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Philadelphia Bans All Indoor Gatherings As COVID-19 Cases Set Records

The coronavirus has roared back in Philadelphia like it has across the U.S. — with a force that has exceeded the spring peak of the outbreak — so city leadership has implemented new restrictions that are expected to be the death knell for some businesses.

Philadelphia Mayor Jim Kenney speaks on a videoconference with reporters on Nov. 16, 2020.

Philadelphia Mayor Jim Kenney and Health Commissioner Thomas Farley laid out a raft of changes to the city’s “Safer At Home” program, as its response to the pandemic has been dubbed, at a virtual press conference Monday. Leading the changes, which will officially take effect on Friday, is a ban on all indoor gatherings of more than one household. That means no more indoor dining, indoor fitness centers, casinos, movie theaters, bowling alleys, arcades, libraries or museums until at least Jan. 1.

Several states and cities have halted indoor dining and restricted other commercial activity in the past few days as the reality of a holiday season amid a once-again-uncontrolled outbreak sets in. Kenney promised to lobby for the release of unallocated CARES Act funding from the state's General Assembly and expressed frustration at the federal government's inaction on a stimulus bill, leaving many restaurants with little chance of making money until the new year.

“Every single restriction and change was discussed with the knowledge that it will impact businesses and jobs,” Kenney said. ”Hopefully, these restrictions will only be needed for six weeks.”

Outdoor gatherings will be limited to 10% of a venue’s capacity, or 10 people per 1K SF in places that don’t have official capacity limits. Gatherings larger than 2,000 people are banned entirely, as is food and beverage service at all outdoor events. Outside seating for restaurants is still allowed, with a firm emphasis on limiting party sizes to four diners. The four-person limit is meant to discourage people from meeting those outside their household for a meal.

“It’s increasingly unsafe to interact with anyone,” Farley said.

All school and community sports are banned, and all high school and college classes will be forced to go virtual. Nonrestaurant retailers will have density restrictions at the same level as immediately after the spring lockdown: 5% capacity or five people to every 1K SF, including employees. All workers who can perform their jobs remotely are directed to do so full time until at least Jan. 1. 

Some businesses in addition to retail will be allowed to continue some level of in-person operation, including hotels, construction, manufacturing, logistics, child care and real estate. Public transit, taxis and ride-sharing services are still permitted, as are in-person classes for elementary and middle school students, due to the low rate of infection among young children and essential workers’ need for daytime child care, Farley said.

Farley laid out the current statistics as a sobering backdrop for the new restrictions: 2,564 new cases from Friday through Monday morning, not including some delayed test results, a positivity rate over 13% and hospitalizations doubling in the past 11 days. If nothing were to change, Farley projected that Philly would see over 3,000 positive cases per day and overwhelm the city’s hospital beds by the end of the year.

“People often misuse the term exponential, but this is truly exponential growth,” Farley said.

Philadelphia Health Commissioner Thomas Farley called the city's rise in coronavirus infections in the past month "exponential."

Part of the city’s rationale in making its restrictions so broad is how difficult it has been to pin down the source of all the infections. Farley estimates that about half of those who have tested positive in the city don’t know where they contracted the virus, but he said it’s safe to assume it is “spreading a little bit everywhere.”

As Kenney and Farley emphasized, no one is happy about the new restrictions, especially as they come without the federal aid that softened the blow of the March lockdown for individuals and small businesses. But reactions still varied among Philly real estate leaders.

“I think [the new restrictions] are excessive,” Alterra Property Group Managing Partner Leo Addimando told Bisnow. ”I understand that the mayor wants to be ahead of the curve and not behind it in curbing the spread of the virus, but I haven’t seen any evidence that responsibly run, capacity-limited indoor dining and gyms are causing the spread of the virus.”

A Stanford University study published on Nov. 10 in the scientific journal Nature found that indoor dining and gyms show the most direct correlation between capacity limits and a slower spread of the coronavirus, but it did not include a full ban on indoor dining as part of its model.

Addimando, like some reporters who spoke up during the press conference’s question-and-answer portion, wondered whether a total ban on indoor dining would actually increase the number of indoor gatherings in private. Farley acknowledged that beyond businesses that can be inspected, a full ban on indoor gatherings between households is unenforceable.

“We know that not everyone will follow that [guidance], but we hope that most will,” Farley said. “We know that when people followed it in the spring, cases went down.”

At multiple points during the press conference, Kenney emphasized that the new policies, even if they mean the failure of some local businesses, are worth it to avoid the loss of life and hardship that further unchecked spread of the coronavirus would bring.

