Thanks to Philly millennials, Center City undergoing a radical change
With millennials invading Center City and national retailers chasing them, the Philadelphia downtown shopping scene is undergoing a radical transformation.
With millennials invading Center City and national retailers chasing them, the Philadelphia downtown shopping scene is undergoing a radical transformation.
Brokers say they almost can't close deals fast enough with demand for prime retail space high and supply limited.
The continued influx of millennials and the steady growth in health care and higher-education institutions are expected to drive the Center City retail market for years.
"There's been a seismic shift in the commercial real estate market in Center City over the past few years," said broker Chris Shenian of the Shenian Co. at 1518 Walnut St. "The ground is literally shifting under our feet."
He should know. Shenian represents high-end furniture maker Thos. Moser out of Maine, which last month committed to opening a shop at 1605 Walnut St., next to a busy Apple store. Shenian also counts Pennsylvania Fine Wine & Good Spirits Stores as a client. He represented the landlord in negotiations for a state wine store at 1218 Chestnut St. about 10 years ago. That store is moving to a bigger space on the 1100 block of Chestnut.
"The shifts in the past two to three years are unlike anything I have seen in the past 25 years," he said. "The renaissance of the restaurant scene has been notable with the redevelopment of Market East, which entails several blocks on Market Street East. It's definitely trending toward a younger demographic, which is reflected in all the millennials coming to Center City in droves."
It didn't hurt that the city raised its profile over the last year.
"These national players realize Philly is hot right now," said Shenian, who also represents Toppers Spa, Susanna Foo, and My.Suit. "The papal visit and the DNC convention continue to highlight that Philadelphia is a national player."
According to CBRE Inc.'s 2015 Urban Retail Report for Philadelphia, Center City's population is up roughly 30 percent over the last 20 years, while the average household income in the area rose from $63,400 to $103,300 over the same period. The number of apartments in Center City is expected to rise to 35,000 by 2019, up 7,000 from 2000.
"Philly's demographic has changed within the last 10 to 15 years," said Andi Pesacov, senior director of retail services for commercial real estate company Cushman & Wakefield. "Where 15 years ago graduating students moved away, now they're staying, working and living in the city."
"Empty nesters are moving back to the city in droves," she said. "Residential development pre-2008 was on the rise, as it is again. More homes equal more people living in the city. They all need clothes, food and furniture, and pots and pans."
Enter Thos. Moser, which made the wooden chairs that Pope Francis used at Independence Hall and Philadelphia International Airport during his visit last year. The company plans a soft launch in September and a grand opening in October.
To clothe the millennials, over the last two years Nordstrom Rack, Forever 21, Uniqlo, and Bloomingdale's the Outlet Store have all opened stores on the 1600 and 1700 blocks of Chestnut Street.
"We look for the best locations for our Nordstrom Rack stores, and Center City is no exception," said spokeswoman Jessica Canfield. "A strong mix of fashion and specialty retailers, and a vibrant surrounding neighborhood make this space a great fit for us."
Shenian predicts his revenue will be up 250 percent this year over 2015. "Business is phenomenal," he said. "The real competition is the sense of urgency to move on prime retail space."
Brittany Goldberg is MSC Retail's high-street specialist, which means she deals exclusively with luxury brands wanting to locate downtown.
"These are national retailers expanding to Philly that are largely targeting our millennial demographic - the young professionals that are savvy shoppers, value-conscious, and demanding a much more customer-driven, interactive shopping experience," she said. "We are also seeing a trend of successful e-commerce sites launching brick-and-mortar stores," such as Warby Parker, Bonobos, and Athleta.
To feed the millennials, "retailers and restaurateurs are looking at ancillary corridors, locations, and neighborhoods," said Goldberg, who has been with MSC for five years and has watched the surge. "Essentially, the target territory is growing because of strong residential, office, hotel, and retail activity."
Millennials - those aged 19 to 34 - now make up 46 percent of the downtown core population, 40 percent of the greater Center City population, and 26 percent of the citywide population, according to data from Jones Lang LaSalle's Philadelphia office.
Goldberg, whose recent deals include Vince, Under Armour, Bonobos, Lululemon, Rag & Bone, and Bloomingdale's the Outlet Store, said the momentum for Center City began to shift in 2013 and is not likely to slow down anytime soon.
Last week, MSC Retail announced that &Pizza - a D.C.-based, fast-casual pizza concept - will arrive this year. It will occupy 2,375 square feet at 1430 Walnut St. for its first Philadelphia location. Goldberg represented New York-based developer Midwood Investment & Development in the deal.
Pesacov, a 19-year veteran, has placed Stanford Grill, Cantina Laredo, III Forks, Bloomingdale's Outlet (she represented the landlord, while Goldberg represented the tenant), Orangetheory Fitness, among others, in Center City.
"The branded retailers are both discount and designer, though not couture," she said. "Most are fashion-forward and known names. For millennials, live-work-play is the mantra."
On July 19, Pesacov signed the 40,000-square-foot health club City Fitness, which will take a portion of the street level and the entire second floor at the Sterling, a 29-story building at 1801-1851 JFK Blvd.
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