Reach for the Sky

Building boom alters Philadelphia skyline

By Bruce Buckley

From high-rise residential towers to major health-care facilities to flashy casinos, Philadelphia is getting a new look thanks to a boom in construction activity. After several years of growing opportunities, several market sectors have yet to hit their peak.

William Penn is getting quite a show from his perch atop Philadelphia City Hall. The city's skyline is undergoing tremendous changes these days with a boom in new residential towers and other significant development projects.

Penn Medicine recently announced the largest capital project undertaking in its history with the new $232 million Center for Advanced Medicine.

"This market is as strong as it's ever been and it's not just coming from one segment," said Al Fazzini, director of marketing at L. F. Driscoll Co., a Bala Cynwyd, Pa.-based construction management firm that has been serving the Philadelphia area since 1929. "High-rise residential, health care and education are all looking good for us, so our outlook for 2006 is very optimistic."

Hopes remain high among many members of the local construction community, who see billions of dollars worth of new projects on the books for the coming years. Total construction starts are looking up for the state of Pennsylvania as a whole and Philadelphia is helping drive that activity.

The state is expected to see total construction values jump 11.1 percent in 2006 to $17.4 billion, according to McGraw-Hill Construction forecasts. Nonresidential will see an 11.5 percent increase while residential will improve more modestly by 5.4 percent.

However, construction starts in the multifamily residential market are expected to hit $1.3 billion in 2006, a 17.2 percent increase over 2005.

A slew of new multifamily residential projects dominates the list of current and proposed developments in Center City Philadelphia. In 2005, there were 1,801 new apartments, condo units and single-family homes added to the Center City area, according to estimates by the Central Philadelphia Development Corp. and the Center City District.

The estimate for this year is 1,444 new residential units, including 1,215 new condos.

And more are on the way. The $280 million Waterfront Square residential development will complete in 2007. Other major projects, such as the $100 million Marina View Tower near the Benjamin Franklin Bridge, have also broken ground.

It's a surge of activity that general contractors such as Jeffrey M. Brown Associates have positioned themselves to capitalize on. The Huntingdon Valley, Pa.-based company has shifted many of its resources from the area's sagging commercial office market to multifamily residential projects, said Greg Hill, president of JMB.

But with potential shifts in buyer demand, the current boom is a trend that Hill is eyeing carefully.

"There's a tremendous number of significant housing projects on the books in Philadelphia and it's yet to be seen how many will come to fruition," Hill said. "Time will tell, but with the momentum of what's in place right now, there will be a significant number of projects constructed over the next 24 months."

Jeffrey M Brown Associates is also carefully watching the commercial construction market. Downtown office vacancy rates reached above 17 percent in 2005, even as the Cira Centre was completed and the new Comcast Tower got under way.

The retail market has also been spotty. Hill added that the company sees continued work with existing clients but has not seen the type of downtown retail activity in Philadelphia that is happening in other major markets.

"Major retailers find ways to fit into places like Manhattan, but in Philadelphia they tend to stay more in the peripheral areas," he said.

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Institutional building continues to be hot in the Philadelphia area, which is home to a concentration of health-care and higher-education facilities. Ed Butler, an associate at design firm Ballinger of Philadelphia, said the number of opportunities in health care continues to climb steadily. Many hospitals are expanding, adding patient beds to meet new regulations and rising demand. Others are building new facilities.

Penn Medicine recently announced the largest capital project undertaking in its history with the new $232 million Center for Advanced Medicine.

Butler added that many hospitals have master plans that indicate significant health-care work will be available for the foreseeable future. Fox Chase Cancer Center, for example, recently started the first phase of a 20-year, $1 billion expansion plan.

"Every [hospital] is planning to do something," Butler said. "It could be decades before we see a drop."

Philadelphia's numerous colleges and universities remain prime hunting ground for new work. With the economy improving, funding for higher education projects is more secure than in recent years and major work is moving forward.

The University of Pennsylvania remains a top developer in higher education, but L.F. Driscoll's Fazzini added that ambitious programs are going on at other schools, including Temple, Drexel and Villanova.

Temple projects include the $75 million Tyler School of Art, which is scheduled for completion later this year, and the $67 million Fox School of Business, which is set for completion in 2007.

Following the wave of new stadiums built in recent years for the Phillies and Eagles, more megaprojects are on the way to Philadelphia. The state recently released the initial funds for the Pennsylvania Convention Center expansion.

The project, estimated at $632 million, would be the largest in the history of the state. The expansion would nearly double the size of the existing center, making it the largest convention space in the Northeast.

The Museum of Art is also considering expansion plans that could exceed a reported $500 million over the next decade. The museum is currently restoring and renovating the 100,000-sq.-ft. Raymond G. and Ruth Perelman Building to create additional archive and exhibit space.

But Philadelphia's next big boom could be a roll of the dice. Plans are moving forward to bring casinos to Pennsylvania, including two in Philadelphia.

"This is a whole new market coming to town," said Karla Wursthorn, who works in estimating and marketing at T. N. Ward of Ardmore, Pa. "It could spark a variety of activity in other markets, too."

T. N. Ward has already landed one of the first projects in the state, acting as the general contractor on the $200 million Chester Racetrack and Casino south of Philadelphia. However, Wursthorn said she isn't sure how long the payoff from casinos could last.

"Will it be a one time boom and then fade away or will it be ongoing?" she added. "No one can say at this point."