Gallery's developers say rebirth delayed until at least 2018

A rendering of the main entrance at Ninth and Market Streets of the Fashion Outlets of Philadelphia after redevelopment.
A rendering of the main entrance at Ninth and Market Streets of the Fashion Outlets of Philadelphia after redevelopment.
Posted: February 10, 2016

The Gallery at Market East's rebirth as a hunting ground for off-priced designer goods will be delayed by more than a year because of holdups in getting the project started and finding the right mix of tenants, its developers say.

Fashion Outlets of Philadelphia - as the reformed Gallery is to be known - will not be completed until late 2018 or early 2019, according to Santa Monica, Calif.-based Macerich, which is completing the shopping-mall project with Pennsylvania Real Estate Investment Trust (PREIT), of Philadelphia.

The developers had previously anticipated completion in summer 2017.

"It's taken some time to get it through the predevelopment process, get the pre-leasing commitment needed," and begin construction, Robert Perlmutter, Macerich's executive vice president for leasing, said in a conference call with analysts last week.

PREIT and Macerich are planning a $325 million rehab of the Gallery featuring discount versions of upscale shops and destination restaurants to draw tourists, conventioneers, and other visitors.

The project is seen as integral to the sustained revival of the Market East neighborhood, long a district of low-end shopping that's now seeing a boom in commercial and residential development.

No tenants have been announced for the redeveloped Gallery yet, and the delay could make it harder to attract retailers that are in a rush to open new Philadelphia locations, said Steven Gartner, executive vice president with CBRE-Global High Street Retail Services.

"There are going to be some tenants that will hang in and wait," Gartner said. "There will be other tenants that say, 'I'm looking to have something in the market in the next 18 months or two years, and now that it's delayed, I'm going to look at other options.' "

When City Council approved the project and $55 million in development aid in June, construction was expected to begin the following month. The original plan also anticipated that the project would be finished and leased to a point of financial stability by January 2019.

The efforts did not start in earnest until last month, however, when the Gallery's east end closed for demolition work.

Still, the city's planning and development director, Anne Fadullon said the developers' deal with Philadelphia gives them until June 2020 to finish work, adding that the delay won't mean downgrading expectations for taxes from the project.

The delay was partly the result of the amount of time it took to finish complicated project-related paperwork between the companies and city officials, PREIT spokesman Kevin Feeley said.

It also took the partners longer than anticipated to strike the right balance among the shops and restaurants that have expressed interest in taking space at the redeveloped mall, Feeley said.

"It's making sure we have an optimal mix of tenants, and it's making sure we have optimal locations for those tenants," he said.

Feeley also said Macerich was being overly cautious with its announcement of a delay to as late as 2019. Completion could come as soon as spring 2018, which he characterized as within the anticipated range of the original date.

"A spring 2018 date is still pretty much on target, and we look forward to bringing in the project on budget and on time," Feeley said. "We're confident that it's going to be a success."

jadelman@phillynews.com

215-854-2615@jacobadelman

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