Philadelphia officials have broken off an agreement to sell the historic Family Court building on the Benjamin Franklin Parkway to Peebles Corp. for the developer to revamp into a 203-room luxury hotel, as the coronavirus pandemic clouds the demand outlook for visitor accommodations in the city.
The Philadelphia Industrial Development Corp. said that it had “coordinated with the city and concluded that we will formally terminate the agreement” to purchase and redevelop building at 1801 Vine St., across from Logan Square, according to an email the agency sent last week to Christopher Leng Smith, Peebles’ managing director for the northeast U.S.
The decision was made “in consideration of the impact of COVID on the hospitality market,” Sam Rhoads, a PIDC executive vice president, wrote to Smith in the email, which was provided to The Inquirer.
The move underscores the uncertainty surrounding the hotel industry and other categories of commercial real estate, with the long-term impact of the pandemic on everything from office use to convention businesses yet to play out.
“Nobody really knows what the landscape is going to look like post-pandemic,” said Christophe Terlizzi, who heads KeyBank’s commercial real estate practice in the region. “It’s unknown and it’s unknowable.”
Although hotel performance has ticked up since the early days of the pandemic, when business travel and tourism came to a virtual halt, the sector continues to struggle.
Occupancy at hotels in Philadelphia and the surrounding Pennsylvania and South Jersey counties remained depressed at 46% during the week ended Nov. 14, down from 74% during the same week a year ago, according to the hospitality-industry tracker STR Inc.
Revenue per available room, a standard metric used in the hospitality industry to gauge hotel performance, fell 61%, from $110.53 to $42.75, during that time.
With vaccinations against the coronavirus expected to reach the market in the months to come, some see a resumption of more commercial activity on the city’s horizon. Yet, it’s uncertain how long some sectors, such as hospitality, will take to return to pre-pandemic levels, if they ever do.
Workers who have gotten used to discussing business with associates around the world using teleconferencing software such as Zoom may be less likely than before to take expensive and time-consuming business trips or attend costly conventions, some have speculated.
And Center City may become less of a destination for whatever business travel remains if companies continue allowing employees to work from home, or if a new demand for less densely filled offices prompts a move to the suburbs where space is cheaper, others fear.
“In 2020, the immense adverse impact to the hospitality industry caused by the COVID-19 novel coronavirus created significant changes in market dynamics that impacted viability of hospitality development across the nation,” PIDC president Anne Bovaird Nevins said in an email