Walnut Street corridor seeing property sales

A property in a top-tier location along Walnut Street in Center City has sold and another is under agreement that is expected to soon trade.

The sales activity and prices for the buildings underscore what a hot retail corridor Walnut Street has become and these new owners are likely anticipating that it will continue to gain even more traction.

Pearl Properties reportedly paid $10.5 million for 1527 Walnut St., a 3,415-square-foot property, according to sources. The property was in the news earlier this year when it was struck by falling debris from a nearby building and caused a partial collapse of its roof. The structure, which had housed a Lululemon store, has been vacant since the incident happened in February.

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The building adds to Pearl Properties growing portfolio along Walnut Street and, with this acquisition, gives the Philadelphia developer the ability to either maintain it as is or eventually build a larger, taller mixed-use project as it is doing at 19th and Chestnut streets.

“Pearl Properties continues to show the rest of the market how to create value on our high streets,” said Larry Steinberg, a Center City retail broker with CBRE Inc. “If they are able to build on this lot and utilize the air rights of their adjacent property at 1529 Walnut, they have found a way to improve value on a street that is already at record highs.”

It’s not clear what Pearl’s intentions are with this latest acquisition since no one from the company could be reached for comment.

The property at 1513 Walnut that houses Brooks Brothers is under agreement for $14 million, according to real estate sources. The property totals 14,100 square feet and, at that sale price, would mean the property would trade at $1,000 a square foot. It couldn’t be determined who the prospective buyer is, but it’s likely someone, who already has a presence along Walnut Street, wants to add to it and is willing to pay top dollar.

“Urban core locations are commanding a huge premium,” said Doug Green, a retail broker with MSC Retail. “It’s a high barrier-to-entry market so developers are willing to pay a premium for core Walnut Street properties. Obviously you have developers trying to aggregate like Domb, Pearl and Midwood and can justify paying a premium because they want to control and aggregate. If you have critical mass, you can justify paying a premium to justify that growth.”

Rents along Walnut Street close to Rittenhouse Square and particularly corner locations have soared to $200 a square foot, and in some cases, up to $225 a square foot. In spite of those steep prices, there are disparities and some mid-block spaces are getting any where from $100 to $150 to $180 a square foot.

The range can be attributed to some property owners who are content with a slow, steady return and not necessarily looking to push rents up, Green said. In contrast, some of the newer property owners are looking to drive rents to the top of the market.

“The more assets you control in a market the more you can control rents and set the market,” he said.

Source: Philadelphia Business Journal