How University City's Future Is Philadelphia's Future
With the announcement of two massive developments that will dramatically alter the Philadelphia real estate landscape (not to mention its physical landscape), University City has cemented itself as the most important neighborhood for the future of the city. Come discuss it at Bisnow’s Future of University City event tomorrow at 7:30am at International House Philadelphia.
Over the next few decades, the Schuylkill Yards and 30th Street Station District plans will add acres of residential, retail and office space on the eastern edge of the neighborhood, and, in doing so, will attempt to capitalize on the increasing demand from Millennials, primarily those involved with UPenn and Drexel, to live and work in an urban setting.
“Historically, students in Philadelphia—even though we have so many educational institutions here—had been graduating and leaving for other markets,” says Radnor Property Group's David Yeager (who's scheduled to speak on Thursday). “Now, there’s a high level of interest to stay, and I think it’s because of growing businesses and a desire to live in Philadelphia. We are not seeing the brain drain of earlier generations.”
Developers like Radnor and Southern Land, whose EVP Dustin Downey is also set to speak on Thursday, aren’t waiting around for Schuylkill Yards to capitalize on that demand. Both companies opened large, multifamily developments in the fall geared to young professionals; Radnor with 3737 Chestnut St and Southern with 3601 Market St.
David, second from right, snapped with fellow board members Elisabeth Miller and Timothy Gigliotti (to David's right), is not surprised at the influx: “There’s not enough product yet for new, Class-A, multifamily housing, and the development community is responding to it.”
Of course, when there’s such a rush to develop a certain kind of property in a market, the natural question is: how long until supply starts to outstrip demand? All around the country, commercial real estate growth has slowed dramatically, and Dustin called it a full-on “crash,” but one from which Philadelphia is insulated, "100%."
“A lot of [the downturn] is because developers overbuild the same product by so much. Nashville has 10,000 new apartment units, whereas Philadelphia has 2,300,” says Dustin.
Although Philadelphia is the sixth-largest metropolitan area in the country, it sits 10th in rental units per capita. More importantly, Philadelphia has experienced nothing but steady growth since the 1970s, so there’s been no boom from which to bust.
A crucial element of that steady growth has been the involvement of Penn and Drexel in the development of the area, with Drexel putting its weight behind both Schuylkill Yards and the 30th Street Station District Plan. Dustin called public-private partnerships “almost a requirement to get anything done in University City.”
Though universities can frustrate developers with their cautious investing, Dustin insists the benefits in partnering are great.
“Because [universities] have such a long-term vision," he says, "it provides a much better overall plan for the future and current projects.”
However, it’s not as if universities have been lining up to get in bed with developers over major community projects. David, who specializes in public-private partnerships with Radnor, is glad to see a new trend emerging.
“What you’re seeing today in higher education is that they’re realizing the value they bring to a community,” David explains. But the universities usually have limited funds and spend them on, naturally, new academic buildings and dorms. It's in their best interests to forge more partnerships, David says, to improve quality of life for students and everyone else around the school.
These partnerships have gone a long way in accommodating the demand drivers of a dynamic University City. However, as Drexel has gotten more ambitious with its plans around 30th Street, will it create a concentration of development in one area at the expense of other proposed projects throughout the UCD? Moreover, are there enough jobs to feed continued development?
Offices are being planned along with retail and residential spaces at Schuylkill Yards and beyond, but there is no guarantee that there will be enough jobs to fill them.
Both Dustin (above) and David agree that Philadelphia struggles to produce jobs at a rate commensurate with the residential growth they’re anticipating, and Dustin believes, “There will have to be a new fundamental [industry] or a new corporate regrow to continue producing enough jobs.”
Many developers are calling for the Pennsylvania state legislature to allow Philadelphia to reduce its wage and business taxes to encourage more companies to move back in from the suburbs, even advocating for an increase in commercial real estate tax to balance out the revenue stream.
If that legislation passes, it may be the break that University City needs to ensure that its planned, explosive growth is sustainable. Otherwise, its ambitions might come at the cost of Philadelphia’s stability.
Learn more about this and everything else University City at our event tomorrow. Sign up here!
