There has been a 26% loss of private sector jobs Downtown since 1970, according to Paul R. Levy, executive director of Center City District, who participated in a panel on "KOZ, Job Growth and Retention." He noted that office vacancies have only been stemmed because 4.5 million sf in older buildings was converted to residential space. The strategy that led to the conversions and emphasized art, entertainment and tourism Downtown was a resounding success.

"There is no strategy for the office sector." In fact, conditions are "anti-growth in the commercial office sector," he said, adding "the real challenge is to stem migration to the western suburbs (taking place) in order to avoid the CBD tax structure."

Although Levy released one of two studies that show KOZs will have a negative impact on the office market, he said, "KOZ on the table distracts from the real need for tax reduction." KOZ proponents Brad Molotsky, general counsel for Brandywine Realty Trust, and John S. Gattuso, Liberty Property Trust's SVP of urban and national development, listed the benefits of KOZ and dispelled what Molotsky called its "misconceptions." Randy Scott, SVP, Thomas Properties Group, called KOZs "the wrong tool for Downtown job growth," he said they lack transparency, efficiency and fairness.

Despite efforts to prevent KOZs from dominating a panel on "Dealmaker's Dilemma," the perceived unfair advantage many believe Brandywine's Cira Centre and Liberty Property Trust's One Penn Plaza will gain from KOZs in luring tenants was the underlying subtext in panelists' gloomy picture of office vacancies and "compressed rental rates" for several years to come. "It's bad, and it's going to get worse," said Todd Monahan, director of leasing, Equity Office Properties Trust.

"The issue is supply and demand," added Salvatore Ambrosio, CEO of Tactix Real Estate Advisors. "We don't have enough jobs to fill up all our office space." Monahan and Ambrosio painted a scenario in which the spread between rates in classes of office buildings narrows significantly, "down to a differential of about $14 per sf to as low as $6 per sf, between class A buildings and trophies."

Robert Walters, partner and senior managing director of CB Richard Ellis, however, suggested that by adding new inventory, Philadelphia would be better able to become competitive all along the Middle Atlantic.

Ron Rubin, chairman and CEO of PREIT, offered an encouraging long-term perspective on market conditions, which have suffered turmoil before, during an "Inside the Real Estate Mind" interview with Michael Desiato, editor-in-chief of Real Estate Media, publisher of GlobeSt.com and Real Estate Forum, and host of the conference. Jonathan Schein, Real Estate Media's president and CEO, declared this second RealShare Philadelphia a "sell-out.