Center City Borders - prime real estate - is closing in May

Customers read books in the stacks at the Borders Book Store at the corner of Broad and Chestnut on Friday afternoon, March 18, 2011. (Laurence Kesterson / Staff Photographer)

The Borders Group said Friday it would close its 26,000-square-foot store at the corner of Broad and Chestnut Streets - a prime piece of Center City real estate - in May as the Ann Arbor, Mich., bookstore chain struggles with Chapter 11 reorganization.

The store is one of 225 nationwide that Borders will close. Outlets in North Wales, King of Prussia, and Langhorne also will be shuttered, the company said. The first wave of closures was announced Feb. 17.

Borders spokeswoman Rosalind Thompson said Friday that Borders had been given some time to "work with landlords on obtaining concessions on rent," but the company had been unsuccessful in doing so for the Center City store.

The going rate for prime commercial real estate around City Hall ranges from $50 to $100 a square foot, some experts said. There was belief that Borders was paying well below those prices and that the rates would rise considerably as the lease renewed.

Broad One L.P., a New York company, bought the building from Wall Street bank J.P. Morgan in 2003 for $48 million.

The building, which for several decades was the Philadelphia National Bank headquarters, is managed by KTR Capital, which did not respond to an e-mail for confirmation. Office-space leasing at the property is handled by Jones Lang LaSalle.

"It's not unusual to raise the rent for prime space at renewal time," developer Carl Dranoff said.

Dranoff, who is negotiating leases for his residential buildings 777 South Broad St. and Symphony House, farther south along Broad, said finding commercial tenants in this market was getting more challenging.

"National retailers have retrenched, so you are dealing with local entrepreneurs," he said. "It takes longer, and landlords are spending more money on improvements for tenants."

But even in a down economy, don't expect that space at Broad and Chestnut to be vacant for long.

"It is not the worst thing in the world to have a large, attractive space in Center City Philadelphia," said Steven H. Gartner, president of Metro Commercial Real Estate Inc. in Conshohocken.

He added that he was working with several unidentified clients whom "shoppers and city fathers will be happy with."

"There is a line of people forming who want it," said Gartner, pointing out, as many in commercial real estate here do as well, that "there are a whole lot of retailers who want" this kind of large three-level space.

The closing "is not an indictment of Philadelphia," he said. "Borders is troubled and under the gun and no longer wants to pay the high rents this space commands."

Borders has been at 1 South Broad St. since 2002, moving from 1727 Walnut St. on Rittenhouse Square.

"Borders helped turn that neighborhood into a 24/7 destination" during the mid- and late 1990s, said Paul Levy, president of the Center City District, and was doing the same on Broad Street, attracting restaurants and the Lucky Strike Lanes nearby on Chestnut Street.

While Levy called the bookstore's closing a "loss to the city," he said the space was one that was engendering strong interest in retailers and restaurants "and can accommodate both."

Levy, Gartner, and Dranoff all believe that the space will likely be leased before the end of the year.

Reactions from Center City workers and residents to the closing were mixed.

"Oh, no," said Ellen Rohlfing, 33, who lives at 15th and Locust Streets and has frequented the store for the last eight years. "Because I love buying books as presents there," she said.

"I'm a big reader, and I use it all the time," said Katie English, 29, who runs her own public-relations firm.

Yet, English has acquired an iPad and has begun acquiring classics on the iBooks app for free. Analysts say that Borders' failure to latch on to the electronic-book market, allowing Amazon's Kindle and Barnes & Noble's Nook to capture it, led to Borders' financial difficulties and bankruptcy.

Sarah Casey, 26, and Molly O'Leary, 28, who work at the Maven Agency on South Broad Street near Borders, both say they find the convenience of buying books on Amazon and music on iTunes more convenient.

But they said they would miss the book signings by top authors that Borders hosted.

While "we all lament the passing of Borders," Gartner said, nothing lasts forever.

"These businesses are like Hollywood sets," he said. "They go up and down."


Contact real estate writer Alan J. Heavens at 215-854-2472, or Twitter: @alheavens.