Center City endures as an inviting locale

Don't panic. Compared to the rest of the country, we're in pretty good shape.

That's the gist of the annual state of Center City report, released yesterday by Philadelphia's Center City District (CCD).

"What is required now for Philadelphia is a calm, deep breath, a focus on facts not fears," CCD president and CEO Paul Levy wrote in the introduction.

Not to be too sanguine about the ka-thunking economy, but so far, CCD reports, Philadelphia is coping better than many other urban areas.

In its 58 pages, the report reviews 12 aspects of city life, including real estate, employment, arts and culture, education, tourism, and transportation. In nearly every category, it finds that Philadelphia is on a steady course. One advantage is the city's Franklinesque tradition of moderation. Since we didn't enjoy the lucrative thrills of high-risk finance and real estate over the last few years, we aren't hurtling back down to earth now.

"Places that did not engage in speculative . . . initiatives have been spared a great deal of suffering," the report says.

An unscientific survey yesterday supported CCD's conclusions. Students, professionals, elderly residents, and visitors, asked to offer their assessments of Center City, consistently said that, frankly, they were smitten.

"I enjoy the city," said Mike Chicalo, a 45-year-old software salesman. "I could easily retire here." A graduate of Drexel University, Chicalo lives in New Stratford, N.J., with his wife and three children. He was in the city to meet a client for lunch at the Palm.

"I'm here once or twice a week on business," he said, and he regularly meets friends for dinner at restaurants like Cuba Libre and Circa.

Since his student days, the city has vastly improved, said Chicalo, citing retail stores, the Kimmel Center, sports venues, and the renaissance in Old City and Northern Liberties.

At 12th and Market, which the report found to have some of the highest foot traffic in the city, the reviews were similarly upbeat. Dee Spagnuolo, a 34-year-old defense lawyer, said that compared with 1996, when she moved to Philadelphia for love and a job, "Center City is safer and more vibrant."

Spagnuolo, who grew up in New Hampshire and lives in Washington Square, said Philadelphia had a growing reputation as a more affordable alternative to New York City. On a break from jury duty, she had just ordered a plate of falafel and was leisurely reading a Junot Diaz novel, periodically checking her BlackBerry.

This past year, she said, city services declined. Her street wasn't plowed all winter. But that, she said, is a minor issue.

Education is not.

As the mother of 2-year-old twins, she said, "if I leave the city, it will be only because of the state of the public schools."

Like many Center City residents, Spagnuolo would be loath to give up her home in a historic neighborhood, where she can push her children in a stroller to the park, walk to the theater, and belong to a diverse urban community.

All these factors have helped the city's residential market hold up better than other metropolitan areas this past year.

According to the report, home prices here fell about 10 percent from the peak in 2006, compared with drops of 12 percent in New York, 13 percent in Boston, 32 percent in Los Angeles, and 39 percent in Las Vegas.

In Center City, average home prices dipped just 1 percent in the last two years and remain 34 percent higher than 2003 averages, the report found, attributing this resiliency to the absence of much speculative development and to "healthy" demand from students, young professionals, and empty-nesters.

While home sales are well off the pace of a year ago, there are signs of life. New condominium sales for the first quarter of 2009 totaled 103, compared with 318 for the first quarter in 2008, according to Delta Associates, a real estate valuation and consulting company. Existing-housing sales totaled 149 for this year's first quarter, down from 298 a year ago, according to Prudential Fox & Roach Realtors HomExpert market report.

With 28,000 students attending colleges, medical schools, and universities downtown and 70,000 in West and North Philadelphia, Center City's rental market had a healthy vacancy rate of 4.8 percent at the end of 2008 and is expected to remain strong.

So is tourism.

Even on a dreary day like yesterday, Center City was busy with visitors who had come to see the Cézanne exhibit at the Philadelphia Museum of Art, and busloads arriving for tours of Independence Hall.

The report touts the Convention Center for making Philadelphia a serious contender in the hospitality business. But the hall's 392,000-square-foot expansion, to be completed in 2011, could be a problem. Experts predict the city will be nearly 2,000 rooms short of the 2,500 needed to support it.

The credit squeeze has frozen development of several proposed hotels, including the 260-room Intercontinental Hotel at 1601 Vine St. Just two are expected to open this year: the 231-room Hotel Palomar at 17th and Sansom Streets and the 202-room Le Meridien in the old YMCA building at 15th and Arch Streets.

The report frames the slowdown in hotel-room additions as "making market absorption easier and keeping existing hotel occupancy rates from dropping substantially."

Meanwhile, projections are bright for Center City's convention business. Bookings of more than 10,000 attendees are expected to increase from five last year to eight in 2009, drawing 100,200 conventioneers.

And as The Inquirer reported Sunday, Center City's office market has weathered the recession stoically with a vacancy rate of 11.3 percent for the first quarter of 2009. Rents remained relatively stable, too, with high-end space going for $26.30 a square foot.

Wayne L. Fisher, a broker at Grubb & Ellis Co., predicted conditions would be "tricky" through the first half of this year, as companies downsize or - in the case of the Wolf Block law firm - close. A strong moderating factor, however, is that Center City was not overbuilt heading into the recession, he said. And no office buildings are currently under construction. The chances of one going up are "totally remote and impossible," Fisher said, without substantial credit and the guarantee of at least 50 percent occupancy.

Any substantial new office construction is likely three to four years off, Fisher said, which will help Center City absorb whatever vacancies are yet to come.

Not that there isn't anything to worry about.

The report notes that Center City continues to lose jobs to the suburbs, so its share of the region's office space is 28 percent, down from 41 percent in 1993. The report contends that with "a continuing commitment to tax competitiveness and with new investments in transit and infrastructure, Philadelphia can align itself well for the next cycle of growth."

For John Cipolla, living on unemployment, the realignment cannot arrive soon enough. But the 69-year-old former messenger for a blueprint company, who lives with his niece in South Philadelphia, isn't complaining.

"This is real nice here," he said, working his way leisurely through a piece of buttered rye toast and a cup of tea, at his favorite spot, a table overlooking the atrium in Liberty Place.

Since his brother died a few months ago, Cipolla, a mild-mannered man in a flannel shirt and bifocals, has been taking a bus to Center City every morning.

"I come here not to be alone," he said. "The people are real nice, and they keep the bathrooms clean and all." And throughout the day, the salesmen from a menswear shop come out to chat.

Cipolla, who approves of Mayor Nutter's efforts to fight drug dealers and go after tax evaders but doesn't "believe in that casino stuff," takes a long view of the city. It has changed enormously since his uncle used to take him to Ninth and Arch to be fitted for custom-made Easter suits. "Shops are not as nice as they were back then," he said. "And they were cheaper, too."

Still, this is home, he said. "And it's a great city."