Why Market East is becoming the new hot area for Millennials

Go east, young people. Especially if you're a shopper or an apartment-seeker in Center City.

East of Market, long dubbed the "hole in the doughnut" for the saddest of reasons, is finally getting some love.

Three key projects are fueling its retail resurgence: the Gallery Mall, which is becoming an outlet center; the East Market project encompassing a full city block; and the development of 11th and Chestnut Streets, including a Target Express store set to open there this month.

Some are calling it Center City East.

"Creating a new retail area is a big unknown," said Andi Pesacov, senior director of retail services at Cushman & Wakefield, who is brokering several new retail deals in the area. "But when you're now making uptown cohesive to downtown, it becomes more of a natural occurrence."

Pesacov said the Market East corridor could play a central role in bridging the historic and Market East business districts with uptown Rittenhouse Square.

"Midtown will now become a neighborhood unto itself, attracting and aligning the tourist trade, the millennials [19- to 34-year-olds] moving into the new residential high-rises being built, and creating a pedestrian easement of phenomenal retail from east to west on Chestnut Street," she said.

Based in Philadelphia, Dan Killinger is managing director of development at National Real Estate Development, the firm behind the $600 million East Market project taking shape between 11th and 12th, and Market to Chestnut Streets.

The first phase - at a cost of $260 million - will span an entire block, and is set for completion by next summer. It will feature 322 residential units, 140,000 square feet of retail, and 200,000 square feet of office space.

"We designed East Market for those creative innovators and young professionals who value design and urban living," Killinger said. "It's exciting to see our tenants bring this vision to life."

Among the tenants that have signed leases are Design Within Reach, which sells authentic modern furniture, lighting, and accessories from designers old and new, and Mom's Organic Market.

So has the Design Center, a collection of nine design firms, which is moving into a former warehouse at 34 S. 11th St. along with Mom's Organic.

Another large-scale project is underway nearby, on the other side of Chestnut. "We have always been believers in the city," said John Connors, president of Brickstone Realty, which is behind the 1100 block of Chestnut Street development. The project will offer 112 luxury apartments and 90,000 square feet of retail, including a Target Express at 1126 Chestnut, which is to open July 26.

"Our neighborhood - Washington Square West - is already home to more millennials per acre than any other neighborhood in Center City," Connors said. "Our apartment units feature everything the millennial market desires and the amenities. Target will be a major contributor to the quality of life, providing grocery, pharmacy, health and beauty aids, housewares, electronics, and even a Starbucks, all under one roof."

"We at Brickstone have been working east of Broad Street for 30 years," Connors added. "We've been waiting a long time for this.

"It is 100 percent a function of supply and demand. For the first time since the 1950s, we have real, speculative demand for residential, retail, and office space.

"The east is what's left, and the fundamentals of the east side are fantastic, including the infrastructure with the Market East commuter tunnel," he said. "It is now filling up like it emptied out."

Connors said the city's population, which fell from 2.2 million in 1950 to 1.5 million in 2000, is gaining "and hitting on all cylinders."

East of Market is prime turf for all that, extending from Broad Street down to Seventh Street, and from Market to Locust Streets.

Joseph Coradino, CEO of Gallery Mall owner PREIT, also sees the fundamentals in his favor. The Gallery, "in particular, is well-situated where mass transit, tourism, a growing residential population, and employment bases converge just steps away from the Pennsylvania Convention Center, the Reading Terminal Market, SEPTA's Jefferson Station, and the historic district," he said.

PREIT and project partner Macerich are remaking the Gallery into Fashion Outlets of Philadelphia at Market East. The renovated mall is to debut in the spring of 2018.

"Twenty-two million commuters are delivered to our project annually, which is double the annual traffic a suburban mall attracts," Coradino said. "This creates tremendous opportunity to enhance this area with a vibrant, metropolitan marketplace. The current development in the corridor is probably the most significant concentration of capital currently being invested in Philadelphia."

Many view the East Market project that started in summer 2014 as the catalyst.

"Center City is ready for more pedestrian-oriented retail," Killinger said. "There are all these individual components - all very different with a different character - but all working toward the same thing."

This includes the McDevitt Co. under Tim Duffy, who is working with Killinger's firm.

"We look at this project as connecting City Hall, the Liberty Bell, the Convention Center to Thomas Jefferson Hospital and Chinatown, to midtown village," Duffy said.

Dana Zamparelli, a broker with MSC Retail, who worked with Design Within Reach on relocating to East Market, said the development of Center City East could be transformational.

"Millennials are constantly looking for new experiences, new neighborhoods to navigate," she said. "The thoughtful implementation of retail planning, dining, and residences that stands the test of time will determine if Market East is the next great urban center."

Source: Philly.com