PhillyDeals: Fine dining replacing takeout in Center City Philadelphia

Cheesesteak, pizza, hoagie shops, and takeouts are being replaced by tablecloth establishments in Center City at the rate of nearly one a month - even with the recession, says a new report.

Since 2006, the number of takeouts and sandwich joints in Center City has fallen, from 210 to 171. The number of "fine-dining" restaurants rose from 238 to 278, as falling rent and other costs made new ventures more affordable, according to the tally published by the Center City District in its new Retail Report, out Tuesday.

Example? Try 1001 Spruce St., formerly Logan's Pizza, now home to Kanella, "which is impossible to get into without a reservation," district spokeswoman Linda Harris told me.

The trend also cuts the other way, with some

"casual-dining" chains replacing, for example, Suzanna Foo's on Walnut Street. The number of Applebee's, Chipotle Grill, IHOP and other "casual-dining" restaurants rose even faster than "fine-dining" places, to 128, from 72 four years earlier. Coffee and teahouses also rose, to 60, from 41. Bakeries were flat, around 50.

Overall, about 1 in 9 Center City retail sites is now vacant, according to the district's survey. That empty-store rate has gone up two years in a row, but the overall number is still lower than it was for most of this decade.

With so much space available, office tenants are demanding "more free rent" from new landlords when they move,

George D. Johnstone

, operations chief at Center City's dominant office landlord, Radnor-based

Brandywine Realty Trust

, told investors at an

FBR Capital Markets

conference Tuesday.

"They basically want anywhere from three to six months of free rent," Johnstone said. For leases taking effect in 2011, "about 60 percent of the deals would have some element of free rent," up from 42 percent this year.

That applies especially in suburban and small-building markets, where tenants in unrenovated "B-minus" buildings are upgrading to vacant space in newer quarters, and demanding sweeteners to pay for transport, phone, cable, and other moving costs.

What's good for the tenant might be good for the landlords, if they could get it. Brandywine executive vice president Thomas E. Wirth said he wanted to upgrade the company's BBB- bond rating so it could trim its borrowing costs. But that'll be tough until the economy speeds up.

U.S. temporary hiring was up 25 percent in the third quarter of this year vs. last year in the same period, and should peak at a 30 percent gain this winter, notes

Boenning & Scattergood analyst William Sutherland

in a report to clients, citing data from the

American Staffing Association.

"Staffing services have represented about half of the total private-sector hiring" since the recovery began last year, he added. But "the only consistently positive trend is in [information technology] employment, [while] the accounting and finance sector, in contrast, continues to decline at progressively greater rates," Sutherland adds, citing reports by TechServe Alliance, and the federal Bureau of Labor Statistics, which has scheduled an update Friday.

The deal went down in Baltimore, but the buyer, as well as the banker and lawyer who advised the parties, were all based in the Philadelphia area.

Milestone Partners, of Radnor, said Tuesday that it bought a piece of Learn It Systems L.L.C., a Baltimore firm that says it provides tutoring and other public-school services to 25,000 low-income school students in 11 states, including New Jersey.

Milestone partner Brooke Hayes would not say how much his firm invested, but noted that Milestone typically puts at least $8 million into the firms it backs. It is Milestone's first school investment. Hayes says his firm, with three funds and more than $360 million in client assets, met Learn It through investment banker Anthony Lopez-Ona and his firm, Philadelphia-based Mufson Howe Hunter & Co. L.L.C., who advised Learn It in the deal.

Dan McDonough, of Philadelphia law firm Pepper Hamilton L.L.C., advised Milestone.