Gallery-area developments seen as cooperative

Here's how the man behind the planned revamp of the Gallery sees the massive retail, residential, and office complex being built just a couple of Center City blocks away:

It's the "co-opertition."

That would be the amalgamation of cooperation and competition - not a term taught in business school, but one created by Pennsylvania Real Estate Investment Trust chief executive Joseph F. Coradino to explain the symbiotic relationship between two future shopping-center rivals on Market Street.

Sure, PREIT's $575 million Gallery at Market East project and the East Market development down the street will compete for some of the same tenants and - eventually - customers in what remains an untested market, Coradino said.

But the combined draw of the two new projects will create a synergy that more than compensates for any business either of the two might snag from the other, he said.

"We see them as complementary," said Coradino, whose company is teaming with the California-based mall developer Macerich on the Gallery project.

The two ventures are part of a wave of investment now crashing over the long-neglected strip of Market Street between City Hall and Independence Mall.

According to Clint Randall, an analyst with the commercial real estate services firm Jones Lang LaSalle, about $1.5 billion will be spent across 5.5 million square feet in the area through 2017.

Much of that will go to the Gallery overhaul and the $500 million East Market development, which many say have more to gain from each other than they have to lose.

"I think the two together are greater than the sum of their parts," said Luke Butler, chief of staff for the city's deputy mayor for economic development. "Together, they'll change that section of the city in a way that perhaps one project doesn't have the capacity to."

PREIT's plan calls for the Gallery to replace its tenants - largely suburban-mall stalwarts like Old Navy and discounters including Burlington Coat Factory - with outlet shops of upscale brands such as Gucci and Prada over its 1.5 million square feet.

The Gallery's hulking white shell, often blamed for deadening a once-vibrant outdoor shopping street, would be replaced with a glass skin. Restaurants and stores would line Market and Filbert, the streets bounding the mall, allowing customers myriad new points of entry.

National Real Estate Development, meanwhile, is building most of its East Market project in a large empty lot between 11th and 12th Streets where its crews recently tore down the unbroken row of storefronts that once stood there.

The first phase of that project includes 105,000 square feet of retail and restaurant space scheduled to open in the summer of 2016. The shops will be on the lower levels of two new 18-story residential towers and a re-clad industrial structure that had been used as a Family Court building.

The Gallery and East Market projects share a goal of making Market Street more inviting to pedestrians by breaking dull, block-long facades into visually stimulating storefronts, said Harris Steinberg, executive director of the Lindy Institute for Urban Innovation at Drexel University.

"Urbanistically, they're definitely playing from the same playbook," he said.

Dan Killinger, managing director of National Real Estate Development, said East Market's shops and restaurants would rely on the Gallery to pull foot traffic its way from the historic sites to the east.

"It's important that the Gallery be successful," Killinger said. "They're trying to activate Market Street, and we are really extending the grid through" to City Hall.

Killinger conceded that the two projects may vie for some of the same retail and restaurant tenants.

The only tenant announced so far at the East Market project is Mom's Organic Market, a small upscale grocery chain with branches in the Washington area and in suburban Philadelphia.

Coradino, meanwhile, said he was "working with" Eataly, an Italian food chain that also sells some high-end groceries, though there is no deal in place with the company.

But those two stores, at least, are dissimilar enough to coexist without competing for much of the same business, said Ki Bin Kim, an analyst with the corporate and investment bank SunTrust Robinson Humphrey who expects the two projects to help each other succeed.

"That kind of critical mass could be the magic bullet for at least that end of Market Street," Drexel's Steinberg said. "Maybe that's what you need to really kind of get people on the street, attract the retailers, and really get the ball rolling."

215-854-2615 @jacobadelman