Philadelphia’s recent boom in new commercial & residential building may be just the tip of the iceberg

The latter part of the “aughts”—the first decade of the 21st century—may not be remembered fondly by many Americans. But for the city of Philadelphia, those years mark a turning point in the decline of the city’s population.

In 2010, Philadelphia showed its first measurable population growth in 60 years. In the past 10 years, Philadelphia has seen a 7% uptick in population.

Ironically, the population growth concurred with the economic downturn of the 2007-2008 years, leading to a situation where demand for new property was increasing as businesses and individuals were tightening their belts. But more people in the city means more housing, more jobs—and greater demand for places to put all these residents and businesses.

A recent study commissioned by the General Building Contractors Association (GBCA) demonstrates just how great an impact the population trend—and resulting new construction—is having on Philadelphia’s economy. The study’s data was provided by Reed Construction Data, an information service provider to the construction industry, and then analyzed by Econsult Solutions, a consulting service specializing in real estate, economic development, and many other areas.

Over the most recent three-year stretch (2013-2015), new construction expenditures in Philadelphia totaled almost $3.9 billion—with each successive year demonstrating growth of at least 10% over the preceding year. Researchers found these projects to have a $6.5 billion impact just within the city of Philadelphia. Expanding the research to the five-county region (Philadelphia, Montgomery, Delaware, Bucks, Chester) saw that impact grow to $13.6 billion.    

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The impact of construction activity is two-fold: the indirect effect, where locally sourced materials generate new business activity for vendors; and the induced effect, where workers enjoy increased wages and spend their earnings within the local economy.

“The downturn meant there was a pent-up demand for new projects,” explained Ben Connors, president of the GBCA. Established in 1891, GBCA serves as the Philadelphia chapter of the Associated General Contractors of America. “There was very little development from 2008-2010.”

But around 2011, construction started “catching up” with the backlog in demand created by the population growth. By 2013, the industry began a period of bustling growth, and hasn’t slowed down since.

Other interesting findings from the study included:

    • 27,000 jobs are supported directly or indirectly each year as a result of commercial construction. Over the three-year period, workers in these jobs earned approximately $5.6 billion in wages and benefits.
    • Construction jobs in particular grew in the past three years, accounting for 63% of those supported jobs. Industries such as healthcare, retail and financial services also benefitted financially from growth in new projects.
    • Philadelphia’s millennial population (typically defined as those born between the early 1980s and the year 2000) is growing faster than that of any other large city.

Additionally, population projections show sustained growth in both the city of Philadelphia and the surrounding counties for the next 20 years.

“Between 2006-2012, about 100,000 millennials came into the city of Philadelphia,” shared Connors. “That brings a separate set of demands on the infrastructure of the city. Whether it’s transportation or recreational activities, frankly, the city as it was designed previously was unprepared to meet those demands. Growth in those areas plus retail has allowed the millennial population ample opportunity to live and work within the city of Philadelphia.”

Attracting a high number of young professionals has myriad effects on future population growth. As they start families of their own, they create an entire generation that will call Philadelphia home, leading to an increased demand for housing, jobs, and transportation, and setting up a potential “golden era” for regional construction well into the future.

“There’s a compounding effect,” agreed Connors. “Even during the downturn, we had growth in the areas of medicine and education. That’s how it starts. Then as demand increases, the demand is met with newer, high-quality facilities. People see this, and they want to be part of it. They want to be in the city and surrounding areas.”

Connors cited a study from the Delaware Valley Regional Planning Commission showing consistent, sustained population growth in Philadelphia and the surrounding counties through the year 2040. If this comes to fruition, it would mark the longest, sustained period of growth in the city since the early 20th century.

“What we build, and how we build it will help the city to reach those numbers,” Connors continued. “Projects that are going on right now like the FMC Tower (University City) where people can shop on the first floor, live on the top floor, and work somewhere in between. Those types of developments didn’t really exist in Philadelphia before.”

Once they do exist, however, they will attract additional young adults to the city—and that’s by design. Each portion of the cycle goes hand-in-hand with the next—new population leads to increased demand for new development, and if done properly, those new projects will attract more families and businesses. It’s difficult to project growth beyond 20-30 years, but it’s also safe to say that given the current landscape, the sky is the limit.

“By and large, this [millennial] generation has decided they prefer to live in a city that’s close to recreation and work,” summarized Connors. “As a result, you have a city that is now building facilities that will attract people on their own.”

A 30-year period of sustained population growth in Philadelphia is unprecedented in our lifetimes, but studies and trends project it to be inevitable. Plenty of Philadelphians—current and future—stand to reap the benefits.

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