One thing is for sure about Philly: University City is booming. From the increasing number of startups that stick around to the increasingly impressive talent pool, University City is the place to be for businesses. Region’s Business set out to learn more about this side of town.
From food trucks to tech companies and life sciences startups, it seems University City is exploding as a hub for small businesses. But what’s behind this growth, and why are small businesses straying away from the Center City district?
The easternmost region of West Philadelphia, University City was named by the University of Pennsylvania during a 1950s urban renewal effort. Drexel University and the University of the Sciences have since joined Penn in driving the phenomenal growth. It’s also home to several medical institutions, independent centers of scientific research, 30th Street Station, and the new neighboring Cira Centre complex.
Despite the declining economy, the past few years have been great to University City. In 2011 alone, the neighborhood saw about $2 billion worth of real estate projects for public spaces as well as commercial projects. That same year the University City Science Center’s Port Business Incubator opened the Bullpen, a co-working office for budding startup companies — providing entrepreneurs with a desk, phone and high-speed Wi-Fi. The Science Center rivals North Carolina’s famous Research Triangle now extending to 15 buildings totaling 2 million square feet, which extend from 34th Street to 39th and Market.
“The current institutional expansions of the University of Pennsylvania, Drexel University and Children’s Hospital Of Philadelphia, along with the Science Center, are laying the foundation of the economic growth,” said Stephen S. Tang, Ph.D., MBA, president and CEO of University City Science Center. “This physical growth, matched with the increased vibrancy of the startup community in the neighborhood, is sparking University City to transition beyond a cluster of higher education institutions into a world-class center of innovation. The momentum of the neighborhood is a testament to the level of ambition and quality of human capital in University City.”
Already at 80 percent capacity, 2.0 University Place at 41st and Market was completed this past September and is the first pre-certified LEED Platinum building in Philadelphia. LEED, or Leadership in Energy & Environmental Design, is a green building tool that provides third-party verification of green buildings. Buildings can achieve different levels of certification, i.e. silver, gold, and platinum. There are prerequisites and credits for each rating system, and a team determines the best match for each project. 2.0 has all platinum tenant spaces and the first accessible green roof in Philadelphia.
Scott Mazo, founder and managing partner of University Place Associates, LLC, believes that the LEED Platinum certification is important to companies who are trying to attract the young, innovative minds graduating from the nearby universities, because these people care about being economically and socially responsible. The U.S. General Services Administration (GSA) is 2.0’s largest tenant. The GSA has a LEED requirement for any leased or owned building. Previously, that requirement was silver, but recently it’s been upgraded to gold. Mazo said, “They have that interest because the U.S. Government has been trying to set a standard for commercial construction. This is their headquarters.”
3.0 University Place at the same location will begin construction once an anchor tenant is found, and, according to Mazo, should take two years to complete.
3.0 University Place is one of 100 building projects chosen to participate in the U.S. Green Building Council’s LEED v4 beta project. Additionally, news broke this month of plans for the third and final tower of Cira Centre South with the commitment of global specialty company, FMC Corporation, as the major tenant beginning at completion in 2016. Cira Centre South will be a mixed-use development, which includes an 850-bed, upscale housing option for graduate and professional students.
So the question remains: Why is University City booming while the rest of the nation is in decline?
University City is part of a Keystone Innovation Zone (KIZ), an incentive program that provides tax credits to for-profit companies less than eight years old operating within specific targeted industries within the geographic boundaries. KIZ is a partnership between Drexel University, Thomas Jefferson University, University of Pennsylvania, University of the Sciences, The Wistar Institute, BioAdvance, and the Science Center. The tax credit pool is $25 million. Companies can get a tax credit that equals 50 percent of the increase in their revenue since the previous year. No company who has applied has ever been denied this credit. Each company is eligible to receive up to $100,000 and can opt to sell their credits to larger companies. Last year, Apple bought $2.33 million worth of Pennsylvania tax credits.
In 2012, only three companies applied for the University City tax credit leaving more than half the pool unused. So far this year there are already 13 applicants for the credit — the highest number ever to apply. This is because, in past years, only life science companies were eligible, but this year KIZ decided to make tech companies eligible as well. The awards are announced in December each year.
Residential and Commercial Projects
The University Science Center now includes 15 buildings totaling 2 million square feet of available plug-and-play incubator office space stretching from 34th and Market Street to 39th and Market.
With the addition of 2.0 University Place and the planned 3.0 University Place at 41st and Market to the West, and Cira and Cira South at 30th Street to the East, space is plentiful.
University City also boasts a 93 percent office occupancy rate and an 89 percent retail occupancy rate, as well as a 90 percent residential occupancy rate.
According to UniversityCity.org, 2.6 million square feet of new residential real estate projects have recently been completed or are under construction, which is expected to increase population by roughly 10 percent over the next two to three years.
Tang said, “It’s clear that not only are we attracting jobs but residents, too. The Science Center’s planned residential tower at 3601 Market is one of many projects slated to increase the residential concentration in University City. The growth and expansion in the area isn’t limited to the anchor institutions either. We have new green spaces and parks, like The Porch at 30th Street Station and Penn Park popping up.”
30th Street station is located in University City, the second busiest train station in the nation, with 50,000 travelers a day. SEPTA’s regional rail provides connections to neighborhoods throughout Philadelphia and the suburbs all the way to Delaware and the Philadelphia International Airport. New Jersey transit trains cross the Delaware River, and AMTRAK trains go to destinations as far away as Miami, Chicago, and New Orleans. SEPTA has trolleys, buses (including the University City Lucy Loop), and subways servicing the neighborhood from end to end.
The district also offers easy on and off access to two major highway links I-76 and 676. University City also offers some of the most bicycle-friendly streets with a network of roughly 25 miles of bike lanes.
Due mostly to the area colleges, the majority of the population is between the ages of 20-34. Between 2000-2010, the number increased by 21 percent. Furthermore, more than half of residents over 25 have obtained a Bachelor’s Degree or higher. In fact, an astounding 27 percent have Bachelor’s Degrees and 27 percent have Master’s Degrees or higher. In Philadelphia as a whole the numbers are 13 percent and 9 percent, respectively. Between Penn, Drexel, and the University of Sciences there are over 50,000 students in University City. This entrepreneurial spirit is a breeding ground for start-up companies. Academic funding for research has been increasing as well. University City researchers received more than 44 percent of all National Institutes of Health funding distributed statewide.
Josh Kopelman is a prime example of the type of ingenuity a lot of these students possess. Kopelman, originally from Great Neck New York, is a non-native Wharton School graduate who stayed in Philadelphia. He co-founded Infonautics Corporation in 1996, and founded Half.com in 1999. Half.com quickly became one of the world’s largest sellers of books, music, and movies. It was purchased by eBay in 2000 for $245 million. Kopelman remained with the company for three years, stepping down in 2003 to found TurnTide, an anti-spamming company, which was acquired my Symantec just six months later. In 2004, Kopelman founded First Round Capital, one of the nation’s most dynamic beginning stage venture capital firms, which is now headquartered at 40th and Locust streets. Kopelman told UniversityCity.org, “First Round Capital is thrilled to move our headquarters into University City. We’ve seen a real surge in the number of companies that were founded by students at Penn and Drexel—and are looking forward to helping the next generation of entrepreneurs get their start.”