As you’re reading this, the City of Philadelphia has officially announced Gateway Philly, an initiative geared at luring suburban companies to establish beachheads in town by way of cash subsidies.
Here’s what the program is about: Companies moving teams of at least 20 people to town will receive a yearly cash incentive of $1,000 per seat (capped at $30,000 total), meant to offset the costs of office space. Mind you, the cash will only be forked over after a one-year lease is concluded.
“There are many benefits to having an office in Philadelphia, and we want to help companies explore the positive effects they would see with a city location,” said Mayor Jim Kenney in a press release. “Gateway Philly is designed to give businesses access to the best Philadelphia has to offer, to serve as a gateway to talent, innovation and collaboration.”
Three important caveats before we dive into what this all means, per Commerce Department spokeswoman Lauren Cox:
- Companies have the option of hosting their seats at multiple locations throughout the city.
- The deal is not retroactive, so companies like Vanguard, which has already announced the intention to place staff in town, can’t have access to the program.
- Companies can choose freely between the city’s network of coworking centers as well as more traditional, private office purveyors like Regus.
As Billy Penn reported yesterday, it’s fair to say that coworking company WeWork, with its sprawl of 150,000 square feet of space across the city, looks like a natural beneficiary of the program. Smaller coworking hubs like Pipeline and Venturef0rth can’t really accommodate several large teams.
The Benjamin’s Desk network might be better equipped to go after the gateway office push, what with its recently inaugurated spot at 1608 Walnut Street which features more private offices than its previous locations. Co-CEOs Anthony and Jennifer Maher did not immediately respond to a request for comment.
However, WeWork’s own Dave McLaughlin, the company’s manager for the Eastern U.S. and Canada, said that, based on the firm’s previous experience with satellite offices, the Gateway Philly initiative benefits the ecosystem overall and not WeWork.
“In our experience, companies split these kind of groups across several spaces, so that shouldn’t preclude [other coworking] spaces from participating,” McLaughlin said.
The timing of WeWork’s latest Philly-relevant announcement is, at the very least, curious. Just yesterday the venture-backed firm gave Philly.com an exclusive look at a program with a similar goal: The company will offer to rebate $1,200, “half of the average $2,400 city wage tax bill per worker — as a prorated, monthly reduction on the client’s membership fees and space rental,” Gizmo Guy Jonathan Takiff reports.
The end goal is to allow companies to use that cash to boost employees’ salary in the face of the City tax which, as we’ve heard before, is a frequent qualm among tech workers. (Here’s more on the tariff’s dubious legacy).
“Are the two programs connected? No, but they can stack together,” said Dave McLaughlin, East Coast manager for WeWork. “We’re telling employers: We’ll share in that cost with you.”
As news of the program hit, we quickly started speculating about its first entrants.
Enterprise software giants SAP immediately popped into our heads, as the German company — which as we’ve reported hires over 3,000 at their Newtown Square North America stronghold — is already slated to add 400 jobs split between an upcoming base in Pittsburgh and the suburbs.
Will the offer pique SAP’s interest to add a smaller Philly subset? A request for comment was not immediately responded, but check back for updates.
Meanwhile, the Gateway Philly offer has already enticed one Philly player to pop its head in from King of Prussia: fintech company CardConnect.
“This is a unique opportunity for businesses to take advantage of, particularly for those in the expanding tech industry of Philly,” CEO Jeff Shanahan said in an email. “The city has been on our radar for some time now and a program like this could be a great way to get our team over there and attract new talent.”
Whether or not the program can mean deliver on its promise remains to be seen. Some, like Indy Hall’s Alex Hillman, feel it’s a band-aid on a bigger gash:
As long as gov’ts overvalue “big“ employers (and build incentives as such) they’ll continue to struggle. Networks are stronger than towers. https://t.co/bLyHer3f8g
— Alex Hillman ? (@alexhillman) February 28, 2017
Others, like Magento’s engineering manager Ben Garvey, worry about the program benefiting orgs like WeWork (read the whole thread for more of his thoughts on the program):
1. An incentive like this favors large coworking spaces for no conceivable reason to me https://t.co/blkmzYfWE2
— Ben Garvey (@bengarvey) February 28, 2017
And though Cloudamize CEO Bob Moul applauded the effort, he also echoed our sentiment when this plan was announced: Getting companies to choose Philadelphia has to be about more than subsidies:
“[We] still need to fix the underlying structural issues like taxes and education if we’re going to get them to stay for the long haul,” said Moul.