PHILADELPHIA — The area called East of Broad Street in Center City, long in the shadow of its more successful, fast-changing brother — West of Broad — is on the verge of coming into its own.
A bevy of current and anticipated activity covering a swath of city blocks running from City Hall east to Independence Square and flanking both sides of Market Street has finally begun to coalesce. Momentum for the area has been created.
“This is the next frontier,” said Larry Steinberg, a director at Michael Salove Co., a retail brokerage in Center City. “There’s a lot of opportunity east of Broad and that’s going to define the next wave of retail development, and it’s very important to the future of Center City.”
Mega-projects are percolating for this section of town that, once firmed up, under way and in place will dramatically change the landscape of East of Broad. Already, however, changes on a smaller scale — a condominium project here, new restaurant and retailer there — cumulatively add up and have helped set a tone for the area.
On the larger scale, the Girard Estate is in negotiations to sell or lease on a long-term basis what is referred to as Girard Square, a Center City block bordered by Chestnut and Market streets and 11th and 12th streets — across East Market Street from the Pennsylvania Convention Center. Negotiations are in process and could be firmed up in the next two weeks, said Ken Snyder, a spokesman for the trust.
The block had been eyed for a slots parlor but is no longer under consideration for that use. What a new owner would do with the site is uncertain but changes there could have a huge effect on the immediate area. The block has about 850,000 square feet of usable space, suitable for retail and office space. By tearing down the structures and starting anew, a developer could build up to 4.5 million square feet.
“It’s the biggest piece of Center City on the block that has come around,” Steinberg said. “It’s going to affect Chestnut and Market streets. It’s going to be the keystone in the development of the east side of Broad.”
A $632 million expansion of the convention center that would nearly double the exhibition area to 541,000 square feet of contiguous space, or enough to run two major shows at once, is making headway and stretching development and attention northward to Chinatown, Chinatown North and the Loft District.
The convention center expansion and market conditions prompted Starwood Hotels and Resorts Worldwide Inc. to plan two new hotels for the convention center area: a W Hotel & Residences at 1200 Arch St. and Four Points by Sheraton at 1201 Race St.
Goldenberg Group is moving forward with developing the former Disney Quest site, a block that covers from 8th to 9th streets along Market Street.
“We’ve been working over the last year to put together a multiuse development that would be what we consider to be the keystone of Market Street East,” said Robert W. Freedman, senior vice president at Goldenberg Group in Blue Bell. “It’s a very important parcel to help solidify the renaissance of Market Street East.”
The company is in negotiations with a national retailer, rumored to be Target, for a 150,000-square-foot store. Small and midsize national retailers as well as restaurants would be located on the street level of the project as well as on a concourse level. That initial phase would cost an estimated $75 million and is expected to be under way by next year.
A second phase, which would happen if demand warranted it, includes two skyscrapers that could be used for offices, a hotel or even residential units.
Pennsylvania Real Estate Investment Trust, which owns the Gallery and Strawbridge’s along East Market, has big plans for its properties. Though in the early stages, the Philadelphia REIT anticipates revamping the Gallery to open it up more to the street and is in the works to fill the vacant Strawbridge’s store space.
It is envisioned the activity along Market will help connect Independence Mall area to the rest of Market Street.
While those projects along the spine of Market are on the drawing board, several anchors have been established within the last seven years that have solidified East of Broad’s heft and influenced residential and retail development beyond Market Street, said Josh Nadel, a broker with Mallin Panchelli & Nadel, a commercial real estate brokerage.
Those anchors include the Avenue of the Arts, the Kimmel Center for the Perfoming Arts, the St. James apartment tower on Walnut Street and continued expansion by the Jefferson Health System, all of which have had a spillover effect. Chestnut Street, once closed to vehicles, was reopened, spurring more commercial interest along the thoroughfare and prompting outdoor cafes to flourish.
Goldman Properties of New York took a shot eight years ago at forming a new neighborhood along the 13th Street corridor, branding it as B3, or Blocks Below Broad.
“People thought: ‘What is this guy crazy?'” Nadel said. To those who were skeptical, and there were many, Goldman has made progress.
“It has become a neighborhood,” Nadel said. “You can have dinner at a Stephen Starr restaurant, go across the street for a gelato, and stroll across the street to the Kimmel Center for a show. He’s kind of connected the dots.”
The payoff has been the lease up of space to trendy retailers, such as Naked Chocolate, Bonte Coffee and Wafflerie and Sailor Jerry.
“It’s nice to see this part of town evolve into what we hoped it would,” said Craig Grossman, managing director at Goldman.
A strong residential real estate market with low interest rates and demand has also been important to the progress in the area, as well as its historical architecture, which is a selling point especially to out-of-town investors, Nadel said.
The hubbub emerging over East of Broad has prompted real estate investors to take a keener view on the area, Nadel said. Last spring, a developer bought the Lincoln, a 46-unit apartment building at 1220 Locust St., for $7 million. That will be rehabbed into condominiums by the new owner, Bhumi Real Estate of Philadelphia. Nadel wrapped up the sale of the Arts Tower in August. Crescent Heights paid $30 million for a 16-story apartment building at the corner of Juniper and Locust streets and plans to convert it to condos. The building has 373 apartments and 15,000 square feet of commercial space. The owners of the Chancellor, a 25-story apartment building at 206 S. 13th St., have decided to sell in light of interest in the area, said Nadel, who’s marketing the building.
Retailers have also turned their sights on the area, Steinberg said. The main reason is the dearth of available space on the west side, where rents are also steeper, he said. The size of the retail space East of Broad is larger than on the west, an attractive feature to some prospective, bigger-box tenants.
While changes are in motion, one challenge will be to elevate the type of retailers and eventually get building owners to improve their real estate, Steinberg said, noting some properties on Chestnut and Walnut streets haven’t been maintained and are owned by speculators who have no intention to upgrade them.
“There is interest in retail and restaurants but if nothing is done, the barriers that exist now will prevail and improvement will not take place,” he said. “We can’t sit around and wait for something good to happen.”
Natalie Kostelni, Reporter
Philadelphia Business Journal