For Philly To Come Back Stronger Than Before, It's All About The Jobs
As new coronavirus cases continue to dwindle, Philadelphia’s revival seems well underway. Its leaders are already thinking about how to use this moment to make the city ascend to new heights.
“It’s not enough to simply recover,” Mayor Jim Kenney said in a keynote address at Bisnow’s Philadelphia in Phase 2: Seizing the Moment digital summit on May 19. “We need to rebuild equitably while ensuring growth that benefits all.”
Due to a combination of lower case numbers, lower cost of living and its seeming immunity to booms or busts, Philadelphia did not fall as far as cities like New York, San Francisco and Chicago, panelists at the event agreed. As a result, Philly has the opportunity to gain on those cities in terms of prosperity.
“I think this is Philadelphia’s moment to mature as a market," said Lauren Gilchrist, who until recently was a senior vice president and senior research director at JLL and who will soon take a managing director of research job at Longfellow Real Estate Partners. “I think that a lot of this next cycle is going to be about new institutional capital and bringing Philadelphia into the next stage of its evolution.”
Any sort of growth that Philadelphia can achieve going forward, especially in commercial real estate, will be entirely dependent on how many jobs it can create. Whether in real estate development, infrastructure improvement or life sciences growth, the current labor pool is insufficient to meet even short-term goals.
"Pre-pandemic, our city produced twice as many jobs [that pay] below $35K as any other major city," City Council Member-at-Large Allan Domb said. "That’s a problem. We’re not producing any middle-income jobs."
Awareness around the racial inequities baked into the socioeconomic history of the city is at a high, and policies have been put in place to ensure opportunities for businesses owned by women and minorities. One of those, the Economic Opportunity Plan, is required for any major real estate development that requires a zoning change.
While "well-intentioned," the program is hamstrung by the fact that the businesses required to meet its standards are too small and too few to keep up with construction demand, Alterra Property Group Managing Partner Leo Addimando said.
"The reality is that if you add up all the EOPs that have been signed, you’ve already exceeded the capacity of the available minority workers and businesses two times," he said. “We really need to have a reckoning around how to create capacity and not just continue to blindly say, ‘Do your best, enter into these agreements and see what happens.’ Because everyone who’s part of those agreements is going to fail on some level."
A similar problem is set to plague whatever infrastructure projects would arise from President Joe Biden's American Jobs Plan if, when and in whatever form it passes, Gilchrist said. In life sciences, Philly's most vital growth industry, developers and occupiers alike are painfully aware of the supply/demand imbalance regarding staffing whatever manufacturing facilities come online.
Philadelphia's poverty rate has hovered around 25% for years, infamously the highest rate of any major U.S. city. The jobs Philly will need to reach its economic development goals are also the types of jobs that can stabilize a household, and many of them don't require an advanced degree.
That leaves the city and its businesses in need of robust training pipelines specific to their industries. Panelists, from city politicians to developers to brokers, were unanimous in supporting such pipelines, but they had no answers regarding feasibility, potential reach or a timeline for building these pipelines.
As for the bigger picture, job creation is a rallying cry for those pushing cuts to wage and business taxes in the city. Domb has been active in this realm; this year, he introduced bills that would cut the wage tax by 25% over the next 20 years and net income tax by 50% over the next 10.
"That would send the right message to every Philadelphian and every business owner that we’re serious and we want people to come back," Domb said.
Kenney proposed tax cuts of his own in his budget for the city's fiscal year 2022, a move that has drawn some controversy considering that Philly needs every cent of the $1.4B in federal stimulus the city will receive as part of the American Rescue Plan to shore up its five-year plan. Philly experienced a revenue shortfall of nearly 15% last year, worse than any major city save Detroit, Domb said.
"Without a doubt, the ARP will help save countless jobs while providing direct relief to residents and struggling businesses," Kenney said in his remarks.
Domb pushed a step further, theorizing that stimulus funds combined with tax cuts could juice business investment enough to outperform the city's current revenue projections.
"Right now, we have an opportunity with federal funding to really make that change and advance across the board," Domb said.