High style puts its brands on Center City

Chestnut Street at 17th Street, a closed Daffy's department store, will soon become a Nordstrom Rack. October 1, 2013. ( MICHAEL S. WIRTZ / Staff Photographer ).
Chestnut Street at 17th Street, a closed Daffy's department store, will soon become a Nordstrom Rack. October 1, 2013. ( MICHAEL S. WIRTZ / Staff Photographer ).
Posted: December 07, 2013

When landlord Morris Jerome inked a deal for a Nordstrom Rack at the old Daffy's on Chestnut Street, he was quick to say that the lease would potentially pack a bigger punch than just a sizable rent check.

The Rack, to occupy four floors of a marquee building in the heart of burgeoning Center City next fall, would attract other big-name retailers, and further corrode the once-ironclad notion that downtown Philadelphia was too dowdy to interest fancy brands.

"We're going to change that perception with this new Nordstrom Rack, which is a tremendous retailer," said Jerome, principal of New York-based JEMB Realty Corp., in an October interview when the Rack deal went public.

JEMB picked up the 17th and Chestnut corner property in the Daffy's bankruptcy but had little other Center City real estate, to which Jerome offered: "Not yet."

The central district, after years of angling to boost its dollar value and retail image, has developed the market muscle it has long sought, a conclusion further supported by data in a survey being released Friday by the Center City District.

Retail rents on Walnut Street have gone up 33.8 percent in a year, the sharpest annual increase of all so-called "high streets" among U.S. cities cited in an April 2013 survey by Colliers International. That firm's data made its way into the CCD annual report on the state of Center City retailing.

"I feel like the rubber's really hitting the road now," said Michelle Shannon, vice president of marketing and communications for the business improvement district. "People we wouldn't see four years ago, or signing leases in Philadelphia, are now open."

Flocking to downtown's core in the past year were tenants such as Theory, Madewell, and Ulta, while Nordstrom Rack is due to open next year, and the Barneys Co-Op on Rittenhouse Square will be converted into a Barneys New York in 2014.

National companies are chasing a critical mass of spending power accumulated during the decade-long redevelopment of high-rise downtown housing and gentrification of surrounding Center City neighborhoods.

"Theory, Madewell, Athleta - they're pretty major brands to have coming into the city," said Brandon Famous, who two months ago sold his regional retail brokerage, Fameco, to CBRE Group Inc. and is vice president of CBRE | Fameco.

Famous, who represents Nordstrom Rack and other retailers locally, said one supermarket client has asked him to find a Center City location for a 70,000-square-foot store. He also is representing a movie-theater chain and other retailers in talks to sign leases as part of the planned renovation of The Gallery at Market East.

The influx of bodies and affluence has created an alluring walkable demographic density to rival the driveable suburbs.

Proprietor-owned shops increasingly are making way for corporate chains, whose more lucrative longterm rent terms are preferred by landlords. But even that is boosting values in adjacent areas - and interest from chains.

"The number of workers within a walkable one-mile radius of City Hall is 18 times higher than the number of workers within a one-mile radius of Cherry Hill Mall and nine times greater than the number of workers surrounding King of Prussia Mall," the CCD report notes, in a jab at suburban rival malls.

On Monday, CCD's Shannon will staff a booth for the fifth year to woo retailers and landlords at the International Council of Shopping Centers dealmaking convention in New York.

But instead of looking to walk away with an armful of signed leases, as is the goal of brokers and landlords, the CCD booth hopes to engage in an ongoing strategy of a softer sell.

Armed with data, a giant map of Center City, and binders of block-level street maps, CCD seeks to court passersby and form relationships that it says have been paying off on the street back home.

"They're amazing," said Famous. "I've gone by [that booth] with retailers when I might have forgotten a statistic."

In addition to Shannon and an assistant, the booth will be staffed by Dawn Summerville, of the city Commerce Department, and Ivy Olesh, of Philadelphia Industrial Development Corp.

mpanaritis@phillynews.com

215-854-2431

@Panaritism

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