Changing Skyline: Is 'over-success' in development hurting Phila.?

Inga Saffron, Inga Saffron, Inquirer Architecture Critic

Updated: Thursday, July 10, 2014, 10:59 PM

Many expected a multistory development on this lot at 38th and Chestnut Streets, in keeping with neighboring buildings, but Santander's money carried the day. (TOM GRALISH / Staff Photographer)

It wasn't long ago that Philadelphia's movers and shakers were lamenting that the city was being ignored by international retailers. Those chains finally discovered the city, and now they're colonizing the shopping districts around Rittenhouse Square and the West Philadelphia universities at a stunning pace. Sometimes, the only way to be sure you're not at the King of Prussia Mall is to look up at the sky.

Many expected a multistory development on this lot at 38th and Chestnut Streets, in keeping with neighboring buildings, but Santander's money carried the day. TOM GRALISH / Staff Photographer
At 1616 Walnut, lively retail displays have been replaced by the ATMs of Santander bank , which is making a major push into the Philadelphia market. TOM GRALISH / Staff Photographer
The bank, with ATMs front and center, at 1616 Walnut. TOM GRALISH / Staff Photographer
Santander Bank at 38th & Chestnut Streets. The bank hopes to become a big player in the Philadelphia market by opening new branches. TOM GRALISH / Staff Photographer
Photo Gallery: Changing Skyline: Is 'over-success' in development hurting Phila.?

Having gotten what it wished for, the city is starting to feel the first side effects of what New York urbanist Kent Barwick, former head of the Municipal Arts Society, identified as "the over-successful city."

This may sound like an odd worry in a town that looks over its shoulder and still sees Detroit. It's certainly great that the chains help draw throngs to Walnut and Chestnut Streets again. They've brought their stylish displays and uncovered the dormant charms of many old commercial buildings. Yet, there is a numbing sameness to much of the retail. You've seen identical mannequins in identical outfits perched in windows on New York's Fifth Avenue, Boston's Newbury Street, and Chicago's Michigan Avenue.

More worrisome is the possibility that some of the city's newfound energy could be lost as chains push up rents and squeeze out the quirky local retailers and restaurants that gave these places their distinct flavor in the first place - and made them shopping destinations. When you combine skyrocketing prices and expedient landlords with lax city regulation, there is a risk that these big-money players could do more harm than good.

A hint of what is to come is visible in two new branches of Santander, a Spanish bank that is making a major push into the Philadelphia market. The bank has been on the prowl for high-visibility sites that can double as massive billboards, and money appears to be no object. It just scooped up two prime retail locations that should have more going on - one at 1616 Walnut, the other at 38th and Chestnut.

Banks are notorious for draining life out of urban streets. They don't entertain passersby with clever window displays. They close early. Sometimes they don't even open on weekends, when people are most likely to be out shopping. That's why Rittenhouse Square had a special zoning overlay prohibiting banks from leasing space on Walnut Street.

But when the zoning code was streamlined two years ago, those restrictions were watered down to allow banks that provided a full array of services and not just cash machines. So when the owners of 1616 went looking for a tenant for the grand space once occupied by the women's clothier Joan Shepp, there was nothing to stop them from choosing a bank.

The landlord, Alterra Property Group, had just converted the historic art deco office tower to 206 high-end apartments and was talking to several luxury chains, including Ralph Lauren and Marc Jacobs, about leasing the ground-floor space. Then, along came Santander with an offer that Alterra's managing partner Leo Addimando said he couldn't refuse: $450,000 a year in rent ($150 a square foot), well above what Walnut Street commanded just a few months ago.

On a street that is perennially short of good-size retail lots, the deal took an unusually roomy store - 3,000 square feet - out of circulation. The space also boasts a soaring, brass-trimmed shop window that is among the best showcases in town. Before being forced out of 1616 Walnut by a rent increase, Joan Shepp was known for its witty displays, often linked to local events at the Art Museum or Convention Center.

Now when you peer in that gorgeous window, what you see is a row of anonymous ATMs. The space has literally been turned into a money machine. There were more employees than customers the day I stopped in. Did I mention that there are already two banks on the block, Conestoga Bank and Capital One, both on the same side of the street? How will Alterra's other big tenant, the clothing store Theory, fare in that banking ghetto?

If you really want to understand how big money can distort real estate, consider the one-story, drive-through Santander branch that just opened on a long, 11,000-square-foot surface lot at the southwest corner of 38th and Chestnut.

There was a 7-Eleven there for years, but many expected it would be replaced by a multistory building. The block sits in the heart of Penn's domain, surrounded by high-rises new and old. Hoping to develop an apartment house or hotel, Tom Lussenhop of U3 Advisors opened negotiations with the site's owner, Theodore Pagano.

Then, Pagano told me, Santander came in and offered "twice as much" as Lussenhop to build its highway-style box. Pagano said he couldn't refuse a lease for somewhere "under $1 million" a year. "It's the value of the exposure. That's what it's all about," he argued, noting that Santander also operates a branch at 32d and Market. (The bank, in an e-mail, said it's "serving its customers.")

The intersection at 38th Street is really a controlled experiment in the vagaries of Philadelphia real estate. While Pagano was inking his deal, Radnor Properties was beginning construction on a $110 million, 25-story apartment house on the northeast corner.

Santander could also have been part of a larger development on its site, but Pagano didn't have an incentive to take advantage of the strong market for apartments. He's owned the site since the '70s and the assessment on it is a paltry $317,000 - no more than a typical rowhouse, although it's zoned for a mixed-use high-rise.

While Pagano's assessment will probably go up to reflect Santander's improvements, it's the city that loses. It will collect much less revenue on Santander's box than it would have on a high-rise.

Pagano, who runs Club Risque on Columbus Boulevard and once owned the beloved Pagano's restaurant, also controls another one-story property at the northwest corner of 38th and Chestnut that similarly cries out for denser development. He said he's open to that, though no offers have been to his liking. Santander holds a 15-year lease.

For a city that is just getting used to success, a dull, lifeless bank is what "over-success" could look like for a long time to come.

215-854-2213 @ingasaffron

Inga Saffron, Inga Saffron, Inquirer Architecture Critic

Read full story: Changing Skyline: Is 'over-success' in development hurting Phila.?