A craft brewery in a warehouse last used as a martial arts studio. A fashion-design and sewing school in a factory where bicycles were once assembled. A restaurant bound for a long-empty quick-lube garage.
To a casual passerby, these might look like signs of a neighborhood coming into its own. In fact, they’re part of a meticulous — if gutsy — plan to convert the blighted warehouse district north of eastern Center City into Philadelphia’s next big commercial enclave.
Investment group Arts & Crafts Holdings LLC has over the last three years spent nearly $325 million on more than 20 buildings, most of them industrial, in an area largely bounded by Spring Garden and Callowhill Streets, between Second and 11th Streets, easily establishing itself as the dominant landlord in what its principals call the Spring Arts district.
Arts & Crafts’ properties encompass 1.6 million square feet of space, an area bigger than the new Comcast Technology Center tower rising in Center City.
They include the buildings that house the Electric Factory and Union Transfer concert venues, a historic former bank that was home to one of restaurateur Stephen Starr’s early ventures, and three apartment houses, among them the 74-unit property at 1217 Spring Garden St. that the group acquired just last month.
Although Arts & Crafts is focusing its efforts on refashioning the area into a new office district, it’s buying up a vast array of properties to engineer the right balance of work spaces, restaurants, homes, and entertainment venues, said Craig Grossman, a general partner in the group.
It’s also keenly aware of the promise held by elevated railroad tracks that run past many of the group’s properties. Some see the strip of tracks as the next phase of the Rail Park scheduled to open on a connected section to the west later this month.
“Those are all ingredients in the bouillabaisse,” he said. “All of those are important pieces of the recipe for organically changing the neighborhood.”
Arts & Crafts’ move to reshape a swath of the city recalls developer Bart Blatstein’s effort to establish a community of apartment dwellers in Northern Liberties with his shop-lined Piazza courtyard and Liberties Walk retail street, as well as property investor John Longacre’s push to make the pocket of South Philadelphia he dubbed Newbold more enticing to new residents by filling vacant spaces there with bars and coffee shops.
Another antecedent is the transformation of part of South 13th Street in Center City from a red-light district and drug bazaar into the fashionable quarter sometimes called Midtown Village through the careful curation of ground floor tenants in the early 2000s by Goldman Properties Co. of New York, which managed similar revitalization initiatives in Manhattan and Florida’s South Beach.
Much of its Philadelphia work was led by Grossman, Goldman’s chief for Philadelphia at the time.
Grossman and Arts & Crafts partner Aaron Cohen, who worked for Brandywine Realty Trust before striking out on his own, are thinking even bigger for their expanding turf north of Center City, said Patricia Blakely, who has experience with the group as executive director of the nonprofit Merchants Fund, which provides grants to small Philadelphia businesses, often in revitalizing areas.
“This is not the intimacy of Midtown Village,” Blakely said. “It’s a sprawling more-than-a neighborhood. It’s a big vision.”
So far, Arts & Crafts has renovated the seven-story former medicine warehouse at 990 Spring Garden St. that had long served as a drably appointed office building for city agencies, playing up its mushroom columns and polished cement floors.
Office tenants there now include mapping-software developer Azavea, which moved in early 2016 from a space near Chinatown, while its ground-floor space is occupied by Chambersburg-based Roy Pitz Brewing Co., soon to be joined in an adjacent unit by an outpost of Lucky Well, the Ambler barbecue restaurant.
Another eatery to be operated by Michael Pasquarello’s 13th Street Kitchens group — owner of Kensington Quarters and the nearby Cafe Lift — is headed to the long-vacant auto garage, once a Jiffy Lube shop, beside Union Transfer at 11th and Spring Garden Streets.
Nearby, at 448 N. 10th St., the former Haverford Cycle Co. building has also been converted into offices, with tenants that include Made Institute, a state-licensed fashion-design academy that moved from Old City, and a branch of Kismet, a shared-office operator with a space in Chestnut Hill.
And 1025 Hamilton St., an industrial building most recently used as a mixed-martial-arts studio, is now home to Love City Brewing Co. on its ground floor, with office tenants including Momentary Ink — an online seller of temporary tattoos — in the space above.
Momentary Ink founder and chief executive Jordan Denny said he moved into his 2,000-square-foot office there because the price and atmosphere were better than anything he could find in Center City, where his team had previously been operating out of a co-working space.
“The affordability up here is vastly different from downtown,” he said. “We needed the ability to grow.”
Lauren Gilchrist, Philadelphia research director for real estate services firm JLL, said Arts & Crafts’ formula of funky industrial spaces and increasingly lively streetlife should continue to attract creative businesses and nonprofits seeking more affordable alternatives to Philadelphia’s central business districts, where the conversion of older commercial buildings to apartments has kept demand tight.
Rents for office space in dated but still desirable “Class B” buildings across Center City, University City, and the Navy Yard average about $28.69 a square foot, Gilchrist said. Arts & Crafts, by contrast, charges between $21 and $22 a foot for space, Cohen said.
“I do feel that smaller tenants would be drawn to the Spring Arts area from the perspective of the cheaper deal and the more authentic environment you can find up there,” Gilchrist said. “A lot of people want to work in differentiated creative environments. It’s not just tech companies and not just companies that are filled chockablock with millennials.”
Cohen said Arts & Crafts had first conceived of Spring Arts as a “village” consisting of 990 Spring Garden St. and surrounding buildings, but the group’s success leasing out those properties at higher-than-anticipated rents prompted it to broaden its geographical scope.
Its most dramatic expansion came in February, when it closed on five of the eight properties put up for sale a year earlier by property investor Mark Rubin, including the Northern Saving Fund & Safe Deposit Co. building at 600 Spring Garden St., where Stephen Starr operated a nightclub in the late 1980s and 1990s.
Also included was a large tract at 444 N. Third St. that already has zoning permissions for a pair of residential high-rises that Rubin commissioned architect Cecil Baker to design. Grossman said the group has no immediate plans to embark on that project or any other new construction.
Arts & Crafts is also under contract to buy the remaining three properties in Rubin’s portfolio, including a former warehouse near the Spring Garden Market-Frankford Line stop that is home to a City Fitness gym, Grossman said.
With all the work they were doing to make the area an attractive place to own property, Cohen said, it only made sense to buy more.
“Our first initiative was a placemaking exercise, creating a village in this neighborhood, and in doing so, create value around the office assets,” Cohen said. “And when we started that exercise, we realized there’s a bigger opportunity.”