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During this holiday season, Philadelphians are once again hitting the streets in full force, finishing up their gift lists and making last -minute purchases.

If they go to Center City, however, their experience is likely to be very different than it has been in the past because shopping there is not what it used to be.

For starters, there are a lot more people out – reflecting the fact that Center City now ranks third in the nation in the number of people who live in the downtown area, second only to New York and Chicago. Just as important, there are more, and better, stores.

Big shopping is no longer limited to Walnut Street between Rittenhouse Square and Broad Street. High-end national chains like Theory, Madewell and Athleta are opening up along both Walnut and Chestnut on the west side of Broad Street; independent stores pushed off Walnut by higher rents are moving to adjacent streets, and a critical mass of interesting stores can also be found East of Broad Street, a neighborhood now known as “Midtown Village.”

People who work closely with retailers and investors say this growth is likely to continue, as Philly’s shopping revival is part of a clear national trend and the city still offers plenty of space to fill. The numbers suggest they’re right. Retail rents have gone up 33.8 percent in the past year, the steepest rise for retail rent in downtown shopping districts among cities anywhere in the country. Just as important, the average annual income for all these people now living in Center City has crested $100,000 per household – a tipping point for national retailers.

“In today’s economy, an average income of $100,000 is a pretty significant number,” said Jesse Tron, spokesman for the Independent Council of Shopping Center, a national trade group for big retailers.

John Conner, president of Brickstone Realty Corp, the company now building 70,000-square feet of new retail space on the 1100 block of Chestnut Street, said the tipping point really happened about 18 months ago, when new census data showing Center City’s new population density and income levels started coming in.

“The numbers were pretty shocking,” said Connor. “It suddenly became clear to everyone that Philadelphia is an underserved market, and there are whole classes of retailers who want to be here, and aren’t.”

And with the $120 million sale of the Granary Building in Logan Square, institutional investors made it clear they were paying attention. “The institutional financing market has finally found Philadelphia, after all these many years, and we are now seeing a different type of investor,” Connor said.

Continental Restaurant 2

The Continental

“For a long time, many investors thought of Philadelphia as an Acela stop between New York and DC,” said John-David W. Franklin, senior vice president at Madison Marquette, a national real estate investment firm that specializes in urban development.  “And then all of a sudden everybody realized how affordable it is, and also what a great place it is.”

Obviously, these changes haven’t happened at all once.  Expansion has happened block by block, often spurred by the addition of a store or restaurant.

The corner of 18th and Chestnut is a case in point. “It was a dead intersection, and then Stephen Starr came in with Continental,” Franklin said. “And suddenly everyone realized it was a wonderful block, and look what followed – Allen Edmunds moved in, now you have the Camper store, then just a block away you’ll have Nordstrom Rack.”

“I think Camper is particularly telling,” echoed Stefan Sklaroff, co-owner of Cella Luzuria, a new furniture store on the east side of Chestnut Street. The high end Spanish retailer is particularly focused on design, he said. Its spends a lot of money on showrooms and appeals to a sophisticated “hip” sensibility.

According to Franklin, the Center City District did a game-changing thing when it opened Sister Cities Park, which features the Milk-n’Honey eatery.

“Putting that café there really showed that you can monetize the parks – that you can take public spaces and make them more vital, things that contribute to the “buzz’ of the city,” he said.

Retail jumps Broad Street

Sklaroff is perhaps the most notable new example of the fact that this energy has also crossed Broad Street. The eastern side of Center City has historically more bedraggled than its western counterpart, and it wasn’t so long ago that walking 13th Street between Locust and Chestnut was a depressing, and sometimes frightening, experience.

Now, with the help of developer Tony Goldman, 13th Street is ground zero for some of the most interesting retail in the city, run by a group of independent store and restaurant owners who call themselves the “Midtown Village” business collective. And that vitality is now turning the corner onto Chestnut. In January, Skarloff opened his high end Cella Luxuria, a 10,000-square-foot furniture store with storefronts on the 1100 blocks of both Chestnut and Sansom Streets. The store, with its focus on sophisticated design and sustainably sourced materials, would be at home in the trendiest districts of either New York or San Francisco.

cella luxuriaSklaroff, like Brickstone’s Connor, said he chose Chestnut Street because he sees huge potential. The buildings, many of which were originally designed for shopping, have big footprints, and their facades, now often covered in vinyl or cracking stucco, are elegant.

