Philly’s downtown is a ghost town. What will it look like when the virus subsides?
Center City is likely to bear the economic brunt of the virus. If people have fewer reasons to make the trip, can downtown remain the democratic meeting ground it has always been, where people of all incomes and backgrounds come together to work, shop, eat, be entertained, and just gawk?
Seven weeks into our new, hunkered-down lives, the commercial heart of Center City looks suspended in time, like a noir-ish freeze-frame shot from a bygone era.
In the windows of Walnut Street’s fashionable shops, the brightly colored blazers and flowery spring dresses already seem dated. The evidence of a hasty retreat is starkly visible. Several stores have removed all merchandise, leaving empty display cases in disarray. Windows have been boarded up to deter vandals, and those temporary canvases are now covered with an impasto of graffiti, giving them an aura of permanence.
Apart from some determined panhandlers and the occasional jogger, the sidewalks are deserted. There are so few customers at the AT&T store on the corner of 15th Street — one of the rare businesses to remain open during the crisis — that employees pass their time playing cards.
This unnatural stillness won’t last forever, of course. Once people start returning to work, Center City will awake from its enforced slumber, office workers will gradually return to sanitized cubicles, and pedestrians will again roam the sidewalks. What’s unknown is whether Philadelphia’s eclectic downtown will ever recapture the same level of activity and dynamism that existed before we learned to say COVID-19.
Seeking answers, I reached out to a dozen policymakers, urban planners, economists, retailers, businesses, and real estate developers. Much depends, they agree, on how long the lockdown continues, and how quickly people migrate back to their workplaces once restrictions are relaxed. Gov. Tom Wolf has come up with a color-coded, three-phase schedule for resuming normal life over the next few months. Mark Zandi, of Moody’s Analytics, is less optimistic and argued in a recent Inquirer column that the recovery won’t really begin until there is a vaccine, probably in 2021.
Whatever the pace, it’s already clear that our habits have been profoundly altered after just a few weeks of home confinement. Many people have grown comfortable working in their dens and basements and having life’s necessities brought to their doorsteps. The longer the closures go on, the more likely that Center City’s struggling retailers will finally succumb to the delivery economy. Department stores, retail experts say, will cease to exist or become historical anomalies, like pay phones.
The restaurant renaissance looks as if it’s over, too. Many of the city’s 6,000 eateries will be unable to reassemble their old staffs, even if they manage to restart their kitchens. And don’t believe the happy talk about restaurants spreading out diners in social-distanced pods: No eatery can make a profit serving even half of its usual customers. A Harvard Business School study forecasts that 65% of small businesses will lack the cash to make it through the end of the year.
Because so much of Philadelphia’s economic life is concentrated in Center City, it’s likely to bear the brunt of the virus’ aftershocks. If people have fewer reasons to make the trip, can downtown remain the democratic meeting ground it has always been, where people of all incomes and backgrounds come together to work, shop, bank, eat, be entertained, visit doctors, and just gawk at other humans?
“What happens to our society when you don’t have those opportunities for random encounters,” wondered Lauren Gilchrist, director of research in Philadelphia for JLL, a commercial real estate broker. “Will there be more stratification, more me, myself, and I?”
Not that any serious economists expect significant numbers to flee the city anytime soon. While there has been much chatter about the connection between dense living and the severity of the virus outbreak, American cities have faced three major existential challenges in the last 20 years — terrorism, the Great Recession, and the opioid epidemic — and each time they’ve soldiered on. “There is a reason we agglomerate in dense places. They’re exciting, productive places to be,” observed Joseph Gyourko, a Wharton economist specializing in real estate.
That said, things will look very different in the near future. The issue for Center City isn’t whether residents will leave, but whether outsiders will continue to pour in in the same numbers before a vaccine exists. Will the daily tide of daily commuters coming from the city’s outer neighborhoods and the suburbs be diminished? Will tourists, who dropped $7 billion on the city’s economy in 2018, visit for conventions and sightseeing? Will anybody dare attend events in theaters and concert halls?
