A survey of nearly 3,100 residents living in the eight ZIP codes that comprise Philadelphia’s Center City overwhelmingly believe that their affluent, vibrant neighborhoods will rebound from a recession that has taken its toll on this metropolitan area.
The reasons for their confidence are detailed in a report, “Residential Development 2009: Riding out the Storm,” that the Central Philadelphia Development Corporation and the Center City District released recently. That report is based on surveys completed by 3,077 homeowners and renters who represent 3% of Center City’s total population.
It found that 81% of those polled feel good about the future of Philadelphia’s downtown district. More than one quarter of the respondents say they are seeing signs of improvement already, and another 55% believe the district has “held its own” during the economic downturn.
“I can say that every day here gets better than the day before,” says John Westrum, president of Ft. Washington, Pa.-based Westrum Development. His company isn’t building in Center City because its 300- to 500-home projects generally require more land than is available there. But Westrum has lived in the Center City district for five years, during which he’s seen restaurants, entertainment venues, and retailers “that in past years would have jumped over Philadelphia” opening locations. “They used to roll up the sidewalks at 5 p.m., but this city has turned the corner and is becoming a 24/7 city,” says Westrum.
Philadelphia’s housing market is far from stable yet. Through the first half of 2009, residential sales were down 27.6% from the same period a year earlier, to 1,232; the average selling price was off nearly 4% to $380,415; and the number of days an unsold home is on the market increased 21.5% to 116 days, according to Center City District data. Still, the report provides several reasons for Center City’s residents’ confidence about the future.
For one thing, Philadelphia has experienced a lower rate of job losses than the nation as a whole, due in no small measure to the strengths of economic forces that affect its universities and medical centers, which employ 36% of Center City residents.
“Philadelphia is extraordinarily well positioned for economic and residential growth,” the report states. “This is the first major recession in which the city has lost fewer jobs than our region or the nation.”
The Center City district is also populated by highly educated residents who have been able to weather the recession better than lower-skilled workers. Ninety percent of the survey’s respondents have college degrees, and 54% hold master's degrees or higher.
Nearly half of the respondents have annual household incomes of at least $100,000. And by living close to where they work, they are spending less on transportation. Two-thirds of those polled say they don’t rely on a car to get to work: 35% walk to work, and 24% take public transportation.
Between 2000 and 2009, Center City has added 12,121 new housing units. Like other metro markets, Philadelphia has its own condo glut problem. (Right now, there’s a two-and-a-half-year supply of unsold condos on the market.) However, while house prices have been falling across the city since 2007, they have been falling at a slower rate than in all but three of the 20 metro markets tracked by the Case-Shiller house price index.
The report’s findings seem to be in line with what other market trackers are seeing in the City of Brotherly Love. For example, the Prudential Fox & Roach HomExpert report said that Greater Philadelphia saw a 30.5% rise in homes under contract in September, compared to the same month a year ago, to 5,766. HomExpert also found that the Philadelphia region’s home sales of new and existing homes that month were up 0.9%, to 16,759. The Philadelphia Business Journal reports today that more than 800 new affordable housing units are in development in Philadelphia, with at least 300 of these under construction.
“Our sales have been remarkable,” says Brian Emmons, assistant vice president for Toll Brothers, about Naval Square, Toll’s four-year-old community on 20 acres in the heart of Philadelphia’s Center City. Emmons says that Toll has sold around 75 home units at Naval Square so far this year, which is only 5% to 10% fewer than a few years ago. Toll recently broke ground on this project’s $100 million second phase, which will have 344 townhouses and condos. Emmons noted that Toll is the only builder in Center City offering a three-bedroom, 2,160-square-foot unit with two parking spaces for under $800,000.
Emmons says that because Naval Square’s prices range from the $300s to the $800s, it has been able to attract a fairly broad range of prospects and buyers. Still, Center City appears to appeal to two distinct buyer groups, according to the Center City District report: Young professionals between the ages of 25 and 34, who account for 28% of the report’s respondents; and empty nesters 55 or older, who make up 39% of respondents. (Twelve percent of those polled identified themselves as retired.)
John Caulfield is senior editor for BUILDER magazine.
Learn more about markets featured in this article: Philadelphia, PA.