What the Avenue of the Arts has meant to Center City real estate

Banks moved out, theaters moved in, and - if the price of real estate in the neighborhood is any sign - things got a lot better around South Broad Street after the birth of the Avenue of the Arts.

Back in 1993, Peter C. Soens recalls, he sold the former Girard Bank building at Broad and Chestnut Streets, now home to the Ritz-Carlton, for $2 million.

Soon afterward, Soens, a partner at the commercial building broker and manager SSH Real Estate, sold One East Penn Square, across from City Hall, for $2.1 million.

By contrast, Soens said recently, "last year, 260 S. Broad St., a similar-sized building, also basically empty, sold for $27.5 million." The buyer, Post Bros., says it will convert the former Atlantic office building to apartments.

"That's quite a difference in 20 years," he said.

By Soens' count, when Mayor Ed Rendell announced the Avenue of the Arts project, there were five major Center City office buildings along South Broad that were "mothballed and left completely vacant."

Old-line Philadelphia companies and their new owners partly or fully vacated properties belonging to the former Philadelphia National Bank; Girard; Butcher & Singer; Western Savings Bank; and Land Title Co., among other once-bustling financial firms that were bought and consolidated, their proud old names junked.

As business moved to the new towers on Market Street west of City Hall or left town, "Broad Street became a dreary place," recalled developer Carl Dranoff. He was looking for new projects after the federal government ended the investor tax breaks that helped make his Old City factory-to-condo conversions profitable in an earlier wave of city revival.

In all the years since the Avenue of the Arts' creation, the city has had little success attracting big new office employers. Office vacancy on the blocks adjacent to Broad is down, according to Soens.

Office rents, however, averaging in the $20- to $29-a-square-foot range, are little changed from 10 and 20 years ago, after factoring inflation, according to data collected by Michael L. Compton, research manager at the office broker CBRE's Philadelphia office.

What has changed: Those South Broad Street buildings the vanished banks left behind have found new uses - and new investors - as hotels, condos, apartments, retail stores, and restaurants.

What has made the difference is "the major demographic shift in the city," said Jay Shah, chief executive at Center City-based Hersha Hospitality Trust, a national company whose Philadelphia hotels include the Rittenhouse and the Clarion.

"The young people, the millennials, are now very urban," Shah said, "not like the baby boomers."

The result: People actually live in that part of the city again.

Would the move back downtown have happened even without the new theaters, and all the state spending on new street lighting and sidewalks?

"Avenue of the Arts certainly helped kick-start the momentum, and they have done a great job of marketing the corridor," Soens said. "South Broad offers the best diversity of uses in the central business district: cultural, tourist, shopping, students, office, residential, and the great restaurant scene, which has also greatly benefited from Mid-Town Village one block east."

Other downtown locales also have prospered. But the cultural projects on South Broad are the key to it all, insisted Dranoff, whose Symphony House, 777 South Broad, and Southstar Lofts projects make him one of the residential developers most closely associated with the new face of the neighborhood.

"Anyone who says it would have happened anyway has a very short memory," Dranoff said. "The city was bankrupt. The Avenue of the Arts gave us a whole new economic engine. Putting $25 million into crosswalks, sidewalk, and lighting gave a new patina to the street.

"Paul Levy's Central Philadelphia Development Corp. had put a brilliant strategy together for revitalization. Ed Rendell took it off the shelf, and he and [then-Gov. Bob] Casey made it happen when they got $250 million for the Kimmel Center. That brought the revitalization of theaters - the Merriam, the Prince, the Wilma Theater, and later the Suzanne Roberts as part of our Symphony House.

"They set the table for me," Dranoff said. "They created a hook to bring people to South Broad Street. Arts and culture did that.

"Broad Street was built as the spine of this city. Look north or south, you can see for miles. It's our Broadway, our Michigan Avenue. You can take an elevator down and walk to a show. You can jump on a subway and be at the stadiums in eight minutes. These are huge advantages," he said.

"If we didn't reinvent South Broad Street as a street with shops and restaurants and culture - where would we be if we had depended on the office market?"

City real estate tax breaks on new residential construction helped, Dranoff acknowledged. But condo transfer taxes, construction wage taxes, retail, restaurant, and show sales taxes have helped in return.

"No one contemplated large residential developments on South Broad all those years ago," he added. "When I built Symphony House in 2005, people gave me dire predictions. I was supposed to go broke." But PNC and Citizens Bank of Pennsylvania backed his projects.

The banks may have left Broad Street. But to Dranoff, "they deserve a lot of credit for sharing the vision and being willing to invest in South Broad."

Source:  Philly.com