Retail in Philadelphia’s historic core has been a mixed bag lately, and a new report released Tuesday tells the story.
Occupancy in Center City fell slightly over the past year. On the flip side, the neighborhood boasts more stores now than it did even before the pandemic.
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Occupancy in the submarket was at 83% last month, according to the latest retail report from the Center City District. That is down slightly from the 83.6% reported in June and the 84.5% reported by CCD this time last year.
The metric sat at 89% in 2019.
But there were 513 retailers in Center City last month, up 15% from 2019, prior to the onset of the pandemic. The 2-square-mile area is also home to 568 food and beverage establishments, down 6% from before the pandemic, which decimated the bar and restaurant business.
“Center City's retail landscape continues to evolve and strengthen, driven by strong demographics and growing residential density,” CCD President and CEO Prema Katari Gupta said in a release. “The success of initiatives like Open Streets and the continued attraction of national retailers demonstrates the district's vitality and potential for further growth.”
A survey of Philadelphia residents conducted by the nonprofit found particularly strong demand for local boutiques (48.5%) and luxury retail (39.2%) in Center City.
That data lines up with the neighborhood’s increasingly affluent residential population. The area median income in Center City grew from $61K to nearly $95K between 2012 and 2022. The report attributed this to in-migration from more expensive metro areas and the Philly suburbs.
Three different ZIP codes covered by CCD are now among the 50 wealthiest in the nation.
Residential development has been a major trend in Center City recently, but the health of the neighborhood’s retail businesses is still somewhat tied to the state of the office buildings that tower above them, according to the report.
The office vacancy rate in the neighborhood was 20.6% at the end of the third quarter, Cushman & Wakefield reported, up from 20.4% from the same time last year. Asking rent per square foot dropped by nearly a dollar, from $34.49 to $33.50 over the same period.
Net absorption in the office sector remained negative but isn’t as low as it was this time last year. Tenants vacated 297K SF more than they occupied in Q3. That figure stood at 366K SF in Q3 2023.
The negative absorption wasn't spread evenly across Center City. Office tenants in the neighborhood east of Broad Street saw 341K SF of negative absorption, while the section west of the corridor was in positive territory, with 44K SF absorbed.
That trend isn't mirrored in Center City’s retail sector. Retail spaces in Midtown Village and Market East are 84.2% and 82.7% occupied, respectively, while the sector is 81.7% and 80.3% occupied in Rittenhouse Row and the West Market Office District.
Some of the lower occupancy can be attributed to new construction in the neighborhood, CCD reported.
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