On tall windows up and down Walnut Street - the luminous shopping district that is Philadelphia's mini-Madison Avenue - two words are spreading like chicken pox these days:
The recession has provoked a reversal of fortune for a glitzy avenue near the towering new condos and old-money brownstones that embody exclusivity in Center City. Retail landlords who commanded top-dollar leases just a few years ago are scrounging for wealthy suitors.
A dozen retail properties on a 41/2-block stretch of Walnut west of Broad Street - banks, two marquee restaurants, a jeweler, chain boutiques - are shuttered this year, compared with zero just two years ago, brokers say.
The woe reaches over to Chestnut Street, where on one once-sizzling block, a handful of distressed tenants have switched to month-to-month leases and others have shut down, said Larry Steinberg of Michael Salove Co.
There has been a drought of high-rent offers from new tenants. Landlords are keeping stores empty until the economy turns around. Brokers are learning to revel in small victories: One space was snapped up two weeks ago in a deal with the North Face for 1515 Walnut, where Rosenbluth Travel had been.
"It's the first lease signed in 2009, and it shows that there are still retailers interested in Walnut Street, looking to come into the right situation at the right rent," Steinberg said.
"However, the demand is way down from what it was two years ago - or else we wouldn't have these vacancies," he said. "We went through a period of time when we were paying tenants to leave."
Steinberg, who represented the landlord, said the outdoor gear/apparel chain will pay about $120 per square foot - down from the $145 (and higher) struck for addresses on Walnut before the recession.
John Wilson of Cushman & Wakefield, who represented the North Face, would say only that the rent exceeded $100 per square foot. The retailer has one other store in the area and will open on Walnut by November, he said.
"With the economy, we've taken our hits in Philadelphia," Wilson said, adding, "I'm just starting to see positive signs."
A second deal was sealed Monday for Town Home specialty gifts to replace Teuscher Chocolates in a tiny storefront. All other 2009 openings, including the Esprit fashion store at 1729 Walnut St., were deals struck before September's stock market crash, brokers said.
With low rent offers dominating, landlords will wait till 2010 for better deals. Many are "well-heeled," said Steinberg, whose firm represents several property owners.
"We have received a lot of lowball offers on these spaces, and the landlords have resisted," he said.
For several years leading up to the recession, Walnut Street landowners were lavished with big rent offers from chains eager to expand.
In today's dismal retailing environment, however, national chains have slashed spending. In fact, Steinberg said, in the next few months, "a major retailer" on the 1700 block of Walnut hopes to get out of its lease as part of a chainwide retrenchment.
He declined to name the retailer. The block contains such stores as Talbots, Zara, and the Children's Place.
One of Walnut's most glaring vacancies, the 9,000-square-foot former home of Brasserie Perrier, remains unoccupied nine months after the glittering restaurant closed under rent pressure from the landlord.
"I've never heard 'No' so many times in cold-calling and canvassing as I've heard in the last four months," said Wilson, whose firm entered the Walnut Street market during white-hot 2006.
He said he has been hustling all year to fill the Brasserie space on the 1600 block, whose proprietors shut down New Year's Eve so the landlord could replace them with a higher-paying tenant.
"The timing was such that the retail market was cratering at exactly the same time," said David Orkin, a partner at Fameco Real Estate who has expertise in Center City restaurant deals.
Wilson also is charged with striking deals for two other empty stores on Walnut, and is searching for a tenant for the Jacques Ferber Furs site on the 1700 block, whose owners hope to become landlords.
He and other brokers have their work cut out for them.
"A landlord's not going to do a long-term lease that locks him into an artificially low rent because he's panicked to do a deal," said Steve Gartner, president of Metro Commercial Real Estate, another Center City player. "You don't want to lock into a bad long-term situation."
The wait-and-see gambit is easy for landlords flush with cash. But for owners who bought buildings in recent years at peak prices, with big mortgages, it is essential.
"It may be financially more feasible for them to gamble a bit and hope that things get better," said Orkin.
Among the storefronts gone dark are two bank branches (Bank of America at 15th and Walnut moved to a side street for cheaper rent, Steinberg said); two restaurants, Susanna Foo and Brasserie; the high-end Teuscher chocolate shop; I. Brewster Gallery; Bebe women's apparel store; Waterworks bath store; and a jeweler, Jack Kellmer Co.
"I'd like to see the landlords lower the rents so we can get a vibrant shopping area again," said Ann Gitter, owner of Plage Tahiti, a high-end boutique just a block away on South 17th Street. Gitter and her partners also own Knit Wit on the 1700 block of Walnut Street.
When they got their start in 1969, she said, rents were low enough for home-grown retailers to plant stakes.
Those days ended in the last decade, she said, and rents would have to drop to $80 per square foot or less for those stores to return.
Corie Moskow, executive director of the merchants group Rittenhouse Row, said businesses have alternated between fear and hope in the last year. "What I think needs to happen now is an adjustment in the prices that our landlords are asking for," Moskow said.
There are few signs of rent relief even on the 1700 block of Chestnut, which just a few years ago was transformed by the arrival of a DiBruno's gourmet store and the Sephora cosmetics chain.
Five stores are vacant. A sixth, onetime Walnut Street stalwart Pearl of the East, has hung a "Going Out of Business" banner.
Owner Warren Kuo - who left Walnut Street in 2004 after 25 years, to escape what he called a massive rent hike - said his store would close in a few months due to low sales.
Kuo, 68, said he was being let out of his lease early with no penalties because his landlords were "actually happy to see me go."
"If I had held onto my lease," he said, "they wouldn't have been able to renegotiate it for a higher price."
Despite the closure of other stores on the block, including a hamburger chain, Kuo said rents are "not relenting at all."
Even at unoccupied properties, he said, "nobody's running a fire sale rent-wise."