s 2017 Life Sciences Outlook report put Philadelphia in the number five spot out of the 15 top metropolitan areas for life sciences in the United States and Canada. This represents an improvement for the city over the previous year’s report, in which it ranked number seven. Major contributors to Philadelphia’s climb in the rankings include the constant growth of lab space and the more than $900 million in National Institute of Health (NIH) funding for 2016. Moreover, the industry receives a steady influx of talent thanks to the many reputable institutions of higher education in the region that continue to produce a growing number of graduates, as well as the educated millennials who continue to move into the area thanks to its combination of job opportunities, affordable living and big-city style. Philadelphia boasted a 30 percent growth in its bachelor’s degreeholding population between 2010 and 2015, which is better than the rest of the nation’s 10 biggest cities. 400,000 of those students graduated into the life sciences industry and its supporting sectors. Another important barometer for the health of Philadelphia’s life sciences industry is its impact on the regional real estate market. Greater Philadelphia contains more than 11 million square feet of life sciences space, and an incredible 98 percent of that is already occupied by long-term tenants. The region’s nearly nonexistent vacancy rate is a clear indication that life sciences real estate is hot and that additional
David Payne Vice President Infectious Disease GSK
As a global company, what are the benefits of having a headquarters in Philadelphia? It has been wonderful for us to watch the growth of biotech and life sciences industry in the area. The innovation and the number of companies that are represented here is amazing, especially in the cell and gene therapy space. The term “Cellicon Valley” has been used to describe this region, and I think that is very fitting. There is some real dedicated expertise here. Now that we have established our U.S. research and development (R&D) hub in the Philadelphia area, we look forward to further contributing to this local innovation ecosystem. We conduct collaborations with innovators all over the world, and we are now hopeful of creating more collaborations locally, which is much more efficient for our R&D and our pipeline. What innovations are coming out of GSK? GSK has a new strategy for research and development that aims to capitalize on the assets we have in our promising pipeline and to build the next wave of growth, in part through a new strategic relationship with the human genetics company 23andMe. At the core of this approach is science related to the immune system, the use of genetics and advanced analytics. This combination of science and technology will generate new insights to direct our focus, improve our probability of success and, most importantly, bring new medicines to patients. This approach will guide our efforts in areas that have traditionally been strengths for our company — like respiratory, HIV and infectious diseases — but also in areas that are already emerging, such as oncology, where we are rapidly progressing unique experimental treatments. From a GSK standpoint, we are looking to become more integrated in the local innovation environment and better understand the potential collaborations that could create innovative medicines for patients. This is such an exciting time for research and development in the region.
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Adrian Rawcliffe CFO – Adaptimmune
We have grown dramatically in the region. We opened our facility at the Navy Yard a little over a year ago and subsequently started manufacturing here. This process has been enabled by the depth of the employee base and talent pool here in the Philadelphia region. We are a global leader in T-cell therapy, and there is a high concentration of other leading gene and cell therapy companies in the region as well. Combine that with the developmental expertise here, and Philadelphia is very powerful in this space right now.
development is necessary as new and existing companies seek to expand in the region. Finally, access to precious funding helps to make the region a destination for those seeking to make a splash in life sciences. Investment in initiatives like Pennovation, DreamIt Health Ventures and the Health Care Innovation Collaborative have increased access to the more than $389 million in funding available in the region in 2016. The Wistar Institute The Wistar Institute was founded in 1892 and was the first independent biomedical research institute in the United States. More than 120 years later, Wistar is at the forefront of cancer and vaccine research, with a special focus on cancer biology, gene expression and epigenetics, immunology, virology and translational research. Another exciting avenue of research at Wistar is the advancement of DNAbased technologies, such as DNA vaccines and DNAencoded monoclonal antibodies. These technologies introduce into the body the necessary genetic instructions to combat infections like Zika and offer the potential for a safe, effective, affordable approach to disease prevention for people the world over. Wistar actively engages in partnerships and initiatives to promote the development of promising new treatments and also uses its internal Wistar Science Discovery Fund to overcome early stage funding issues for life science startups (four of which Wistar has helped launch).
One specific Wistar Institute initiative from the last year that is worth noting is its partnership with Chinese biopharmaceutical firm Harbour BioMed, with the goal of discovering antibodies that could treat cancer and other infectious diseases. The partnership capitalizes on Wistar’s unparalleled skill with research in the fields of cancer biology and immunology and Harbour BioMed’s expertise in generating human monoclonal antibodies against unique targets. The overarching purpose of the partnership is to combine the resources of academia and industry to help advance promising therapeutic solutions through clinical development.
In 2018, Penn Medicine received a $2 million donation from the Blavatnik Family Foundation to benefit biomedical research.
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Biomedical research There have been many exciting announcements in investment and partnerships in biomedical research over the past few years. For example, in 2018, Penn Medicine received a $2 million donation from the Blavatnik Family Foundation that aims to benefit graduate students at the Perelman School of Medicine who are performing biomedical research. For the next four years, the donation will defray one year of tuition and other education-related expenses, as well as provide a living stipend, for six students in the Biomedical Graduate Studies program each year. More funding for research at Penn in 2018 came in the form of the Hartwell Individual Biomedical Research Award to Shinjae Chung, an assistant professor of neuroscience at the Perelman School of Medicine. The Hartwell Award is intended to provide financial support
LIFE SCIENCES & BIOTECHNOLOGY OVERVIEW
for early stage biomedical research that has the potential to benefit children. Dr. Chung’s research deals with the neural circuits that affect sleep, with a particular focus on problems among children with autism spectrum disorder (ASD) around falling asleep and staying asleep for reasonable durations. Dr. Chung will receive $100,000 in funding for the direct costs of her research per year for three years from the Hartwell Award. Finally, another exciting partnership was initiated in 2017 between the Wistar Institute, the Pennsylvania Department of Labor and Industry and the Community College of Philadelphia. The Department provided Wistar with $200,000 to develop a private apprenticeship program to train biomedical research lab technicians. The exciting new program will allow passionate young lab techs learn how to do their jobs through hands-on experience, while actually getting paid. Biotech Like biomedical research, biotech has also experienced some head-turning funding and startup news this year. First, Pennovation, the tech transfer hub operated by the University of Pennsylvania, welcomed two new biotech startup tenants. One is Biorealize, the developer of a desktop bioprototyping platform, and ZSX Medical, the makers of a medical device with a focus on minimally invasive surgery. The Pennovation center is there to provide resources and facilities that these companies need to bring their products — which aim to improve people’s health and lives — to the public. Penn is also planning to contribute $50 million to an initiative intended to help keep Philadelphia life sciences innovators in Philadelphia. The three-year investment program will target 10 Philadelphia biotech companies with the goal of convincing them to keep doing good work at home rather than fleeing to San Francisco, Boston or New York, the cities where many biotech companies go in search of capital. This will be accomplished by helping companies in the program make new treatments available to patients quickly and safely, support Penn faculty initiatives and diversify Penn’s research to receive more private funding. There might even be opportunities for manufacturing support and software services to expedite production. Recipients of funding must commit to keeping their headquarters in Philadelphia. Immunology and immunotherapy One particular realm of life sciences where Philadelphia is leading the way is immunotherapy
Dr. Dario Altieri CEO The Wistar Institute
The Wistar Institute has been a fabric of the local community for more than 126 years. We were the nation’s first biomedical institute, so we have been a part of Philadelphia’s infrastructure, as well as the industry’s, for a very long time. Cancer and vaccine immunology are the two main themes of research that Wistar scientists conduct. In the vein of vaccine immunology, the preliminary clinical trial of a new Zika vaccine was developed here. Usually it takes five to 10 years to develop a vaccine and bring it to trial, but this Zika vaccine was developed and taken to trial in eight months. We have a long history of vaccine immunology. Some vaccines that are currently in clinical practice, such as rubella and rotavirus, were developed here. Philadelphia is a city of firsts, and we have a few of those firsts in the life sciences and biomedical research industries. We are not a degree-granting institution, but we are very committed to education and training of the next generation of biomedical researchers. We do this by forming partnerships with higher education institutions like the University of Pennsylvania, Drexel University, the University of the Sciences, and the Community College of Pennsylvania. Our partnership with the Community College of Pennsylvania (CCP) has been around for more than 20 years and our Biomedical Technician Training Program is one that has become very important to the life sciences industry in Philadelphia. BTT students do a two-year program with us, just in the summer, and learn how to be lab technicians. Laboratory technicians are a crucial component of research labs, and through this program they become well versed in technical and important skills. We have expansion the BTT Program to offer a Biomedical Research Technician Apprenticeship (BRT). It is the first-ever registered, nontraditional apprenticeship program for biomedical research in the U.S., supported by the Pennsylvania Department of Labor and Industry. This program is important to us because it isn’t just about training, but also job creation in the life sciences.
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Mike Kelly President of U.S. Operations Adapt Pharma
How is Adapt Pharma combating the opioid epidemic in the region? We have seen an evolution in the heightened awareness of the opioid epidemic over the past year. The way people are looking at the epidemic is changing. It is slowly becoming destigmatized. We hope we are part of the reason for that in some way. Awareness is incredibly important to us. In the Greater Philadelphia region, our first Narcan Nasal Spray consumers were the Delaware County Police Department. They adopted the product and brought it to the streets. Delaware County has a high level of opioid overdoses, especially in this region, so the impact of Narcan was immediate. They were able to save many lives and reverse many overdoses in a short period of time. What strategies are you finding most effective? We know how to get a pharmaceutical product to people who might not typically be purchasers of pharmaceutical products. We work hand in hand with the Delaware County Police Department to educate police departments across the country on how to bring Narcan into their communities and start programs to educate people on the product and its effects. We have created a roll call video for police officers to help educate them. We do not create these programs directly, but we are involved in the education process. What notable trends are you seeing? We are seeing two trends occurring right now. The first is that we are helping to make non-EMS people first responders. Anyone can walk into a pharmacy in Pennsylvania, due to a statewide standing order, and get a prescription and purchase Narcan. This means that caregivers and family members of people who have opioid addictions and are prescribed opioids can be the first line of help if someone overdoses. This has been paramount in the success of Narcan and the adoption of the product.
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and immunology. With biotech companies like Spark Therapeutics calling the city home and innovative research going on at pharmaceutical companies like GSK and at the Children’s Hospital of Philadelphia (CHOP), when it comes to cell and gene therapies Philadelphia is the place to be for both research and procedures. Dr. Carl June, a pioneer immunologist and professor at the Perelman School of Medicine at the University of Pennsylvania, has spearheaded groundbreaking research in the field. His research in T-cell therapy led to the first FDA-approved gene therapy to treat cancer. In November 2018, CHOP announced the opening of its “gene therapy factory.” The $75 million underground laboratory at the hospital’s University City campus will increase the clinical trial products available at the hospital, which has put together products for hundreds of patients in 30 clinical trials since 2008. Actual manufacturing of the clinical trial products will happen in the lab, and currently there is nothing like it in the country. Spark Therapeutics is a Philadelphia-based biotech startup that came out of CHOP in 2013. Founded by Katherine High and Jeffrey Marrazzo, the company works to commercially develop treatments against haemophilia, which High was working on at CHOP. Spark currently has three products in various stages of approval. Voretigene neparvovec, commercially marketed as Luxturna, is an FDA-approved gene therapy that treats the rare genetic eye disease Luber’s congenital amaurosis. Bright future Big things are happening in Philadelphia’s life sciences scene. The industry is so hot that there’s barely enough room for all the companies directly and indirectly involved in the sector. The fact that 98 percent of the 11 million square feet of life sciences real estate is occupied means that more space needs to be developed — and will be — meaning there will be tremendous opportunities for investment and for companies to get into some great new spaces. Unlike real estate, there is no shortage of skilled life sciences talent in Philadelphia, thanks to its world-class research universities and the steady influx of highly educated millennials. Finally, the record sums of funding received by the life sciences industry and its supporting sectors from traditional public sources and newer private sources of funding clearly show that the life sciences market in Philadelphia won’t be cooling down any time soon.
Manufacturing, Trade & Logistics: Philadelphia’s economy used to be powered by the manufacturing industry, but over the past few decades that industry has left, leaving space for new industries to emerge. However, some manufacturing still takes place in the region, and many companies are headquartered in the region even if they don’t produce here. Philadelphia’s long-standing port system was one of the main reasons manufacturing has been so successful and its trade and logistics industry is still thriving today.
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Ports and plants: Philadelphia was the nation’s first industrial center, and its manufacturing heritage has helped turn it into a modern-day logistics hub Philadelphia is a city where history and the future merge. The cobblestone streets of Old City, where Ben Franklin once strolled, are mere blocks from the towering Center City skyscrapers that house Fortune 500 companies like Comcast, Dupont and Aramark. It is a city where local traditions continue to be honored even as new industrial and scientific undertakings bask in the spotlight. Part of Philadelphia’s storied history is its trade manufacturing heritage, which has helped it to blossom into a vibrant logistics hub. Location, location, location Philadelphia seemed destined to become a hotspot for manufacturing and trade. The city is only a few hours from several major east coast commercial centers, a strategic location that allows employers and employees alike to be close to the action while sparing them much of the expense and hassle. The Port of Philadelphia (PhilaPort) facilitated $26.96 billion in trade in 2017 and $2.33 billion in June 2018 alone. For air-shipping needs, the Philadelphia International Airport offers flights to 86 domestic destinations and 39 international locations that include all significant business hubs in Europe. 130 | Invest: Philadelphia 2019 | MANUFACTURING, TRADE & LOGISTICS
Of course, Philadelphia’s greatest asset is its people. The city boasts the third-largest residential downtown area in the country and is home to 6.1 million people. This amounts to a formidable labor pool of 2.9 million people across a diverse range of industries, including aerospace, electronics, chemicals, engineering and apparel. With its unprecedented level of access and thriving population, it’s no wonder the city is the eighth-largest U.S. economy with an annual GDP of more than $410 billion. However, with a large and diverse population comes a diversity of tastes, which requires companies to adapt their products accordingly. “The city of Philadelphia is a city of distinct neighborhoods,” Jim Conway, co-owner of Mister Softee, told Invest:. “Many of the neighborhoods from South Philadelphia to Northeast Philadelphia are entirely different from one another. Cultures and ways of life differ greatly. This makes Philadelphia very unique and also makes the taste preferences in Philadelphia different from say, New York. Philadelphia seems to prefer a lighter, sweeter product whereas in New York they seem to prefer a heavier, more custard-like product.”
MANUFACTURING, TRADE & LOGISTICS OVERVIEW
Global trade The last few years have been fairly eventful across the board, and this has touched international trade, as well. One of the most salient shifts in international trade policy was the Trump administration’s decision to withdraw the U.S. from the Trans-Pacific Partnership (TPP). The TPP is a free trade agreement among countries bordering the Pacific Ocean, including Japan, Malaysia, Vietnam, Australia, Singapore, Brunei, New Zealand, Canada, Mexico, Peru, Chile and, formerly, the United States. With the U.S., the TPP would account for nearly 40 percent of global economic output. Shortly after President Trump took office, he began to publicly criticize the deal and ultimately pulled the U.S. out, citing an unfair balance of economic advantages among member countries. The other member countries continued negotiations and arrived at a deal called the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), a free trade agreement covering a market of over 500 million people that no longer includes the U.S. Many experts believe that the U.S. withdrawal from the TPP will make it more expensive and difficult to engage in trade with the large bloc of CPTPP members, which is bad news for a commercial hub like Philadelphia. In spite of this, however, Philadelphia’s international trade continued to soar long after the TPP news broke. At the end of December 2017, the city reported a 7.46 percent increase — from $69.61 billion to $74.8 billion — over its performance in 2016.
For now, China remains the city’s top trading partner. It is important to note, however, that the CPTPP is not set to be ratified until early in 2019, so its effect on Philadelphia might not be felt until then. Philadelphia has global trade resources available to the industry, as well. The World Trade Center (WTC) of Greater Philadelphia works to accelerate global business growth for companies located in the region. One notable success story was the role WTC played in bringing Bassett’s ice cream successfully to numerous Asian markets. Tariff wars Philadelphia, like other American trading centers, is expected to feel the impact of national trade policies. In addition to the U.S. withdrawal from the TPP, another policy making waves in the manufacturing and trade sectors is the passage of new tariffs on steel and aluminum imports from other countries. As of June 1, 2018, steel and aluminum imported from the European Union, Canada and Mexico are subject to a 25 percent and 10 percent tariff, respectively. Tariffs on Chinese steel and aluminum went into effect a little later, on July 6, 2018. The responses to the tariffs from the countries targeted by them were swift and negative. The European Union filed a World Trade Organization challenge against the U.S. the same day the tariffs went into effect and also enacted retaliatory tariffs on over 180 different U.S. goods with a combined value of about $3 billion. Canada, Mexico and China ( )
Philadelphia, like other American trading centers, is expected to feel the impact of national trade policies.
Linda Gillis President – World Trade Association of Philadelphia
The port of Philadelphia recorded record-breaking numbers last year, and total tonnage was up 10 percent over 2016. There was close to 6.9 million in tonnage, which is a new historic number for the port of Philadelphia. Cocoa beans are a major commodity that comes through the port of Philadelphia, and the percentage of cocoa beans coming through last year grew 45 percent. We are seeing a lot of maritime activity in Philadelphia, which is very exciting. To see this type of growth is really amazing.
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MANUFACTURING, TRADE & LOGISTICS INTERVIEW
Smart investment How the commonwealth’s investment in the port’s infrastructure and PhilaPort’s commitment to sustainability is keeping trade strong in Philadelphia
Jeffrey Theobald Executive Director and CEO – PhilaPort
the U.S. East Coast with 19 percent growth in 2017, and we’re already up 8 to 9 percent from that this year. We’re very happy with the operation, and a lot of that is due to the labor side. We have a great labor atmosphere here in Philadelphia.
What were some highlights for PhilaPort in 2018? We were fortunate enough for Governor Wolf to allocate $300 million to the port infrastructure, which was very much needed. There hasn’t been that kind of infrastructure investment at this port in a long time. We also celebrated the arrival of the first two of five super post-Panamax cranes in March. They cost about $12 to $13 million per crane, and we’re simultaneously rebuilding the whole berth to accommodate them. From a cargo standpoint, it’s a two- to three-year project. We’ve seen dramatic growth in volumes already — showing improvements being made through the investment are already making an impact. It’s a changed world and a new brand for Philadelphia. We had record volumes on the container side, leading 132 | Invest: Philadelphia 2019 | MANUFACTURING, TRADE & LOGISTICS
How is PhilaPort contributing to the city’s sustainability goals? As we build Packer Terminal, we’re creating the infrastructure to allow for ships to plug in rather than using onboard generation for power in port, known as cold ironing. That conduit is being laid as we do the construction. The new cranes are electric, not diesel, like older cranes. We do have a few older, diesel cranes at the terminals, which we will be converting to electric. We’ve also applied for several grants to do some prototyping on electric tractors to switch them from diesel. PhilaPort, through the Mid-Atlantic Regional Air Management Association (MARAMA) and U.S. Environmental Protection Agency (EPA), promotes the Dray Truck Replacement Program to reduce air pollution and greenhouse gases. Dray truck owners serving the ports in Pennsylvania and Delaware can apply for up to $30,000 towards the purchase of a newer vehicle with model year 2012 or newer engine. Additionally, we are working with local stakeholders to identify short-term and long-term goals that can be benchmarked. The industry is moving to low-sulfur diesel in 2020, meaning the emissions coming out of the stacks will be more environmentally friendly. It is important to remember, compared to other methods of transport, by ship is still the most efficient and environmentally friendly way to move your cargo directly to market.
MANUFACTURING, TRADE & LOGISTICS OVERVIEW
( ) implemented similar retaliatory tariffs designed to match the dollar value of the tariffs imposed by the U.S. The tariffs have proven to be incredibly polarizing back home, too, with many in Washington decrying them as harmful for American workers, while manufacturing veterans see them as a much-needed step toward leveling the international playing field for American factories. On the one hand, there are legitimate fears that the tariffs will push prices even further beyond the reach of American consumers and promote retaliatory tariffs on our exports, some of which has already come to pass. On the other hand, many industry veterans believe that the taxes will revive the country’s decimated steel and aluminum industries and stoke the economy. The tariffs could potentially affect the Philadelphia region in a number of ways. First, farmers in southeastern Pennsylvania are expressing concern about the profitability of their crops in the wake of retaliatory tariffs imposed by our trading partners, especially China’s promised tariff on U.S. soybeans. Philadelphia is home to a fairly substantial steel industry, and expectations about the effect of the tariffs on steel manufacturing here are similar to those in the rest of the country. Philadelphia’s burgeoning solar power industry is not expected to be heavily impacted by proposed tariffs on imported solar panels since most projects in the region are more small scale and residential, requiring only a few panels. While the outlook for Philadelphia in the wake of the tariff announcement is not particularly grim, area businesses and investors will surely be keeping a close eye on things as the situation continues to develop.
and blue-collar employees in the plan. The governor’s administration has already carried out an overhaul of the state’s overtime rules that has resulted in a wage increase for nearly a half million middle- and working-class workers. The plan also includes the more than $1 million Manufacturing PA initiative, which will provide eight training programs for highpaying manufacturing jobs. Moreover, state funding for the Shell Cracker Plant in western Pennsylvania and PhilaPort in Philadelphia is expected to generate a total of 15,000 jobs. Finally, the plan incentivizes businesses to move into the state by eliminating the capital stock and franchise taxes. In Philadelphia specifically, Mayor Kenney’s Fueling Philadelphia’s Talent Engine initiative is an ambitious workforce development strategy geared toward aligning workforce education with the needs of local industries. The strategy is executed by the new Office of Workforce Development, which will work with businesses and workers to help bridge the gap between them and develop a workforce in Philadelphia with all of the skills employees are looking for, as well as a group of model employers for whom people will want to work. This focus on practical education and training is expected to make Philadelphia’s labor pool even more valuable than it already is. The upshot of both of these plans is that Philadelphia is going to be more attractive as a manufacturing and logistics hub than ever before. The already bustling PhilaPort is receiving more funding, the city’s worldclass workforce will be even better trained and more desirable and worker-friendly initiatives statewide are making Pennsylvania a more attractive place for people who want good jobs for good pay.
PhilaPort is a thriving trade center, with $26.96 billion in trade to countries all over the world in 2017.
City and commonwealth support One of the biggest drivers of Philadelphia’s performance as a center of manufacturing and trade is the commitment of the commonwealth and local governments to expanding this sector. Governor Tom Wolf and Philadelphia’s mayor, Jim Kenney, have both announced comprehensive plans to grow industry and manufacturing in their respective jurisdictions. Governor Wolf’s Action Plan for Pennsylvania includes a promise to grow jobs and support workers, and it makes sure to include high-tech, manufacturing
By sea An internationally recognized port is a key asset for a city aspiring to be a global logistics hub, and this point is not lost on stakeholders in Philadelphia. PhilaPort is already a thriving trade center, with $26.96 billion in trade to countries all over the world in 2017. PhilaPort was on track to beat 2017’s total, with $22.04 billion in trade already passing through the port as of September 2018. The port’s biggest trading partners are Australia (with 8.2 percent of total trade), Saudi Arabia (8.2
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percent), South Korea (7.3 percent), Germany (7.1 percent), New Zealand (5.8 percent), Chile (5.4 percent), Brazil (4.2 percent), the United Kingdom (4.0 percent) and the Netherlands (3.2 percent). Of course, there is always room for positive change. One obvious example of this is the port’s name. In 2017, the port dumped the cumbersome moniker of “Philadelphia Regional Port Authority” in favor of the catchier PhilaPort with hopes of increasing brand recognition in international trade. This was a smart move, since the Delaware River is full of ports with names like DRPA (Delaware River Port Authority) and DRBA (Delaware River and Bay Authority). PhilaPort is now distinguished from the alphabet soup of its nearest competitors. Another important development for the port is the injection of funding it is set to receive under the ambitious Action Plan for Pennsylvania. On November 22, 2016, Governor Wolf announced the provision of $300 million to the port to fix ship berths, buy cranes, update warehouses and double cargo-handling space. Not only will this funding update and improve the port’s capabilities, but it will also create many jobs.
