Shut Out Of New Builds, Philly Retail Owners Look To Juice What They've Got

Elevated interest rates, high construction costs and limited developable land have kept investors from buying or building new shopping centers in mature markets nationwide, and Greater Philadelphia is no exception.

Still, a series of relatively modest power center expansions and renovations are underway in the region as retail players seek creative ways to boost returns and capitalize on demand for fresh space amid muted retail construction activity.

“Developers are looking for ways to deploy capital,” MSC principal Douglas Green said.

“When faced with a challenging acquisitions market, they have turned to look inward at their existing portfolios and have found ways to add new [gross leasable area] to their existing portfolio, which allows them to capitalize on this pent-up demand.”

Metro Philly’s retail pipeline remained stagnant at 202K SF in the first half of 2025 as the availability rate grew 10 basis points to 8.1%, according to CBRE data.

That is because new builds have become cost-prohibitive. Nonresidential construction prices grew 28% between March 2020 and last month, according to the Bureau of Labor Statistics. They are particularly high in Philadelphia, which Turner & Townsend dubbed the nation's fifth-most expensive commercial construction market, with an average price of $427 per SF.

But that doesn’t mean the industry is willing to watch and wait — especially since growth in shopping center asking rents in Greater Philly has outpaced inflation, growing 32% to $22.07 per SF between Q2 2019 and last quarter, according to Cushman & Wakefield data. 

Redevelopment and renovation projects underway include Brixmore Property Group’s work on Barn Plaza in Doylestown, where the developer is tearing down a shuttered Regal Cinemas and building three new mixed-use buildings with 50K SF of retail in its place.

There is also MSP's work on the roughly 100K SF Deptford Town Center, which was occupied by Bed Bath & Beyond and several sister brands until the company went bankrupt. The existing building is already fully leased, and construction is underway on redeveloping some of it into an Aldi.

MSP is also building out two new pad sites for Aspen Dental and Chase, which Institutional Property Advisors Senior Director of Investments JP Colussi characterized as a common expansion strategy for landlords.

“A lot of times these pad sites are ground leases, where the tenant develops and owns the building, so that helps to control the cost,” Colussi said. “If you have utilities that are already there and curb cuts that are already there, and it can be a pad that you drop in some excess parking spaces … that becomes more economical.”

Federal Realty Investment Trust is leaning heavily into power center expansions and renovations in Greater Philly, where the firm owns 13 properties.

“Nearly all of them have been touched in some meaningful way to make them more relevant,” Federal Vice President of Leasing Jeff Fischer said.

That includes ongoing work at two properties: $32M worth of revitalization at Andorra Shopping Center in Roxborough and a $150M mixed-use redevelopment for Bala Cynwyd at City Avenue.

Andorra Shopping Center is getting a 50K SF Giant grocery store, which is replacing an Acme, and 30K SF of other new retail space. There are also facade and streetscape renovations underway to give it more of a Main Street feel. Work is expected to wrap up next year.

The firm is also planning changes at the Wynnewood Shopping Center, where Club Studio Fitness will open its first Pennsylvania location next year, but Fischer declined to elaborate.

While adding additional leasable space to a property should increase rental revenue, Fischer said revitalizations like this are about more than that.

“It is economically driven, but you do it on so many levels,” he said. “In some cases you’re protecting against erosion.”

In a crowded market like Greater Philly, tenants have options and might leave for somewhere better if upgrades aren’t made.

The Bala Cynwyd project follows a different playbook. Federal is building 217 apartments over 16K SF of retail at the site of a former Lord & Taylor store. That work is expected to wrap up in April, in addition to the 87 residential units Federal previously built on the site.

A similar project was carried out by BET Investments in the Promenade at Upper Dublin, where the developer built 402 units at a Sprouts-anchored shopping center.

“It creates a mixed-use live-play environment which is symbiotic,” Green said. “It’s good for the retail because it gives them a higher frequency visit and more traffic.”

While he said mixed-use communities like this may attract a higher caliber of tenant, adjoining apartment projects aren’t a game changer when it comes to retail rents. Green added that they are somewhat rare.

“Not every developer has that opportunity,” he said. “You need to have the alignment of zoning, of market demand.”

Totally new ground-up shopping center construction is still hard to pencil in the Philly suburbs, but Green said it is starting to happen again in some corners of the region.

With multifamily and industrial construction slowing down a bit, retail projects are not competing for capital in the same way they were a few years ago, he said.

Green pointed to the 162K SF mixed-use Montgomery Promenade project with a Whole Foods under construction in Princeton and a 145K SF grocery-anchored shopping center coming to Route 29 in Collegeville.

MSC’s marketing materials for the latter project characterize it as the first development of its type in Collegeville in more than 15 years. It is set to deliver in summer 2027.

“In the next 12 months, I think you're going to be able to point to a handful of big new shopping centers that are actually coming out of the ground,” Green said. “Right now, they are in the predevelopment planning stages.”

CORRECTION, AUG. 15, 11:30 A.M. ET: A previous version of this story included incorrect information about the size of the development in Collegeville and its anchor.