For the last couple of decades the Market East
neighborhood has been stuck in Center City purgatory. Rundown stores selling
outdated stereos or trading cash for gold dot the streetscape — and those are
the businesses that are actually open. Compared to Old City, Washington Square
West and even the business-rich area of Market across Broad Street, the
neighborhood is a wasteland.
But now? Now is finally the time to see if meaningful
development will work. The final beam to top off the first residential tower of
the hyped East Market development will be lifted and placed atop the structure
today. Pre-leasing for its apartments will begin early next year, and move-ins
will happen in the spring. Sooner, as early as next month, MOM’s Organic Market
will open as a retail portion of the project.
Add in the Gallery’s overhaul, the new Target near 11th
and Chestnut and the exodus of Aramark, which is actually seen as a long-term
bonus for the area because new commercial tenants will be sought at a time when
revitalization is happening, and the hope is Market East will change. Some $1.5
billion has been invested in the neighborhood in recent years.
But success is not guaranteed. The shops and apartments
are entering the market at an interesting time for Philadelphia. The city is
booming with new apartments by perhaps too much. The number of new, luxury
units scheduled to be built in Center City is outpacing population growth,
meaning there’s still risk even a well-planned Market East could get left
behind.
The neighborhood has fallen and fallen since the 1980s.
Originally it was one of Philadelphia’s prominent shopping districts. Market
East — which is generally considered the stretch from Sixth Street to
Broad Street and Arch Street to Walnut Street — featured major
department stores like Gimbel’s and Lit Brothers. When they began folding in
the 1970s, the Gallery took their place.
Most of us looked at the Gallery and laughed the last few
years, but, Center City District Executive Director Paul Levy notes, it was
America’s first suburban-style mall built in a downtown. The problem is these
types of malls quickly fell out of favor, and the Gallery’s underground set-up
gave Market Street an abandoned feel.
The next great hope for Market East was the Pennsylvania
Convention Center. It didn’t work either. The Center attracts enough
conventions, but it hasn’t translated into new retail and restaurant
opportunities a few blocks away.
Geographically, the struggles of Market East make little
sense. The neighborhood is situated blocks from Independence National
Historical Park, which brings in 4 million visitors per year, and City Hall.
It’s along the Market-Frankford Line and close to the Broad Street Line. A
large educated workforce is drawn to Jefferson and the businesses on the other
side of Broad Street.
In 2009, partners involved with the East Market project
began noticing a growing population in addition to all these other factors and
purchased the site. By 2013, a $500 million plan had been formulated, with
National Real Estate acting as the developer.
“We’re big believers,” said Daniel Killinger, managing
director, development for National Real Estate, “in the east of Broad
neighborhood.”
Their East Market project attempts something nobody has
tried in decades: bringing people to live in Market East. Previous developments
have been about hotel and retail. When completed, the two residential towers of
East Market will have space for 560 people, Killinger said. Apartments will go
in the $1,500 to $3,500 price range.
The first tower is expected to open next spring. The
other should be ready by 2018. A pedestrian walkway called the Chestnut Walk
will open about the same time as the second tower.
In neighborhoods surrounding the East Market development,
new apartments will be rising, too. William Rich, senior vice president of the
real estate research firm Delta Associates, estimates 5,000 apartment units —
more than Philly has seen in ages — will be completed in the next three years.
The Center City District’s annual housing report estimates the current pace of
building exceeds demand by about 600 units.
“It’s clear that at some point in the future there will
be a downturn,” Levy said. “Hopefully it won’t be a big downturn.”
On the plus side, the growth of high-income individuals,
who would rent these apartments, has outpaced overall population growth
substantially. According to Census numbers, Philly households making at least
$100K have increased from 47,000 in 2005 to 97,000 in 2015.
“The question for me is not do we have enough growth,
but do we have enough high income growth and have enough people that want to
rent as opposed to buy,” said Lauren Gilchrist, vice president and director
of research for Philadelphia for the real estate research firm JLL. “And that
remains to be seen.”
Developers of another project in the Market East area, called
709 Chestnut, backed out of plans to build a 300-apartment tower.
Rich said East Market will have to differentiate itself from the numerous other
new apartment complexes — either through lower rent or amenities unavailable
elsewhere.
Levy thinks East Market is positioned to do that through
the rejuvenation of the Gallery, the MOM’s grocery store and the Chestnut Walk,
which will connect people from Market Street to near the popular bars and
restaurants on 13th Street near Chestnut and Sansom.
Others are already starting to bet on success for the
Market East neighborhood. Brandywine Realty Trust purchased a parking garage at
7th and Market for $17 million last year. Gilchrist notes that Brandywine
historically hasn’t been in the business of operating garages and is likely
betting good things will happen for East Market and thus Market East.
“I think they’re planning for the future,” she said, “and
what it looks like there.”
Source: Billy
Penn
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