Crews are scheduled to begin rebuilding the Gallery at Market East this week, reinventing the shopping mall as a new retail, dining and drinking emporium for visiting tourists, bargain-hunting fashionistas, and thirsty commuters.

Friday's planned start of construction on what is to be called Fashion Outlets of Philadelphia follows months of stripping drywall, tearing up flooring, and dismantling escalators at one end of the sprawling Center City complex.

The work is being done in phases, with some stores continuing to operate in the western section of the building closer to City Hall as construction begins in what has become a cavernous space in the eastern section.

Last week's announcement that the project has been awarded a $10 million state redevelopment grant is allowing the work to begin, said Joseph Coradino, chief executive of Pennsylvania Real Estate Investment Trust (PREIT), a partner in the venture developing the project. 

Although it is less than the $31.5 million sought from the state's Redevelopment Assistance Capital Program, the award "achieves our vision," Coradino said in an interview following the grant's formal announcement Thursday. "We always expected it was going to be a range."

Philadelphia-based PREIT and its partner in the redevelopment venture, Macerich of Santa Monica, Calif., plan to spend at least $325 million to fill 730,000 square feet of retail space with outlet shops of upscale brands such as Gucci and Prada, typical mall tenants such as H&M, and crowd-drawing restaurants.

No tenants have been announced for the project, scheduled for completion in 2018, but Coradino said his team is in "active negotiations" with a brewpub to lease space at the southeast corner of 10th and Filbert Streets. 

The brewpub would open a new public portal into the structure, a much-needed step, he said, toward enlivening the mall's largely blank Filbert Street-facing exterior. Coradino declined to identify the pub operator, saying only that it would be new to the Philadelphia region.

Coradino also said "it remains a possibility" that the large Burlington Coat Factory store on the mall's western end would be relocated to make way for a different anchorbut he declined to specify where the store might be moved.

Burlington Stores Inc. spokeswoman Lauren Flanagan has said the Gallery store would stay open through the construction, but she did not immediately respond Monday to a request for comment on Coradino's remarks that it might move.

Coradino also hinted at plans for three properties opposite the Gallery on the 1000 block of Market Street that it bought with Macerich last year, including the former Robinson department store building subsequently listed on the Philadelphia Register of Historic Places. In most cases, developers seeking to alter properties listed on the register must first prove that preserving them represents a special hardship.

The PREIT-Macerich venture is challenging that designation in hopes of better solidifying its control over the Market Street shopping experience, while maintaining the flexibility to combine the properties for a retailer seeking a large "flagship" location, Coradino said. 
"We haven't identified the store, but we've identified how we want to merchandise the street," he said.