Features: The Condo Revolution!

Suburban empty nesters willing to pay $1 million and more for the romance of urban life are driving a luxury condo boom that’s about to turn our rowhouse town into the Upper East Side. What’s our cut on the deal? Maybe the world-class city we say we’ve always wanted

What that means, in real simple terms, is that wherever and whatever you buy, it’s going to cost you. A 1,327-square-foot condo in CityView sold for $476,000 this spring. A relatively spacious 2,230-square-foot condo on Pier Five at Penn’s Landing cost $440,000, which sounds like a deal compared to a dinky 843-square-foot condo on Washington Square that went for $312,500 in May. But on Rittenhouse Square, a 1,175-square-foot condo at 1900 Rittenhouse sold for $1,250,000 — thus breaching a thousand dollars a square foot. “We now have condo space going for more than Class A office space,” says Gillen. But crossing that threshold doesn’t surprise him, really. It’s in keeping with what he sees as the signal long-term trend: “The city is becoming a place of consumption, not a place of production.”

Among all the charts he keeps in his computer, the most worrisome tracks the price-to-rent ratio. Right now, the average price of a condo in Philadelphia is more than 20 times the annual rent it would fetch as an apartment. “That number is higher than it got in 1989, the last time real estate crashed,” says Gillen.

Ah, yes. I remember that crash. I owned a townhouse on St. James Place, near 22nd and Locust. I bought it for $160,000 in 1986, poured $20,000 worth of improvements into it, and sold it for only $171,000 in 1993. But I’ll tell you what really hurts: Today, that townhouse would sell for around $500,000.

So yes, condo prices can and will go down — but that belabors the obvious. “Real estate development is always sort of lumpy,” says Stephen Mullin; there are peaks and valleys of both supply and demand. More important are the long-term trends — and when you look at the long term, Center City looks pretty good. The apartment vacancy rate stands at a relatively tight five percent. Center City has steadily gained population since 1970, even as the rest of Philly has been losing people. (The midtown population is now 88,000.) And that population is exceptionally accomplished: 62 percent of adults have college degrees, compared to 18 percent citywide. All in all, Center City is such a homogenous elite, it can be considered a city within a city — a “boutique city,” to borrow a term coined by trend forecaster Joel Kotkin in his book The New Geography. Such places, like San Francisco or Boston, are full of expensive theme-park restaurants and high-end retail chains. People live there, not because they happen to, but because they can afford to. “It’s a lifestyle choice,” Kotkin told me. “These places are not economically diverse. In fact, they’re more homogeneous than the suburbs.”

As Center City continues to evolve into a boutique city, that transformation will be facilitated by a number of improvements already in the works. By the end of the decade, the Barnes Foundation will move to the Parkway, the Convention Center will be expanded, and Comcast will move into its new 57-story office tower. CCD’s Paul Levy thinks the Barnes will only add to “a more animated Parkway, with more pedestrians and cafés.” With the Philadelphia School Board moving its headquarters to 440 North Broad Street, development north of Vine will get a boost — a trend that’s already begun with the conversion of 640 North Broad into lofts. On the south side of Broad, the Avenue of the Arts will continue to push past South Street. As for retail, Levy says we could see changes soon: “With Federated [owner of Macy’s] buying May [owner of Strawbridge’s], we could have dramatically improved department stores downtown, including something high-end.” And as the Schuylkill River Park is extended to Bartram’s Garden, a bike trail along the Delaware will run from Penn Treaty Park to Home Depot; the two paths will be linked by an east-west bike lane, maybe along Washington Avenue. All in all, Center City will both fill in and spill outward.

That’s not a pie-in-the-sky scenario. It’s a reasonably hopeful vision of the near future based on the recent past. As Carl Dranoff notes, “Center City has taken on a momentum of its own.” And when Philadelphia becomes a true world-class city, we’ll have to thank a generation of new believers — people like Roy and Judy Murray.