Philadelphia's First "Lit Building" by Lesley Hensell
For the first time since 1992, an office building has been constructed on spec in Philadelphia. The result - a 140,000 square-foot office facility - now is 90 percent leased up or under negotiation. The Port of Technology Building has attracted high-tech tenants to its high-end location at 37th and Market streets with state-of-the-art wiring, telecommunications and wet labs. Owned by University City Science Center, the office complex is on the Science Center’s 17-acre campus, just two blocks from the University of Pennsylvania and Drexel University. Tenants will begin moving into the eight-story building in July. Just because it’s on Market Street, however, doesn’t mean this is a totally market-based building. Philadelphia may be a healthy marketplace, but it isn’t Atlanta, Dallas or San Francisco, where building on spec has been common and successful in recent years. To get a project like this going in Philly, it takes a government grant. That’s right - the city’s first "lit building" was constructed in part with a $1 million grant from city hall. And tenants can benefit further from the building’s location - being in a "Keystone Opportunity Zone" means that nearly all state and city taxes are waived until December 2010. "We’re building an exciting community that supports and nurtures fast- growth technology companies," said Jill Felix, president and CEO of University City Science Center. "A critical issue for technology companies is attracting and retaining talent. More than 100,000 knowledge-workers are within walking distance of the Port of Technology." So far, leases include the Port of Technology business incubator, Internet development firm CTNY, co-location provider Meridian Telesis, LLC, high-tech investment banker Communications Equity Associates and Web-based applications developer InterMedia Interactive Solutions. An exciting client list, to be sure. But considering the turnover of Web-based businesses, I hope the landlord got some substantial deposits. And speaking of the Web, experts brought together by the Urban Land Institute say that electronic commerce is bringing radical, permanent changes to the retail real estate sector. This will result in more emphasis placed on the "total purchase experience," more streamlined services and more customer-specific pricing methods. "Actual shopping will continue to offer some advantages - the ability to touch an item and receive it the instant it’s purchased. There’s no risk that physical retail services will be replaced altogether, but they will be used for different reasons," said David McIntosh, senior manager for the Ernst and Young Center for Business Innovation. "We’ll see fewer, bigger stores providing more space for the total shopping experience, and smaller stores focused on selling a specific item or service to a market niche." The proliferation of online shopping will cause data collection about consumers’ tastes, preferences and shopping habits to become more efficient, McIntosh added. Internet shopping could lead to lock-in pricing, or customer-specific pricing to create brand loyalty, something that traditional stores cannot offer.. With the number of online shoppers expected to reach 40 million households by 2002, the next frontier for retail development is high-speed online access wiring for retail space, according to Mark Borsuk, managing director of The Real Estate Transformation Group, San Francisco. "Retail developers will be challenged to deal with a slowdown in [on-site] sales and a possible decline in rents," Borsuk said. To offset such a downturn, Borsuk suggested that some developers might set up "virtual malls" - Internet sites that would feature a variety of their tenants. Through this mall, customers would click to tenants through the developer’s Internet site, and then make the purchase. The developer would collect information about the purchasers, and would sell the information to the tenants. To capitalize on the explosion of online shopping, developers "must think about new ways to market space, whether it’s virtual or actual," Borsuk added. "It’s a revolutionary way to deal with an evolutionary environment." | 