Yet another critical improvement is under way in the form of the deepening of a 103-mile stretch of the Delaware River channel. The massive undertaking will deepen the channel from 40 feet to 45 feet, which will allow it to accommodate larger ships and enhance PhilaPort’s viability for international trade. The project has a projected completion date of December 2018, which means more and larger ships will have access to PhilaPort in 2019. “The dredging of the Delaware was a game changer for Philadelphia’s port system,” Larry Antonucci, president of 721 Logistics, told Invest:. “It is not 100 percent done, but it’s close. The dredging and the $300 million investment in the port’s infrastructure has already made a tremendous difference in the size of vessel we can handle. Larger ships, larger cranes, outstanding labor/ labor relations and constantly improving technology will not only keep us competitive in our specialties but also make us a viable option for freight that has traditionally discharged in the Ports of New York and New Jersey. We haven’t reached our full potential as a port yet, but the growth and momentum is there, and it is starting to come together.”
MANUFACTURING, TRADE & LOGISTICS OVERVIEW
Mark Nikolich CEO – Braskem
The I-95 corridor is a huge advantage for us, as well as other companies in the city of Philadelphia. Accessibility is a huge asset to Philadelphia. The size and capabilities of the city are amazing. There is a history of chemical and pharma companies in the area, which bodes well for companies that want to come and develop here. Having a sector base already established is a viable asset. We could have placed our headquarters in Texas, where a lot of our competitors are located, but Philadelphia has so much to offer, especially when you are a new brand like we were when we first opened here.
All of these massive improvements, in addition to the fresh leadership of new CEO Jeff Theobald, make it clear that PhilaPort is on the cusp of enormous growth. It has already seen a 6.74 percent increase in trade over 2017 and that is before completion of the Delaware River dredging project or any of the improvements being funded by the state. Once these projects are done, PhilaPort will be a sophisticated member of the increasingly global trade network, and this will mean more jobs and trade for the City of Philadelphia.
Tech-savvy In April 2018, Holt Logistics Corporation, which operates the Packer Avenue Marine Terminal in South Philadelphia, became the first independent port operator in the Northeast to conduct a pilot of blockchain-based global trade digitization solutions developed by Maersk and IBM. The idea is to improve transparency and information sharing within the global trade ecosystem, ultimately reducing costs, amping up productivity and increasing speed of delivery for goods shipped globally. The new technology has the potential to save as much as 20 percent of the cost of shipping when it is fully implemented.
PhilaPort has already seen a 6.7 percent increase in trade over 2017, and that is before completion of the dredging project.
Philly Shipyard The Philly Shipyard (formerly known as Aker Philadelphia Shipyard) is a leading U.S. commercial shipyard that builds vessels for operation in the U.S. Jones Act market. With a stateof-the-art shipbuilding facility, the yard has earned a reputation for being the choice provider of oceangoing merchant vessels. In 2018, the Philly Shipyard completed the Daniel K. Inouye — the biggest container ship ever constructed on U.S. soil at 850 feet long. A second ship, the Kaimana Hila, is expected to be completed in 2019. But with a changing economy, the yard is looking to diversify its projects beyond simply commercial ships. It has set its sights on a heavy polar ice breaker for the Coast Guard, whose contract — with an estimated value of $750 million — will be awarded in the summer of 2019.
By air The Philadelphia International Airport (PHL) also makes a hefty contribution to the city’s GDP and serves as an attractive hub for international trade. In 2017, trade at PHL totaled $11.68 billion with countries all over the world. As with PhilaPort and Philadelphia’s manufacturing sector, location is a key part of PHL’s success. The airport has quick access to interstate highways that fan out in any direction you need to ship to, including I-95, which spans the east coast from Maine to Florida. In fact, approximately half of the U.S. population, and six of the country’s eight largest markets, are within a oneday drive from Philadelphia. This nexus of sophisticated infrastructure for air, land and sea trade makes
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Linda Mysliwy Conlin President World Trade Center of Greater Philadelphia
This has been a very challenging time for global trade since the rules for trade have been changing. Despite the changes at a national level, a recent trade and investment report published in June 2018 by the World Trade Centers Association showed how cities where world trade centers are housed, like Philadelphia, continue to take the lead to drive innovation, economic growth and job creation. These cities now account for $27.7 trillion, or more than 35 percent of global GDP and generate higher exports and foreign direct investment than the national averages of their respective countries. Greater Philadelphia was one of 28 metro regions selected to participate in the Brookings Institution/ JPMorgan Chase Global Cities Initiative that, in 2017, produced the region’s first comprehensive export plan, developed by the WTCGP, the Economy League of Greater Philadelphia, Drexel University and other local and regional partners. The analysis of Greater Philadelphia’s export economy showed that the region accounts for some $32 billion in exports that include manufactured products and services. We have closely analyzed the export economy to understand what the growth sectors are and develop strategies to accelerate that growth. The challenge remains to let companies know that organizations like ours are out there to provide them with the tools and information they need to expand to global markets. On average, we work with 300 to 400 companies a year, largely small and medium-sized companies, providing individual trade counseling, educational programs and valuable connections to partners and customers worldwide. Over the last 16 years, we have helped companies generate over $1.7 billion in incremental export sales — companies like Bassetts Ice Cream, located right in Reading Terminal Market, which has been able to introduce this Philadelphia favorite in markets like China and Korea. From producers of cooling systems used in laser technology to underwater robots used in commercial and defense applications, the companies are as diverse as the markets they serve. 136 | Invest: Philadelphia 2019 | MANUFACTURING, TRADE & LOGISTICS
Philadelphia an attractive home for any logisticsrelated enterprise. In addition to its advantageous location, PHL has made no shortage of efforts to position itself as a destination airport for international trade. First, the airport operates 24 hours every day and is always ready to receive cargo. Second, it has long runways (10,499 feet and 9,500 feet) to accommodate cargo planes. Third, PHL attracts 30 airlines that offer flights to 86 domestic destinations and 39 international hubs, including all major European commercial centers. Finally, PHL made a move to increase its capacity for cargo shipping by purchasing a lot adjacent to the airport on January 19, 2018, and preparing to develop it into an air-freight complex. The tract spans more than 135 acres and cost the airport $54.5 million. Developing this land into a shipping hub would allow PHL to break into the cargo business in a serious way for the first time. When the project is completed, it is expected to result in an enormous influx of cargo business from key players like FedEx, Amazon and UPS. All of the above efforts and developments are already having an effect: PHL experienced a 10.4 percent bump in trade during the first half of 2018. Along with the improvements being made to PhilaPort, the new PHL air-freight complex will help to position Philadelphia as a major contender in the international shipping sector. Manufacturing Philadelphia is not a new home for manufacturing. The city has a long and storied industrial past, and today that has culminated in a mature and diverse manufacturing sector that attracts businesses and workers from all over the country and the world. While the city’s industrial and manufacturing industry boomed from the 1800s to the late 1900s, changing times and economies saw many major companies migrate away from the area. Philadelphia and the surrounding region had to adapt to fill the gaps that the industry left behind, as well as adjust to how it changed. Phoenixville, located outside of Philadelphia in Chester County, is one of the towns that had to reinvent itself. “Phoenixville was founded on manufacturing. We used to make everything here — from glass to steel to potato chips to orange soda,” Peter Urscheler, mayor of the Borough of Phoenixville, told Invest:. “When the steel mill closed in the 1980s, the economy really suffered. We are now known for our festivals. We have a festival for everything. Phoenixville spent years working hard manufacturing things for the world, and now we work hard to celebrate.”
MANUFACTURING, TRADE & LOGISTICS OVERVIEW
The 2018 Greater Philadelphia Manufacturing Survey published by Philadelphia-area business advisory firm Kreischer Miller sees growth continuing in the sector, however. The survey reveals that a majority of manufacturing enterprises in Philadelphia and the surrounding region hired new employees in 2017, and 65 percent of them planned to do so again in 2018. On top of this, a whopping 92 percent of manufacturing employees received pay raises in 2017, up 5 percent from 2016. Based on these numbers, the outlook for manufacturing in Philadelphia couldn’t be more positive. The impetus for this flurry of hiring and pay hikes is inspired in large part by confidence in the regional and national economy. In fact, 86 percent of survey respondents stated that they were very or somewhat optimistic about the probable performance of the U.S. economy over the next 12 months. Nearly 50 percent of respondents also predicted that their companies would grow by more than 5 percent in 2018. Federal tax reform is also expected to be a boon to manufacturing businesses, with almost 70 percent of respondents expecting the tax reform to have a positive impact on the economy. While the news was certainly positive overall, there are some negative points to be aware of. One
of the biggest problems identified by the survey was a dearth of qualified labor according to about half of the respondents. Hopefully, the worker training programs developed by Governor Wolf and Mayor Kenney will reduce this disconnect between worker skills and employer needs, but it could remain a hurdle for the foreseeable future. Montgomery County, a net importer of jobs, is also in need of skilled workers, and this initiative is something the county is taking very seriously. “Our Workforce Development Board is the leading driver behind fostering and growing the workforce in Montgomery County. The county assists with helping residents find employment, as well as connecting employers with talent,” Montgomery County Commissioner Joseph Gale told Invest:. “This is a huge asset to our manufacturing companies, which tend to have a harder time finding people who are properly skilled. These manufacturing companies will hire immediately, and the jobs pay well; they just have trouble attracting talent with the right skills.” There was also some residual concern related to IT security risks inherent in the increased use of internetconnected machinery, but improved investment in
MANUFACTURING, TRADE & LOGISTICS OVERVIEW
security measures over the last year have mitigated these risks considerably. Although a somewhat troublesome proportion of manufacturers in the area have still failed to take appropriate security measures, this number will likely continue to decrease over time and shouldn’t pose a systemic threat to manufacturing in the region. There are a handful of manufacturing companies that have significant presences in the Philadelphia region. West Philadelphia saw its first high-rise tower with the completion of the FMC tower in 2017. FMC is an American chemical manufacturing company that does not do its manufacturing in the region but calls Philadelphia its headquarters. Braskem, a Brazilian-based petrochemical company, has its American headquarters in Center City Philadelphia. Braskem is the eighth-largest resin producer in the world. Essity, a Swedish global hygiene and health company, is headquartered in Stockholm; however, its American headquarters is in Philadelphia as well. Essity produces the popular Tork brand of products. While companies like FMC and Essity are headquartered in Philadelphia, they do all of their manufacturing outside of the region. Braskem, however, manufactures in the area, at its plant in Marcus Hook. Additionally, Chester, in Delaware County, is home to the Kimberly-Clark mill that produces Scott 100 toilet paper. Boeing also calls Delaware County home. Its Ridley Park location is the company’s main rotocraft factory.
Pharma Philadelphia has been a leader in the healthcare and pharmaceutical industries since Benjamin Franklin and Dr. Thomas Bond opened the Pennsylvania Hospital in 1751. Today, the city’s life science incubators, including the Navy Yard, University City Science Center, University of Pennsylvania, Children’s Hospital of Philadelphia, Jefferson Hospital, Drexel University and the Wistar Institute, regularly produce medical and pharmaceutical breakthroughs and attract talent and investment in droves. On top of this, more than 80 percent of the nation’s pharmaceutical companies are located two hours or less by car from Philadelphia, and this dominance shows no signs of slipping. Take the recent announcement by RLS Logistics, for example. The major logistics company has plans to open a cutting-edge cold storage facility in Delanco, New Jersey, close to PhilaPort. At the time of print, it was not yet open. When the facility does open, it is expected to prompt a marked influx of pharmaceutical shipping through PhilaPort. There is also up to 245,000 square feet of available flex space for manufacturing, production and distribution. Another interesting trend in the Philadelphia pharma sector is the gradual growth in life sciences jobs despite consistent layoffs by Big Pharma in the area. Even though juggernauts like Merck, GlaxoSmithKline and AstraZeneca cut jobs in the region, many of the
More than 80 percent of the nation’s pharmaceutical companies are located two hours or less by car from Philadelphia.
Richard Bolte CEO – BDP International
We are in global logistics with a major focus on chemicals and dangerous goods. We have been in business for over 50 years, so people know us in the industry, and they know our culture and our history of being family focused. That longevity really benefits us, especially when we do work around the world, because many countries have similar cultural ideals when it comes to family. We serve clients on a global scale from right here in Philadelphia. We have been pioneers in this industry through our creation of a unique service model. We created the next-generation logistics company.
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CONSTRUCTION REAL ESTATE OVERVIEW
companies’ former employees and executives stuck around and struck out on their own. Consequently, life sciences jobs in Pennsylvania increased from 111,430 in 2011 to 112,068 in 2016. More good news: the average annual salary in 2016 was $137,976, up 13.9 percent. The pharmaceutical industry is certainly evolving, and the trend in Philadelphia appears to be positive overall. Looking ahead As noted earlier, Philadelphia is strategically located on the east coast of the U.S. between New York City and Washington, D.C., making it a major shipping destination. Recognizing the impending influx of shipping thanks to the continued growth of e-commerce, PhilaPort is undergoing significant improvements supported by state funding, and the Delaware River Navigation Channel is being dredged to accommodate even larger ships. Similarly, PHL has announced plans to develop a massive air-freight complex in order to service more domestic and international shipping needs. Once shipments arrive, the proximity of PhilaPort and PHL to I-95 facilitates same-day delivery by truck to virtually anywhere in the eastern U.S. Another important advantage in Philadelphia is the rate at which the city’s vast and diverse labor pool is growing. There are 2.9 million working adults in the region immediately surrounding Philadelphia and 650,000 in the metropolitan area itself. One in six of these are industrial workers, and 30 percent of the city’s population consists of millennials. This means that the population presents a unique situation where there are both growing numbers of e-commerce consumers and a steady growth of workers able to staff the e-commerce logistics industry. Of course, the city is not without its challenges. America’s withdrawal from the TPP could have a negative impact on trading centers, including Philadelphia. The long-term effects of the Trump administration’s steel and aluminum tariffs also remain unclear, but a large faction of detractors is not optimistic. However, Philadelphia can expect stable growth for the foreseeable future despite these few clouds. The city’s premier institutions of higher education continue to attract world-class students to the city, and a remarkable number of these students stay in town to work after graduation. These highly skilled, highly paid millennials are the lifeblood of the city’s future and will help it to remain competitive in an increasingly global and information-based economy.
Don Lewis President Essity Professional Hygiene
What are the benefits of having Essity’s North American and professional hygiene headquarters in Philadelphia? Essity is a global health and hygiene company with headquarters in Sweden. We’re proud to call Philadelphia headquarters to our global professional hygiene division and home to our North American personal care team and several other corporate functions. Logistically, Philadelphia is a great location. The airport has a broad reach with an increasing number of international flights. For our more than 200 employees who commute to our office at the Cira Centre, having the regional rail system is really important. And being located in a vibrant, desirable city enables us to attract talent, which is also essential. Philadelphia has some of the best colleges and universities in the country. We partner with these both for talent recruitment and also on projects related to sustainability, innovation and professional development for our employees. While we don’t manufacture our Tork® brand of professional hygiene products (paper towels, napkins, bath and facial tissue) or our TENA® brand of adult incontinence care products in Philadelphia, the city is a convenient hub for our teams across the country. How does your commitment to sustainability translate to the work you do in Philadelphia? Philadelphia is a natural fit for Essity’s sustainability focus and offers opportunities to partner with like-minded organizations and businesses on sustainability issues. At Essity, we view sustainability through the lens of people and nature. On the people side, we are focused on improving hygiene and health. On the nature side, we ensure our products are made sustainably. We found a natural partner with the Philadelphia Eagles, the most sustainable team in the NFL. As a company, we are committed to sustainable innovations and we measure and track the sustainable attributes of every innovation we launch.
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City of Chester: The City of Chester sits between Philadelphia and Wilmington in Delaware County. Home to the Philadelphia Union and Harrah’s Casino, Chester is undergoing a period of revitalization. The city is working hard to attract more businesses and development, and with anchor institutions like Widener University, Kimberly Clark and Crozer Health System, Chester is quickly rewriting its story.
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Phoenix rising: Once an industrial powerhouse, Chester faced years of economic decline but today is rising from the ashes with a strong sense of community The City of Chester, located south of Philadelphia on the way to Wilmington, Delaware, is the largest city in Delaware County and technically the oldest city in Pennsylvania. Chester sits right on the edge of the Delaware River with direct access to New Jersey via the Commodore Barry Bridge. It also offers quick and convenient access to the Philadelphia International Airport and the area’s numerous ports, making it a prime location for businesses and residents alike. Once an industrial powerhouse, Chester fell on hard times thanks to urban upheaval and a changing economy. Plagued by the stigmas of political corruption, organized crime and historic redlining, this small city surrounded by thriving middle-class suburbs has faced an uphill battle to reinvent itself. However, today major institutions like Widener University, the Philadelphia Union soccer team and Harrah’s Casino, along with an energized government, the Delaware County Riverfront Alliance and the city’s residents, are showing both their commitment to the city and their faith that Chester will not only bounce back but also rise from the ashes even stronger. 142 | Invest: Philadelphia 2019 | CITY OF CHESTER
Deep roots Chester has a rich history. The area was settled in 1644 by the Swedish and originally called Upland. William Penn — who allegedly first stepped ashore here, not at Penn’s Landing — changed the name to Chester in 1682, when he acquired the settlement as a safe haven for Quakers. Chester is the oldest city in Pennsylvania, incorporated as a borough in 1701 and then as a city in 1866. Chester is also home to the country’s longest continually used municipal building, the Chester Courthouse, which has been in use since 1774. From its settlement in the mid-1600s and through the next 300 years, Chester was a prosperous manufacturing hub focused primarily on metal, machinery, textiles and shipbuilding. The city saw massive growth around World War I, welcoming 20,000 new residents who swelled the population from 38,000 to 58,000. This growth was fueled by a surge in the industrial base, creating many jobs and a need for workers to fill them. The influx of residents also raised a need for housing. The city saw a second period of economic prosperity during World War II, fueled again by industrial and ( )
CITY OF CHESTER INTERVIEW
Revitalization How the City of Chester is reinventing itself as a great and affordable place to live, work and play, with a focus on safety, education and job growth
Thaddeus Kirkland Mayor – City of Chester
What are some things the city is doing to drive business and jobs to Chester? We lowered our business tax, and now we have one of the lowest rates in the county. We are seeing a lot of younger residents opening up businesses in our Overtown section of the city. We are seeing more boutiques and restaurants. We were very excited to have Uno’s, a large chain restaurant, come to the city. That created a lot of jobs for our residents. The development of an 86-room hotel right near city hall is going to bring in jobs, as well as new business. It will give visitors to Harrah’s Casino a close place to stay and generate more commerce in our city. Bringing in business and creating jobs is important, not just because it helps our residents and gives them employment opportunities here so they don’t have to leave the city for work, but it also helps Chester’s reputation. The City of Chester doesn’t always get the best reputation, and we are committed to changing that and showing that it is a great place to live and raise a family. How are you working to better the education system in Chester? Chester Charter School of the Arts, a new K-11 school, opened recently. Next year it will be K-12, and it has been an amazing asset to our community. It is a beautiful facility that focuses on the arts, as well as regular academics, and it is something that our children, parents and teachers are all excited about. Currently, a large number of Chester children seek their education outside of the city, but we are hoping that more choose to be educated in the city and that Chester Charter will help with that retention. Our biggest challenge is funding. We have greater needs than a lot of other communities, and right now we are not getting significant funding. We are continuously looking for creative and innovative ways to generate funding so we can give these children the best education possible.
We want to increase our graduation rate and offer more opportunities for the parents who want to go back to school to earn their degrees. Right now our biggest challenge is getting the funding from the state and showing it that we have greater needs that are not being met. What is your outlook for the city of Chester? I see great things happening here in the city. We received a grant from the state that allowed us to put more cameras in the city to increase security, and we also increased our police force. We are recruiting directly from our community, which has been an amazing way to create jobs, make the city safer and involve the community more. A huge challenge for us as a city is stigma, and as mayor I am working hard to reduce that stigma.
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Julie Wollman President Widener University
How is Widener University staying innovative in its research and program offerings? Widener launched a new robotics engineering program in the fall of 2018. It is the first undergraduate program of its kind in our region, and one of less than 20 in the country. We pride ourselves on our ability to offer prospective students new and innovative programs. Widener is a research-focused institution, and that work not only leads to innovation, but also enhances our academic programs and gives our students experiences that accelerate their careers. We are classified by the Carnegie Foundation as a Doctoral and Research Institution, and our students can start conducting research with professors as freshmen. We offer a summer research program that allows our students to continue their research outside of the traditional school year. We are conducting a significant amount of research in the sciences and healthcare, as well as in engineering. In a highly competitive region, Widener’s focus on engaging students in research that changes lives distinguishes us from other universities. How does Widener University impact the Chester community? Widener is an anchor institution in the City of Chester. We have almost 1,300 employees; some who live in Chester, and many who live in the county. We are proud to offer many resources to the city, including our pro-bono clinics. We have one of the leading student-led pro-bono physical therapy clinics in the country. It has been so successful that our faculty and students host conferences and teach others to run successful student-run pro-bono clinics for people across the country. We offer several other clinics in the city in fields including mental health, nursing and child therapy. Every year, Widener students, faculty and staff consistently contribute more than 100,000 hours of community service within the Chester community, valued at more than $2.5 million annually.
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( ) business growth. Its population hit a peak shortly after the Second World War in the 1950s. However, in the mid-1950s and 1960s, Chester entered a period of economic decline as manufacturing and other industries moved out of the city. With employment waning, people migrated to the surrounding suburban areas in search of opportunities. The lack of industry and outward migration led to an economic downturn. The history of the manufacturing industry also caused environmental challenges that the county has worked hard to rectify. In the 1980s, the Wade Dump, a rubber recycling facility, was declared a Superfund cleanup site and saw remediation throughout the decade. It was declared safe in 1989. In 1995, the Commonwealth of Pennsylvania declared Chester a financially distressed municipality. Today, Chester’s population numbers just under 34,000 residents, 75 percent of whom are African-American — a demographic makeup the city boasted at its peak as well. The 2010 census ranked Chester the largest city in Delaware County. Rebirth Chester is in a period of tremendous revitalization. Despite being declared a financially distressed municipality in the mid-1990s, the city is working diligently to turn things around. Chester is a Keystone Opportunity Zone (KOZ), which means it is part of a program that incentivized businesses, in the form of local and state tax breaks, to invest and develop in KOZ-designated areas. Businesses that took advantage of the KOZs were exempt, for the most part, from all state and local taxes through 2013. December 2017’s federal tax reform created Qualified Opportunity Zones (QOZs), which are similar to KOZs but have fewer restrictions. QOZs are designated by Governor Wolf, and at the time of print he had already highlighted 300 across the commonwealth to partake in the program. Two of these fall within the City of Chester. A great deal of economic development in Chester has been focused on the waterfront, which was once home to the booming industrial industry. The Philadelphia Union, the region’s major-league soccer team, calls the Chester waterfront home, as does Harrah’s Casino and Racetrack, Kimberly-Clark and Power Home Remodeling. The waterfront itself is a KOZ, which has greatly encouraged its development. The KOZ designation brought the Wharf at Rivertown, which in turn brought businesses directly to the waterfront. The Kimberly-Clark mill, which produces Scott 1000 toilet paper, is investing $150 million into its waterfront
CITY OF CHESTER OVERVIEW
Chester is in a period of tremendous revitalization, and the community celebrates the new development and investment.
property to make it more green. Investments like this on the waterfront are incredibly important to the city of Chester. Thaddeus Kirkland was elected mayor in 2016 and has pushed hard for the revitalization of the city. He delivered a State of the City address in June 2018 in which he provided those in attendance with an update on the state of the economy, education, crime, infrastructure and the city as a whole. Developing partnerships is a big focus for Mayor Kirkland, who has been fostering a strong relationship with the Delaware
County Chamber of Commerce. Many retail storefronts in the downtown part of Chester have reopened in the past few years, bringing private business back to the city in a way that it hasn’t seen in quite some time. One of the businesses that has been seeing success in downtown Chester is DTLR, a shoe and apparel store opened by Orlando Tucker, better known as Jahlil Beats. Beats is a hip-hop producer native to Chester who was signed to Roc Nation and rose to fame producing Philadelphia native Meek Mill’s “Ima Boss” and “Burn.” Having grown up below the
Chris Albrecht Senior Vice President and General Manager – Harrah’s Philadelphia
Harrah’s is an anchor institution for the City of Chester, drawing over 2.7 million customer visits to the area in the last year. The city sees a direct benefit from the tax out of our facility. Our gaming operations are taxed, and that money goes directly to Delaware County and the City of Chester. Indirectly, we are a very active organization in the city. We also invest in the local community, and we have built partnerships with different organizations throughout the city, as well as the county.
