PHILADELPHIA — Two properties in the heart of Center City’s retail corridor have traded even though the frequency of such sales are few and far between.
Pearl Properties, a Philadelphia real estate investor and developer, bought 1510-12 Chestnut St. for $4.2 million from a local partnership going under the name 111 Spring Garden Associates. In the second transaction, Allan Domb, better known as a Philadelphia condominium developer, bought what is referred to as the Diesel building at 1507 Walnut St. for the retail tenant that occupies its space, for $4.25 million. Goldman Properties sold the Walnut Street building.
These sales and recent leasing activity underscore the desirability of that part of Center City.
“There’s a whole transition going on west of Broad,” said Ken Mallin, who along with Josh Nadel of Mallin Panchelli Nadel Inc., arranged the sale of both the Chestnut Street and Walnut Street properties. “You can really see the change.”
The retail environment has shifted to one that doesn’t cater just to the 9-to-5 workers anymore.
Chestnut and Walnut streets near Rittenhouse Square see some of the highest foot traffic in the city, according to recent Center City District data. Chestnut Street in and around 16th and 17th streets sees 2,485 pedestrians going by per hour during the business day. Walnut Street in the same general area has 2,247 passersby. Center City’s retail vacancy rate is at 11.9 percent, CCD data indicate.
All of which has helped propel the value of Chestnut and Walnut’s real estate and investor interest, Mallin said.
The nine-story, 35,000-square-foot Chestnut Street building was constructed in 1923. It was renovated and redeveloped in 2003 into student housing for the Art Institute of Philadelphia, which had a seven-year-lease on the 23 apartments in the building. The lease has since expired and wasn’t renewed. Pearl Properties plans to renovate the building into market rate apartments, Mallin said. Pearl declined comment.
The building had been on the market for about a year for nearly twice the recent sale price. While the vacancy left by the Art Institute cut the value of the property, it served as an opportunity for a developer such as Pearl to seize on a flourishing apartment market under way in Philadelphia. The vacancy rate in the city is 4.7 percent at the end of the first quarter, which is the lowest since the recession started, according to Marcus & Millichap research.
The building at 1507 Walnut is two stories and totals 5,000 square feet. Diesel Jeans has been in the space for the past 10 years and recently renewed its lease for another 10 years. Domb intends to maintain the building as is.
“It is a positive sign that fashion retail continues to find a home these days on Walnut Street,” Nadel said.
This was the only building Goldman Properties owned west of Broad. Goldman has clustered its holdings east of Broad in an area referred to as Midtown Village.
Other potential redevelopment activity could happen at the building at the southeast corner of 15th and Walnut streets owned by Midwood Investment and Development of New York. Comprised of several properties totaling 15,000 square feet, the site is occupied by several tenants. Midwood is tinkering with a plan to redevelop the site and create up to 45,000 square feet of retail space that would be completed by 2013. However, that idea hasn’t been finalized and details are still being worked out, said John Usdan of Midwood.
Retail interest in Walnut and Chestnut streets is picking up after retailers pulled back during the recession.
“There has been a tremendous increase on retailers looking,” said Paige Barrow, a retail broker with Fameco Real Estate. “They are making deals but at a slower pace than in past years.”
National and international retail tenants are increasingly considering leasing space in Philadelphia and cities throughout the country.
“They see the strength of Philadelphia,” said Jacqueline Ballin, a broker also with Fameco.
Some recent deals include Jack Wills, a British retailer that leased 6,800 square feet at 1617 Walnut St., which was space most recently occupied by Jennifer Convertibles. Michael Salove & Co. represented Jack Wills while Metro Commercial Real Estate represented the landlord. Dr. Martens, another British retailer, is opening a store in 3,800 square feet this fall at 1710 Walnut on Rittenhouse Row. Children’s Place reopened at 1535 Chestnut, having jumped from Walnut Street.
Natalie Kostelni, Reporter
Philadelphia Business Journal