While all regions of the US have experienced growth in suburban office markets, Levy acknowledges, "Philadelphia, which is better served by transit than other regions experiencing sprawl, has now fallen below the national average for Downtown market share." That average Downtown share nationwide is 34%. At 72%, San Francisco has the largest downtown share, and, at the other end of the spectrum, Downtown Miami has just a 12% share of its region's office market.

If Center City were to simply reach the national average, the CCD report notes, it would add the equivalent of four more Bell Atlantic Towers, or four million additional sf, which would house nearly 16,000 more jobs. The last year of significant positive absorption of Center City office space was 2000, even though three submarkets--Chestnut/Walnut, South Broad, and East Market--saw positive absorption last year.

In response to low demand and slipping occupancy rates, downtown rents fell between 2002 and 2003, CCD also notes. Citing data from the local office of Grubb & Ellis, the report says the average rate fell from $24.37 per sf to $23.68 per sf.

Despite CCD's successful efforts, in partnership with Philadelphia Industrial Development Corp. and the Philadelphia Dept. of Commerce, to convince 90% of downtown office tenants whose leases came due in the past three years to stay in Center City, "many are downsizing or shifting a growing percentage of workers to suburban locations," according to the report. Now, with increased competition from adjacent states and new KOIZs, "the downtown office sector is at a crossroads," the report concludes. "Either well-paying office jobs will continue to migrate beyond the reach of the regional rail lines . . . , or city and state efforts to reduce taxes will converge with `Select Greater Philadelphia'," the regional marketing effort to expand office jobs here.

Meanwhile, while the office sector has declined, Center City has added 4,235 housing units since 1998, and its residential population grew to 83,000, an increase of 6,000 over the past five years. The retail and restaurant sectors have also seen significant growth, according to the report.