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CITY OF CHESTER OVERVIEW
Jahlil Beats Founder – Tandem
We have become more involved in the economic development of Chester. We own a few properties in the downtown area, and our main focus is to create jobs. We are closing on a deal that includes 340 properties, which we are going to keep as affordable housing for people in Chester. We want to bring more businesses and jobs to the city, but we don’t want anyone to be displaced or priced out. That is important to us — making sure the people who live here can stay here. poverty level in Chester, Beats promised to give back to his community. He and his fellow Tandem business partners, Ra-Tah Johnson and David Elliott, have worked hard to bring business into Chester. They have made significant investments in real estate, as well as acting as promoters for the city, courting businesses that see the same opportunity as they do. New development Development is happening in Chester; whether it is down by the waterfront or in downtown, the city is rebuilding. The Riverfront Alliance of Delaware County, in partnership with the Chester Community Improvement Project, is engaged in an overall housing revitalization effort for the residential neighborhood Nova Vista, located between Widener University and Crozer Hospital. The lot slated for development is half an acre and is in a neighborhoodsthat has been around since the 1960s. The project that will go up on the site is called
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Arbor Estates, two pairs of twin homes totaling four three-bedroom homes that will be the first new homes built in Chester in the last five years. The properties will be listed at $130,000, making them affordable for people at or below 80 percent of the area’s median income. The Nova Vista neighborhood is also home to Uno Chicago Grill, another major recent development that Chester is proud of. Uno is the first national casual dining chain restaurant to enter the city and sits near Arbor Estates and Widener University. The 8,076-square-foot restaurant holds 224 guests and has created 150 jobs in the city. July 2017 saw the groundbreaking of the Candlewood Suites Hotel in Chester, and the 89-room hotel opened in the spring of 2018. This $6 million project is located near Chester City Hall and is in proximity to the Philadelphia International Airport, which makes it a great extended stay option for business travelers, the hotel’s target demographic.
CITY OF CHESTER INTERVIEW
Renewed growth How Delaware County is helping to revitalize the City of Chester by providing government representation and tax incentives to potential investors
Brian Zidek Councilman – Delaware County
What are some benefits for businesses to be located in Delaware County? Delaware County is a very dynamic place that is extraordinarily diverse. You can go from Chester to Thornbury in about 20 minutes and go from an urban community to rolling horse country. We have communities that appeal to every type of person and business. We have a lot of industrial space in Chester and some of the neighboring townships, but we also have rolling farmland for companies like Wawa. We also have numerous highly rated colleges and universities like Widener, Swarthmore and Villanova, so we are producing a lot of highly educated talent for local businesses. In Chester, we are home to KimberlyClark, which produces Scott toilet paper. SAP has its headquarters in Newtown Square and Boeing has a large presence near the airport. With I-95 running right around us and our proximity to Philadelphia, New Jersey and Delaware, this is a great place to locate a business. How is Delaware County aiding in the revitalization of the city of Chester? Chester is going through immense change at the moment, and the county is supporting the revitalization in every way we can. When investors tour Chester, we make sure that we have government representation there to support them. Bringing investors to Chester not only helps them but also the county as a whole. The county has access to resources that the City of Chester might not have, so our economic oversight board and our commerce center are able to act as resources for the City of Chester. We are also a taxing authority, so we might be asked to step in and offer support from a tax perspective. We are very involved with the City of Chester, and its revitalization is something we are going to continue to support.
What are some challenges facing Delaware County? Delaware County used to be a huge manufacturing and industrial hub, but much of that industry left the county decades ago. When a huge industry leaves an area it can be hard to find a new identity. Our industrial history also created some environmental challenges that Delaware County has been working hard to rectify. The KimberlyClark mill in Chester just invested $150 million to switch to a natural gas cogeneration facility as opposed to coal, which is a huge help. We are seeing more companies come into the county, which helps replace the jobs we lost when manufacturing left. However, the future for Delaware County is very bright. We are seeing growth and more businesses coming in, and we don’t expect that to slow down any time soon.
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Tom Shoemaker Chair Riverfront Alliance of Delaware County Pennsylvania Market President TD Bank
What is the primary goal of the Riverfront Alliance? The Riverfront Alliance was originally formed in 1996 as the Institute of Economic Development. We are an organization consisting of all the major corporate and not-for-profit stakeholders of the City of Chester and the surrounding Delaware County waterfront. The goal is to improve and sustain economic development in the area of Chester and the surrounding waterfront. Our three main areas of focus are economic development, housing and public safety. We have narrowed our focus to these three areas because we think they will have the greatest long-term, sustainable benefit to the local community. We are creating a master plan for the city that will help communicate to the citizens, stakeholders and potential investors what the residential, commercial and retail zones are because that is a little unclear at the moment. We are also putting in a great deal of effort to revitalize the waterfront, which is an amazing asset for the city. What are some of your current public safety and housing projects? A highlight for us has been our continued investment in our public safety program. We have raised almost $1.5 million in grants for security cameras. This has allowed to us create a network of cameras across a portion of the city and work toward making it a much safer place to live. We work closely with the Chester police department and other anchor institutions — like Widener University, Crozer Hospital, the Philadelphia Union and Harrah’s — that are involved with the public safety of the city as well. We also have a strategic priority for housing, and we are well underway with Arbor Estates, which are four new homes being constructed within Chester. These are the first new homes in Chester in five years, and they are expected to be finished by early 2019. In addition, we have established programs that help people in Chester purchase and renovate homes, which has been very helpful in building the community.
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Infrastructure improvements Much like the rest of Pennsylvania, Chester has aging infrastructure that, with the help of the commonwealth, is being replaced. In May 2017, the city announced the launch of a $50 million stormwater infrastructure community-based public-private partnership (CBP3) for the Stormwater Authority of the City of Chester. The purpose of the Stormwater Authority is to help the city with its efforts to reduce stormwater runoff and educate the residents on safe practices so water does not become polluted. These initiatives are in place to help improve water quality in Chester, as well as quality of life. The CBP3 plans on financing, building and maintaining $50 million worth of green stormwater infrastructure in Chester over the next 20 to 30 years. The projects will take place on 350 acres of city land and will address critical pollution and flooding issues in the area. They are also expected to fuel economic growth, support small and minority-owned businesses and lead to significant job creation in the city. Additionally, there are proposed cost savings in regards to other private and public capital improvements, such as streets, housing and education. The partnership consists of the Chester Water Authority, the U.S. Environmental Protection Agency, PENNVEST and Corivas. Along with the projects involving the utility infrastructure in Chester, there is also significant rehabilitation going on surrounding the bridges in the city. At the beginning of 2017, the Pennsylvania Department of Transportation (PennDOT) announced that construction on eight bridges on I-95 in Chester would begin in March of that year. The project, estimated to cost $16.6 million, calls for the closing of each bridge while it is being worked on, with all work expected to be completed in November 2018. At the time of print it had not been completed. PennDOT stated that since the bridges go over highways and railroad tracks, they are critical to fix. The project also includes improvements to Chestnut Street and Morton Avenue in Chester. Transportation Transportation is the backbone of the Greater Philadelphia region, and Chester is no different. Chester City sits just 12 minutes south of the Philadelphia International Airport, making it closer to the gateway to the rest of the world than Center City Philadelphia itself. Another 12 minutes south of Chester is the Delaware border, putting the city in a prime location to commute to or from both
CITY OF CHESTER OVERVIEW
Philadelphia and Wilmington. The Southeastern Pennsylvania Transportation Authority (SEPTA) started service in Chester in 1968 and today operates seven bus lines in the city. SEPTA serves the city by regional rail on the Wilmington/ Newark Line. Both the Chester Transportation Center and the Highland Avenue stop are within city limits. The Chester Transportation Center sees trains every hour at off-peak times going in both directions and twice an hour at peak times. While this certainly helps people commuting both to and from Chester, more frequency would allow for more opportunity for residents to move to Chester to take advantage of its lower housing costs. Improving connectivity between Chester and Philadelphia is essential; currently there is more frequency between Chester and Wilmington, and the ride between Delaware and Chester takes only 18 minutes. However, the city of Chester would benefit greatly from more frequency in both directions. There are ride-sharing opportunities in Chester that come at a fairly low price point. An Uber or Lyft from Chester to Center City Philadelphia costs about $28, with a ride from Chester to downtown Wilmington running about $30. A ride from the downtown area of Chester to the Philadelphia International Airport costs less than $20 — less expensive than riding from Center City Philadelphia to the airport. This makes accessing key players like the Talen Energy Stadium, Widener University, Harrah’s Casino and Crozer-Keystone Hospital an affordable option from both hubs. Chester used to be a stop on the Pennsylvania Railroad service to Washington, D.C., but has not had routes since the 1970s. Health matters Chester City is home to Crozer-Keystone Health System, a five-hospital health system that serves Delaware County, Northern Delaware and Western New Jersey. The CrozerChester Medical Center is an anchor institution for Chester. A large portion of the population is employed by the healthcare profession, and 20 percent of the jobs in the city are healthcare related. Crozer-Chester Medical Center is a 68-acre campus established in 1963 through the merger of Chester Hospital (established in 1893) and Crozer Hospital (established in 1902). It became one of the founding hospitals of the Crozer-Keystone Health System in 1990. The hospital is a 300-bed, tertiary care teaching hospital and admits 19,000 patients a year, treats 53,000 patients in the Emergency Department and delivers almost 2,000 babies. Delaware County State Health Center, part of the Pennsylvania Department of Health’s Bureau of
Tim McDermott Chief Business Officer Philadelphia Union
I am bullish on the sport of soccer in the U.S. and especially in Philadelphia. I have been with the Union for two and a half years now, but I have always been impressed with how the franchise entered the market. There are two components of the Union that have made it as successful as it is. The first part is the fan base. Union fans are amazingly passionate, which is largely driven by our supporters group, the Sons of Ben. They were a huge part of bringing the sport to Philadelphia on a major-league level and a huge part in getting fans involved and making the fan experience what it is. With most major-league sports, excitement comes from the game itself, but there is also “manufactured” entertainment from the music, the fanfare and the promotions during the games. In soccer, that sort of piped-in entertainment isn’t thereas the fans create an organic atmosphere themselves that is unique to the sport itself. The second component of what has made the Union really resonate with people in the area is the stadium. The stadium is directly next to the Commodore Barry Bridge in Delaware County overlooking the Delaware River. The views are amazing! We recently acquired adjacent land and a 400,000 square foot Class A office building and now control about a mile of waterfront campus. With the help of county, city and Riverfront Alliance officials, we are collectively looking at how we can transform the waterfront into an even more incredible year round destination. We are laser focused on growth and how we grow the Union brand and the sport of soccer in the Philadelphia region. Part of that opportunity comes from focusing on youth soccer programs. When we help the local youth soccer community we are building a fan base from an early age. To that end, we recently hired Dave Pettican as our Youth General Manager. He will focus on getting kids in the surrounding communities engaged with the sport and giving them a home team to root for.
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CITY OF CHESTER OVERVIEW
Community Health Systems, is also located in Chester. The Health Center offers services to the residents of Delaware County, while the bureau of health is responsible for monitoring the health of the residents. Direct services offered by the State Health Center include free STD testing, a free tuberculosis disease clinic and free or low-cost child immunizations. Child immunizations are provided at no cost for people without health insurance. According to the latest census, 15 percent of people under the age of 65 are without health insurance in the city of Chester. Due to the city’s history of manufacturing, many residents suffer from asthma. Both Chester and Delaware County are working diligently to make environmental changes to improve air quality.
upon their graduation from high school. The K-7 school also offers experiential learning opportunities for students in Widener University’s education and social work programs. Arts and culture Chester has a longstanding history of arts and culture. The city boasted a thriving arts community in the 1950s led largely by William Dandridge, who was once known as the “Father of Arts and Culture in the City of Chester.” Dandridge strived to create an arts corridor right in the center of Chester while also being a vocal activist. His nephew, Devon Walls, is currently fostering the community’s arts and culture scene with a focus on local ownership. Part of the city’s revitalization program is supporting the arts and culture communities in the city. The campaign “Chester Made” is a big part of that support. This campaign is a collaborative effort to support the Historic Chester Arts and Culture District and the proposed concept of a Chester Cultural Corridor that would run through the downtown area from City Hall to Widener University. The initiative is a collaborative effort between the city, Widener University, Chester Arts Alive!, Gas and Electrics Arts, Pennsylvania Humanities Council and the Artist Warehouse. In 2015, a Cultural Asset Map was created to mark areas of artistic and cultural significance in the city. Notable areas include
Part of the city’s revitalization program is supporting the arts and culture communities.
Education Widener University is another major anchor institution for the city of Chester, fueling the region’s reputation for being a top higher education destination. The university is a partial owner of Uno’s Pizzeria, the city’s first chain restaurant, and a significant employer for the city. It also fosters the community through the Widener University Partnership Charter School, a K-7 school that offers opportunities to students who attend. Provided they maintain a strong GPA and meet the admission requirements, students who attend Widener University Partnership Charter School are awarded scholarships to attend Widener University
CITY OF CHESTER OVERVIEW
Jeff Hutter Mill Manager – Kimberly-Clark
Kimberly-Clark is a large employer for the city of Chester. We employ about 600 people at this mill, which is significant for this area. We spend a lot of time in schools teaching them about STEM, as well as the wide array of opportunities we offer here. We want the children of Chester to know the different jobs they can do right in their backyard, whether they want to learn a skilled trade or become an engineer. Community involvement, especially in Chester, is very important to us.
the MJ Freed Performing Arts Theater, Art on Avenue of the States, Artist Warehouse and Laran Bronze. Cleaning up Environmental injustice is an issue that Chester has been fighting since 1993. As the home to a trash incinerator for the county, processing plants, oil refineries and a sewage treatment plant that receives waste from the entire county, Chester has been the home to many environmental pollutants that affect not just the environment but the health of the residents as well. Chester residents and politicians pushed back against the entry of bottom-rung projects like the aforementioned into the community as a half-baked attempt at economic redevelopment. Residents worried about pollution and noise. In 1993, a community activist group called Chester Residents Concerned for Quality Living partnered with the Law Center to launch a lawsuit to stop the opening of Thermal Pure, an infectious waste-processing facility. The Pennsylvania Supreme Court finally revoked the plant’s permit in 1995, forcing the plant to close. The plant was originally given its permit by the Pennsylvania Department of Environmental Resources (DER) even though the plans exceeded the DER’s limits tenfold. A more recent environmental success story involves Chester’s Sun Village Park, a place where people would illegally dump tires and other debris. On Earth Day 2018, volunteers worked to not only clean up the park but also paint murals, rebuild stream beds and plant native vegetation. Led by a local resident, the volunteers were able to give the city back a usable park, as well as clean local waterways. Challenges Chester has had its fair share of challenges, but with challenges comes opportunity. While once deemed
unsafe, Chester is putting an immense effort into improving public safety for its residents. In April 2018, the city announced that it was closer to its goal of citywide surveillance thanks to a grant of $240,000 from the Pennsylvania Department of Community and Economic Development. The city installed sixteen surveillance cameras across the west end (the east end already has 110 cameras installed). Some of the cameras are in plain sight, and some are hidden. According to the mayor, the city has seen an increase in crimes solved, as well as a reduction in crime. Bright future Chester is experiencing a renaissance, shaking off its rough history and becoming safer every day. The city of Chester, both its residents and government alike, is committed to the revitalization efforts happening within its borders. As more businesses take advantage of the two Qualified Opportunity Zones and the prime real estate on the waterfront, Chester will continue its upward trajectory. The city was advised by recovery coordinators to enter a three-year exit plan from its status as a financially distressed municipality. During his State of the City address, Mayor Kirkland was positive that the city would not need all three years. With people like Jahlil Beats and Mayor Kirkland working hard to show the surrounding areas what Chester has to offer, there is no doubt Chester will make a name for itself as the hot new place to live, work and play on the Delaware River. Capital Analytics would like to thank the City of Chester for its contribution in compiling this chapter. To learn more, visit their website: www. chestercity.com.
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Banking & Finance: As the city of Philadelphia grows, so does its capital. More banking and financial institutions are coming into the city, like JPMorgan Chase, which opened its first local branches in late 2018. Philadelphia is seeing more and more capital from both domestic and foreign destinations, thanks in large part to the federal tax reform. It is also the birthplace of the nation’s insurance industry, which many consider the lubricant of the economy. With the tax overhaul, deregulation and advances in technology, Philadelphia’s banking and finance industry is poised for growth in 2019.
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Solid coffers: The banking industry remains strong in the wake of tax reform and deregulation, and Philadelphia’s financial sector is riding the wave Philadelphia’s banking sector is anchored by institutions like Beneficial Bancorp, the oldest and largest bank in the city, and the Federal Reserve Bank of Philadelphia, part of the central bank of the United States that serves eastern Pennsylvania, southern New Jersey and Delaware. These assets — along with financial deregulation, rising interest rates and lower taxes — are bolstering the Greater Philadelphia region’s banking and financial industry moving into 2019, despite some concerns over the impact the escalating trade war and heating global tensions could have on corporate America. Performance In Q1 2018, big bank stocks fell nationwide despite strong reported earnings. For regional and super regional banks, the bag was mixed. Following December 2017’s federal tax reform, most banks saw an increase in net income but reported only modest loan growth. In Philadelphia, the story was much the same. Citizens Bank, owned by Providence, Rhode Island-based Citizens Financial Group, reported a 28 percent rise in earnings share from Q1 2017, with 154 | Invest: Philadelphia 2019 | BANKING & FINANCE
loan growth of 1 percent. While this loan growth was slightly higher than expected, fee revenue was weaker than predicted. In Q3, the bank reported a 27 percent rise from Q3 2017. BB&T, the sixth-largest bank by deposits in the Greater Philadelphia area, nearly doubled its net income from Q1 2017, in part thanks to lower tax expenses from the new tax legislation. However, the bank reported loan growth at a sluggish 0.6 percent, citing lower mortgage warehouse balances and indirect retail lending as reasons for this lag. Philadelphia’s oldest bank, Beneficial Bancorp, also saw an increase in net income despite flat loan growth at 0.8 percent. Even so, the bank’s commercial real estate (CRE) and commercial and industrial (C&I) loan portfolios both increased — by 1.3 percent and 4.4 percent, respectively. Lancaster’s Fulton Financial Corp. saw an increase in earnings per share by 12 percent and loan growth of 4.6 percent, while Bryn Mawr Bank Corp. reported a 70 percent (from $9 million to $25.3 million) increase in net income following its merger with Royal Bancshares. Loan growth for the bank remained ( )
BANKING & FINANCE INTERVIEW
Bank and ballpark How Citizens Bank’s brand is growing with Philadelphia’s population, reaffirming a deep commitment to the community and staying on the cutting edge of technology
Daniel Fitzpatrick President, Mid-Atlantic Region & Head of National Industry Verticals – Citizens Bank
What are some of the benefits of being in the Philadelphia market? Philadelphia, both as a city and region, is doing very well as the population continues to grow. A significant influx of millennials has decided to make this area their home, and that has been terrific for the city. Citizens Bank benefits from this as well. Our commercial real estate group has been active over the last few years with the new rental units being constructed around the city. That has been a really positive driver. The population increase also offers a larger customer base for Citizens Bank, as well as a larger talent pool. We have a student loan refinance program that is popular with millennials and Gen Z and has been successful in this region. Being able to reach members of the younger generations is important, and we have really been connecting with them in this region. How does Citizens Bank Park impact the bank’s brand? We take a lot of pride in having the park where the Philadelphia Phillies play bear our name. It shows that we are a hometown bank of Philadelphia, which is very important to us. The Phillies are a big partner for us philanthropically in the community. They are a wonderful organization to work with, and they are committed to making big impacts, which aligns with our mission as well. It also helps us grow as a national brand because when we enter a market that we might not have been in before, they will know us because their baseball team played the Phillies at Citizens Bank Park. The park creates a strong image for us and is something that is very important to us as a Philadelphia institution. What services are seeing a lot of demand in Philadelphia? Digital connectivity is important right now. With more millennials in the market than ever before who
are used to seamless digital experiences, offerings need to be simple, and it needs to be easy to open an account. We have found success customizing our products for the different demographics we serve, like the student loan refinancing program. We provide a number of services online, like wealth management,. We launched SpeciFi, which is a “robo-advisor,” where users can go in and access tools and advice for investment strategies. However, no matter how popular digital services become, banking will always be a relationship business. We still focus a great deal on our branches and making sure that our customers have good relationships with their tellers and advisors. That is incredibly important to build trust with a banking institution. We want to help people plan for their futures and expand their financial literacy.
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Robert Kane, Jr. Market President Eastern Pennsylvania and Southern Jersey KeyBank
How does KeyBank impact the communities it is in? We have been in business almost 200 years, which means we have a longstanding history of impacting the communities we are part of. In 2017 we formalized this commitment with our $16.5 billion Community Benefits Plan, which invests in workforce, education and our neighbors across the 15 states and 26 markets we operate in. Workforce development is huge because it is a way to lift people out of poverty. We do this through small business, mortgage and inner-city lending. The majority of employment in this region comes from small businesses, so it is important to make sure those businesses are set up for success. In the city we do a lot of work with tech and innovation hubs that are incubating other businesses. We have a Neighbor’s Day volunteer event every year where KeyBank employees go out into their respective communities and give back. We want to make sure our presence has a positive impact. In what ways has KeyBank leveraged technology to better the customer experience? We are always trying to find ways to make the banking experience easier for our customers. A large part of that is offering services online and through mobile apps. A unique service we offer is a financial wellness program called HelloWallet. HelloWallet provides financial wellness tools and resources that help people achieve their financial goals. One of the tools is an app that is essentially a data gatherer. It holds the customer’s information about credit cards, wealth management, checking accounts, etc. It gathers and tracks this data and gives a financial wellness score. Customers can increase their score by saving more, paying down credit cards and managing their expenses. Our employees and customers use it, and we have received amazing feedback. Financial literacy and wellness are so important for people to understand, and we want to offer them an easier way to manage that and get started on their path to financial wellness.
