UCity McDonald’s finally succumbs to Penn’s redevelopment plans

For over 30 years, hungry college students, late-shift workers, and late-night revelers have come to the 24-hour McDonald’s at 40th and Walnut Streets.

In a city with few early-morning dining options, the restaurant attracts all kinds of city residents. The atmosphere is often crowded and chaotic.

But early next year, this bedraggled burger joint will be demolished and replaced by an office building for the University of Pennsylvania, with a brand-new McDonald’s on the ground floor.

“We’ve had ongoing conversations with McDonald’s corporate on the potential acquisition of the site for many years,” said Ed Datz, executive director of real estate at the University of Pennsylvania. “Two years ago we began talking in earnest — I think in part because McDonald’s realized that the existing asset was in need of renewal.”

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The land at 3935 Walnut St. is owned by McDonald’s, which bought it in January 1991 for $570,000. The structure dates back to 1970, and the university has been petitioning the company to part ways with the building since Penn began revitalizing the commercial area around 40th and Walnut Streets in the late 1990s.

In some ways, it’s surprising it took so long for the wrecking ball to visit this one-story fast-food restaurant. In the late 1990s, Penn bought out the lease for a Burger King across the street and invested in redevelopment efforts that resulted in a new late-night grocery store and a movie theater at the intersection. The land is covered by one of Philadelphia’s most liberal zoning districts, where especially dense and tall construction is allowed.

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But McDonald’s held on despite University City’s heated development environment in recent years, both on and off campus, and Penn’s interest in the intersection.

“With everything Penn was doing in terms of development, it just stood out,” said Barry Grossbach, chair of the Spruce Hill Community Association’s zoning committee. “That dump was just always there, so it was always on their radar screen.”

The university plans to build a six-story, 50,000-square-foot office building on the lot. Datz says it is part of a larger push to move more of the administrative, back-end operations of the university out of the campus.

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“It’s a win-win,” said Datz. “We can take some of the spaces that may now be used for administrative purposes in the core, and [put them] on a key commercial corridor while repurposing our internal spaces.”

Penn does not yet have plans for which department will occupy the 35,000 square feet of office space in the structure. Residential units were considered as well, but that option was dismissed.

“There’s been a tremendous amount of residential development multifamily in University City,” said Datz. “From our perspective, with the dramatic increase in residential, this was more appropriate to be office.”

Datz says that even though the COVID-19 pandemic has shifted some professional and managerial work to hybrid, home-office workspaces, the University of Pennsylvania believes that office buildings still have a place.

“The office market in University City is still very strong,” said Datz. “We all believe that the hybrid work environment will change the demand factor, but we haven’t seen that play out as of yet.”

The university will purchase the land from McDonald’s, and then it will “create a condominium interest,” providing shared ownership of the first floor, which will allow the current operator of the restaurant to return to operate the business again.

Neither Penn nor McDonald’s could confirm whether the restaurant will still be open 24 hours a day, especially as late-pandemic-era retail, dining, and labor trends are in flux.

“These decisions are to be determined closer to the reopening,” said Steve Kramer, a spokesperson for McDonald’s. “We hope that we will reopen in 2024.”