Center City's office sector struggles to regain its mojo
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Good old Billy Penn looks upon Center City from his perch atop City Hall. Photo: Visions of America/Joseph Sohm/Universal Images Group via Getty Images
Center City's commercial office sector may have lost some of its swagger as it faces slow post-pandemic growth and uncertainty, per a new report.
Why it matters: Vacancies are up, firms are downsizing, and some say Center City towers aren't the status symbol they once were.
State of play: Center City's positive post-pandemic job growth is not robust enough to stabilize or grow its commercial office sector, the Center City District's new employment report found.
- And many firms that planted their flag there before 2020 have either reduced or eliminated office space since, causing vacancies to stay elevated.
- The report, released Wednesday, analyzes data over the past 15 years.
Threat level: Center City's office space is losing its cachet.
- A survey of major real estate brokers in Philly found the "overall product has diminished," and the value of having a Center City office spot is not as persuasive or powerful as it once was, per the report.
- Plus: Concerns around a perceived lack of safety and quality-of-life issues, along with what some describe as a burdensome tax structure, were among the top concerns for would-be office tenants.
The big picture: Philly's job sector has grown 13.6% since 2020, per the report.
- Driving the trend: Job growth in the arts, entertainment, recreation, accommodation, food services and personal services sectors.
- Health care and the social assistance industry remain one of the fastest-growing in the city, accounting for nearly a third of all jobs last year.
Meanwhile, the main industries that fuel Center City's office sector — think finance, insurance, real estate — have grown only 1% since 2020, per the report.
- And the demand for office space in Center City remains roughly 42% below its pre-pandemic numbers.
💡 The intrigue: The report recommends extending Rittenhouse Row northward into the prime office corridor, like along Market, JFK and Arch Streets.
- The problem: Many of those spaces are former banks and pharmacies, so converting them for dining and entertainment uses can be costly.
Office-to-apartment conversions offer a partial solution, per the report.
- Many are in the works, including at the historic Wanamaker Building.
It's not all bad: Philly office-sector job growth has outshone its rival, Montgomery County.
- In 2022, Philly dethroned Montco to claim the greater share and overall number of office-occupying jobs for the first time in at least 15 years.
What they're saying: Center City is facing a critical need to grow the demand for office space, unlike any time in its past, Clint Randall, CCD's vice president of economic development, tells Axios.
- Growing that demand, he says, will likely include addressing quality-of-life issues, making public space improvements, and adding a new mix of retail in office buildings.