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( ) slow, at 0.6 percent, with commercial mortgage loans fueling the most growth. Over the past decade, the U.S.’s three largest banks by assets — JPMorgan, Bank of America and Wells Fargo — have added more than $2.4 trillion in domestic deposits, a 180 percent increase, according to the Wall Street Journal. This is larger than the domestic deposits from the top eight banks combined in 2007. At the end of 2017, the three top banks in Philadelphia for region deposits were TD Bank, with $126.39 billion; Capital One, with $111.51; and Chase Bank, with $41.66 billion. Loosening chains In May 2018, Congress approved and President Trump signed a bipartisan bill that rolled back the DoddFrank regulations put into place following the 2008 financial crisis. Among other things, the Economic Growth, Regulatory Relief and Consumer Protection Act raises the threshold for increased regulatory scrutiny from banks with $50 billion in assets to those with $250 billion. The legislation also exempts banks with less than $10 billion in assets from the Volcker rule, which limits banks’ ability to make risky bets through activities like proprietary trading, and exempts small banks from reporting detailed data on borrowers. In addition, it loosens restrictions on high-volatility commercial real estate (CRE) loans (HVCRE), which were marked high risk under the Basel III mandate. Under the previous law, banks had to keep more capital on the books for HVCRE loans in an effort to prevent them from damaging the economy by taking on too much risk. This translated into higher costs for the borrower. Loosened restrictions could have a big impact on Philadelphia’s CRE sector. While the new bill doesn’t completely do away with the strict regulatory regime imposed by Dodd-Frank, it does substantially water it down. Under the new law, fewer than 10 large U.S. banks will be subject to stricter federal oversight, giving thousands of banks — including many in the Greater Philadelphia region — newfound freedom from harsh regulatory burdens. This could free up capital for many Philadelphia banks to amp up mortgage and small business lending. Temperature rising In December 2018, the Federal Reserve raised its benchmark federal funds rate — which helps determine rates for mortgages, credit cards and other types of borrowing — a quarter point, from 2.25 percent to ( )
BANKING & FINANCE INTERVIEW
Lasting legacy How Wells Fargo continues to invest in Philadelphia’s diverse, creative and innovative economy, with inclusion and financial literacy remaining top priorities
Susanne Svizeny Executive Vice President, Middle Market Banking – Wells Fargo
How does Wells Fargo help businesses in Philadelphia? This is a market in which Wells Fargo has a strong share, one that’s building on its historical roots with an innovative and creative economy. Wells Fargo has been a part of those deep historical roots and is committed to this region’s success. We are constantly asking ourselves how we can better align our resources to support the growth of the market and how we can re-commit to Philadelphia companies to help them thrive. The region is strong due to the diversity of the economy, with some sectors such as technology and life sciences growing rapidly. How is Wells Fargo fostering diversity and inclusion? Diversity and inclusion continues as a top priority at Wells Fargo as we reaffirm our commitment to communities in Philadelphia and nationwide. We have a diversity and inclusion strategy that provides a common direction and clear goals across Wells Fargo, and we focus on three areas: team members, the marketplace and advocacy. In the marketplace, we make sure we integrate diversity and inclusion into the business decisions we make every day. Women are growing businesses at an incredible rate. We have a committee set up across the country to foster growth and our commitment to women-owned and led businesses. We have also made a commitment to build our business with other diverse segments of business owners and have launched a national Hispanic focus. It is important that we stay relevant within these diverse communities and help them grow and expand their businesses, which will foster the diversity of our economic development in the Philadelphia region. What is Wells Fargo doing to teach financial literacy? Financial literacy is one of the most important ways Wells Fargo continuously recommits to its customers
and communities. Financial literacy is incredibly important, especially at a young age. Last year, our employees devoted more than 40,000 volunteer hours across the commonwealth, and a good part of that time was spent teaching financial literacy. We have a tool called Hands-on Banking that speaks to all age groups. We visit elementary schools and talk to young students about saving money. In high schools, we talk about credit scores, how to make a budget, balance a checkbook, set goals and make sound financial choices. And we teach many of these same basic money management skills to adults through partnerships with community organizations. Financial literacy is a major initiative for Wells Fargo across the country. Education is so important, and for us, financial literacy is the foundation of that education. The earlier people become financially literate, the better their chance of financial success.
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( ) 2.5 percent. This was the fourth rate hike in 2018. A majority of policy makers expect two more hikes in 2019, a reflection of the hot U.S. economy. With nationwide unemployment at 3.7 percent — the lowest since 2000 — inflation is slowly creeping higher. The Federal Reserve is gradually raising interest rates in order to prevent the economy from overheating. “Global economies are growing, and we think interest rates will go up over the next year or so,” David Hoffman, chief financial advisor at Brandywine Global Investment, told Invest:. “Hopefully not too quickly or by too much. That is a tightrope we walk in this industry between targets of low inflation and unemployment. The next year looks bright, and we are confident in the market.” The average rate on a 30-year fixed-rate mortgage climbed to 4.62 percent in December 2018, the highest in seven years. In Philadelphia those rates were
slightly lower, hovering around 4.47 percent, but still significantly higher than average rates in December 2017. While mortgage rates typically fluctuate with the bond market, a higher federal funds rate can also cause them to increase. As it becomes more expensive for banks to borrow money, this often translates to higher borrowing rates for consumers. Investors are showing some concerns over the yield curve, or the difference between interest rates on short-term U.S. government bonds (twoyear Treasury notes) and longterm bonds (10-year notes). In a healthy economy, rates are higher on longer-term bonds in order to compensate for potential inflation. However, with the Federal Reserve’s short-term rate hikes, the yield curve has been flattening. Compounding this, long-term rates have been slower to rise, indicating some concern about long-term economic growth. Historically, inversion — where yields at the short end rise above
The average rate on a 30year fixed-rate mortgage climbed to 4.62 percent in December 2018.
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BANKING & FINANCE OVERVIEW
Frank Leto CEO – Bryn Mawr Trust Philadelphia, as a market, has a large percentage of small and medium-sized businesses. It is critical to have the products and services to meet the needs of businesses because they are the key driver of economic growth in our communities. Their needs range from a standard loan or line of credit, to SBA and commercial real estate loans, cash management solutions and everything in between. BMT offers all of these solutions and more. those at the long end — has been a reliable indicator of recession. In early December 2018, the yield curve produced its first inversion, with the spread between three- and five-year yields falling to -1.4 basis points. While a flattening or inverting yield curve has traditionally indicated softening market conditions on the horizon, it also suggests that present market conditions might be prime for savvy investment in certain product types. In addition, the economic backdrop of 2018 is quite different from 2007 and other pre-recession years, with technological innovation, globalization and an aging population suggesting a lower likelihood of inflation rising too quickly. It’s too soon to tell what the future holds, but Philadelphia’s financial sector will surely be keeping its eye on interest rates and the yield curve moving into 2019.
In August, WSFS Financial Corp announced the $1.5 billion acquisition of Beneficial Bancorp. The deal is expected to close in Q1 2019 and will create a bank with $13 billion in assets. It was reported in early December that 80 percent of Beneficial Bancorp employees were offered jobs at WSFS. In September, JPMorgan Chase announced that it would be opening 50 retail branches in the Greater Philadelphia region, with 30 of those in the city itself, over the next five years — a true testament to the market’s growing potential. In November, the first local branch opened in Camden, New Jersey, with a second following in Wilmington, Delaware, in early December and another opening in Center City on December 13. 20 percent of the new branches (for a total of 10) will be located in low- to moderateincome neighborhoods. In October, startup Linkbancorp purchased the struggling West Chester-based Stonebridge Bank and plans to rebrand it as LinkBank by the end of the year.
Wealth management firms made 137 acquisitions as of October 2018.
M&A activity In a swiftly changing financial environment, many Philadelphia banks are expanding to take advantage of favorable conditions, new markets and fresh sources of capital. In March 2018, Charlotte-based Bank of America revealed plans to enhance its wealth management offerings for mainstream investors by adding hundreds of new locations and brokers over the next two years. The plan includes Merrill Edge offices in existing BofA retail branches throughout the Philadelphia region. In April, Meridian Bank opened an office in Center City in the hopes of taking advantage of the steady consolidation activity in the Philadelphia market, which has left a void for businesses looking for small to medium-sized loans.
Wealth management According to data from investment bank and consulting firm Echelon Partners, wealth management firms made 137 acquisitions as of October 2018, which had them on track to set a record for the sixth year in a row. Q3 2018 alone saw 43 acquisitions — the highest volume of any quarter tracked by the firm. Fueling many of these deals is private equity capital. In October 2018, Minneapolis-based Wealth Enhancement, backed by a private equity fund, announced that it would purchase GDM Advisory Group, located in the Philadelphia suburb of Fort
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Bruce Foulke CEO – American Heritage Federal Credit Union
Giving back to the communities where our members and employees live and work is the heart of American Heritage. Just this past year, our support has underwritten health programs, schools, child programs, parks and recreation here in Philadelphia. Our lending programs have helped businesses grow, creating jobs and revitalizing badly needed parts of our city. Our Philadelphia headquarters’ meeting room and branches host more than 200 community events per year, including financial literacy, home buying and women investing programs, as well as school and community groups.
Washington. GDM has about 250 clients with $470 million in assets under management. This marks Wealth Enhancement’s second acquisition in the Philadelphia-area market in two months, following the September purchase of LPL hybrid RIA OneSource Retirement. It also underscores the proliferation of private equity and alternative investments in the Philadelphia financial sector. “We have become an industry leader in terms of providing access to alternative investments to individual investors,” Steve DeAngelis, president of FS Investment Solutions, told Invest:. “Over the last 18 months we have launched four new investment products, each with new investment partners that span that country. Those illustrate the desire from some of the leading institutional investment firms looking to partner with what FS can bring to the table.”
Philadelphia isn’t unique in these racial discrepancies. According to Reveal, AfricanAmericans were denied conventional mortgages at higher rates than whites in 61 metro areas across the U.S. Latinos were turned away at higher rates in 25 cities, Asians in nine and Native Americans in three. The city where these groups were most likely to be rejected for a loan was none other than the country’s capital, Washington, D.C. At a city council hearing in March 2018, several Philadelphia banks responded to the report with written testimony, pointing out that it didn’t represent the full scope of their lending activities, nor did it tell the full story of how mortgage lenders make their credit decisions. Credit history, debt-to-income ratio, interest rates, total loan costs and loan-to-value ratio for the proposed loans are some of the additional factors not considered in the Reveal report. However, many of the formulas banks use to determine things like credit scores are not available to the public, further complicating the issue. In addition to an imbalance in loan acceptance rates, data compiled in 2016 by LendingPatterns. com shows that low- and moderate-income minority customers in the Philadelphia area were more than twice as likely to be given mortgage loans with a spread, or those with interest rates 1.5 percentage points above the prime rate. This was after controlling for income, loan amount, neighborhood and other
In February 2018, Philadelphiaarea banks faced accusations of modern-day redlining.
Lending landscape In February 2018, Philadelphia-area banks faced accusations of modern-day redlining, or using discriminatory lending practices based on race, as outlined in a report by Reveal from the Center for Investigative Reporting (CIR). According to the report, in 2015 and 2016 white Philadelphians acquired 10 times as many conventional mortgage loans as black Philadelphians, even though these groups make up a similar share of the population.
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factors that might affect loan approval. Some major lenders had even higher disparity; for example, minority borrowers at Meridian Bank were 8.3 times more likely than white borrowers to be given a loan with a spread. Police & Fire Federal Credit Union, Philadelphia’s second-largest residential mortgage lender behind Wells Fargo, had the highest spread frequency for minority borrowers of any major lender, at 21.87 percent. May 2018’s rollbacks to Dodd-Frank included the exemption of 85 percent of banks from reporting more detailed lending data — a requirement banks have long been claiming is costly, especially for small lenders. The concern is that without this detailed data reporting, lending abuses will be even more difficult to spot.
From ATMs and online banking to blockchain and Bitcoin, technology continues to revolutionize the financial world.
Reverse mortgages From 2010 to 2016, Philadelphia ranked number one in the U.S. for reverse mortgage originations per senior homeowner, with these primarily concentrated in lower-income, minority neighborhoods. Close to one-third — more than twice the national rate — of borrowers with loans that originated between 2010 and 2014 have defaulted on the loans due to nonpayment of real estate taxes and homeowner’s insurance. In February 2018, in an effort to reduce the high rate of reverse mortgage foreclosures in the city, Philadelphia considered a new bill stipulating that a reverse mortgage borrower who is in a payment agreement for real estate taxes on his or her home cannot be considered delinquent on those taxes. Reverse mortgages allow homeowners over the age of 62 to access the equity in their homes via loans, which don’t need to be repaid until the last borrower dies or moves out of the home. In the meantime, ( )
Jeff Schweitzer CEO – Univest Bank and Trust Co. Philadelphia is in a positive place right now. There are certainly areas of the city that are ‘hotter’ than others. We are cautious of that when it comes to lending, and we make sure we remain disciplined in managing credit. It is important to make sure we are doing sound deals. There has been a lot of multifamily construction, and there are young people and baby boomers coming into the city. We want to make sure we are providing support and financing while managing our risk.
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business Market voices: Small lending
Evelyn Smalls CEO United Bank of Philadelphia
Over the last couple of years we have started engaging more robustly as a business bank and supporting small businesses. We work closely with the Small Business Administration (SBA) loan program. This means that the loans are guaranteed 75 percent by the SBA, which mitigates the risk and allows us to work with borrowers of all types. We are able to help small businesses that we wouldn’t be able to lend to without support from the SBA, so it really expands our impact in the community, which is amazing for us. Small business loans are one of the ways we give back to the community, and that’s something that is really important to us.
We have a small business lending team that we are really proud of. It is incredibly successful. Many businesses in Philadelphia are small to mid-sized, so having that representation is very important to us. This team is able to address the needs of the entire county. For many reasons, Philadelphia is a great location to start a business. We are so well located and are one of the largest markets in the country with so much variety. We are a city of banks. It is a great place to be, not only for businesses, but for us as well.
Susan Lonergan Regional President Southeastern PA Fulton Bank, N.A.
Varsovia Fernandez Senior Vice President, Philadelphia Market Leader Customers Bank
There is significant demand for middle market and small business loans in Philadelphia. Our team is a part of the Greater Philadelphia Chamber’s Middle Market Action Team and Roadmap for Growth initiative which focus on both of these segments. We have an experienced team of middle market relationship managers and a robust SBA team. The SBA team allows us to do a lot of small business lending on our own, as well as through the SBA. The majority of the businesses in Philadelphia are small- to medium-size businesses, which is a reflection of the nation’s economy, so there is a lot of demand for these services.
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Improving lives How Bank of America is committed to helping Philadelphia businesses and individuals improve their financial lives through investment, expansion and community service
James Dever Philadelphia Market President – Bank of America
and economic development. Businesses, large and small, can benefit from our financial and intellectual capital. And the organizations, nonprofits and companies addressing society’s toughest problems can have the resources and expertise of the company and the efforts of our more than 200,000 employees behind them.
How is Bank of America growing in Philadelphia? The 1,100 employees of Bank of America in the Philadelphia market are committed to the people and diversified economy of Philadelphia. With all eight of our lines of business in market, we can help people and companies improve their financial lives. We offer tailored solutions with our full range of financial products and services through our 52 financial centers, 131 ATMs, 11 Merrill Lynch offices and two U.S. Trust offices in the Philadelphia market. That means that as our clients grow and their needs change, we can grow with them. Young adults and families can have the tools and support to live more successful financial lives. Neighborhoods can be built on a solid foundation of responsible home lending 164 | Invest: Philadelphia 2019 | BANKING & FINANCE
What are some challenges that are facing banking and financing in Philadelphia? While Philadelphia is a city with numerous financial institutions and more coming here all the time, we view the competition as a good thing, demonstrating that the city is growing and full of opportunity. By integrating our offerings across our eight product lines, we are able to provide the financial products our clients need to meet the opportunities they are facing and grow with them as they succeed. In addition to serving our clients, the company and its employees invest more than $200 million in philanthropic giving globally each year to support organizations making an impact on local economic and social progress issues. In the Philadelphia market, we focus on efforts to enhance community development, workforce development and basic needs including hunger and housing. Since 2013, our philanthropic partnerships in the Philadelphia market have totaled $14 million. Our employees have volunteered 45,000 hours and contributed $3.2 million to local nonprofits and community needs. Through our Neighborhood Builders® program, we work with the community to advance nonprofit leadership to solve tough community challenges. Since 2004, we’ve partnered with nearly 1,000 nonprofits across 49 communities and helped nearly 2,000 nonprofit leaders strengthen their leadership skills by investing more than $220 million in communities.
BANKING & FINANCE OVERVIEW
( ) borrowers are required to reside in the home, maintain the home and pay both property taxes and homeowner’s insurance. Tech revolution Technology is changing the face of the banking industry in much the same way it is disrupting the rest of the transaction world, influencing how consumers access and use products. According to the Pew Research Center, 77 percent of Americans own smartphones today, up from just 35 percent in 2011, and these devices accounted for nearly $100 billion in U.S. retail sales in 2018 alone. With this digital transformation comes a new set of expectations from banking customers. When choosing a bank, Philadelphia residents are looking for the same convenience and accessibility they enjoy in other areas of their lives, putting financial institutions in the precarious position of integrating technology into their platforms or losing customers to more techforward competitors. Fortunately for Philadelphia, innovation is in its DNA. Many area banks are finding synergy with the growing number of fintech companies in the region as the two factions work together to create products that meet the needs of an evolving customer base. Fintechs spur innovation, facilitate payment and provide cybersecurity and fraud protection, while banks provide clients and regulatory compliance. While some Philadelphia banks have been a bit slow to adapt to changing technology, they are indeed adapting. To compete with companies like Venmo, which offer direct peer-to-peer money transfers, traditional banks are offering digital payment networks like Zelle that allow customers to instantly transfer money between bank accounts. Commercial banking is also seeing new platforms for trading, money management and payments. As digital banking, blockchain technology and other fintech innovations continue to revolutionize customer experience, they also raise risk levels associated with user confidentiality and cybersecurity. Banks are putting a lot of resources toward keeping transactions safe, which can
be a major financial challenge, particularly for smaller institutions. Managing risk The American insurance industry owes a great deal to Philadelphia. The first Marine Insurance Brokerage opened in the city in 1721, and Philadelphia continued to play an important role in marine insurance throughout the 18th century. In 1790, the city became home to the Insurance Company of North America, the first marine insurance company in the United States. In 1752, Benjamin Franklin founded the Philadelphia Contributionship for the Insurance of Houses from Loss of Fire, whose standards for evaluating buildings later evolved into the city’s building codes and zoning laws. Life insurance was born out of the Corporation for Relief of Poor and Distressed Widows and Children of Presbyterian Ministers, founded in 1759, and the Fire Insurance Society of Philadelphia, founded in 1901, became the Insurance Society of Philadelphia in 1925. “Ben Franklin helped to popularize insurance in the United States right here in Philadelphia,” Marc Armstrong, managing principal at AON, told Invest:. “Philadelphia has always had insurance and risk management and has always been part of the engine oil that keeps commerce going. Regardless of what sector you are in, you are not going to expand and go into additional markets or product lines without having some way to protect what you have. The insurance and risk management community, in line with commerce in general, is a partnership that has been strong in Philadelphia for a very long time.” Philadelphia-area residents have access to coverage that is typically slightly lower than the national average. Annual premiums for homeowners insurance in the state of Pennsylvania are $913 per year for an HO-3 policy, compared to $1,173 nationally, while auto insurance rates are right in line with the national average, running about $970 per year compared to $1,000. With the tech revolution in full force, the market for cyber insurance is rapidly evolving. More and more insurers in Philadelphia, and across the country, are offering liability coverage for data breaches involving sensitive customer
According to the Pew Research Center, 77 percent of Americans own smartphones today, up from just 35 percent in 2011.
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information, which are typically excluded from general liability policies. “We have been having conversations about the future of the insurance industry,” Brad Messinger, managing director and Greater Philadelphia market leader at Willis Towers Watson, told Invest:. “With artificial intelligence and wearables like smart watches, you have to look at risk differently. There is a lot of interest in our understanding of what is going on in the insurance world and how companies can protect themselves as technology becomes more and more integrated.” In other insurance news, City of Philadelphia officials recently spearheaded an effort to offer a new insurance option that will cover the aging pipes running between their homes and the water department mains. The new plan is meant to be an improvement on the Homeowner’s Emergency Loan Program (HELP), which the city previously offered to aid homeowners in the event of a broken line. Water customers received postcards about the new insurance options in early November 2018.
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Bright future According to the FDIC, 70 percent of the nation’s 5,606 banks grew their bottom lines in Q1 2018, while the percentage of money-losing banks dropped to 3.9 percent. The FDIC’s list of banks at risk of failure fell to 92 — the lowest number since Q1 2008. While the FDIC cites the tax cuts for boosting bank earnings by about $6.7 billion (mostly for large banks), even without the sweeping overhaul U.S. banks would have seen about $49.4 billion in profits. December 2017’s tax reform has made an already strong banking industry even stronger. Today U.S. bank capital levels stand at nearly $2 trillion, putting financial institutions in a solid position to increase lending to meet future demand. Banks are prepared to offer more financing as businesses start to capitalize on the incentives and opportunities created by the new tax laws. With the recent tax cuts, regulatory reform and continued advancements in technology, Philadelphia’s banking and finance sector is poised for positive growth for many years to come.
Education: Philadelphia has a long-standing history of excellent higher education institutions. The region is home to 115 colleges and universities, and 34.7 percent of the city’s 3 million workers have earned at least a bachelor’s degree. Only 15 percent lack a high school diploma. In the 2015-2016 school year, 92,840 degrees from associates to PhD were granted in Philadelphia, making the Greater Philadelphia region fourth in the nation for degrees granted per year. This tradition continues to be strong as we move into 2019.
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Talent hub: Philadelphia’s world-class education sector has withstood recessions and industry crashes and continues to be a pillar of the local economy Education is a long-standing economic driver for Philadelphia, allowing the city to weather the storms of recession and industry crashes. While higher education is an ever-evolving industry, and kindergarten through 12th grade has its own set of challenges and opportunities, one thing remains true: education isn’t going anywhere. Lay of the land The City of Philadelphia itself contains roughly 1,580,863 people. With a population of more than 6 million, Greater Philadelphia represents the eighth-largest metropolitan area in the U.S. Its population has been growing slowly but steadily for the past seven years. Overall, residents of Philadelphia are well educated; more than 82 percent of adults over age 25 have attended at least some college, while 34.7 percent of the city’s 3 million workers have earned a bachelor’s degree or higher. Only 15 percent lack a high school diploma. The Greater Philadelphia region is home to 115 colleges and universities enrolling more than half a million students each year. This robust academic presence ranks the metro area as the fourth-largest university 168 | Invest: Philadelphia 2019 | EDUCATION
population in the country. The region also ranks number four, according to the Department of Education, in the country for the most degrees granted per year, with over 92,000 — ranging from associates to PhD — conferred in the 2015-2016 school year. The University of Pennsylvania, founded in 1740 by Benjamin Franklin himself, is the fourth-oldest university and the first educational institution in the country to offer both undergraduate and graduate programs. Funneling students into Philly’s hardy network of higher education institutions are 214 public schools operated by the School District of Philadelphia, the eighth-largest district in the country. This includes 149 elementary schools, 16 middle schools and 49 high schools. The remaining 86 public schools are independently operated charter schools. For longer than the United States has been a country, Philadelphia has had premier educational institutions, and that is a tradition the city plans to continue. Fueling talent Until about a decade ago, Philadelphia and the surrounding region experienced significant “brain drain.”