In a recent article in the Atlantic, Derek Thompson argued that “chains will proliferate” while “many mom-and-pop dreams will burst.” But experts like Jacob Cooper, managing director at MSC, a retail broker, predicted the opposite outcome. Because so many chains sell standardized goods that fall into the category that historian Daniel Boorstin dubbed “the repeatable experience,” there is little to gain from buying those items in a store. The brick-and-mortar retailers who survive, Cooper argued, will be those offering a unique or curated experience.
The coming retail contraction will completely alter how Center City’s commercial buildings are inhabited. Since the late 19th century, downtowns have been defined by the presence of dense commercial streets, lined with ground-floor shops. Those rows of stores may become a thing of the past, replaced by islands of retail. Cooper predicts a drastic streamlining, with retailers shrinking their physical footprint and reducing the amount of merchandise they display. They may partner with competitors to share space, in a retail version of co-working. They will also demand shorter leases and lower rents. Many storefronts will be converted to offices or apartments.
Surprisingly, two of Center City’s best known independent retailers, Joan Shepp and Boyds, remain undaunted about the future.
Ellen Shepp, who runs the Chestnut Street clothing boutique named after her mother, has used her downtime to rethink the business. The store is known for its personal service, and she expects to focus even more on individual consultations. Boyds’ Kent Gushner, who has kept all 125 employees on the payroll thanks to a federal loan, has been beefing up his e-commerce site, in an effort to grow sales from 5% to 15%. Although known for dressy, designer clothes, both stores are ordering mostly casual wear for the fall.
“The first three months back will be challenging. People aren’t going to run out into the world just because the government says it’s OK,” explained Gushner. “But one reason I’m optimistic is that there is a movement toward shopping locally. We’re perfectly positioned to be the middle, between the small store that can’t make it, and the big store that sells the same things as everyone else.”
Still, the loss of downtown businesses, and the decline in the office population, will reverberate far beyond Center City. Tax revenues could plunge by nearly $650 million this year, according to a report by Controller Rebecca Rhynhart. If suburbanites continue to work at home, the city will lose their wage tax. Retail and hospitality workers contribute 12% of the wage tax the city collects. The hotel tax will be almost nonexistent. Since online retailers don’t pay sales tax on the first $100,000 in sales, the city could lose revenue as residents transition to e-commerce.
The sharp decline prompted Richard Voith, president of Econsult, to wonder in an essay whether cities will drastically cut public services, prompting “a redux of the vicious cycle of population loss amid a return to suburbanization, as they did in the 1970s and 1980s.” He concluded the answer was no. But that history has been on the minds of city officials, said Mayor Jim Kenney’s chief of staff, Jim Engler.
Even though city departments have been asked to look for ways to trim their budgets — as much as 20% — he insisted the city will not gut crucial services or amenities, like schools and parks. “The disinvestment of the ‘70s was one of the great mistakes the city made. We will not do that again,” Engler said.
Because of its diversified economy and strong medical section, Philadelphia could be in a better position than some places to weather the economic downturn, noted Gilchrist. Her firm’s clients have not rushed to cut office space — just the opposite. To keep workers healthy, they’re talking about giving employees room to spread out. Philadelphia, still affordable relative to other big cities, could pick up new residents looking to cut expenses.
Brent Toderian, the former Vancouver chief planner, is convinced that this crisis does not spell the end for downtowns. Over the years, he said, "smart cities have made a social compact with their residents. People will agree to give up a backyard and live in dense places in exchange for walkable neighborhoods, great parks, and playgrounds.”
He may be right. Even with shops and restaurants shuttered, the crisis has shown that we still want to gather — maybe too much — in Center City’s public spaces. Our lives today may be the prototype for how downtowns will look in the future.
Note: This story was updated to clarify how much revenue Philadelphia receives in sales tax from online retailers.