“To me, Chestnut Street should be so much better, and one of the great streets of Center City,” he said. “With Milkboy there at the corner of 11th and Chestnut, Bru, West Elm, all right across the street from Macy’s, there’s no reason this can’t be an amazing spot to be.”

Milkboy is a bar and grill; Bru a gastropub and West Elm a furniture store.

“You don’t get floor plates like this anywhere else in the city,” said Brickstone’s Connor, whose project on the 1100 block of Chestnut Street will include 70,000-sqaure feet of retail space and 140-feet of storefront. “We’re talking 24,000-square feet of retail space per floor. These are the kind of high quality large format dimensions that appeal to big retailers.”

And while the pace of revival may seem slow, it’s definitely happening, now that the effects of the Great Recession are receding.

There is word – though it is just rumor now – that Trader Joe’s will anchor the Brickstone Development project on Chestnut Street, which will renovate the old Oppenheimer Collins Department Store. High-end apartments have replaced the methadone clinic that once occupied the corner of 12th and Chestnut. And all across the neighborhood, a steady conversion of dusty old buildings into upscale loft apartments is bringing more and more new residents.

“We have people in here all the time who tell us they just moved in to the neighborhood, into this loft or that, and they need something to hang over their bed, or on their dining room wall,” said Jim MacManiman, co-owner of Absolute Abstract Art and founder of the Midtown Village Business Alliance.

Chestnut Street

1200-Block of Chestnut St.

“I really credit Goldman for that – he was smart, and make a point of getting creative people into the spaces above the stores. Upstairs in these buildings, there are dozens of web developers, architects and designers,” he said. “And I feel like it’s reached a tipping point for retail. It used to be that you could always pick from half- dozen empty storefronts. Not anymore. It’s finally at that point where you have to wait for something to come open.”

Michelle Shannon of the Center City District has spent the last four years leading an effort to market Philadelphia’s retail potential to big investors and retailers with a team that includes the city of Philadelphia’s Commerce Department, Greater Philadelphia Tourism Marketing Corporation, the Pennsylvania Convention and Visitor’s Bureau, and the Philadelphia Industrial Development Corporation.

“I feel like years of consistent, and coordinated teamwork are really paying off, and our retail footprint is really expanding,” she said.

Market Street and The Gallery

When it comes to the east side of Broad Street, however, the big wild card has always been what might happen at Market Street’s Gallery, the three-block behemoth 1970’s-era shopping mall between 8th and 11th Streets that’s currently home to K-mart and Burlington Coat Factory. Despite sitting above a regional rail hub, right next to the Convention Center and Reading Terminal Market with City Hall, Independence Mall, Society Hill and Old City within close walking distance, the mall is hardly a picture of excitement.

Owner and developer PREIT (Pennsylvania Real Estate Investment Trust), which recently finished acquiring all the parcels of land that the Gallery sits on, is promising big news for the mall sometime early next year. CEO Joseph Coradino has promised a major renovation that will open the mammoth stretch of concrete with windows to the street, and “transformative” new anchor stores.

New development is also promised across the street on the Girard Estate’s property, which spans the entire city block between 11th and 12th and Market and Chestnut Streets. The block was recently purchased from the City Board of Trusts opening that to new projects. Finally, there is still the possibility that big empty lot at 8th and Market streets will be home to the city’s next Casino.

Any one of those three developments would be game changer for Market Street, and for Center City as well.

Of course, promises are easy. And none of these projects have broken ground.

But for those who are immersed in the daily work of putting these deals together, they see a trajectory that’s clearly on the rise.

“Look, you’re still going to have plenty of people for whom shopping at King of Prussia is always going to be more convenient,” said ICSC’s Tron.  “But there are a number of powerful demographic forces that are driving this revival of interest in downtown urban shopping.  And they’re not going away.”