It's Personal: Are the stars aligning for a Center City retail boom?

The entrance of the Big Kmart at The Gallery at Market East on Market Street on Monday, December 3, 2012. ( Yong Kim / Staff Photographer ) PANARITIS04

It is easy to be a cynic when it comes to the lack of big-name retailing in downtown Philadelphia. For the many years of hype that gentrification would and should turn Center City into a mini-Manhattan of shopping, time and again the market has proved boosters wrong, with major players repeatedly skipping bets in the core of the nation's fifth-largest city.

But something feels different right about now. Expectant, even - as though a buildup of critical mass may be imminent.

From the long-bedraggled stretch of Market Street east of City Hall, to the towering old Bonwit Teller building at 17th and Chestnut Street now on the market with the closing of Daffy's, there is movement and buzz.

Longtime Center City retail broker Larry Steinberg was so busy in meetings with retailers Monday in New York that he could barely squeeze in a call. Available real estate in Center City was a hot, hot topic at the New York National Conference of the International Council of Shopping Centers.

"We have more activity this year than we have in the last three years," said Steinberg. "We have meetings every half-hour for both days" of the two-day confab.

Steinberg was at ICSC with other retail real estate brokers including Michael Salove Co., and Metro Commercial Real Estate Inc.

The Center City District, too, sent in-house retail expert, Michelle Shannon, to pump up the downtown from a CCD marketing booth. CCD has long trumpeted the rising demographics of downtown, most recently with the release Monday of its annual retail report. That paper reiterated high incomes and population density within a mile of City Hall.

Forty percent of meetings requested of Steinberg's Fameco Real Estate Co. Center City team were with retailers interested in parts of the 90,000-square-foot, nine-story Daffy's space.

"Since the retail recession," Steinberg said (with what sounded like a touch of euphoria), "we're back to pre-2008 activity."

A lot is going down this year in downtown, from notable tenant signings on Walnut and Chestnut Streets west of Broad Street, to interesting developments along Market between City Hall and Independence National Historical Park.

In October, publicly traded owners of the Gallery at Market East - who spent hundreds of millions of dollars to upgrade their malls in Cherry Hill, Voorhees, and Plymouth Meeting several years ago - told investment analysts they were working to secure public financing to help overhaul the indoor urban mall.

Once a history-making shopping complex along a thriving department store district, the Gallery has struggled for several decades to draw rents and strong tenants. As nearby department stores folded, incomes of commuters to Market also dropped below levels that could sustain higher-end retail.

Pennsylvania Real Estate Investment Trust (PREIT), based in Center City, has been working on a plan to transform the Gallery. "A number of government concessions," its chief executive told analysts, are essential before PREIT settles on the scope of any transformation. (The Inquirer, the Philadelphia Daily News, and are PREIT tenants in a building adjacent to the Gallery.)

On Oct. 29, a big chunk of Gallery real estate - the Kmart anchor at Ninth and Market Streets - was sold to PREIT for $60 million. That deal, slated to close by year's end, gives PREIT control over a three-block span of real estate east of City Hall. Talks with local officials, meanwhile, are continuing.

"We're all cheering on PREIT for when they can put the whole package together for the Gallery," said Center City District chief executive Paul Levy. "We're talking about the ability to impact three contiguous city blocks."

Earlier this year, Mayor Nutter joined PREIT officials at ICSC's convention in Las Vegas to pitch the city to big-name retailers. PREIT, however, has remained mum on its plans, though there has been buzz of breaking down the Gallery's concrete walls.

"They have talked again and again," Levy said, "about restaurants opening out onto the street."

Just as all of this points to momentum, however, Philadelphia is a complex city. And complicating factors keep cropping up to slow things down - or create new opportunities, depending on one's view.

For Market East, that included big news last month that an investor klatch led by Goldenberg Group was vying for a casino license to build across from the Gallery at Eighth and Market Streets, at a parking lot partly owned by PREIT and Goldenberg.

So, does all this mean that big retail is ready to land? In this town, especially, a betting man would do well to wait and see.


Contact Maria Panaritis at 215-854-2431 or or @panaritism on Twitter.

Continue Reading