EDUCATION OVERVIEW
Tens of thousands of students were seeking degrees at the region’s premier institutions, but after graduation they were taking their degrees to find jobs elsewhere. In 2004, the nonprofit Campus Philly was created in order to manage and promote Philadelphia’s growth as a brain magnet. According to a recent report by the organization, 67 percent of students in the class of 2017 planned to stay in Philadelphia after graduation. This marks a 9 percent increase from a similar study conducted in 2010. While the city’s diverse and growing job market is a major incentive to young people to stay put after earning their degrees, Philadelphia still struggles with being one of the poorest large cities in the nation. Its poverty rate is nearly 26 percent, and almost half the city’s 400,000 poor residents live in deep poverty. These statistics have prompted city leaders to shift their education focus from alleviating brain drain to alleviating poverty. In February 2018, Mayor Jim Kenney and his administration, in conjunction with the Greater Philadelphia Chamber of Commerce, put together a citywide workforce strategy called Fueling Philadelphia’s Talent Engine, which addresses the discrepancies between the education system and the workforce in the city. “Philadelphia’s workforce, economic development and education institutions need to be better aligned with business needs,”
the report states. Kenney’s strategic plan focuses predominantly on apprenticeships, job training and adult education (primarily in literacy) to prepare Philadelphians to connect with blue-collar jobs. This program targets marginalized groups and those in poverty, as well as immigrants and “returning citizens,” or those previously incarcerated. The construction industry in particular is facing a serious labor shortage, and there is a gap between the talent that Philadelphia employers need and the skills the current workforce holds. “Middle-skills” jobs that require some education and training but not necessarily a traditional four-year bachelor’s degree are distinctly lacking in talent, and the city is hoping this new workforce strategy will help bridge that gap. In March 2018, Temple University established a workforce development initiative for North Philadelphia, thanks to a Lenfest grant of over $500,000. Temple aims to break the cycle of poverty in North Philadelphia and help revitalize the community around the university by helping residents obtain jobs with family-sustaining wages. The North Philadelphia Workforce Initiative (NPWI) will see its first phase begin in 2018. This includes extensive research of the community and its workforce needs in order to ensure that the professional development programs at Temple, along with job training and education, match these needs, creating direct career pathways.
67 percent of students in the class of 2017 planned to stay in Philadelphia after graduation.
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oundtable:
Business schools
Philadelphia’s buisness schools recognize the important link between education and entreprenurship and are focused on developing savvy future business leaders through techforward, hands-on experience in partnership with local industries.
Joseph DiAngelo, Jr. Dean Erivan K. Haub School of Business, St. Joseph’s University
In a region with so many college and universities, how does St. Joseph’s continue to stand out? Our strategic plan is to focus on industry related programs. There are 88 colleges within 25 miles of Philadelphia, and the majority of them have business programs, so that is how we set ourselves apart. We have the largest food marketing program in the country. We also have a large pharmaceutical graduate program, which is essential for being located in Philadelphia. You can find an accounting program at many of the universities in the area, but ours is integrated with SAP, which puts our graduates from that program at an immediate advantage. We have five programs ranked in the top 25 in the United States by the US News and World Report. Those programs are insurance, marketing, finance, data analytics and our EMBA Program. What synergy has St. Joseph’s University created with the City of Philadelphia? Looking at the food marketing program, for example, there are companies from all over the country that come to us to hire our students. Because we offer such specialized niche programs, our students graduate with skills that these companies won’t find in recent graduates from anywhere else. Our students can hit the ground running. We also do a lot of work with social services agencies, which helps our students start to give back to the community while they are still in school. We have multiple programs that have 100 percent hire rates after graduation. We also look at industry needs and adapt our curriculum to meet the trends in the business world. In a city like Philadelphia, if you are not on the cutting edge, you are behind. 170 | Invest: Philadelphia 2019 | EDUCATION
MarySheila McDonald Dean La Salle University School of Business
What makes LaSalle different from its peers? Experiential learning has always been in our DNA as the patron saint of our university and the Christian Brothers, St. John Baptist de La Salle, emphasized educating the head, heart and hands of students. The rapidly changing global economy presents students and graduates with a fiercely competitive landscape, and standing out can be challenging. La Salle’s School of Business has developed several unique programs designed to fast-track hardworking students in attaining the skills, knowledge, experience and confidence to prepare and differentiate themselves as they enter an increasingly competitive workplace. We just launched a new experiential learning program, the Business Leadership Fellows Program. This transformational leadership development program provides students with their own mentor, as well as valueadded experiences inside and outside of the classroom with particular emphasis on 4 pillars: Living Leadership, Active Social Responsibility, Enlightened Experiential Opportunities and Personal and Professional Development. How is technology changing the academic landscape? Technology is changing every industry, and higher education is no different. We offer a completely online MBA program, as well as a hybrid MBA option that allows students to have 50 percent face-to-face classes and 50 percent virtual classes. Whether in our MBA or undergraduate programs, we leverage the use of technology as a tool to provide convenience, enhance teaching and learning and promote strong professorstudent relationships.
EDUCATION ROUNDTABLE
Paul Jensen
Dean Drexel LeBow College of Business
How does LeBow stay competitive in Philadelphia? The key to being a successful institution is the success of your students. In 2019, we will mark the 100-year anniversary of Drexel’s co-op program, which sets students up incredibly well to succeed in the future. A critical component of the Drexel Co-op is our connection with industry. We also have curricula grounded in research, so we focus on setting up our students to be able to solve current and future business and societal issues. I believe that business education of the future is going to be more about academic and industry partnership, which is a major focus at Drexel LeBow. What are the benefits of being located in Philadelphia? You are always going to be impacted by what is happening in your region. With Drexel being located in the University City neighborhood of Philadelphia, we are centered in a place of technological influence and entrepreneurial spirit. This environment allows us to be on the cutting edge of what is happening and what is coming, and that allows us to integrate new technology and ideas into our curricula very quickly. How does technology influence your curriculum? In terms of the impact that technology is having on society and business, this is an incredibly unique time right now. For decades, technology was really just augmenting business models, but that is no longer the case. The disruption of technology in industry has huge implications, not just for business schools, but also for universities as a whole. Going forward I believe there will be less “separate thinking” when it comes to research, academics and industry engagement.
Joyce Russell
The Helen and William O’Toole Dean Villanova School of Business
What programs are seeing the most demand? Our business school is extremely selective and competitive. At the undergraduate level, we received nearly 7,000 applications for 400 spots in our freshmen class. Our finance and accounting programs have always seen a lot of demand from students due to the close relationships we have with top employers in these industries and the great ROI students get from a degree at Villanova (in terms of job placements, salaries, bonuses, etc). At the graduate level, we cater towards working professionals in our professional MBA, online MBA, Executive MBA and our specialty master’s programs in finance, accounting with data analytics, business analytics and church management. We are continually updating the curriculum for these programs to meet the changing needs of the workplace and the requests of our audience for flexible and adaptable programs. Additionally, we are making a strong push towards incorporating even more data, technology and analytics in our curriculum to further prepare students for future careers. What is your outlook for the Villanova Business School over the next 12 to 18 months? It’s a great time to be in business school, especially at Villanova, because there is so much momentum here. We are seeing tremendous growth in our enrollment, and we are attracting more women and diverse students to our programs, which is an important initiative. As we continue to redesign our curricula to prepare students for the jobs of the future they will be well positioned as lifelong learners. This will ensure that they will always be successful. www.capitalanalyticsassociates.com
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Richard Englert President Temple University
Temple University is in a great place right now. We are the only public, four-year university in the city of Philadelphia, which puts us in a unique position when it comes to serving the community. North Philadelphia, especially North Broad Street, is seeing a revitalization from a real estate side, and we are at the center of that. We are seeing more jobs and more opportunities come into the area. Not only are we a premier academic institution, but we are also a pillar in the community. Research is huge for us in all aspects of the university, as well. We have some game-changing research happening here — particularly in the brain and concussion space — that we are very proud of. Many people don’t know we are international in scope. We have a campus in Rome and a campus in Tokyo that allow students, not just from Temple but also from across the country, to have an international experience on a Temple campus. We pride ourselves on our accessibility, not just domestically, but internationally as well. Temple powers this city: one out of every seven people in this region who have a degree have a Temple degree. Our students come here to be part of Philadelphia, and they stay after they graduate. Our campus is undergoing some massive construction right now, which we believe mirrors the growth we are seeing as an institution. We are building a new library that is going to be the heart of our campus. We are making many investments in our campus and our students. Our business school was recently renovated, and along with the new library and our new science building, the renovations are reinvigorating our campus in a way that we are very excited about. Higher education has long been an anchor for Philadelphia’s economy, and we are proud of being one of the premier institutions in the city. We are the largest we have ever been, and we are excited to see how we can continue to grow and expand, as well as continue to serve the city of Philadelphia. 172 | Invest: Philadelphia 2019 | EDUCATION
The city isn’t just focused on helping adults, however. At the beginning of 2018, city leaders announced that they would be spending around $6 million to connect disadvantage youth, particularly those between ages 17 and 21 who already receive some sort of government aid, to jobs through job-readiness programs leading to fulltime employment. The program focuses on four groups of Philadelphia youths: those with previous involvement with the criminal court system, those with intellectual and/or developmental disabilities and autism, those who have aged out of foster care and those who have graduated from Philadelphia’s career and technical education healthcare programs. The program currently holds 1,000 youths, and the money has been divided across nine organizations, including CHOP and Youthbuild, to offer a variety of training and pathways. Premier destination Philadelphia has many characteristics that make it attractive to an international student seeking her education stateside. High-quality institutions aside, the city offers walkability, amazing food, cultural experiences and all the American history one could ask for. An international student seeking an urban American experience might choose Philadelphia over New York, D.C. or Boston due to the ease of getting around not just the city but the rest of the country as well. Additionally, Philadelphia was named by Frommer’s as one of the top 10 best cities in the world for green space, meaning someone seeking nature in a concrete jungle doesn’t have to look very hard. In 2015 it was reported by Expat.com that Philadelphia saw more than 41,000 international students come to the city, with 36 percent coming from China, 13 percent from India, 7 percent from South Korea and 3 percent from France. A total of 110 countries were represented. Pennsylvania is in the top 10 cities for international students according to a study done by U.S. News, which isn’t surprising considering that within a 100-kilometer radius of Philadelphia alone there are over 100 degreegranting institutions. Drexel University, located in West Philadelphia’s University City neighborhood, is ranked highly for the most international students. 17 percent of Drexel’s 21,000 undergrad enrollment is made up of international students. Temple University, with an enrollment of 33,000, on average attracts about 8 percent international students. The University of Pennsylvania has a total enrollment, both undergraduate and above, of about 22,000, with 20 percent of those students being international. 72 percent of the school’s international students are
EDUCATION OVERVIEW
enrolled in postdoctoral programs or in the MBA program at the Wharton School of Business. Welcoming such a large population of international students every year means universities have to be prepared to meet their diverse needs. While the majority of these students come to Philadelphia with the English skills needed to be accepted into degree-granting programs, some need to take intensive English courses before entering. However, enrollment in these programs has taken a sharp downturn in the last five years, with some of the smallest intensive English-language classes at Temple University seeing only 10 students. This is a trend being seen across the country. With the dollar gaining strength, it is becoming cost-prohibitive for international students to seek their educations in the U.S., especially when other English-speaking countries like Australia and Canada are more affordable. According to Forbes, the amount of international student visas dropped 40 percent in 2017 from 2015. The same study suggests that this could be due to the current political climate in the United States. There is also a different perception of the United States under the current administration, which is leading to international students as a whole feeling less welcome to study here than they have in the past. According to the Association of International Educators, in 2017 international students contributed about $37 billion to the U.S. economy, which led to the creation of almost half a million jobs. That is a significant contribution
that the country would like to see continue. While Philadelphia has a reputation for being a welcoming city to immigrants and international students, that is not the case across the country. Philadelphia is widely multicultural and a majority-minority city, making it a bit more comfortable for students who are choosing to earn a degree here rather than in their home countries. Universities in the region are working diligently to make sure that their programs are in line with the wants and needs of international students in order to make sure they continue to choose Philadelphia as their education destination.
The amount of international student visas dropped 40 percent in 2017 from 2015.
High costs Higher education is an everchanging landscape as costs rise and the availability of programs across the region increases, making schools more competitive than ever. Drexel University continues to see an increase in applications and subsequently enrollments, a trend that has been ongoing over the last few years. The fall of 2018 saw 3,600 incoming freshman submit deposits, which was a 2.5 percent increase over 2017’s recordbreaking 3,500. Of those 3,600, 3,300 are expected to actually attend, which will still be an increase from 2017’s 3,200. In 2017, the University of Pennsylvania saw 40,413 undergraduate applicants and accepted 9.3 percent. Of the 3,757 students accepted, 2,456 attended. As it is across the country, tuition is rising at Philadelphia colleges and universities. In fact, the 14 universities in Pennsylvania’s state system announced that they will be hiking tuition by nearly 3 percent
Chris Everett Domes President – Neumann University
An area we are starting to focus on more is data science, analytics and cybersecurity. This comes from feedback we have been getting from large companies in the region that our students complete internships with. There is tremendous demand for data science and analytics, with a need for workers who have an understanding of how to interpret and manage big data in their organizations. Individuals with these backgrounds can move into leadership roles quickly because there is such a need for them. We have added these programs so our students can be poised and ready for these opportunities.
Craig Carnaroli Executive Vice President University of Pennsylvania
Can you tell us about the Pennovation Center? The Pennovation Center opened a little over a year ago, and it has already seen immense success. It has been a supportive element for the people involved, and there are so many resources there. Showing people that the pursuit of knowledge outside the classroom is a part of our ethos and DNA has been really important. A strong culture is already developing there and making an impact. It is creating a community of entrepreneurs here in University City and allowing us to retain talent not export that research and innovation elsewhere. How do you stay connected to the community? Philadelphia is a top 10 city in terms of size, but we still act as a community. To succeed here you can’t live on an island; you have to be integrated. We are the largest private employer, and we are interdependent with the city. Our campus master plan is called Penn Connects because we are committed to both the internal connections on campus and how we can connect to the community around us. This is why we have developed partnerships with organizations in the city, why we are involved with the panoply of economic support organizations and why Pennovation has been successful. It is all about connecting deeply and relationships. What is your outlook for Penn moving into 2019? Penn has an amazing momentum right now. The research that is happening here, like Dr. June’s CAR-T therapy, and the people we are attracting to the university are creating an amazing trajectory for us. We are a part of some gamechanging gene therapy that was just recently FDA approved and could have a huge impact on both improving lives and the Philadelphia economy. The University of Pennsylvania and the Philadelphia higher education sector are very strong. There is a need for a larger STEM workforce, and with the quality of student we continue to attract, we can make an impact on that workforce.
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The Pennovation Center is a 58,000-square-foot business incubator and laboratory that officially opened in 2016.
for the 2018-2019 school year. This hike comes in an effort to close a nearly $50 million budget gap, with the increase helping with about $30 million. The state university system has been struggling for years with declining enrollment and budget shortfalls but embarked on an improvement plan in 2017. At the primary and secondary levels of education, Philadelphia-area schools continue to confront challenges of racial segregation, safety, funding and marginalized student populations. While not a challenge unique to Philadelphia, these challenges are things that the city faces year after year. According to the state Department of Education’s annual School Performance Profile, more than 15,000 Philadelphia
EDUCATION OVERVIEW
students attend schools that are failing. 70 percent of the children in these failing schools are AfricanAmerican, and 79 percent live in poverty. On the flip side, more than 8,000 students attend high-performing district neighborhood schools, but of these children, only 16 percent are African-American and 47 percent live in poverty. The issue comes largely from wealthier families having access to better schools, which tend to be private schools. While the racial segregation is not deliberate, families that cannot afford to send their children to private schools are faced with little option when it comes to educating their children. Cap and gown Major higher education institutions in Greater Philadelphia include the University of Pennsylvania, Temple University, Drexel University, the Community College of Philadelphia, Villanova University and more. These schools, and over 100 others located in and around Philadelphia, offer incredibly varied student populations, academic specializations and cultural experiences. Many of these educational heavy-hitters are undergoing both physical and program expansions in order to continue to enhance the quality of educational opportunities available in the region. University of Pennsylvania Founded in 1740 by Benjamin Franklin, the University of Pennsylvania (UPenn) considers itself to be one of the four oldest universities in the country and the first to offer both undergraduate and graduate studies. Since its founding, UPenn has been seen as a premier institution, not just nationally but also internationally. UPenn is well known for both its academic programs and its medical institutions. With an estimated $14 billion impact on the state of Pennsylvania and a ( )
Guy Generals President – Community College of Philadelphia
We have transformed our entire approach toward education by becoming a guided pathways institute. The purpose of guided pathways is to provide a more structured environment for students to come through. This starts from the moment they begin classes up until they enter the job market. It encourages students to think about their careers and how their academics will lead to those careers. It is more program focused than individual course focused, and we are very excited about it.
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Civic engagement How Drexel remains focused on community involvement, access to opportunity and innovative development as it promotes connectivity and quality of life
John Fry President – Drexel University
to create opportunity for those in different parts of the city who are limited by a lack of education, a lack of access to jobs, a lack of access to quality healthcare or whatever it might be. We’ve developed a whole wing of our strategy to make sure that we’re not only taking care of our students and creating opportunities for them but also working closely with leaders throughout the neighborhoods we intersect with to create opportunities for them as well.
What are some business practices Drexel has in place to support regional and economic development? Drexel is known for being the most civically engaged university in the U.S., and we view ourselves as an important extension and connector throughout not only University City but also the entire region. First and foremost we provide people the opportunity to study, to learn, to participate in co-ops, to discern what they want to do with their professional lives and to get some experience in trying out different things. That connects us to hundreds of businesses in the region where we have our students actively co-oping. We’re not here merely to create an opportunity for people who already have opportunity but 176 | Invest: Philadelphia 2019 | EDUCATION
Why is Schuylkill Yards important not just for Drexel and University City but also for Philadelphia? Schuylkill Yards is one of the things that could put Philadelphia on a globally competitive level. If you take a look at the cities around the country that have led the way and flourished economically — places like Boston, Cambridge, San Francisco, Silicon Valley — one of the things they have in common is that they are places of profound innovation and have immense opportunity for small businesses to grow. In Philadelphia, we certainly have assets that set us apart, but this will be an innovative development project that is physically fused to the leading universities in the city: University of Pennsylvania and Drexel. Because of the location’s access to our main transportation infrastructure, there is so much opportunity for development here in University City. Philadelphia was built for about 2.5 million people, and today we have only about 1.5 million people, which means we have plenty of opportunities for growth. This, along with affordable housing rates, is attractive to companies that want to bring their employees into an environment where they not only have a great place to work but also a great place to live. Philadelphia ticks all of those boxes, and the Schuylkill Yards project will only accentuate that.
EDUCATION OVERVIEW
Philadelphia offers its students access to an urban lifestyle at a relatively affordable price.
( ) daily impact of $29.6 million on Philadelphia’s local economy, UPenn is a powerful economic engine. Ancillary spending by UPenn students, patients and visitors alone is estimated to be about $279 million. The school has been seeing a great deal of expansion since 2006, with the launch of PennConnects, its campus development plan, and the acquisition of the postal properties near campus, which have been home to much of the expansion. PennConnects is a three-phase project that will extend to 2022. At present, UPenn has added over 30 acres of open space, more than 6 million square feet of new construction and almost 3 million square feet of renovated space since PennConnects launched. The first phase of Penn Medicine’s Center for Healthcare Technology was completed in December 2018. The 250,000-square-foot, 10-story building will include offices for Penn Medicine employees, as well as other functions. New College House, a new dorm for the university on 40th and Walnut streets, was announced at the end of 2017. The project is expected to cost $163 million and represents the school’s need for more student housing to accommodate its growing student body. The project broke ground in the spring of 2018 and is expected to open in the fall of 2021.
Drexel University Noted financier and philanthropist Anthony J. Drexel founded Drexel Institute of Art, Science and Industry in 1891, and the school adopted the name Drexel University in 1970. Drexel offers a cooperative education program (co-op), which allows students to gain up to 18 months of paid full-time work in their career fields while pursuing their degrees. Drexel was originally a nondegree-granting institution; however, it started granting degrees in 1914. A major driver of economic development in Philadelphia, Drexel University, in partnership with Brandywine Realty Trust, is developing Schuylkill Yards, a $3.5 billion, 14-acre development in University City that is projected to turn West Philadelphia into a hub for innovation and technology. Although it will be a 20-year buildout, the project started with Drexel Square, a 1.3-acre park at 30th and Market that wrapped up construction in 2018. On the education side, Drexel has numerous projects going on, including renovations to the Gross Anatomy Lab to update the furniture and equipment in the embalming room, set to be completed in August 2018; renovations to the existing laboratory at the Bossone Research Enterprise Center to increase usability for chemically intensive energy and energy
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Geoffrey Garrett Dean The Wharton School of the University of Pennsylvania
Traditional business school offerings like accounting, finance and marketing are foundational building blocks here. On top of that, a big focus in finance for us right now is the fintech world and the popularity of cryptocurrency and blockchain technology. That is something that you wouldn’t expect from a business school, but we think it is important to emphasize. As a second area of major focus for us in finance, we are a leader in financial investments, private equity, hedge funds and real estate trusts, both in our research and through our alumni’s contributions. While those fields are a little less traditional areas for a business school, they are traditional financial practices, which is why we think they are important to research. Our alums have done a lot to transform the industry. We also have two initiatives surrounding analytics, which is a hugely important part of everything we do at Wharton. One initiative is customer analytics — the kind of thing we see every day in how in firms are using data to customize the experience for users. We have the leading research initiative among business schools in customer analytics. The second initiative is people analytics, which is a cutting-edge concept for a business school. This initiative looks at the bottom line for organizations: the notion that organizations flourish best when the people in them flourish. This initiative digs deeper and teaches that you can use science to help people flourish. An overall trend in higher education at the moment is putting more emphasis on undergraduate business degrees. Business degrees are among the most popular degrees in American higher education. I believe Wharton defines what an undergraduate business degree looks like. We attract a focused student. The degree we offer is much more than just teaching what a balance sheet looks like. In addition to business expertise, we provide creativity, context, history, language and culture. We will continue to do that and help to define the American business degree through our all of top-rated programs. 178 | Invest: Philadelphia 2019 | EDUCATION
storage-related work, set to complete in the winter of 2018; and an expansion of the Robert and Penny Fox Historic Costume Collection in the URBN Center, which includes a new gallery, archival storage, a new classroom for costume study and HVAC upgrades. In 2012 an in-depth economic impact report was done by Econsult to assess the economic impact Drexel University has on the city of Philadelphia. The study showed that Drexel University’s impact within Philadelphia was $1.5 billion annually, broken down into three categories: operating activities generated $1.2 billion, $59 million came from capital investment and $287 million was from visitor spending. While no formal in-depth study has been conducted since, the university is confident these numbers have increased. In 2018 it was reported that Drexel was the fifth-largest employer in the city, with 12,124 employees. Temple University Temple University is a leading research institution with 17 schools and colleges, eight campuses, hundreds of degree programs and more than 38,000 students. The school has a $7.5 billion economic impact on the state and generates $4 billion in operations revenue for the City of Philadelphia. Temple University was founded in 1884 by Baptist Minister Russell Conwell. In 1907 it was incorporated as a university. Temple is a state-related university, meaning it receives state funds subject to state appropriations but is independently operated. In the summer of 2017, the Fox School of Business announced that it would be expanding to 1810 Liacouras Walk in order to accommodate the growing student population. The 77,000-square-foot expansion will include more classroom space and a skywalk to the third floor of Speakman Hall. The façade of the historic Liacouras Building will remain unaltered. The project started in August 2017 and was supposed to be completed by the 2018-2019 school year; however, at the time of print, construction was still ongoing. Community College of Philadelphia The Community College of Philadelphia (CCP) is the largest public higher education institution in Philadelphia with an enrollment of over 30,000 student annually. CCP offers more than 70 associate’s degree, academic and proficiency certificate programs. 89 percent of students are working in a job in the city within eight months of graduating. In 2018 former CCP student Hazim Hardeman was announced as a Rhodes Scholar, making him the first Rhodes Scholar to attend a community college. 76 percent of CCP’s students
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are minority students, with 50.8 percent AfricanAmerican. In October 2018 a partnership between CCP and Rutgers University-Camden (RUC) was announced offering students a more affordable path to a bachelor’s degree. This partnership will provide scholarships and other benefits to qualifying CCP students who are entering RUC. Majors and requirements have been aligned so that CCP students with degrees in liberal arts, nursing, computer science or business can move into their junior year at RUC seamlessly. Since its founding in 1965, CCP has educated over 680,000 Philadelphia residents.
