Shopping Center Business

SEP 2017

Shopping Center Business is the leading monthly business magazine for the retail real estate industry.

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METRO PHILADELPHIA 90 • SHOPPING CENTER BUSINESS • September 2017 I think the story in Philadelphia con- tinues to be a good one to tell," says Jacob Cooper, partner and managing director of MSC Retail. "Following the recession, we have been on a pretty con- sistent upswing across our economy with job growth, housing growth and popula- tion gain. This is largely due to our rela- tive affordability compared to New York City, Boston and Washington, D.C. It has translated into a wonderful time of steady growth and it has created a vibrant real estate development climate." With space becoming scarce on Walnut Street — one of Philadelphia's premier shopping corridors — local and national retailers are expanding onto adjacent streets and into neighborhoods walkable to downtown. This migration is transforming the retail offering on West Chestnut Street, and the landscape in neighborhoods beyond Rittenhouse Square including Market East, Fairmount and Fishtown. Since 2000, the population between Tasker Street and Girard Avenue in Center City has increased by 17 percent, according to the Philadelphia Retail report produced by Center City District and Central Philadelphia Development Corp. Millennials, which are entering their peak consumer spending years, represent 40 percent of the population downtown. This metric rises to 46 percent in the city's core, driving an influx of food and beverage, wellness, value and experiential retail concepts to appeal to the millennial shopper. "Center City Philadelphia is changing because of the growing millennial population," says Joseph Lowry, senior vice president of leasing and acquisitions with Levin Management. "It's driving a lot of retailers to the area. Millennials tend to like something that's a little different — they like fresh — and they don't tend to frequent more traditional restaurant chains. Discount and value department stores like TJ Maxx are coming into the market, as are an influx of fast-casual restaurants. [The demographic shift] is definitely driving Center City Philadelphia in general." Marcus & Millichap's Retail Research Market Report for the Philadelphia metro in second quarter 2017 notes that a steady pace of hiring in well- paying sectors is driving an increase in household incomes and fueling retail sales growth in and around Philadelphia. These improving market fundamentals are expected to motivate investors to consider Philadelphia's retail properties at a higher level. The report states that developers completed more than 1.8 million square feet of retail during the year ending in March, following the delivery of 1.7 million square feet the previous year. Retail construction continues to escalate in the Philadelphia metro, with nearly 2.2 million square feet of development underway with completion dates scheduled through 2018. From expansive redevelopments — like PREIT and Macerich's redevelopment of The Gallery at Market East, now called Fashion District Philadelphia — to large- scale mixed-use projects, downtown Philadelphia is experiencing a boom in retail development. "There are a lot of national retailers showing interest in Philadelphia, and there are a lot of large-scale mixed-use developments in the core of the city that are underway — both in planning and in construction," says Cooper. "In short, people are moving back into the city. The neighborhoods around the core are developing in healthy ways in terms of housing and retail. There is a lot of significant infill in neglected parts of Philadelphia that kind of languished in the latter half of the 20th century that is Philadelphia Heats Up Retail development continues to boom across the Philadelphia metro, from Center City to South Jersey. Katie Sloan PREIT and Macerich are currently redeveloping The Gallery at Market East into Fashion District Philadelphia, a 730,000-square-foot center featuring retail, entertainment and dining space.

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