A millennial market for Market East

To get a sense of millennials' clout, hang out at dinner time at the Shake Shack at 2000 Sansom St. on any Saturday. A line snakes outside the venue and the message is clear: Young folks have not only returned to the downtown core, they are starting to own it.

The East Market development, where Mom´s will be housed, is to open next summer.

Those who weren't in line for gourmet burgers and shakes were carrying bags from newly arrived trendy shops (Forever 21, Uniqlo) dotting Walnut and Chestnut Streets.

The city's millennial residential base has risen by 135,000, or 41.5 percent, since 2005 - the largest percentage jump among the 10 largest cities in America, according to 2016 research by consultant JLL.

Philadelphia now has the fifth-largest millennial population, behind New York, Los Angeles, Chicago, and Houston.

Millennials - those 18 to 34 years old - now make up 29.4 percent of Philly's overall population - and in Center City that figure almost doubles.

The JLL report showed that 27,600 of the 58,000, 48 percent, of people who live from South to Vine Streets, river to river, are millennials.

The millennial playbook requires healthy food, scads of entertainment, fitness options, and discount shopping. And those in that group put out lots of social media about their experiences.

Enter Market East, a $600 million project taking shape between 11th and 12th and Market and Chestnut Streets, that courts millennials by offering housing (322 units); retail (140,000 square feet); and a trendy work area (200,000 square feet of office space.)

The project's first phase spans an entire block and is set to open next summer.

"The increase in millennials choosing to live, work, and create in Philadelphia is wonderful for our city," said Dan Killinger, managing director of development for D.C.-based National Real Estate Development, which is building Market East. "Together, we are creating a new neighborhood and urban experience in Philadelphia, and it's essential that our tenants reflect that vision."

The first retail tenant to sign on was Mom's Organic Market.

This will be the chain's first urban location - essentially the same bet that arts-and-crafts store A.C. Moore made last month by signing a lease at 13th and Chestnut Streets.

Mom's, which plans to open in early 2017, will specialize in certified organic produce. The 16,000-square-foot store will feature an organic cafe called Naked Lunch, free electric-car chargers, and a recycling program for light bulbs, shoes, batteries, and cellphones.

And a shocker: It will have 55 free parking spaces.

"Mom's attracts a savvy shopper who values both a personal experience and convenience," Killinger said. "That is exactly the type of clientele who is likely to visit, live, or work at East Market."

One question is whether millennials will stay in town when they have children and hit their prime spending years.

The Center City District's in-house research shows that a significant proportion - 60 percent - of those 30 to 34 and having children are staying in Center City so far, said CEO Paul Levy.

"If you look ahead 10 years from now, this is a significant group who we will try to retain and have done fairly well in retention," Levy said. "It bodes well for retail and the housing market in Center City.

"The millennial mantra is, 'Feed me, entertain me, give me value, and keep me fit,' " Levy said his staff recalled hearing at a New York retail conference over the summer.

Millennials are having a bigger impact on dining and grocery shopping, said David Orkin, CBRE Inc.'s restaurant practice leader for the Americas.

"There is more information available about what we eat than ever before. The rise of food labeling and local sourcing began to grow in earnest about 10 years ago, which is about the same time the millennial crowd started to gain critical mass and some money to exert influence."

Case in point: This year, Whole Foods began rolling out a less costly chain of stores, called 365, geared toward health-conscious millennials; and the restaurant Sweetgreen announced that it was going to accept only credit cards.

Said Lauren Gilchrist, head of research at JLL's Philadelphia office: "New grocery, restaurant, and fitness options geared toward Philadelphia's health-conscious, urban millennials are driving retail development and leasing momentum, especially as traditional hard and soft goods retailers face ongoing pressure from e-commerce."

By mere size alone, millennials will be important. They make up a third of the U.S. population, noted Denise Dahlhoff, research director of the Jay H. Baker Retailing Center at the Wharton School. "Capturing their loyalty at this life stage can provide long-term payoffs.

"Millennials eat out and shop more frequently than other generations," Dahlhoff added. "For millennials, there is also a bigger social component to dining and shopping; they shop more with friends and family, go out in groups or meet up with others."

"In addition, millennials are active, vocal communicators on social media and review websites to share their experiences and preferences and can, therefore, be important promoters for businesses," she said.

It explains the recent slew of fast-casual, quick-service, and grab-and-go venues in Center City: Honeygrow, Sweetgreen, Snap Kitchen, Hai Street Kitchen, Federal Donuts, and the vegan fast-food eatery HipCityVeg.

Wellness is another millennial theme with SoulCycle, Flywheel Sports, New Balance, Under Armour, and Lululemon Athletica.

So is value-conscious shopping - with Nordstrom Rack, Bloomingdale's - the Outlet Store, Century 21, and Target Express all opening since 2014.

And don't forget retailers offering experiences along with the suits: Bonobos, My.Suit, and Suitsupply.

Ironically, Scott Nash, CEO of Mom's, said he has never gone after millennials, yet his store will be part of East of Broad's revival.

Living up to its name, Mom's has targeted suburban mothers. "The mothers with kids come in every week, load up their carts, and tell all their friends about us," Nash said. "We've been lucky to have lots of them as loyal shoppers."

Nash started on the other end of the food spectrum with a job in the fry station of a Burger King at age 22.

He started Mom's in 1987. In 1996, it generated $1 million in revenue with one store. There are now 18 Mom's stores, counting Market East.

Nash, 51 and a father of three, said the chain was on track to hit $200 million in revenue next year. Over a two-year period that extends into 2017, Nash and his team will have opened or renovated 10 Mom's stores on the East Coast, including new stores in Arlington, Va.; Hampden, Md.; and one in Cherry Hill last August. A Mom's in Bryn Mawr opened in early 2014.

Nash said he negotiated a "pretty good deal" on rent with the McDevitt Co., the retail leasing firm for Market East.

But although the rent is a fraction of rates in New York - where Mom's wants to enter next - Market East is still the most expensive space among his chain, said Nash. Like all Mom's stores, the overhead will be kept low with 60 to 70 employees and a no-frills design.

Levy predicts that millennials will be lining up at Mom's in no time, giving Nash his numbers.

"The two biggest indicators of visible change in downtown Philly are sidewalk cafes and baby strollers everywhere," Levy said.

Source: Philly.com