Father Peter Donohue President Villanova University
Villanova University Villanova University is a private research university located in Radnor Township, a suburb 12 miles northwest of Philadelphia. Established in 1842, Villanova is the oldest Catholic university in the commonwealth of Pennsylvania and the only Augustinian Catholic university in the country. The university was incorporated in 1848 and given the ability to grant degrees. Villanova University has shot to the forefront of the nation’s mind after winning two NCAA championships for men’s basketball in 2016 and 2018. It was ranked 49th in the U.S. News and World Report’s 2019 rankings of the top 300 universities in the country. The 260-acre Villanova campus is undergoing a transformation. In June 2017 work on the renovations to Finneran Pavilion, home to both men’s and women’s basketball, broke ground. The $65 million project was completed in the fall of 2018, just in time for the new basketball season. Named after alum William Finneran, who donated $22.6 million to the project, the renovations replaced everything from floorboards to seats to scoreboards.
How is Villanova University seeing growth? Villanova’s campus is in the midst of a renaissance. There is a great deal of construction taking place that is transforming our campus, most notably the Lancaster Commons, an apartment complex that is physically connecting our campus like never before. I often say that people used to drive by Villanova, and now they drive through it. In addition to our physical growth, over the past several years, we have seen our reputation grow as well. Villanova has always been well-regarded, but now our visibility is on a wider, national level. One area in which we have seen the effects of our increased awareness is admissions. We had a record-breaking number of undergrad applicants in 2018.
La Salle University La Salle University was founded in 1863 as a private, coeducational, Roman Catholic university in Philadelphia by the Institute of the Brothers of Christian Schools and offers tradition, online and hybrid courses and programs. It was originally founded as an all-male university. The College of Professional and Continuing Studies within La Salle has three schools: Arts and Sciences, Nursing and Health Sciences and Business Administration. Nursing, education and communications are the three most popular majors. In 2017 La Salle University reset its tuition, bringing it down from $40,400 to $28,800, a 29 percent reduction. The reset was effective for the fall 2017
How is Villanova involved with the community? We have many student-run programs that encourage them to get involved and give back to the community. We have a student-run Special Olympics program in conjunction with the Philadelphia Special Olympics committee, but our students run the entire program from A to Z. They do the outreach and the fundraising, and they get the experience of organizing and planning a large event. We have groups of students who go out every Saturday to Norristown and build homes. We have a great partnership with Habitat for Humanity. Our students want to get involved in their community and give back, which is also a part of our mission. As Villanovans, we believe that we improve our own lives by improving the lives of others.
What has been the impact of the basketball wins? The championships provided an opportunity for people to look closer at Villanova — who we are, what type of community this is and what we have to offer. After both wins, traffic to our website increased significantly. It made people from across the country curious about us, which has been a huge added benefit of the wins. We saw amazing support from the city and the region as a whole.
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semester and brought tuition down to what students were paying in 2008. The driver behind the reset was to make higher education, especially private higher education, more affordable. Other institutions in the region have also reset their tuitions. “In 2015 we announced a tuition reset,” Sharon Hirsh, president of Rosemont College, told Invest:. “The first class that was able to take advantage of it was our incoming class of 2016. We were able to reduce our tuition by 43 percent, and so far we have stuck with it.” In September 2018 La Salle announced that it would receive a $1 million grant for the development of the Connelly Learning Commons. The Redevelopment Assistance Capital Program grant will support the first phase of development to transform the Connelly Library into the Connelly Learning Commons. The project is expected to be substantially completed in mid-March 2019 and fully completed by mid-April. Further phases are to be developed over coming years. “La Salle is making interesting progress,” Steve Melick, executive director at the La Salle Center for Innovation & Entrepreneurship, told Invest:. “We are beginning to integrate topics in innovation and entrepreneurial thinking into existing, traditional class topics rather than separating entrepreneurship as an independent discipline. In one example we are seeing biology students use their technical understanding to explore new business and market opportunities for commercial research. Prior to this engagement, these same biology students typically have little interest in business or an understanding of connecting the two topics.”
West Chester University Located 25 miles west of Philadelphia in Chester County, West Chester University (WCU) is the largest of the 14 Pennsylvania State System of Higher Education (PASSHE) schools. Established in 1871, the school became commonwealth owned in 1913. West Chester University has roughly 17,000 students with a little over 14,000 undergrads and roughly 2,600 graduate students. The U.S. News and World Report ranked WCU 61st in the Master’s Universities (North) category in 2017. WCU has seen a 30 percent increase in enrollment over the last decade and is now the fourthlargest academic institution in the Philadelphia region. In August 2018, WCU started construction on the Sciences and Engineering Center and the Commons. This center is a $130 million project, will be the university’s largest academic and service building at 175,000 square feet. Construction is expected to be completed by the fall of 2020.
In Philadelphia, where higher education thrives, K-12 has struggled.
K-12 In Philadelphia, where higher education thrives, K-12 has struggled. Government officials believe that unless there is a major shift, the School District of Philadelphia could be in $700 million worth of debt by 2022. In April 2018, Mayor Kenney appointed a new school board, with the nine new members overseeing Philadelphia public schools. Their approximately $3 million budget started in July 2018. In September, it was announced that the school board would receive two new members, both high school students. Alfredo Practico, a 17-year-old senior at Masterman High School, and Julia Frank, a senior at Northeast High
Deborah Diamond President – Campus Philly
Talent is a huge economic driver in Philadelphia. That is how we fuel economic growth for the city, by helping to recruit and retain talent in the region. We are home to so many world-renowned higher education institutions, but up until recently talent was an export industry for us. Talent is a resource that you need to mine, cultivate, engage and invite, otherwise it will not stay and fuel your economic growth. That is something Philly has put a lot of effort into, and it’s part of our mission as a company.
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School, were added to the Board of Education as voices for the student population in the city, an important factor missing from the board. Funding is a major issue for the School District of Philadelphia, which had to close 23 schools in 2013, but officials can’t seem to agree where the funding should come from. The school district has received money from the state in the past but cannot rely on state funding to stay afloat and provide the children of Philadelphia with a quality education. Mayor Kenney has made it clear he believes that for the school district to thrive, the funds need to be provided by local means. His proposed budget for 2018-2019 had three main ways for the school district to see $20 million more a year, in addition to the $104 million budgeted last year. The first source of funding in the mayor’s plan is raising the property tax in the City of Philadelphia by 6 percent. The mayor has estimated that this would generate $475 million for the school district while only showing up as a $95 increase on the homeowner side. This idea was backed by the idea that property in Philadelphia has seen a value increase of 11 percent in the last year. However, even though Mayor Kenney amended this proposed raise to only 4.5 percent, it was not accepted by city council. The council’s proposed budget scrapped the property tax increase entirely. The mayor’s second source of funding was an increase to the real estate transfer tax from 4.1 percent to 4.5 percent. Currently the city receives 3.1 percent of that revenue, while the state receives 1 percent. Mayor Kenney estimated that this increase would generate $66 million for the city over the course of five years. City council agreed to raise the real estate transfer tax to 4.278 percent, with a homestead exemption of $40,000. The third proposal from Mayor Kenney was to slow down wage tax reductions. In 2017 it was announced that the city wage tax would be lowered gradually from 3.89 percent to 3.69 percent over the next five years. City council voted to move forward with this proposed idea, which still sees the wage tax decrease over the next six years, but only from 3.89 to 3.84 percent. This will generate an estimated $340 million for city public schools by 2023. Charter schools Another popular choice for K-12 schooling in Philadelphia is charter. The city is home to 87 charter schools serving roughly 70,000 students. Charter schools are an alternative to public and private schools. They are government funded but act independently of the state school system in an example of public asset
Christopher Fiorentino President West Chester University
Where is West Chester University seeing growth? Biomedical engineering is a huge area of potential for this region, so we are especially excited to take the lead with the approval of a biomedical engineering major. By applying biology and science methodologies with engineering principals, students will have numerous opportunities in a field where the U.S. Bureau of Labor and Statistics projects a 23 percent growth in the number of biomedical jobs needed by 2024. With additional classroom and student workspaces, the university has also extended its campus to Philadelphia. By collaborating with other state system universities, WCU has a space specifically for adult students who prefer the convenience of a city campus that is near their place of employment. At Pennsylvania’s State System of Higher Education at Center City Philadelphia, WCU offers undergraduate degrees in business management, nursing and social work, as well as graduate degrees in criminal justice and social work. Beginning in the fall of 2019, we will offer public administration. Being part of the city is very important to us as a state system university. We are happy to offer programs to students who are looking for opportunities through West Chester University.
How does West Chester University act as an economic driver for West Chester and Chester County? The university has seen consistent enrollment growth over the past few years, and combined with the hiring of more faculty, this has brought additional people to the area to live. This is coupled with the fact that we are close to downtown, so WCU students and faculty patronize a number of businesses. In fact, West Chester has been recognized as one of the top college towns in America, as well as one of the best places to settle after graduation.
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oundtable:
Higher ed instutions and medical facilities are some of the largest employers in the country. Philadelphia is renowned for its robust meds and eds sector, whose anchor instituions are developing future industry workers.
Meds in eds Jay Feldstein President Philadelphia College of Osteopathic Medicine
We have a long-standing history — not only in the region but also nationally — in terms of our graduates going into primary care. 60 percent of our graduates go into primary care. With such a high concentration of highly reputable medical institutions in the region, we have been able to develop strong clinical affiliations with many of the hospitals in the area. Our location and our affiliations offer a unique opportunity for students to really immerse themselves in the medical community and culture. PCOM is the osteopathic medical school with the largest number of graduates actively licensed in the U.S. — well over 7,000. We turn out a majority of primary care physicians. We also believe in integrated care, so we offer psychology programs at the master’s and doctorate levels. We have psychologists in our community-based Healthcare Centers, delivering mental health right at the pointof-service. The centers are based in urban and rural areas, where populations are largely underserved, giving our students exposure to diverse populations with myriad health needs. Innovation is huge for us, particularly with regard to education. Our Saltzburg Clinical Learning & Assessment Center is a facility for our students to learn and practice their clinical skills in a variety of simulated environments with a variety of robotic and virtual simulators. We’ve also launched the PCOM Science and Math Summer Academy, an intensive program for African-American and Latino high school students with an interest in science and medicine. It’s a concerted effort to address the lack of diversity in healthcare. And we’ve launched the Primary Care Innovation Fund, which is dedicated to investing in biomedical devices, software and other products and services that can help physicians with the prevention and treatment of chronic diseases. 182 | Invest: Philadelphia 2019 | EDUCATION
EDUCATION OVERVIEW EDUCATION ROUNDTABLE
Dr. Micheal Mittelman President Salus University
Salus University leverages technology wherever it makes sense. For instance, we just transformed our optometric clinical skills lab into a state-ofthe-art facility that is truly an incredible addition to our optometry program and the entire Salus campus. The lab has all of the equipment we want our students to become familiar with before they graduate and start their practices, including a virtual reality lab for teaching our optometry students how to look into the eye with various instrumentation. The virtual reality lab allows us to train in a way we were never able to before, and because everything is digitized, we can show students every possible pathology they might come across, even rare eye diseases and conditions. It allows our students to be prepared for anything when they go out into the field, and we think they will be better doctors because of it. We also just renovated our College of Education and Rehabilitation’s (CER) life skills lab, which is used by our Occupational Therapy (OT), Blindness and Low Vision Studies (BLVS) and SpeechLanguage Pathology students. This has been an amazing enhancement to these programs. The life skills lab is where our CER students work with patients with issues ranging from hand injuries to amputees to stroke victims, teaching them how to do everyday things we take for granted. The lab has a bedroom, a kitchen, a shower — anything you can think of — and it allows our students to help these patients assimilate into everyday life. Technology is incredibly important to the advancement of education, especially in the programs we offer here. All of our new classrooms also integrate the latest technology, allowing students to view lectures on their personal devices in real time, as well as reviewing these lectures on their own time.
Dr. Larry Kaiser President & CEO Temple University Health System
We are rated number one in the country for lung transplants, which is something we are very proud of. Our lung center has shown immense success in the region in terms of lung disease, which is where that transplant program came from. Technology is something that has really helped us stand out. A spin-out company from our lung center that is making a huge impact is HGE, an app that allows patients to put in their data for the day, and it can be immediately seen by our doctors. This allows doctors to make immediate changes in a patient’s medical regime. The app’s significance has been validated now by 2,000 patients with an 80 percent compliance rate. That is a way in which we are leveraging technology to offer our patients the best care possible. We’ve grown our heart failure program, and, in particular, our program in pulmonary hypertension. We’re the biggest program in pulmonary hypertension on the East Coast. Research is a large focus for us being an academic medical institution and a place where we really excel. We received a total of $109 million in NIH and other funding last year, $91 million in NIH funding alone. We also propelled the University into the highest Carnegie classification for research, the Carnegie tier one, which means we are in the top 4 percent nationwide. We are located in North Philadelphia, which is one of the poorest areas in the country, and we continuously provide outstanding service to an underserved population. Philadelphia does not have a public hospital, so in many respects we are the de facto hospital for the community of North Philadelphia. Service to the community has always been a major focus for us. This past year, we added a federally qualified health center that sits right in the front lobby of the hospital. This allows us to better serve our patients.
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privatization. The School District of Philadelphia’s Board of Education is supported by the Charter Schools Office as an authorizer to make sure that charter schools are held to the same academic standards as the public schools in the city. In 1997 the Pennsylvania Charter School Law was enacted to allow local boards of education to establish new charters. In 2010 the School District of Philadelphia announced the Renaissance Initiative, which today is a part of the System of Great Schools. This plan is to ensure that all students have access to great schools and education close to their homes. The Renaissance Initiative and the System of Great Schools is working on transforming schools with academic and climate challenges, both public and charter. The Renaissance Initiative started with seven schools; however, it grew to 21 in the 2017-2018 school year. While a popular alternative to public and private schools, charters remain a polarizing subject in Philadelphia and across the country. Studies have been conducted to assess the fiscal impact of charter school on the city. The School District of Philadelphia pays a tuition for each student that attends a charter, a cost that is similar to the per-student allotment public schools receive from the school district. However, for every child who attends a charter school, that is money being taken away from the public schools. In a study done by Research for Action, the fiscal impact of charter schools in six Pennsylvania school districts was assessed. For Philadelphia this impact is less than $5,000 per student, which is less per student than was estimated in 2012 (about $7,000 per student) but is still no insignificant
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cost. There are many benefits to charter schools in Philadelphia, but they do not eliminate the financial struggles K-12 schooling faces — especially when it comes to funding — in the city of Philadelphia. Looking ahead In 2017, Philadelphia was named one of the country’s 17 “Talent Hubs” by Indianapolis-based Lumina Foundation. This designation recognizes cities for creating an environment that attracts, retains and cultivates talent, particularly among people of color and those living in poverty. As part of the accolade, Philly received $350,000 in grant funding over 42 months to support local efforts to educate more people and better meet the needs of its residents. “Philadelphia has so much to offer in terms of resources and networking,” Donna De Carolis, dean and Silverman Family Professor of Entrepreneurial Leadership at the Drexel Close School of Entrepreneurship, told Invest:. “More innovation centers and incubators are popping up, and there is a thriving ecosystem in place.” This and other initiatives are helping to bolster Philadelphia’s longstanding history of offering its residents — and the world — outstanding educational opportunities. The city’s economic landscape will continue to be fueled by the region’s academic offerings, an industry that thrives when others fail and remains steady year after year. Despite challenges of increasing costs and an uncertain political climate, Philadelphia is poised to remain a top destination for people seeking to improve their minds and expand their careers.
Tourism, Arts & Culture: Whether it is American history, world-renowned art, award-winning dining or a business trip, Philadelphia has something for everyone. 2018 was an amazing year for tourism in Philadelphia, and 2019 is shaping up to be no different. As more hotels are added to the market, the city will be able to accommodate more visitors than ever before. With tourism and hospitality such huge contributors to Philadelphia’s economy, investments in the industry are constantly being made to spur local growth.
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Tourism, Arts & Culture in numbers: Phliadelphia Domestic Visitation by Quarter:
15
+1.9%
0M %
1M 12.8M 13.1M1
13.1M +13.1M
Millions
6
9.5M
+6.8% 6.6M
Philadelphia Growth
+6.3%
12 9
Phliadelphia vs. National Growth (1997-2016):
10.1M
7.0M
3 0
Overnight domestic leisure
101%
visitation growth
(Region)
Tourism employment growth 2016
20187. Q1
2016
20187.
Q2
2016
20187.
2016
Q3
46% (Region)
31%
42%
20187.
Q4
Tourism sales growth
77% (Center Ctiy)
Direct Visitor Spending by Category, 2017:
27%
25%
Food & beverage $1.9 billion
Lodging $1.8 billion
$7.1 billion TOTAL 1% Other $71 million
15%
11%
Retail $1.1 billion
Recreation $786 million
21% Transportation $1.5 billion
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National Growth
36%
TOURISM, ARTS & CULTURE OVERVIEW
State and Local Tax Revenue Generated by Visitors, 2017: Income, Business & Property Taxes
Consumption Taxes
$140M
$339M
City of Philadelphia
$197M
$130M
$132M
$116M
$16M
$479M
Commonwealth of Pennsylvania
$938M
Total State & Local Tax Revenue
$459M
Greater Philadelphia
$327M
Suburbs
Tourism is a revenue generator and supports priority public services, including public safety, transportation and education
Hotel Market Mix, 2017 (Center City Hotels):
31%
32%
Commercial
Groups & Conventions
3.3 million ROOM NIGHTS
4% Airlines & government
33% Individual leisure
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Unique offerings: Philadelphia’s tourism industry, bolstered by the city’s rich history, diversity and creativity, continues to break records and wow visitors From the Continental Congress and the Constitutional Convention to more modern and recreational draws, Philadelphia is a city that attracts people for a variety of reasons. Whether you like history, art, dining, shopping, the outdoors, multiculturalism or all of the above, the City of Brotherly Love has what you need. From the enduring landmarks in the city’s iconic Old City, including Independence Hall, the Liberty Bell, the first post office and Ben Franklin’s print shop, the Betsy Ross House and much more, to a host of museums, including the Philadelphia Museum of Art (which was famously featured in the film “Rocky,” giving it extra significance for movie buffs), the city is jam-packed with history and culture. In addition, Center City offers the big-city glamour of skyscraperlined avenues crammed with shops, restaurants, bars and clubs. In November 2015, Philadelphia became the country’s first World Heritage City, and with the reopening of LOVE Park in 2018, there are myriad reasons to come discover what there is to LOVE about the city. “The World Heritage City designation is a distinction that confirms the uniqueness of Philadelphia,” Greg 188 | Invest: Philadelphia 2019 | TOURISM, ARTS & CULTURE
DeShields, executive director at PHL Diversity, A Business Development Division of the Philadelphia Convention and Visitor’s Bureau, told Invest:. “The designation serves to help people understand the architectural history of the city and the significant cultural heritage that is here. It backs us up when we say that we are the birthplace of democracy and such a city of firsts.” Breaking records The strength of Philadelphia’s tourism industry can be confirmed by taking a walk past the city’s many landmarks and observing the gaggles of smiling tourists snapping photographs and patronizing local businesses, but the numbers tell a similar story. The Philadelphia region, which consists of Bucks, Delaware, Chester, Montgomery and Philadelphia counties, attracted 43.3 million domestic visitors in 2017. This figure marks another record-breaking year and is up 3 percent from 2016’s 42 million tourists. The biggest international tourist sources include Canada and Mexico, with 502,000 and 23,000 visitors, respectively.
TOURISM, ARTS & CULTURE OVERVIEW
2017’s 43.3 million domestic visitors spent a whopping $7.1 billion during their time in the city. This spending is estimated to have had an economic impact of $11.5 billion on the five-county region and also generated $938 million in state and local tax revenue. 98,300 jobs that focus on serving tourists were also supported by this record number of visitors. Despite a temperate climate that threatens to dull the city’s attraction during the cooler parts of the year, in 2017 Philadelphia achieved consistent year-round tourism — a true testament to its allure. 88 percent of these visits were for leisure purposes, not just people who had to be in the city for business. Hotels in the cosmopolitan Center City area booked a record 1.1 million leisure rooms in 2017 — an 8 percent increase over 2016. Hotels in the area experienced occupancy rates of 82 percent and 90 percent on Friday and Saturday nights, respectively, which serves as a litmus test of the city’s status as a leisure destination. As good as these figures may be, the city isn’t simply resting on its laurels. Efforts to further improve tourism in 2018 include a Google Destination Content Initiative to improve the city’s presence in search results and enhance the quality of Philadelphia tourism information available online. Area hotels were also provided with workshops to help them bolster their online profiles as part of the initiative. In addition, the city’s successful bid, spearheaded by the Global Philadelphia Association, to be designated a World Heritage City is expected to provide a projected 15 percent increase in foreign tourism and generate an additional $150 million in economic impact.
Recent tourism-minded infrastructural improvements include American Airlines’ addition of numerous new international and domestic flights to and from Philadelphia International Airport and comprehensive upgrades to SEPTA’s rail system. Enticing visitors In 2016, the Pennsylvania Tourism Office christened a new slogan and logo for the Keystone State. The slogan, “Pennsylvania. Pursue Your Happiness,” was an appeal to potential visitors’ patriotism and virtuous aspirations. Happiness is widely held to be one of the main aims of a good life among laypeople and philosophers alike, and state officials hoped that equating this virtue with a visit to the state would entice tourists. In addition, the slogan is intended to resonate with core American values by conjuring up the Declaration of Independence’s famous refrain about “life, liberty, and the pursuit of happiness.” Of course, some of the credit for Philadelphia’s success with tourists is also owed to local initiatives. Visit Philadelphia, an organization that markets to domestic leisure travelers, launched its “Homesick Philly” campaign in 2018, which hopes to capitalize on the nostalgia former residents have for Philly. The new campaign was launched in response to a survey in which 1.5 million of the city’s social media followers, many of whom were former residents, mentioned a longing for the city’s unique personality. A special focus of Homesick Philly is the city’s dining options, capitalizing on the fact that 81 percent of leisure travelers to the city come for its food. Visit Philadelphia is also continuing with its “With Love,
In 2016, the Pennsylvania Tourism Office christened a new slogan and logo for the Keystone State.
Thom Collins Executive Director & President – The Barnes Foundation We have made great strides in digital curation, which is central to our efforts to engage audiences in new ways. In general, the perception remains that visual art institutions are elitist and inaccessible, and we want people to realize that simply isn’t the case — especially here at the Barnes. Everything we do here breaks down those barriers.
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Larry Korman President AKA Hotel Residences
How does AKA set itself apart in the competitive Philly market? We set ourselves apart by being a balance of hotel stay and long-term residence. We are a blue ocean between the daily stay of a hotel and the annual lease of an apartment. People stay with us because we offer the comforts and amenities of a luxury condominium coupled with the intimacy of a boutique hotel. The bed and bath are like a five-star hotel, but you also have a kitchen, a living room, a washer and dryer that fills the need that a residence versus a room would fill for a longer-length stay. Why is Philadelphia an important market for AKA? Philadelphia is our birthplace and our home. We just celebrated our century mark, and even though we are in other major markets, we bring Philadelphia with us to all of them. For example, our coffee, vodka and wine are all locally sourced products made for AKA. We use a Philadelphia roaster, a Philadelphia winery and a Philadelphia distillery, and these are the products you will find in New York, Los Angeles and London. There is a Philadelphia style in the way that we operate. Philadelphia is a part of our branding. How would you characterize your typical Philadelphia guest? Our demographic in Philadelphia differs from the type of guest we see in Los Angeles and New York. In those other markets we see a lot of production companies and actors, but since Philadelphia has less of that industry represented, we see more people associated with CHOP, Penn and Drexel. It is more corporate based. We see a lot of athletes come through here and make Philadelphia their home. We still draw a lot of celebrities when they are in Philly because we offer anonymity in addition to assuaging their desire for cache.
