Millennials are the focus of much discussion on evolving trends in commercial real estate. While they crave the newest, fastest and most efficient technology, their lifestyles trend towards the artisanal, craft, and the locally sourced. They prefer to shop at small businesses, eat at sidewalk cafés, commute by bicycle, and rent apartments in niche, urban neighborhoods. Nerdy is the new cool.
As a demographic group, millennials are significantly larger than the baby boomers and represent the most sought after talent pool. No major city has experienced a larger increase in 20 to 34-year-olds in recent years than Philadelphia. From 2006 through 2012 their presence grew to nearly 100,000, representing 26% of the total work force. Equally significant, 64% of students at our local colleges and universities are staying after graduation. Non-native graduates residing in the region increased from 29% to 42%.
One of the many factors attracting this talent-force is the dramatic change in the look and feel of “traditional” office space. Tech-savvy companies budding with innovators have inspired a new, open and collaborative office environment, which often includes activated atriums, coffee bars, and outdoor space such as roof decks. This approach can improve productivity and drastically cut down the per-square-foot average cost for each employee.
The ability to develop creative solutions that provide flexibility and unique features in plug-and-play space is critical.
Warehouse and historical building conversions are expected to escalate as resources for innovation centers increase. On the 3rd Street corridor between Market Street and Girard Avenue, a large concentration of innovative companies and coworking spaces have taken root. What started as a fun nickname for the community — “N3RD St” – pronounced “nerd” — became its official name in 2014. City Council passed a resolution to change the name; special street signs have been installed along North Third Street displaying “N3RD St” beneath the conventional signage.
Developers have plans to renovate Bok Technical High School in South Philadelphia into a mixed use complex with its rooftop seasonal pop-up restaurant “Le Bok Fin” already a huge success. FMC Tower in University City, 1919 Market Street in the CBD, and The Curtis in Independence Mall have designed their office space as vertical communities as a result of millennial-driven demands. 2016 will see an increase in co-working space and a morph of the live, work, play environment into more unique office space in fringier locations. Since 2007, 17 co-working spaces totalling more than 200,000 SF have opened in Philadelphia. Interestingly, co-working space users are not only millennials but also the self-employed baby boomers.
“Many smaller, emerging companies don’t know where they will be a year from now, let alone five years or more as required by a typical commercial office lease,” according to Jerre Riggs, Director of Real Estate at Benjamin’s Desk (Philadelphia’s premier co-working network). “The ability to develop creative solutions that provide flexibility and unique features in plug-and-play space is critical. As companies pursue funding and work on scalability, they require and deserve space that supports their unique brands and allows them to attract and retain the talent that will help propel growth. This may not be the traditional path, but it is the path forward.”
Will millennials stay in the CBD? This question is on the minds of businesses, policy makers, and developers. Only 36% of the millennial population surveyed said they believed the city is a good place to raise children. Unless Philadelphia can move toward resolution on quality public education, safety, wage tax, and increasing jobs it will inevitably lose millennials to the suburbs.
And the suburbs’ plethora of mixed-use developments are ready for them. One Belmont in Bala Cynwyd, King Of Prussia Town Center, and Sora West in Conshohocken are just a few of the in-progress or proposed mixed-use projects changing the face of office space in the suburbs.
With office rental rates, net absorption and new construction up, and vacancy at its lowest in 15 years, Philadelphia’s renaissance is poised to accelerate. Add to that our affordability and central east coast location and it’s likely our region will continue to attract talented millenniels. #phillyrising
ELIZABETH MORROW, JD is a Vice President in the Philadelphia CBD office division. She specializes in tenant and landlord representation. Contact Liz at: firstname.lastname@example.org