It turns out people don’t decide where to live solely based on where they work, and that’s good news for Philadelphia’s coffers and the city’s small business recovery — at least for now.
“The core of the downtown, while not fully restored because [we’re still] missing 45% of office workers… is coming back relatively strongly,” said Paul Levy, president and CEO of the Center City District. “The tide is largely coming back.”
Part of that, particularly in the heart of Center City, is due to large employers calling their workers back to the office, at least part-time. Comcast did so beginning in September, asking people to be at their desks three days a week. The city’s commerce director, Anne Nadol, called it a “brave” move and “a strong example for many employers within the city.”
Pedestrian volume downtown, isn’t inching closer to pre-pandemic norms because of commuters. A lot more people walking around actually live nearby.
Overall foot traffic in November was 80% of the count in 2019, according to cell phone data collected by Placer.AI and analyzed by CCD, while resident foot traffic was up significantly — 126% of what it was three years ago. This looked at activity between Vine Street and South Street, stretching from the Schuylkill to the Delaware River.
In contrast, worker foot traffic in November was 55% of its pre-pandemic level. Experts have varying views on what the new normal will be, but agree the full-time in-person office requirements of old are likely to become rare.
“I don’t think I know anyone who wants to go back five days a week,” said LaToya Richie, president of 75-member NExT Philadelphia, the young professionals arm of the Urban League of Philadelphia. “The work-life balance is something that our generation is experiencing that our parents didn’t get an opportunity to indulge in during their youth.”
The data points to the idea that people like to live in the city, and don’t reside downtown just because of their jobs.
“There was this notion that people were going to flee cities… that clearly has not happened,” Levy said.
Philadelphia’s population did shrink from 2020 to 2021, but perhaps not as much as previously thought. Census Bureau estimates released earlier this year showed a 1.5% decline, with 25k fewer Philly residents. A just-released update based on a more reliable data collection process (the 5-year American Community Survey), shows a much smaller decline of less than 0.3%, about 4k people.
Meanwhile, Center City neighborhoods grew their population in 2021, continuing an upward trend.
Also in that year, the proportion of remote workers living in Center City Philadelphia increased from 15% to 21% of workers, Census data shows.
People did leave the city at the beginning of the pandemic, but they quickly got bored, suggested Zak Klinvex, chief investment officer at Post Brothers, which builds and manages apartments throughout Philadelphia. He referenced the live-play-work dynamic that many developers tout in upscale multifamily residential offerings.
“If your office job is going away from the office, that job is just moving into your apartment… you can take that wherever you like to play,” Klinvex said.
A northeast city, but make it affordable
Some of the people living in Philadelphia are coming from New York and other locations — more than before.
Close to half of lease applicants at Alterra Property Group’s Philly properties were from out of state this year. VP of asset management Jeff Schaffer put the number at 48%, compared to 32% in 2020 and prior. The most popular locations they move from are New York and Washington DC, Shaeffer said.
Cell phone data from Placer.AI showed the city’s population may even have grown slightly from April 2021 to April 2022, with a not-insignificant portion of the newcomers moving from Manhattan and Brooklyn.
“They’re not moving to upstate New York, they’re moving to other cities, because they’re city people,” Klinvex said.
This was happening to some extent before COVID-19, with people who committed to being so-called super commuters. With a savvy Amtrak strategy, they found ways to keep their NYC jobs without sacrificing their Philadelphia comforts (and much lower cost of living).
With remote work and hybrid schedules more common, it’s even easier.
Richie, of NExT, said the biggest trend she’s seen is young professionals taking fully remote jobs at companies based in other states, some as far as California.
Even those who have to commute regularly may only do so a few times a week.
Jon Cervi works for Chobani. The 26-year-old treks to the office in Soho, Manhattan, about twice a week from his home in Northern Liberties. He is considering a move to Center City so he doesn’t have to bike to 30th Street Station before sunrise on his New York days.
“If it was 5 days a week, would not be sustainable,” said Cervi, who got over 30k views on one of his “super commuter” TikToks. He’s made some friends on social media and on the train platform since he started the routine, including some who aspire to his lifestyle.
“A lot of people have been asking me questions who are currently living in New York,” Cervi said. “More and more people are realizing that this is more feasible than they thought.”
In the past few years “supply has gone up and demand has gone up” in Center City housing, Levy said.
A record number of residential building permits were granted in Philly last year, though activity has now slowed considerably. Philadelphia is among the leaders in adaptive reuse: from 2020 to 2021, the city saw over 1,500 apartments created in spaces that used to serve another purpose, according to an analysis by real estate blog RentCafe.
Higher mortgage interest rates mean buying a home has become vastly more expensive over the past year. This is showing through in renter behavior, said Shaeffer, of Alterra Property Group.
During the first 9 months of 2021, 28% of the resident move-outs at Alterra’s Philadelphia properties were due to home purchases elsewhere, Shaeffer said, but this year, as of Nov. 30, only 3% of move-outs were due to home purchases.
Will millennials buck the prediction and stay?
All of this is generally good news for Philadelphia. More people moving into Center City means more people paying wage taxes — regardless of where they work and who they work for — and more customers to patronize local businesses. But is it sustainable?
It could be, observers say, if the city is able to make improvements in two significant areas: reducing gun violence and improving the public school system.
The average first-time home buyers right now are in their mid-30s, placing them squarely in the millennial generation, who flocked to Philly as they became adults. This group, born between 1981 and 1996, was credited in 2017 with revitalizing the city.
Millennials have continued to grow their presence since then, Census data shows. The 25 to 40 age group (which overlaps slightly with other generations depending on the year) was up 13% in Center City zip codes from 2017 to 2021.
“I do think there are fewer millennials moving out,” said Klinvex, of Post Brothers.
When the real estate market stabilizes, will they stay? Or, as projected nearly a decade ago, will they eventually leave?
Schools are a factor, though it may not be causing people to leave the city. The number of public school enrollments in the city has decreased, but the population of school-age children in Philadelphia has not.
“The issue in Philadelphia has always been — and it’s no secret — the public school system,” Klinvex said. He’s seen more of his peers seeking out well-resourced public schools and private schools in the city .
With new leadership, the School District of Philadelphia has been planning and pledging major improvements in the next five years.
Gun violence must also be addressed to keep Philadelphia attractive. Everyone interviewed for this story mentioned that tragic deterrent, and it has come up in every mayoral candidate’s announcement. It’s something the business, civic and religious community have been teaming up to address, Levy said.
“Everybody’s got to feel confident that it’s great to be here and it’s safe to be here,” he said. “The perception issue is a challenge.”
Uncertain times also lie ahead on the corporate front. Many companies that still have large offices in the city are likely to shrink their footprint when lease renewal time comes up, said Nadol, of the Commerce Department, and that could leave properties with awkward amounts of excess space. It could be used for co-working by now-untethered workers, she suggested.
That space could also be seen as a motivator to get people back in the office, said NExT president Richie. She expects the norm to move back toward employees spending most of their work time in the office. Still, she said, employers can and should offer increased flexibility in terms of hours.
“I would like for companies in the city and surrounding suburbs to understand that giving people a flexible schedule allows them to be more successful in their career,” Richie said. “We want to keep that talent here.”