Philadelphia developer Craig Spencer is making the biggest wager yet on a resurgence in the city's housing market with a $250 million luxury condominium project across the street from City Hall.
Spencer, an owner of the Philadelphia Soul arena football team along with rock star Jon Bon Jovi, will start construction in November on a 44-story tower on the site of the former Meridian Bank building, whose burned-out shell sat vacant for almost a decade after a 1991 fire.
More than 40 percent of the Residences at the Ritz-Carlton were sold within three weeks, exceeding Spencer's six-month sales goal with just one advertisement posted in mid-July. The units ranged in price from $400,000, to $12 million for the penthouse with a view of the 37-foot tall statue of William Penn that tops City Hall.
"The buying has been fast and furious," Spencer, 44, said in an interview at the Ritz-Carlton, a hotel he helped build that is adjacent to the site of his new project.
Spencer is counting on a continuation of the boom in the Center City region that has added 6,400 housing units since 1998, according to the Center City District, an organization of property owners and businesses. Low prices, attractive mortgage rates and tax incentives have spurred redevelopment and helped blunt a four-decade decline in the city's population.
Housing prices in Center City have more than tripled since 1984, to $525,960 last year, the district said in a report. That's still less than half the average price of a Manhattan apartment, according to New York-based Halstead Property LLC. Citywide, the median home price was $91,000 last year, a Philadelphia Inquirer analysis found.
"It's still a very affordable city," City Councilman Darrell L. Clarke said. "I just hope we can maintain the pace."
Other planned projects include Marina View Towers, 25 stories of condominiums at the foot of the Ben Franklin Bridge to New Jersey, and the nearby Waterfront Square towers, a $280 million, five-tower project next to the Delaware River. Commercial construction is on the rise too, led by Comcast Corp., the largest U.S. cable television operator, which is building a $500 million headquarters on 17th street.
T.J. Reilly, president of the Center City Residents Association, said he was skeptical the boom in Center City would carry over to other neighborhoods.
"I have to wonder how long it will continue," said Reilly. "It wouldn't surprise me if some of them don't come to fruition."
Philadelphia's population fell by almost 7,000 last year to 1.47 million, after falling about 40,000 in the previous four years, according to U.S. Census Bureau estimates. Center City has about 88,000 residents.
Mayor John F. Street's government helped spur Center City's growth in 2000 by waiving property taxes for 10 years on new residential construction and improvements to business properties. More than 1,500 units were approved for this year in Center City and about 4,500 are in the works, according to the district.
The gains aren't spilling over into blighted neighborhoods to the north and west, said Mark Allen Hughes, a former vice president at Public/Private Ventures in Philadelphia. The city has lost almost 480,000 residents since 1970, mostly to suburbs offering jobs, lower taxes, cheaper houses and better schools.
"It certainly blunts the population loss," said Hughes, who oversees research projects on urban policy at the University of Pennsylvania's Fels Institute of Government. "I don't think it's going to be a big enough stopper to plug the drain completely."
Only a quarter of 11th-graders in Philadelphia's public schools meet Pennsylvania standards for reading and math, the state Department of Education says. The Census Bureau estimates 35 percent of the city's children live in poverty and the murder rate last year was three times higher than New York's.
"The condo boom will ultimately lead to growing pockets of prosperity in Philadelphia, rather than large-scale urban renewal," Hughes said. "The folks in West and North Philly need the creation of jobs in Center City, not condos."
Philadelphia was the biggest U.S. city whose population shrank in the 1990s, with a decrease of 68,000, or 4.3 percent. Of the cities bigger than Philadelphia, New York's population rose 9.4 percent, Los Angeles added 6 percent, Chicago's population grew 4 percent and Houston's surged 15 percent.
Philadelphia's decline has slowed since the 1970s, when the population decreased by 260,000. Ed G. Rendell, Philadelphia's Democratic mayor from 1992 to 2000, balanced the city budget with help from the state after inheriting a deficit estimated at $250 million. Rendell, now Pennsylvania's governor, also moved to cut taxes, including a levy of almost 5 percent on wages.
Robert Inman, a finance professor at the University of Pennsylvania's Wharton School, estimated in 2003 that the wage tax had cost the city 207,000 jobs in the past 30 years. Street has continued to reduce the tax to 4.3 percent.
Philadelphia is also benefiting from the nationwide housing boom fueled by a drop in borrowing costs. The average U.S. rate for a 30-year fixed mortgage probably will fall to 5.76 percent in 2005, the lowest ever, Fannie Mae forecast on Aug. 16. Sales of new houses likely will reach a record 1.28 million, the National Association of Realtors estimates.
"With mortgage rates so affordable and downtown revitalized, the fundamentals are there," said Susan M. Wachter, a professor of real estate at the University of Pennsylvania in Philadelphia.
Bloomberg's Jef Feeley in Wilmington, Del., contributed to this report.