“The elimination of anyone’s job is an extreme difficulty in people’s lives,” Kenney said. “I also think that dying of COVID is an extreme difficulty as a result of ignoring what we’re trying to do now to stop the spread. … If people don’t follow the guidelines, this problem will be here longer than it has to be, so it’s sort of a self-fulfilling prophecy.”

Though Addimando expressed support for universal mask usage, size restrictions on outdoor gatherings and other public health initiatives the city is undertaking, he characterized the indoor dining ban as an overzealous move. In response to Farley suggesting that fewer commercial options for socializing would help public attitude shift toward more isolation, Addimando scoffed.

MMPartners founder and Managing Partner David Waxman and Alterra Property Group Managing Partner Leo Addimando

“It’s just silly,” Addimando said. “There’s just only so much you can regulate, and if you overregulate, you leave a lot of people with the short straw. This is a kick in the face, and it didn’t have to be this way.”

The grim trends in terms of case numbers and hospitalizations — the latter of which trails cases by about two weeks — have some in real estate agreeing that desperate measures are justified.

“I think at the end of the day, as the weather has turned even a little bit colder, we have not been able to keep cases under control,” JLL Senior Vice President and Senior Research Director Lauren Gilchrist said. “We don’t know enough about the virus and how it’s transmitting, or people aren’t being honest about where they contract the virus and what they do once they test positive. I’m frustrated and disappointed, but considering the fact that cases are higher than they were in the spring, I find it hard to imagine coming to a different decision.”

While industrial real estate looks to continue largely uninterrupted, retail landlords aren’t the only building owners affected by the new restrictions. Alterra closed amenity areas and common spaces at its apartment buildings during the spring lockdown and is considering doing so again, Addimando said. Alterra is weighing other options, including limiting the use of its own office space.

“For a long period of time, and we may end up reimplementing this, we did not allow guests into the building unless they were providing medical services or a real need,” Addimando said. “But you really can’t stop people from gathering within a building behind closed doors. That’s their choice, and I don’t think we’re in the business of determining what people can do in their own homes. Can we restrict gatherings in common areas or ban guests? Yeah. But there’s only so far you can take it.”

Though Center City’s office buildings had not approached capacity in the past few months, the directive to keep workers at home until at least the end of the year could have some impact on urban foot traffic, which is the lifeblood of downtown retail, Gilchrist said. Brandywine Realty Trust recently estimated that about 15% of office workers in its buildings had returned, while property management tech firm Kastle Systems estimated that Philadelphia offices were 28% full in October based on electronic entry badge swipes.

Even as office tenants continue to leave heaps of office space unfilled, the market hasn’t been flooded with givebacks and sublease availability like New York and San Francisco, Gilchrist said. Most of the city’s negative office absorption this year has come from preplanned exits. The next six weeks may not change that picture significantly.

Philadelphia Health Commissioner Thomas Farley explained the city's new coronavirus restrictions in a videoconference on Nov. 16, 2020.

“The city is still a value play, and we haven’t been a big sublease market in previous downturns, so Philly remains steady as she goes,” Gilchrist said.

Though the restaurants that will be forced to close permanently will continue to lead headlines about the impact of coronavirus restrictions — and no one is under the illusion that all will survive — the overall picture in retail isn’t all negative, CBRE Executive Vice President Steven Gartner said.

“We really have seen retailers bounce back nicely, and many of them that focus on daily needs really never did suffer, like groceries and some larger chains,” Gartner said, noting that the lack of office workers and visitors is one of the biggest headwinds for the city’s retailers. “The good thing about Center City is that we have over 200,000 people. What we have found during COVID-19 is that people are shopping as close to home as they can and shopping at businesses and experiences that they’re familiar with.”

The longer the country waits for the next federal stimulus bill to be passed, the more businesses will be forced to close. But while some stores and restaurants have announced permanent closures, more that have closed likely have not abandoned their leases, Gartner said. And if landlords have few prospects for filling surrendered space, there remains a possibility for economic relief to bring some businesses back from the dead.

One factor that will mitigate the loss of rent for landlords but complicate the picture for small businesses that have run out of time and money is that multiple chain food service brands are actively looking to expand in Greater Philadelphia, Gartner said, declining to name any because he is representing some of those potential occupiers.

“We’re doing a lot of deals with several restaurant brands that have financial staying power, operational excellence even during COVID and also who see a light at the end of the tunnel in 2021,” Gartner said. “[Larger brands] can ride this out a little better and think about [adding] net new locations. We’re seeing that from dozens of brands. They’re saying, ‘This will end, and we think it will end in a time frame that we can now see. And we’re making moves.’”

A broker taking the optimistic view of a poor situation is nothing new, but Gartner acknowledged that whoever is doing business in this environment is making lemons into lemonade.

“There isn’t one person who is happy with this,” Gartner said.