The Problem With Depending On Eds And Meds For A City's Growth
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If Philadelphia is to have a singular industry that drives growth and brings in a significant amount of outside investments, then life sciences are its best bet. But it still might not be enough.
While the truism that Philadelphia neither booms nor busts is often seen as a mild net positive for the city’s long-term health, it is hard for the business community not to covet the explosive growth of the Bay Area or the near-zero vacancy rate of Cambridge’s Kendall Square neighborhood in the Boston metro.
A crucial factor that drove both areas to success was the talent pipeline from nearby institutions of higher learning, and that has been a feather in Philadelphia's cap since the turn of the 21st century.
Since 2000, Philadelphia's young, college-educated population has grown 115%, outranked among major cities only by Washington, D.C., over that period, Philadelphia Industrial Development Corp. Chief Strategy and Communications Officer Anne Bovaird Nevins said.
“In terms of talent retention, we are where we want to be relative to our peers,” Nevins said at Bisnow's Philadelphia State of the Market event at Five Below's new Lits Building headquarters.
As Philadelphia has blossomed as a food and cultural center, its charms have kept those graduating college students in the city. But for adults who didn't go to college in Philly, it hasn't been nearly as successful.
“As that cohort [of graduates] continues to move up in the age bracket, we need to think about where they get their second, third or fourth jobs," Nevins said. "And if we want to bring people in from other markets, we need to think about what jobs we can offer their partners and spouses.”
Though Comcast has been the company changing Philadelphia's skyline, the life sciences innovation coming from the University of Pennsylvania, Children's Hospital of Philadelphia and other University City institutions was at the forefront of Philadelphia's pitch for Amazon HQ2.
Since Penn made a commitment to put $15M toward giving equity funding to startups working on gene and cell therapy, it has been matched by over $480M in private capital, City Councilman Allan Domb said.
Homegrown biotech company Spark Therapeutics was the first in the nation to win Food and Drug Administration approval for a gene therapy treatment of an inherited condition, and is negotiating with Swiss pharma giant Roche on a $4.8B buyout.
Spark has also been a major influence on University City development, as it filled space in the FMC Tower before agreeing to become the first anchor tenant at Brandywine Realty Trust and Drexel University's Schuylkill Yards megaproject, taking space at the redeveloping Bulletin building.
Spark proved the potential for local talent to bring in boatloads of outside capital, but its treatment breakthrough was notable because it is so difficult to replicate.
“We have to cure cancer," PMC Property Group President Ron Caplan said when asked what Philly's life sciences industry has to do to drive meaningful economic growth. "No one is going to go into those [new University City] buildings unless they do something remarkable, but even if they do, there’s no guarantee that it will bring people in.”
Even as gobs of funding roll in for research, it could never hope to match the potential for change that a new employer would bring in.
Life science may be considered the next frontier for tech innovation, but its growth trajectory when compared to Facebook, Uber or even WeWork is slowed by the need for extensive research and clinical trials. The high-profile collapse of blood testing startup Theranos underscored the risks of trying to find a shortcut around that process.
“The universities are crucial for jobs in the city, but job creation is not coming out of research and science,” Caplan said. "It takes years and years and years to take a scientific innovation and turn it into an office-space-using industry.”
To kick off the new construction portions of Schuylkill Yards, and to truly accelerate the job and populations growth that still eludes Philadelphia, the talent produced by the "Eds and Meds" has to bring in employers, not just investment.
“I think we have to be open to the innovation market and bring companies in,” City of Philadelphia Deputy Director of Real Estate Dominique Casimir said. “We have to play up our human capital, because we have so many talented and educated young people that could serve companies eager [for that talent].”
Even as Philadelphia's pool of young talent grows, Philadelphia has failed to draw in new businesses. Many in the business community believe that the biggest impediment to that recruitment is the onerous tax system, which came under harsh criticism from panelists.
“When you think about the growth of this area and the cost of doing business here compared to [cities like] Nashville, that’s what you need to focus on,” Alterra Property Group Managing Director Leo Addimando said.
Even leaving aside recruiting new companies, Philadelphia raising taxes year after year without seeing any improvement to the city's economic fortunes has proved its ineffectiveness, Domb said.
“What upsets me is that four years ago, we had 186,000 people in deep poverty, which is making less than $1K/month," Domb said. "And now we have 215,000 people in deep poverty, which is a disgrace."
Because the life science industry has such a high barrier to entry for those living in poverty — in many cases college and postgraduate degrees — it can't be considered a job creator for that portion of the population. As impressive as Philadelphia's innovation has been, it doesn't have the power to transform the city.