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Report: Center City retail is being decimated by the pandemic. ‘It’s horrible.’

Zara, H&M and Talbots. Ann Taylor, Stuart Weitzman, and ALDO are all gone, victims of the pandemic. And more closings are expected.

Many businesses along Walnut Street in Center City that are boarded up or have rental and lease signs due to COVID-19 on Thursday, Dec. 3, 2020.
Many businesses along Walnut Street in Center City that are boarded up or have rental and lease signs due to COVID-19 on Thursday, Dec. 3, 2020.Read moreTYGER WILLIAMS / STAFF PHOTOGRAPHER

The empty storefronts tell the story.

The 1700 block of Walnut Street, known for its luxury retailers, is hollowed out. About 50% of the businesses that once occupied the premium retail storefronts near tony Rittenhouse Square are shuttered.

Zara, H&M and Talbots. Ann Taylor, Stuart Weitzman, and ALDO are all gone, victims of the pandemic. And more closings are expected, according to a report issued Thursday by JLL, a multinational commercial real estate services company.

The 1400 block of Walnut also is suffering. That strip, just off Broad Street, has a 33% occupancy rate that increased when Tiffany & Co., the exclusive blue box jeweler, moved to new quarters three blocks to the west.

Retailers are drying up because the 275,000 people who used to arrive every work day on SEPTA and PATCO trains aren’t showing up. Neither are most of the 1.2 million annual convention attendees, the 3.5 million annual occupants of hotel rooms, the millions of domestic tourists, and the 1.2 million international visitors. In the wake of the pandemic, Center City office towers were only 20% occupied in November, according to the JLL report.

The report concluded that retail demand dropped by more than $1 billion after office workers were sent home to work remotely.

“It’s horrible,” said Lauren Gilchrist, director of research for JLL’s Philadelphia office. “The market here is in bad shape.

“As office workers come back, there’ll be more foot traffic and more demand. But everything hinges on the vaccines,” she added. “Without question. Absolutely.”

Philadelphia Councilmember Allan Domb, who in the private sector presides over a vast Center City real estate empire, concurred.

“We can see the light at the end of the tunnel with the vaccines,” Domb said. “We just have to make sure that everybody gets to that horizon. We need to provide the supports so everyone makes it. We can’t leave anyone behind.”

Now in the second crest of the pandemic, shoe salesman George Patti worried whether he could be in that group. He can count this week’s sales from his boutique on one hand.

“Yesterday, I had one sale. Monday, one sale. Tuesday, two sales,” he said Thursday at Head Start Shoes, a family-owned shop specializing in Italian footwear on South 17th Street. .

Before COVID, Patti said, he sold perhaps 15 pairs a day, with the average price of shoes running at $300.

Business picked up in August when the number of cases dipped and safety measures loosened slightly, but then regressed to disheartening levels in the fall when the COVID cases climbed again and more restrictions returned.

“We’re trying to be open and keep my employees occupied and busy … to pay my rent, pay my electricity, but I don’t know how long I can keep doing this,” he said.

A few blocks away, foot traffic has been sporadic at Greene Street, a high-end consignment store with eight locations in Pennsylvania and New Jersey.

”It’s very hit-or-miss,” said Ian Kelley, general manager at Greene Street in Rittenhouse Square. “It’s been slowing down, especially with the civil unrest, the election — waiting for that to come through ― and COVID. It’s really impacted just the whole downtown shopping area.”

The 1700 and 1600 blocks of Walnut Street were particularly hard hit by vandalism and looting following the May police killing of George Floyd in Minneapolis. A fire bomb destroyed the Doc Marten’s shoe store at 1710 Walnut St. and two adjoining businesses.

“Those two blocks are the postcard people have in mind when you say Center City shopping,” said Paul Levy, CEO of Center City Business District. “So that creates a more negative image of what exists out there. Not all of Center City was badly hit.”

Occupancy is stronger on Chestnut Street, according to the report, with vacancies hovering between 10% and 20%. Most of those empty storefronts were shuttered before the pandemic

Freeman’s Auction House, Forever 21, and Modell’s remain dark. They either relocated or fell early victim to the long lingering problems in the retail sector. The recent closing on the 1900 block of Snap Kitchen adds to the peppering of papered-over real estate. Freeman’s moved last year into the Aramark Building on the Schuylkill waterfront.

Other potential vacancies are on the horizon,” the report notes. Gilchrist likened the pandemic to “an accelerant.”

Apparel and department stores were already experiencing a steady stream of bankruptcies before this year because of internet competition, the report notes.

“[The pandemic] is throwing gasoline on existing smoldering embers,” she said. “Retail in Center City already was having problems because of the effect of e-commerce. Now people feel they can order their stuff from Lululemon online.”

The shift to nearly universal remote work has redirected the spending power of former Walnut and Chestnut Street shoppers to two places: “online shopping and the hyper-local economies of their own neighborhoods or towns,” according to the report.

Center City may find a new focus as a residential hub. The supermarket and groceries, which are bright spots, are betting on it. Aldi, the discount grocer, is opening an outlet at Broad and Fairmount soon and will be a tenant in an apartment complex at 22nd and Washington, according to the JLL report. Giant is finishing its mammoth flagship at the Riverwalk project at 23rd and Arch while also building a fourth Heirloom Market at 2nd and South Streets.

Before the new round of health restrictions imposed by the City on Nov. 20, there were signs of a gradual recovery.

The number of pedestrians had climbed back to about 50% of the 2019 levels, according to the report. The number of boarded up storefronts in the heart of the city dropped from a high of 276 in early June to about three dozen last week, said Center City District’s Levy.

Mayor Jim Kenney’s recent edict spurred by the second wave of the virus, placed strict occupancy restrictions on retail establishments, and prohibited all indoor dining and entertainment through the end of the year.

“The Philadelphia business story absolutely tracks the COVID narrative,” Levy said. “Right now we’re literately in the middle of the darkest time with the highest number of positive tests and people in hospitals.”

For businesses to survive through the next few months, Gilchrist advised landlords to stay flexible with their tenants.

“It is better to take a temporary setback on rent received,” she said. “However, those same landlords may struggle depending on their debt. If you own a building you can be flexible. If you rent, maybe you can’t.”

Corie Moskow, executive director for Rittenhouse Row, a group of 200 merchants, believes that even if the retail landscape changes, there are better days on the horizon.

“This too will pass,” Moskow said. “The grit of Philadelphia is unbeatable and we will get through this together.”