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Philadelphia XOXO” campaign, which is centered on the meaning of the city’s name (the City of Brotherly Love and Sisterly Affection) and the “We Got You” travel series hosted by Tarik “Black Thought” Trotter of The Roots, the latter of which accrued 10 million views in just four months. Finally, a number of local openings and new offerings in 2018 are expected to bring even more people to the area in 2019. Fashion District Philadelphia, which is nestled in a prime location near the Reading Terminal Market, Philadelphia Convention Center and the city’s largest regional rail hub, is a shopping hub consisting of 838,000 square feet of retail, dining and entertainment space. The internationally renowned Penn Museum at the University of Pennsylvania is also set to undergo renovations to approximately 75 percent of its gallery space to improve visitors’ comfort and quality of life. Finally, The Bourse, a former exchange building located in Old City, a stone’s throw from Independence Hall and the Liberty Bell, will be reopening as The Bourse Marketplace, an artisanal food court featuring ethnic fare by local chefs. D.C.-based firm MRP purchased the building two years ago and is spearheading the $40 million renovation with BLT Architects. Heads in beds A series of high-profile hotels have opened in the city in 2018 or are scheduled to open in 2019, adding 1,902 new rooms to accommodate the ever-growing tourist crowds. To some in the hospitality industry, this increase in supply can be a double-edged sword. “Philadelphia is seeing a lot of new inventory come on board over the next year or so, and that is something we always pay attention to,” Jay Dellavecchia, general manager at the Westin Philadelphia, told Invest:. “However, the supply is coming on because the demand is there, and that is a huge positive for the city.” “A unique challenge that we are facing in Philadelphia’s hotel industry is the amount of supply that we have coming into the city, with an expected increase of 20 percent over the next three years,” Michael Roberts, general manager at the Windsor Suites, told Invest:. “The positive side of the story is that we hope the increase in rooms available in Center City will help to accommodate large conventions needing more rooms available within proximity to the Convention Center. Overall, the increase in demand across all segments — including corporate, convention and leisure business — helps to mitigate the effects that hotels across the city feel as the supply of available rooms increases.”
TOURISM, ARTS & CULTURE OVERVIEW
Larry Dubinski President & CEO – The Franklin Institute
At the Franklin Institute, we believe we have two main jobs: one is to inspire the next generation to develop a passion for science, technology, engineering and entrepreneurship, and the second is to present people with the facts they need to make informed decisions in their everyday lives. Through our programming, permanent exhibits, youth programs, traveling exhibits and the Philadelphia Science Festival we believe we have the ability to succeed at this. The city of Philadelphia supports and fosters our mission to inspire that passion in the residents and visitors who come to see us.
The 15-story Cambria Hotel in Center City is now open and boasts a restaurant on the ground floor, a lounge on the roof and a fitness center in the middle. The ROOST Apartment Hotel extended-stay brand opened its third Philadelphia location, which is situated in a 23-story building featuring studio, one-bedroom, two-bedroom and penthouse units. The unique brand Lokal opened a Fishtown location, providing its signature “invisible service,” consisting of concierge service without a front desk or other trappings of traditional hotels that allow guests to feel like locals while staying in their apartment-style one- and twobedroom units. “Our location is second to none,” Jerry Rice, general manager at the Cambria Hotel Philadelphia Downtown - Center City, told Invest:. “Situated at the epicenter of Philadelphia, just three blocks from City Hall and minutes from top dining, popular retail shops, and unique cultural and historical attractions, the hotel is the ideal destination for those who want to experience the best of Philadelphia, whether they’re visiting for business or leisure.” An exciting planned opening is the Four Seasons location in the new Comcast Technology Center — the city’s tallest building. The hotel’s sky lobby is situated on the top floor, and from there guests can visit the spa, fitness center, pool and luxury restaurants or simply retire to their luxurious accommodations. Pod, the micro-hotel pioneer, will be opening a Philadelphia
location by the fall of 2019 in an 11-story building near Rittenhouse Square, featuring a rooftop greenhouse bar with a retractable roof and a gourmet coffee bar. The Rittenhouse, an elegant 118-room hotel also located on Rittenhouse Square, is nearing the completion of its $20 million overhaul, which promises to make the stately hotel even more luxurious. “Location, service and amenities are the biggest draws when it comes to bookings for us. We are a city hotel, but we behave like a resort,” Reginald Archambault, general manager of the Rittenhouse Hotel, told Invest:. “You can just stay in the hotel the entire time if you wish, but right outside our doors is Rittenhouse Square and all of the offerings of Center City, from shopping to dining to art and history. We attract both leisure and business travelers to the hotel, with more leisure travelers in the summer. Leisure amounts to 60 percent of our bookings, but on any given day we could have a few larger groups in the hotel as well.” These are just a few of the most exciting highlights, and several more hotels across the city are under construction or renovation with plans to serve guests in the near future.
An important segment of Philadelphia’s lodging sector is the burgeoning homesharing market.
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Sharing economy Another important segment of Philadelphia’s lodging sector is the burgeoning homesharing market, including platforms like Airbnb. Philadelphia legalized ( )
TOURISM, ARTS & CULTURE INTERVIEW
Valuable growth How the Philadelphia Convention and Visitors Bureau is helping to attract visitors, promote conventions and develop local business across industries
Julie Coker Graham CEO – Philadelphia Convention and Visitors Bureau
From where is Philadelphia seeing the most overseas visitors? We are a very popular Northeast destination for overseas travelers. In 2017 we welcomed 648,000 overseas visitors, not including visitation from Canada and Mexico, which is handled by our partners at Visit Philadelphia. Overseas visitation in 2017 generated $1.1 billion in economic impact to the city. The United Kingdom is our strongest market and continues to grow. China is our second-largest market, and that is without a nonstop flight between Philadelphia and China, which is really amazing. We are also starting to see gains in more emerging markets like South Korea (up 18 percent), Brazil and Australia, which is also exciting. In January 2017 we opened our Nordic region office to coincide with new airlift between Philadelphia and Iceland. How does the CVB attract meetings and conventions to Philadelphia? One of the major questions we ask is: how do we leverage the assets of our knowledge economy to bring and attract conventions to the city? We have such strong local connections with the chamber of commerce, the Center City District and other amazing organizations around town, and we are able to bring these assets to customers so that they can enhance the programming they want to bring to Philadelphia. When you combine our knowledge capital with the ability of the Pennsylvania Convention Center to flawlessly execute events, Philadelphia provides an incredible attendee experience. Additionally, our convention center is located right in the middle of Center City, so all of Philadelphia’s best assets are within a few steps. When people come here for conferences or conventions, they are immersed in our city’s vast array of experiences and can easily combine business with leisure.
How do the business development divisions of the PHLCVB benefit the community? The three business development divisions at the Philadelphia Convention and Visitors Bureau are centered around some of our city’s most compelling strengths: Diversity, Sports and the Life Sciences industry. PHL Diversity, PHL Life Sciences and PHL Sports collectively work in partnership with our talented sales team to secure meeting, convention and event business within these key verticals. We are the only CVB in the country that has a life sciences business development division, and we were one of the first to have a division focused on diversity. Each business development division has its own advisory board. Whether a customer is looking for speakers at their convention, content for their conventions or even local sponsors, we are able to make valuable connections through these three divisions.
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Market voices: Tourism
Meryl Levitz
Former President & CEO VISIT PHILADELPHIA®
There is a very symbiotic relationship between more tourists visiting the city and more people moving to the city. A few developers have said that what gave them confidence to build first-class housing in Philadelphia was seeing tourists out in the restaurants at night and walking around different neighborhoods. Conversely, when tourists see residents walking their dogs or sitting in restaurants with their children, it gives them the confidence to be out walking and exploring as well. They really feed off each other and give each other momentum. The tourist economy and the resident population in Center City are growing at the same time.
It wasn’t that long ago that Philadelphia was at a crossroads. The city had to decide what it wanted to be and how it was going to get there. We have worked hard — at the convention center and across the region — to change that culture and mindset to fuel the potential success of tourism in this area. Now, as the Convention Center celebrates its 25th year of driving the regional hospitality economy, our customers and visitors realize there is a great cultural experience in Philadelphia. We need to keep building on that success.
Ed Grose
Executive Director Greater Philadelphia Hotel Association
John McNichol
President & CEO Pennsylvania Convention Center Authority
There is a 15.5 percent hotel tax in the city. 7 percent of that is standard sales tax, but 8.5 percent of that is hotel tax that goes to fund other vertices of the tourism industry. Part of the revenue from that tax goes to help pay for the Convention Center, while some of it goes to funding Visit Philadelphia and the Philadelphia Conventions and Visitors Bureau. We have a heavy influence on how these organizations market the city. We work very closely with Visit Philly and the CVB; they are our marketing agencies, and we sit on their boards.
As the official visitor center for the Greater Philadelphia region, we view ourselves as the starting point for visitors when they arrive in the city. Visit Philadelphia and the Philadelphia Convention and Visitors Bureau market the city both domestically and internationally for leisure tourism and conventions. The Convention Center hosts the conventions, and we are here for the visitors when they have questions and need help planning their visits. The building opened in 2001, and last year we had 2,725,000 visitors. We exceeded our average by a healthy 200,000-plus in a slower convention year.
194 | Invest: Philadelphia 2019 | TOURISM, ARTS & CULTURE
James Cuorato
President & CEO Independence Visitor Center Corporation
TOURISM, ARTS & CULTURE OVERVIEW
( ) and began taxing Airbnb in 2015, making it the largest city where residents can legally rent out their properties by the day, which has been a financial boon for the city, guests and property owners. It has also been a challenge to traditional hotels. In fact, Airbnb listings now account for 14 percent of available listings in the city’s downtown core area, with 3,000 listings available on average every day. However, they have an average daily occupancy of 52 percent and daily rates of $143 — putting them well below traditional hotels’ occupancy and average rates of 78.2 percent and $190, respectively. The takeaway is that traditional hotels remain strong, while Airbnb is performing well in catering to its niche of previously underserved markets looking for off-core accommodations and cheaper alternatives. Hospitality boosts Hotels in Center City Philadelphia had 1.1 million leisure bookings in 2017 — a record-breaking performance that is up a staggering 334 percent over 1997’s 254,000 bookings. $7.1 billion was spent by these tourists in Philadelphia in 2017, and a quarter the average visitor’s total spending was on lodging. In response to this staggering demand, investment in hotels is up, with 10 new hotels opening in Philadelphia between 2017 and 2018 and more on the way. Of note is Marriott International’s plans to open a Fairfield Inn in Broomall, Delaware County. This new hotel is special because it is the first ever to open in Delaware County’s Maple Township — a sign that the demand for lodging is not only expanding in downtown Philadelphia but also in other parts of the five counties that comprise the region. Partnerships in the city are also helping to boost the hospitality industry. “We work very closely with both major tourism organizations in Philadelphia to drive hotel occupancy, PHLCVB and Visit Philadelphia,” Daniel Miller, director of sales and marketing at the Warwick Hotel, told Invest:. “We participate in promotions, trade shows and client events with them, as well as target specific time periods in which business levels are soft. Visit Philadelphia focuses on markets to promote leisure tourism whereas the Convention and Visitors Bureau works to attract groups and meetings. As a Philadelphia hotel, it is extremely important for us to stay fully engaged with both of these organizations.”
For other hotels, it is finding a niche — like weddings. “We see the typical business and leisure travelers, but one of our biggest draws to the Bellevue is the ‘Bellevue Bride,’” Pina Purpero, general manager at the Bellevue Hotel, who will soon be locating to Washington, D.C., told Invest:. “We have women who come to look at the venue for their weddings, but they already know they are going to get married here because their mothers got married here and so did their grandmothers. “The Philadelphia market is busy at all times,” Justin Nels, general manager of Le Meridian, told Invest:. “We see a lot of international travelers, and tourism is a yearround industry. We have done quite a bit of renovations over the last year or so, which has really increased our ability to handle weddings and events. We see about 40 weddings a year, and we are looking to expand that.” Some hotels have found significant success by increasing their web presence. “Our recent renovations have led to an increase in our online reputation, which furthers our ability to push our annual daily rate,” Carl Brown, general manager, at the Hampton Inn Philadelphia Center City Convention Center, told Invest:. “We have seen rate growth as our online reputation grows. We are seeing positive feedback from both a service aspect and a product aspect, which is very important to us.” Another interesting boost to hotel bookings in Philadelphia came in the form of a sports championship. When the Philadelphia Eagles made their successful playoff run in Super Bowl LII and defeated the New England Patriots, the city’s hotels scored their own win. The boost went beyond the big game itself, too; during the entire playoff season, hotels in the city sold 12,573 more rooms than they did during the same time in 2017, amounting to $3.3 million in additional revenue.
Hotels in Center City Philadelphia had 1.1 million leisure bookings in 2017.
Cultural attractions In a city that has been around as long as Philadelphia and remained an attractive destination the entire time, a number of unique cultural attractions haven taken root, creating a unique tourist mecca. Independence National Historical Park Perhaps the most iconic and one of the biggest draws to Philadelphia is the Independence National Historical
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TOURISM, ARTS & CULTURE OVERVIEW
Park, a mall housing some of the city’s most important Revolutionary War-era monuments. The park is home to Independence Hall (a UNESCO World Heritage Site), the President’s House (from back when Philadelphia was the nation’s capital), the Liberty Bell and Franklin Court (the site of Benjamin Franklin’s house, the still-operational first post office and a Benjamin Franklin Museum). The Independence Visitor Center is also located nearby to help tourists plan their activities in Philadelphia. The Independence Visitor Center was built in 2001 and is the most visited venue in southeastern Pennsylvania, welcoming almost 3 million visitors in 2017 alone. In 2016 it was announced that the Visitor Center would undergo a $15 million renovation. The first phase of the renovation was completed in May 2018 and included an expansion of the gift shop, the Visitor Center’s top revenue generator; an expansion of the second floor; the addition of digital display boards; and an outdoor area. The second phase of the renovation is currently underway. In 2016, 5.1 million visitors spent $296.3 million in communities surrounding the park. That spending supported 4,600 jobs in the area and generated a local economic impact of $439.6 million. Philadelphia Museum of Art The Philadelphia Museum of Art (PMA) was originally chartered in 1876 for the Centennial Exposition in Philadelphia. The original museum building was completed in 1928, and since then the museum has expended to multiple annexes, including the Rodin Museum, also located on the parkway. In 2017 the PMA saw almost 800,000 visitors, putting it in the top 100 most visited art museums in the world. Based on gallery space, the PMA is also considered one of the largest museums in the world with a collection size of 240,000 permanent pieces. According to the museum’s annual report, PMA had a total unrestricted operating revenue of $59.5 million in the 2017 fiscal year, which was up 0.5 percent from 2016. The PMA is as much a piece of iconic art as the exhibits it houses. Before spending hours inside the huge building, many visitors enjoy running up the museum’s steps in Rocky’s footsteps. 2018 marks the first full fiscal year in which PMA was under construction for the Core Project, a $196 million, three-and-a-half-year renovation that aims to address the museum’s infrastructure needs and revamp the landmark building by removing the auditorium and updating 90,000 square feet of historic public space. The Core Project is ultimately designed to improve and enhance visitor experience. 196 | Invest: Philadelphia 2019 | TOURISM, ARTS & CULTURE
The Philadelphia Museum Art is an iconic landmark at any time of year.
The Barnes Foundation Established in 1922 in Merion, the Barnes Foundation now sits on the parkway with the Philadelphia Museum of Art. The Barnes moved to the parkway in 2012 after numerous court challenges. The arboretum portion of the Barnes is still located in Merion. A private collection from Albert Barnes, the museum holds unique pieces from artists like Picasso, Renoir, Van Gogh and more, with some key holdings from Cezanne and Matisse. The public was allowed access to the collection in 1961. The Barnes puts a lot of focus on education and offers programs for students and adults alike. In 2015 it was reported that the museum saw 240,000 visitors, and that number has only increased. Digital curation is a huge focus for the Barnes, and it works closely with the Free Library of Philadelphia to offer virtual reality experiences to people in the community. The Franklin Institute For visitors and residents who are interested in science, the Franklin Institute is a must-visit on the parkway. The Franklin Institute was founded in 1824
TOURISM, ARTS & CULTURE OVERVIEW
Sean Kelley Senior Vice President Eastern State Penitentiary
and is one of the oldest centers of science education in the United States. Originally in a different location, the Franklin Institute found its home on the parkway, where it still sits today, in 1931. Popular permanent exhibits include a model of a heart that visitors can crawl through, the Neural Climber and the planetarium. According to the institute’s annual report, nearly 900,000 visitors came through the doors in 2016. 194,000 of that total number were students who visited at a deeply discounted rate, while 30,000 visited completely for free. Please Touch Museum Since 1976 children of all ages have enjoyed the Please Touch Museum. Originally located at the Academy of Natural Sciences, the Please Touch Museum is now located in Memorial Hall, the last remaining building from the Centennial Exposition held in 1876. The museum focuses on educating children through interactive play and sees more than half a million
Recently, we rewrote our mission statement. We are a museum that talks about criminal justice, and we decided that our mission statement should focus on that. We still believe in historic preservation, and that remains a focus of ours, but we realized that talking about criminal justice and hosting discussions is what we do. Two years ago we launched a new exhibit where we hired people who were formerly incarcerated. We were worried that our attendance would drop after we began talking about more serious topics and began engaging our audiences with some more difficult questions. But our attendance is thriving. Our most recent year was 270,000 daytime visitors, not counting Halloween. Our attendance has risen every year since 1995. We are continuing our growth strategy by expanding our amenities. We finally have flushing toilets for our guests. It is important for us to make these upgrades, but we do not want to change the integrity of the space because it’s still a bit of an adventure to come to Eastern State Penitentiary. People come here, and they truly explore a stabilized ruin. We want to keep that sense of exploring. The world is full of historic sites, but Americans don’t have access to very many ruins right on their doorstep. Without the building, what do we have? That is the biggest question we ask ourselves when we renovate. There is a fine balance. We have Terror Behind the Walls, our famous haunted house, which is a more modern addition, and we have to balance that experience with the integrity of the ruin. The ruin is surrounded by conversations, both behind the scenes and out in the museum. That is part of the importance of the art installations. We have an installation by Cindy Stockton Moore, where she painted portraits of the people whose murderers ended up in Eastern State Penitentiary. It is hard for us to speak about the victims because our records don’t always speak to them. Those are the conversations we want to start. We offer a unique experience here. People come here from all over the world to explore and have these conversations, and we want that to continue.
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Patricia Wellenbach President & CEO – Please Touch Museum
We are deep into our strategic plan at the museum, which has a large commitment to being a mirror of the Philadelphia community and investing deeply in programming that reflects multiple cultures and communities. We are very proud of that work. We believe we need to create opportunities for children from all families so they feel welcome and see themselves reflected here. In the last year, more than 85,000 visitors came to the museum at no cost, or for only two dollars, which reflects our commitment to ensure that price will never be a barrier to any child or family wanting to experience the museum. visitors a year. Many children attend for free or at a deeply discounted rate. The Please Touch Museum also offers team-building workshops for adults. In October 2018, the Please Touch Museum announced its new mascot, Squiggles, at the museum’s 42nd birthday party. The genderless mascot inspires children to explore their own curiosity and comes from months of creative development. Squiggles was named by public vote and was announced shortly after Philadelphia’s other loveable new mascot, Gritty (of the Philadelphia Flyers.)
Eastern State Penitentiary Formerly the world’s most famous and expensive prison, Eastern State was home to a roster of notorious criminals, including Al Capone. The penitentiary is no longer in use as a prison and now features exhibits and tours. Its annual Terror Behind the Walls is consistently ranked among the top haunted attractions in the nation. Additionally, the hip Fairmount neighborhood the former prison abuts is a great place to grab dinner and drinks. Eastern State Penitentiary is one of North America’s few stabilized ruins, and the experience of visiting is unlike any other museum in the city. Its leadership has worked closely with artists and criminal justice programs to display artwork from formerly incarcerated people and other artists who specialize in social justice reform pieces. Through these programs, Eastern State hopes to educate its visitors on the past, as well as the present, state of the United States’ criminal justice system.
The Philadelphia Zoo, America’s first zoo, sits on 42 acres and is home to more than 1,300 animals.
Philadelphia Zoo The Philadelphia Zoo, America’s first zoo, sits on 42 acres and is home to more than 1,300 animals, many of which are rare or endangered. One of Philadelphia’s top 10 attractions, it welcomes more than 1.2 million visitors annually. The zoo features the first-of-its-kind Zoo360, an animal travel network that lets many animals travel around the park through a series of see-through trails and overhead pathways that both give them more space to roam and offer guests a remarkably unique way to experience the majesty of these creatures. In June 2018, the zoo broke ground on a 20,000-square-foot dining facility that will feature a roof deck and green roof infrastructure to connect guests with nature and underscore the importance of conservation. Earth & Elm, which will have 650 seats and a glass-enclosed pavilion, is expected to open in 2019. 198 | Invest: Philadelphia 2019 | TOURISM, ARTS & CULTURE
Additional attractions Philadelphia is filled with museums and cultural institutions. The National Constitution Center is the only museum dedicated to the Constitution of the United States. The Museum of the American Revolution, aptly located three blocks from Independence Hall, allows visitors to take a deeply informative walk through our nation’s revolutionary history.
TOURISM, ARTS & CULTURE OVERVIEW
The city is dotted with gorgeous public parks, including Rittenhouse Square, Franklin Square, Washington Square, Fairmount Park, LOVE Park, Cherry Street Pier, Spruce Street Harbor Park and Dilworth Park (which is adjacent to Philadelphia’s iconic City Hall), to name just a few. There are also several innovative, multiuse urban spaces like Rail Park, Race Street Pier and Schuylkill River Trail. Other honorable mentions among Philadelphia’s cultural institutions include Elfreth’s Alley, the oldest continuously occupied residential street in the United States; Christ Church and burial ground, where many founding fathers worshipped and are buried; the Mütter Museum, which informs visitors on the vast (and sometimes disturbing) history of medicine; and Boathouse Row. Festivals and events Philadelphia is host to a number of renowned annual events. First, there is the Mummer’s Parade, which features thousands of costumed revelers marching and dancing to celebrate the new year on January 1. The year is also filled with dozens of street festivals and parades celebrating the various cultures that come together to make Philadelphia such a vibrant and wonderful place to live, including the AfricanAmerican History & Cultural Showcase, South 9th Street Italian Market Festival, PrideDay LGBT Parade and Festival, a host of Hispanic Heritage Month celebrations and many more. Jay-Z’s Made in America festival draws a large crowd on the parkway every September. In July, the parkway also hosts Wawa Welcome America, a free concert event that was headlined by Pitbull in 2018. There is never a shortage of concerts, plays and performances at the many venues around the city, like the Fillmore,
Union Transfer and Walnut Street Theater (the oldest continuously running theater in the United States). The region surrounding Philadelphia is known for its events as well. From the Mushroom Festival in Kennett Square to The Blob Festival in Phoenixville, there is something for everyone, especially in the borough of Media, the county seat of Delaware County. “We are an events town, so we are trying to market our events more to drive more people to our town. One of the biggest events we do is Dining Under the Stars, which runs from May through September. Dining Under the Stars brings people from all over to our Main Street, where they can eat outside at our restaurants and enjoy music and entertainment,” Media Mayor Bob McMahon told Invest:. “Our restaurants get a lot of business from the event, and our residents love it. Throughout the year we have different events every one to two weeks, so events and dining are the foundations of our economy here.” In 2017, Opera Philadelphia launched its O festival to great success. O is a binge-a-thon for opera lovers that takes places over the course of 11 days. O18 was the second year for the festival and combines new works with the classics, offering something for everyone. Outlook Philadelphia has broken tourism records for the past eight years in a row, and as long as the city remains true to its character and continues to expand its hotel offerings, it will keep attracting visitors. One of the biggest potential challenges to tourism in the city is cost. A large part of Philadelphia’s appeal is the fact that it offers big-city culture and experiences at a fraction of the cost of cities like New York. With new hotel inventory coming online over the next couple of years and with Philadelphia’s increasing visibility, the city will continue to be a top destination for tourism on the East Coast.
