PHILADELPHIA -- A boxy brown-brick distribution center on the northeast side of downtown is in line to become the latest project for millennial-focused redevelopment of an old industrial area.
The 250,000-square-foot building, now occupied by a distributor of maternity clothing, will be remade into a center for media, advertising and technology companies, under plans recently announced by the developer, Alliance Partners HSP.
The building, in an industrial zone between Philadelphia's Chinatown and the rapidly developing Northern Liberties neighborhood, will be reconfigured at a cost of about $50 million into space expected to accommodate up to eight tenants employing 1,000 to 1,500 workers in an open-plan arrangement, the developer said.
Alliance also is considering offering space to smaller companies that need 2,000 to 5,000 square feet, said Matt Handel, the company's director of leasing. If that happens, the building might be occupied by five or six large companies and 15 or 20 smaller tenants, he said.
The project aims to tap into an influx of millennials -- those born between the early 1980s and the early 2000s -- who are being drawn to Philadelphia by growing job opportunities and housing that, for now, is more affordable than that in Washington or New York.
The city also is retaining more university students who are staying after graduation in response to the growing job market, greater availability of housing, improved amenities such as public parks, and a vibrant downtown restaurant scene.
By creating the new space on the southern edge of the already millennial-rich Northern Liberties and within a 20-minute walk of City Hall, Alliance believes it will be well-positioned to attract tenants that employ the targeted workforce.
"They wanted to be able to recruit, to have millennials think that this would be a great place to work," said Richard Previdi, the firm's operating managing partner.
Previdi said the new space -- named SoNo, for south of Northern Liberties -- will be designed to encourage the collaboration that is highly valued by tenants like software companies. "They want everybody talking; they want everybody sharing ideas," he said.
The redesign will minimize the amount of individual employee space while allowing more for common areas like a cafeteria, a gym and parking space for 70 bicycles. Alliance plans to begin construction by the end of this year, and to complete the project within 24 months.
Overall, the building's location and design are intended for a "live-work-play" lifestyle in which young urban professionals live near their workplaces and the shops, restaurants and entertainment sites that spring up to meet that demand in Philadelphia and other cities, Previdi said.
His hopes of tapping into the market would seem to be encouraged by activity in Northern Liberties, where construction crews on many blocks are building properties that include three-bedroom town houses with starting prices in the mid-$700,000s.
Richard Fravel, a real estate agent with Berkshire Hathaway HomeServices who sells in the area around SoNo, said home prices had more than doubled in the neighborhood since the end of the recession, thanks to surging demand from employees of major local employers, including Comcast and the University of Pennsylvania, that are "rushing to hire talent," he said.
Demand is further fueled by transplanted New Yorkers who discover that even in Northern Liberties they can buy twice as much house for half the price they would pay in New York.
A boom in new houses, which are often sold before they are completed, has used up all available land and pushed buyers into surrounding areas, Fravel said.
"It's driving not only Northern Liberties but also the fringe neighborhoods," he said. "Anywhere within a bike ride -- everyone bikes nowadays."
Demand for bicycling to and from the new development would be satisfied in part by plans for a greenway along the currently uninviting Spring Garden Street, which marks the northern edge of the new development and is a main east-west route along the north side of central Philadelphia.
To help meet the demand for "play," the building is within a short bike ride of several live-music venues, including Union Transfer. A new Live Nation concert space is under construction in a former factory near the Delaware River about half a mile away.
And the SoNo building is a few hundred yards from a planned Rail Park, a 3-mile section of a long-abandoned rail line that is being converted to an elevated urban park similar to the High Line in New York.
But the neighborhood faces stiff competition from other areas like Center City and West Philadelphia that may be more attractive to the millennial market, argued David Scolnic, a real estate lawyer at Hangley Aronchick Segal Pudlin & Schiller in Philadelphia.
"If I were a young person looking for a job I would much rather work in Center City or in West Philadelphia, where there are amenities and places to go at lunch and after work," he said. "It's hard to picture this being an attractive option."
Although the SoNo building is close to Northern Liberties and the Old City section a few blocks to the south, it's not clear that the location is attractive enough to millennials to match the developer's expectations, Scolnic said.
But Alan Greenberger, Philadelphia's deputy mayor for economic development, predicted the project would attract the workers it needs, and would be the first redevelopment in an industrial zone bounded by Spring Garden, Callowhill, Second and Sixth Streets.
"There's other development pressure in the area," he said. "In the next five- or 10-year stretch, you are going to see a lot of redevelopment there."
The City Council is working on changing the zoning to mixed-use commercial, with some residential development likely as well, while the city is seeking dense urban development rather than high rises surrounded by parking lots, Greenberger said.
When other projects are completed, the area will link Old City to the south with Northern Liberties to the north, Greenberger said.
"We've always felt that closing that gap, and making it more walkable and lively between two great neighborhoods," he said, "was both desirable and inevitable."
SundayMonday Business on 07/13/2015