FDI resurgence helps Philadelphia to bounce back

On a bright spring day at the confluence of the Delaware and Schuylkill rivers, Philadelphia Navy Yard is bustling with activity of a decidedly non-military variety. Located at the southern end of the main thoroughfare of Broad Street, the 5-square-kilometre expanse was once employed with building battleships such as the USS New Jersey and USS Wisconsin for combat in the Second World War. Over the past two decades, however, under its new owner the City of Philadelphia, the Navy Yard has been transformed into an industrial park that is home to 120 companies employing about 14,000 people. It is expected to employ about twice that number once fully built.

Located 10 minutes from Philadelphia’s international airport and 15 minutes from the city centre, in recent years the zone has attracted foreign investment from companies such as UK pharmaceutical giant GlaxoSmithKline and Chinese medical device company WuXi AppTec Group, as well as US brands such as clothing manufacturer Urban Outfitters (founded in Philadelphia 50 years ago). The US Navy even maintains a small footprint in the form of one of its three Naval Inactive Ship Maintenance Facilities.

A new life

“It has been an incredible transformation,” says Sam Rhoads, executive vice-president of the Philadelphia Industrial Development Corporation, a 60-year-old partnership between the City of Philadelphia and the chamber of commerce. “For years, so much political energy was spent fighting the base closure on the premise that if the military exited, the world as we knew it would come to an end. But now, in the rearview mirror, that’s the best thing that could have happened to us. We’ve been able to make it a model of base closure and adaptive re-use,” he adds.

The Navy Yard’s rebirth is viewed by many as indicative of the gentle upward curve of this city of 1.5 million located in the south-eastern corner of Pennsylvania, roughly midway between the economic capital of the US, New York, and the political capital of Washington, DC. The job market in Philly, as it is referred to by locals, has grown for 11 consecutive years, often outpacing that of the country as a whole. 

An urban conglomeration important for reasons both historical (the US Declaration of Independence, marking the founding of the country, was signed at Philadelphia’s Independence Hall on August 2, 1776) and cultural (jazz great John Coltrane, many acts associated with the Philly Soul movement of the 1970s and a number of key hip-hop artists are counted as native sons), Philadelphia’s solid economic activity marks a welcome new chapter for a city that struggled through much of the 1980s and 1990s.

“The city is looking for job creators, as most big cities are,” says Lauren Swartz, senior director for international business at the city’s department of commerce. “We’re looking for companies that will come in, plant their flag here and grow here to create jobs that will enhance our business community and create economic opportunities for the citizens.”

Meds and eds

In addition to the Navy Yard, the area of West Philadelphia, home to the University of Pennsylvania and Drexel University, also boasts a ‘research corridor’ from 30th Street to 40th Street that excels at what Ms Swartz calls “meds and eds”. This process is aided by the existence of three of the city’s Keystone Innovation Zones – special districts offering tax incentives to qualifying companies in targeting life sciences and technology sectors. Indeed, local life sciences company Invisible Sentinel was sold earlier in 2018 to France’s bioMérieux for $75m.

“We look at where we can compete with the rest of the US and the rest of the world and [we are particularly strong] in gene and cell therapy,” says Ms Swartz.

The city also has several Keystone Opportunity Zones, which are geographic areas where specific state and local taxes are eliminated for a set amount of time.

None of which is to say the city does not still have its mountains to climb. Despite the steady job growth, Philadelphia’s poverty rate remains stubbornly high to the point where it is considered the poorest of the 10 largest cities in the US. The scourge of drug addiction, especially regarding opioids (an epidemic that has hit the north-east of the US particularly hard), is also a factor. Hard as it may be to believe, the city’s 1000 fatal overdoses during 2018 actually represented a significant year-on-year decline from its 2017 total.

No more brain drain

Nevertheless, there is hope that Philadelphia’s positive attributes – a unique location on the eastern seaboard between New York and Washington, easily reachable from other parts of the world and containing a highly skilled and highly educated workforce – will see the stars align to build on and expand the positive growth the city has experienced in recent years. Whereas the city used to haemorrhage graduates from its well-regarded universities, many more are now choosing to stay

“I think Philadelphia is poised for the next 10 to 15 years to see a level of investment that’s greater than it competitors,” says Harold Epps, the city’s director of commerce. “We have an accessible international airport that is six hours from western Europe, as well as the assets of our hospitals and universities. We’re really blessed.”