David Devan General Director and President – Opera Philadelphia
Opera Philadelphia is a national brand that showcases the future of the art form. With that has come a much younger and vital demographic, which I think mirrors Philadelphia as a city. One of the things we love about Philadelphia is that it is at the intersection of sophistication and grit. That kinetic energy that happens at that intersection is incredibly exciting. Programatically, we are trying to harness that energy.
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Sports: From the Eagles winning their first Super Bowl in franchise history to Villanova University securing its second NCAA championship win in three years, Philly sports were being talked about in a big way in 2018. The city saw new teams come into the market and old teams doing better than ever, all positively impacting the local economy. Philadelphia sports fans cannot be rivaled when it comes to passion, and it’s looking like sports will continue to be a major driver in 2019.
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City of Champions: Perhaps best punctuated by the Eagles’ Super Bowl win, the recent success of Philadelphia sports is a huge boon to the local economy 2017 and 2018 have been big years for sports in Philadelphia, with the unequivocal highlight being the Eagles clinching their first ever Vince Lombardi Trophy in 2018. This was a huge cause for celebration in a city of rabid fans who had gone without a championship win for 10 years. Although the Phillies haven’t brought home a pennant recently, they did have strong 2017 and 2018 seasons, placing fifth and third in the NL East, respectively. The 76ers also had a banner year, placing third in the Eastern Conference, and Villanova brought home its second men’s basketball NCAA title in three seasons. The Flyers enjoyed a respectable 42-26-14 record in the 2017-2018 season and also welcomed a muchpublicized mascot, Gritty. The city’s recent success in sports has been a boon for both morale and the economy, and the benefits are being seen in other sectors. Fly Eagles Fly! One of the biggest stories in Philadelphia sports in the last couple of years is the Eagles’ victory in Super Bowl LII. This was Philadelphia’s first football championship since 1960, with their last win predating the existence of the Super Bowl. It was also the first sports title to 202 | Invest: Philadelphia 2019 | SPORTS
come to the city in general since the Phillies won the World Series in 2008. The long-awaited victory was even sweeter given that it came against the seemingly indomitable dynasty of the New England Patriots, helmed by coach Bill Belichick and quarterback Tom Brady, who were pursuing the franchise’s sixth Super Bowl win. The 41-33 victory was tense and exciting throughout, featuring a first half containing almost 500 passing yards, a missed field goal, two failed extra point attempts, a botched two-point conversion, a fumble by Brady and a touchdown reception — known as the “Philly Special” — by Eagles’ quarterback Nick Foles. The fourth quarter had fans of both teams on the edges of their seats when Foles threw an 11-yard touchdown pass to Zach Ertz, putting the Eagles ahead 38-33 with only 2:21 remaining in the biggest game of the year. Brady made a series of bold plays in an attempt to secure another Super Bowl ring, but the Eagles stopped them all and secured an underdog victory worthy of Rocky himself — whose theme song blared triumphantly throughout the stadium following Philadelphia’s victory.
SPORTS OVERVIEW
Speaking of underdogs, quarterback Nick Foles was an unexpected hero in the historic game, as well as part of the preceding post-season. Foles was the backup quarterback for celebrated starter Carson Wentz and stepped up when the latter tore his knee in Los Angeles on December 10. Initially, many feared that the loss of Wentz meant the end of the Eagles’ championship run. But Foles was able to weather assaults from both the Atlanta Falcons and the Minnesota Vikings, guiding the Eagles to underdog victories that cleared the way for the ultimate unexpected win against the Patriots. Foles did much more than the bare minimum; in fact, the quarterback earned the title of Super Bowl MVP for his touchdown reception and three touchdown passes during the game. The unsung player turned unlikely hero will be long celebrated for bringing the win to the City of Brotherly Love that so loves its Eagles. Beyond the glory and bragging rights that come with a Super Bowl victory, Philadelphia has experienced other salient benefits from the championship run. The entire postseason and the big game itself were an economic boon for the city, with bars and restaurants doing millions of dollars of additional business thanks to the Eagles’ performance. The lodging sector did particularly well, with hotels in the city reporting a $3.3 million bump in revenue during the postseason. Lincoln Financial Field, home to the Eagles, has also attracted attention as a possible venue for at least one game of the World Cup in 2026 as part of a joint bid by the U.S., Mexico and Canada. “The Linc,” as it is colloquially known, is one of 23 world-class venues included in the bid, at least 16 of which will see games in 2026. Of the U.S. cities included in the bid Philadelphia is one of 17 potential host cities, 10 of which will actually host games. Considering that 2026 also marks 250 years for the United States, Philadelphia could be in for one of its biggest years yet. Hoop dreams Coach Brett Brown has led an ascendant 76ers to a steadily improving record over the past few seasons. 2016-2017 saw the team finish 14th in the Eastern Conference, with a record of 28 wins and 54 losses. In 2017-2018, the 76ers showed remarkable improvement, making it to the Eastern Conference semifinals and finishing third, with a record of 52-30. The 2018-2019 season has also showed promise, with several players putting up stellar performances. Joel “The Process” Embiid, for example, is one of the 76ers’ star players and remains one of the best centers in the NBA after being selected to play in the 2017-2018 All-( )
Jay Wright Head Basketball Coach Villanova University Men’s Basketball
2018 has been a great year for sports in Philadelphia. When we won the championship in 2016, Philadelphia was so hungry for a championship win. The city was craving for the Eagles to win the Super Bowl, and this year we were given that, and then we won the championship again. We had two championship teams in the city. The energy and support has been amazing. The Villanova brand, and college sports in the region as a whole, has achieved a new level of visibility, which has been incredible. Philadelphia has always been an amazing college basketball town. We are unique in that the Big Five — Temple, Villanova, University of Pennsylvania and La Salle — all play each other every year. It keeps the local competition friendly and thriving. And for those teams to beat us shows that the whole city can compete on a national collegiate level, which is amazing. However, collegiate sports are not without their challenges. We are challenged by authenticity. College sports in the United States are incredibly unique. There is no other country where amateur athletes compete at such a high level. Money and celebrity have invaded that model, and now there are national discussions about whether these students should be paid athletes. For collegiate basketball, it is the only route players have to the NBA. There is no way for them to go from high school to the pros, so they are forced to go to college even if it’s just for six months. The NBA isn’t solely to blame, but we need to work together to create better avenues for students who just want to play basketball. We need to keep the authenticity of the student athlete intact, and that is something we are trying to figure out. We are excited for the future of the team. We strive to keep our players grounded and a part of the community. They are Villanova students first and foremost, and that is very important to us. We have a great story to tell, and we only hope it continues.
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Built to last How the 76ers are improving rapidly, expanding their audiences and fanbase across the globe and giving back to the local community as a team built to last
Scott O’Neil CEO – Harris Blitzer Sports and Entertainment
to lead the NBA in that endeavor. We want to be the team that brings the NBA to this new global level.
How are the 76ers growing? We exploded onto the scene last season. We won 52 games in the 2017-2018 season after winning less than 30 each season for a few years before that. We are improving rapidly as a team, and we are being led by a constellation of global superstars. We are the world’s team. The last year has been very exciting for us as a franchise. We have played games in London and China, which has helped expand our audience and fanbase across the globe, and we have been making important decisions as a franchise that people have dubbed “The Process.” This past year or so has been a great time to trust the process. We have become a team with massive international brand presence and global popularity. We truly think that basketball as a whole has the potential to be the most popular sport in the world, and we want 204 | Invest: Philadelphia 2019 | SPORTS
How do the 76ers engage with their local community in the Philadelphia region and beyond? We believe wholeheartedly that sports provides an incredible platform to make the world a little better. We spend quite a bit of time thinking about how we can contribute to the communities in which we live, work and play. Harris Blitzer Sports & Entertainment, the parent company that owns the 76ers, is drawn to communities and regions on the rise. We have facilities in Wilmington, Camden and Newark, which are all communities and cities where we feel we can make a difference. Our 76ers Training Complex brings the eyes of the world to Camden and provides us a direct connection to the community. So we can go out into the community, paint the schools, refurbish the playgrounds, connect with young athletes on the court and give back. Our Training Complex also houses the Sixers’ Innovation Lab Crafted by Kimball, which allows up to help grow the business community as well. Community involvement is important to us. All Philadelphia 76ers and HBSE employees pledge 76 hours of community service a year; that generates over 10,000 hours of service annually in our regional market. We close down the office at least once a month so we can get out and give back. What is your outlook for the 76ers over the next 12 to 18 months? We are always looking to improve the team on the court with the goal of bringing a championship back to Philadelphia; this is a playoff-caliber team. The future depends on how this young team comes together and matures; but we plan to be an elite team for the next decade at least. This is built to last.
SPORTS OVERVIEW
( ) Star Games. Ben Simmons is shaping up to be the 2018-2019 rookie of the year. J.J. Redick is the undisputed best shooter on the team, with an average of 17 points per game in the 2017-2018 season. The team also has no shortage of rising stars, such as Markelle Fultz, a number one draft pick who came screaming back after sustaining a back injury. There is also Dario Saric, who was giving J.J. Redick a run for his money with a respectable 15 points per game before being traded to the Minnesota Timberwolves, along with Robert Covington for Jimmy Butler. There is more promising new blood coming to the 76ers, as well, with the team scoring two first-round draft picks: Mikal Bridges from Villanova at the number 10 pick and Landry Shamet from Wichita State at number 26. In 2016, after years of research, design and construction, the 76ers opened their new 125,000-square-foot training complex in Camden, New Jersey, right across the Delaware River from Philadelphia. With two regulation-sized basketball courts; a 2,800-square-foot player locker room; state-of-the-art performance, wellness, recovery and hydrotherapy rooms; and amenities like a player restaurant, the facility is the largest in the NBA. It also sparked big changes to Camden’s waterfront. The 76ers continue to expand across the region. In August 2018, they broke ground on the $26 million 76ers Fieldhouse, a 140,000-square-foot sports complex and youth training center in Wilmington, Delaware. With its 2,500-seat arena, the fieldhouse will be home to the team’s G League affiliate, the Delaware Blue Coats. The facility will also include retail and office space and is expected to become a huge economic generator for the city. It is expected that the complex will generate 43 full- and part-time
Philadelphia is known for its passionate sports fans.
jobs, with a yearly payroll of close to $3 million that will generate $38,000 in annual wage tax revenue. America’s pastime The Phillies have also had a promising past couple of seasons and showed especially inspiring
Lindsey Masciangelo Executive Director – Philadelphia Wings
Philadelphia is one of the greatest sports cities in the country. While it is a crowded market with a lot of great sports teams with passionate fans, we view that as a benefit as we introduce another pro team to the mix. Before the previous incarnation of the Wings left the market in 2014, they built an avid following, and many fans were upset when the team left Philadelphia. Since they already had a fan base here, we knew that the Wings would receive a warm welcome back to Philadelphia.
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David Buck Executive Vice President The Philadelphia Phillies
What are some highlights that the franchise has seen over the last 18 months? We are in a growth process right now that is going very well. Our ticket sales have gone up, and our TV ratings are up over 30 percent. We are truly becoming relevant again, which is exciting. We have a very bright future ahead. The Phillies are the longest one-city, one-name team in sports, and that is very important to us. We have always been a Philadelphia team, and that carries a lot of weight. We are a big part of the community, which is something that has always been important to us. We want people to grow up being Phillies fans, and we do that by being a pillar in the community. How are you upgrading the ballpark? We have been spending a lot of time, effort and money into upgrading the ballpark, and that has been a large focus for us over the last year. We built The Yard out in right field with a climbing wall, a place to play wiffle ball and a hot dog launcher just like the Phanatic’s — all for free. We wanted to have more options for the kids who come to the games, ways to keep them engaged so they want to come to games with their parents. We built a new boardwalk area for additional food options. McFadden’s lease is up next year, so we are going to gut the space and add things like a Shake Shack, outdoor beer garden, a fire pit and seating area. The ballpark is over 15 years old, so we have to do what we can to stay relevant. In what ways are you applying technology to increase the fan experience? All of our games, including spring training, are streamed on NBC Sports, which was a huge step for us. Our streams were up 300 percent from last year. In this day and age, you have to make the games as accessible and convenient for fans as possible, so that is what we are doing. We are trying to bring new people to our games to stay relevant and to offer the best fan experience possible.
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Big upgrades are coming to Citizens Bank Park in 2019, designed to enhance fan experience.
improvement in 2018. The Phillies managed to finish fifth in the NL East in 2017, with a 66-96 win-loss record. In 2018, the team achieved an 80-82 record, finishing third in their division. The Phillies are a beloved franchise in Philadelphia and had gifted the city its most recent championship prior to the Eagles’ win with a 2008 World Series victory. If the uptrend in the team’s performance in 2018 carries into the 2019 season, there’s a genuine chance at another pennant for the City of Brotherly Love. The Phillies’ strong performance earned eight of the team’s members a spot on the 2018 All-Star Games roster. Recently traded first baseman Carlos Santana; second baseman Cesar Hernandez; third baseman Maikel Franco; shortstop Scott Kingery; catcher Jorge Alfaro; and outfielders Aaron Altherr, Odubel Herrera and Rhys Hoskins all took the field as All-Stars in 2018. Big upgrades are also coming to the Phillies’ home field, Citizens Bank Park, in 2019. The renovations and additions are focused on enhancing the fan experience, with special attention paid to children visiting the park. One major addition is The Yard, opened in March 2018, a 13,000-square-foot facility with ample amenities for children and a little
CONSTRUCTION REAL ESTATE OVERVIEW
Shawn Tilger Executive Vice President & COO Philadelphia Flyers
How have the renovations to the Wells Fargo Center impacted the franchise? Every aspect of the Wells Fargo Center’s ongoing $250 million renovation is fan facing. Everything from the concourses to the bathrooms to the video boards and sound system has been upgraded to improve the fan experience. Philadelphia has always been a great hockey market, but we are pushing the boundaries to demonstrate that we can be even more. We are attracting national events like the stadium series, to be held at Lincoln Financial Field in February 2019, which is very exciting for us. Everything we do is geared toward improving the fan experience and increasing fan engagement. something for parents, too. Features include a wiffle ball field modeled after Citizens Bank Park, replete with dugout, outfield wall and a miniature replica of the park’s scoreboard. There is also a bullpen speed pitch area, 30-foot-tall climbing wall, hotdog launcher with targets, foam hotdogs and a Turkey Hill ice cream bar. While their kids are having a blast exploring The Yard, parents can unwind with a beverage at the Backyard Bar. Another addition revealed in March 2018 is the Left Field Plaza, an area dedicated to the Phillies’ storied history while making room for additional concessions. This area serves as the home of the team’s World Series trophies from 1980 and 2008 and also features statues commemorating the team’s retired numbers. The Wall of Fame has been moved to this area to increase the focus on history. A Boardwalk Eats has been added and offers fans fare like hotdogs, burgers and desserts, and Bull’s BBQ has been relocated nearby. There’s plenty to attract visitors to Left Field Plaza and plenty of photo opportunities with Phillies history once they’re there. Other changes include quality of life upgrades, including the installation of LED lights and a new sound system, the painting of structural steel, the
How has the addition of Gritty, the Flyers’ first mascot, benefited the community? We started the process about two years ago, and saw it as a chance to engage with fans, especially younger fans. We also saw it as a chance to make us more accessible as an organization. The players have hectic travel schedules during the season and are not able to attend every fan event. Now, we can use Gritty as another asset to attend events and be a part of the community. Gritty can’t speak but has already established a strong social media presence, so there is more engagement online as well. We knew there would be traditionalists who wouldn’t want a mascot after all these years, and we knew Gritty would have to earn the love of the fans, but the reaction has been amazing. What is your outlook for the Flyers over the next 12 to 18 months? We are going to continue to be progressive and innovative as an organization. That is a big focus for us. We are going to continue to focus on the fan engagement side as well. Everything we have done from a social media and linear broadcast standpoint is designed to make the experience more fun for fans and their families.
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has glass walls to allow for a stunning view of the Philadelphia skyline.
The Flyers unveiled their new mascot, Gritty, in September 2018.
recoating of concourses, the extension of protective netting and the establishment of a parkwide smokefree policy. The park will also see the addition of new social areas throughout, including a standing room-only area in the right field corner and a social space overlooking the bullpen. Finally, the Bill Giles party suites have been renovated and feature social space and spectacular views of the park; one even
Restructuring The Flyers are also having a good couple of years, thanks to sharing in the benefits of a renovated Wells Fargo Center and joining the rest of Philadelphia’s sports teams in performing exceptionally well as of late. In the 2017-2018 season, the Flyers put up 42 wins, 26 losses and 14 overtime losses, placing third in the Eastern Conference. Although they made it to the playoffs, they lost in the first round (4-2) to fellow Pennsylvanians, the Pittsburgh Penguins. As for 20182019, as the time of print, the Flyers record was 10-122, putting them seventh in the Eastern Conference. Goaltending is a particular concern, as the Flyers have the NHL’s worst save percentage at .879 percent. There are still a lot of games to be played this season, and new goalie prospect Carter Hart was just brought up to play. There’s plenty of time for a city known for its underdogs to turn things around. Turning to the future of the team, it appears as though it is continuing to undergo a period of restructuring. One of the biggest shakeups is Ron Hextall’s departure as general manager. Hextall had been working to resuscitate a team that had been languishing under the NHL’s salary cap rules and had succeeded in infusing the roster with some muchneeded new blood, ushering in an era of seeming stability for the Flyers during his four-plus years as GM, but ultimately the team has decided to go in another direction. The new Flyers general manager as of December 3, 2018, is Chuck Fletcher of the New
SPORTS OVERVIEW
Dave Spadaro Eagles Insider – The Philadelphia Eagles
Winning the Super Bowl was transcendent. That win was a true example of the power of sports in a community and how the entire region teamed together to win the Super Bowl. For months afterward Philadelphia was a different city. Winning took the edge off for a bit, and we proved to the rest of the sports world that we were winners, that we were capable of greatness. This team means something to people. Other cities care about their teams, but in Philadelphia our teams are really something special. To bring this win back to the fans means the world to us. Without the fans, we wouldn’t be the team we are.
Jersey Devils. This changing of the guard at the GM level has players and fans wondering if players will be traded. There were also recent changes on the coaching staff, with Scott Gordon taking the helm of interim head coach, also in December. It’s certainly a tumultuous year for the Flyers so far, but hopefully all the changes will lead to good things. In September 2018, the Flyers unveiled a new mascot — the first for the team — in the form of a seven-foottall, orange, bearded, googly-eyed creature named Gritty. Gritty is intended to add value to the younger fans’ experience, but so far reception has been mixed. A big offseason update for hockey in Philadelphia (as well as basketball) is the massive, $250 million renovation to the Wells Fargo Center, the venue where fans can watch Flyers and 76ers home games. The stadium also hosts several high-profile concerts and events throughout the year. The updates will be carried out in three phases, with the last beginning in 2020, and construction will take place during the summer to avoid interfering with the flurry of activity during the NHL and NBA seasons. The first phase of the renovations will add new seating, upgrade concourses, add new open-air lounge areas and make much-needed technological improvements. The front, outer wall is also being torn down to make way for a glass front that will allow guests to take in views of the surrounding area, including the breathtaking
Philadelphia skyline. When all of these renovations are complete, the Wells Fargo Center will be able to better serve a new generation of fans for many years to come. Stellar soccer Philadelphia’s own Major League Soccer (MLS) team is characterized by a steady if not earth-shattering performance. The Union brought the city 11 wins and sustained 14 losses in the 2017 season, placing eighth in the Eastern Conference. Despite a somewhat lackluster season, the team set a new record in 2017 for most wins at home in a single season (the Union’s record is now nine wins at home). In 2018, the team showed measurable improvement and finished with a winning record of 15 wins and 14 losses, clinching the sixth spot in the Eastern Conference. What makes the Union truly exceptional, though, is its ability to draw in fans. The Union play at the Talen Energy Stadium, a $120 million soccer-specific venue situated in Chester along the Delaware River that resulted from the joint commitment of Delaware County and the Commonwealth of Pennsylvania. The stadium has a capacity of 18,500 fans, and in 2017 the average home game attendance was 16,812, while the highest home game attendance was a capacity-busting 18,619. This trend held strong in 2018, with average home game attendance at 16,518 and an even more impressive highest attendance of
The Union brought the city 11 wins and sustained 14 losses in the 2017 season.
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19,013. The Union’s draw is a testament to the love local fans have for the sport and their team and was also driven by the team’s record-breaking home game performance in 2017. The Union puts on an undeniably thrilling performance. In September 2018, they also revealed a new mascot in the form of Phang the snake. Villanova, Wings and Fusion Sports in Philadelphia doesn’t just center on the big four. In 2018, the region saw another big win with Villanova’s men’s basketball team winning the NCAA championship. The Wildcats won the same title in 2016 and before that in 1985. The 2016 and 2018 wins were led by coach Jay Wright and are unprecedented for a college team. The wins put Villanova University on the map, and applications to the school increased dramatically, as did visits to the website. The NCAA championship wins also helped bring Philadelphia into the spotlight as a winning city. 2018 also marked the inaugural year for Philadelphia’s professional e-sports team the Fusion. The Fusion is one of the Overwatch League’s (OWL) founding 12 teams and a part of the Atlantic Division. While the team is owned by Comcast-Spectacor and is based in Philadelphia, the players are from all over the world, including England, France and South Korea. The first season saw a lot of support from fans. The Fusion made it to the league finals against the London Spitfire and came in second overall. The finals were held at the Barclays Center in Brooklyn, New York, and Fusion fans showed up in en masse. The second season kicks off in early 2019, and the Fusion expects its popularity, as well as the popularity of e-sports, overall to grow.
In 2014, Philadelphia saw a professional sports team depart for New England. The Wings, the city’s professional lacrosse team, said goodbye to the City of Brotherly Love and hello to Connecticut, where they were renamed the New England Black Wolves. The Wings were one of the four originating teams of the Eagle Pro Box Lacrosse League that began in 1987. Philadelphia already had a professional lacrosse team from the original National Lacrosse League (NLL) in 1974 and ’75. In 2017 it was announced that the Wings were returning to Philadelphia, bringing the NLL back to the city under the Comcast Spectacor family of teams. Fans voted to keep the team named the Wings, and the franchise will honor the history of the original team. Their home opener was on December 15, 2018. Looking ahead Philadelphia is a town that loves its sports. The city is famous for the ferociousness of its fans, regardless of whether its teams are winning or losing. For the last year, the city has been riding the crest of the enormous wave of an Eagles’ Super Bowl victory, a win that seems to have made every block scintillate triumphantly. Although no other championships have been forthcoming for the city since the Phillies’ 2008 World Series win, the Flyers, 76ers and Phillies have had strong performances in 2017 and 2018, all standing near the top of their respective conferences. On top of the stellar records of its teams, the city is also investing in upgrades to the Wells Fargo Center, where its hockey and basketball franchises play, as well as the Phillies’ home field, Citizens Bank Park. All signs point to the potential for a new city of champions in the City of Brotherly Love.
Joe Marsh Chief Business Officer – Philadelphia Fusion
The Overwatch League Grand Finals played out over the course of two days at a sold out Barclays Center in Brooklyn. That was an incredible moment — not only for the fans and the organization, but for the players as well. The success of the Grand Finals really solidified that the esports movement is only going to grow and get bigger. While our team has earned popularity around the world, we are continuing to grow the fan base in our home market. Philadelphia is home to the most passionate fans on the planet, and with more education, awareness and the exciting experiences that we create and deliver we know that this growing phenomenon could really take off. 210 | Invest: Philadelphia 2019 | SPORTS | Invest: Miami 2018 | REAL ESTATE