The clock is ticking for the much-anticipated debut of Fashion Outlets of Philadelphia at Market East, the former Gallery Mall, with its half-billion-dollar makeover.
Joseph Coradino, CEO of mall owner Pennsylvania Real Estate Investment Trust, said Monday that construction and leasing of nearly 800,000 square feet of retail, dining, and entertainment space were "on track" and that he had leasing commitments as letters of intent, ongoing negotiations, or verbal agreements for about 70 percent of the space one year out.
With the grand opening set for spring 2018, interviews with some city brokers conveyed worry that PREIT might not be moving fast enough.
"Why hasn't there been one announcement of a lease signed?" asked one Center City broker who, like many interviewed, asked not to be identified for fear of losing business with PREIT, which owns eight malls here, including Cherry Hill, Moorestown, and Willow Grove Park.
"It's a nationally known project with a lot of eyeballs on it. The lack of progress/announcement/absorption looks really bad for Philly.
"The oversupply will deflate rents across the board," added the broker. "We've already seen a plateau."
Another broker said: "The project was poorly conceived from the beginning. Many industry insiders knew it would be really, really difficult to fill that vacancy in that location."
Coradino, who showcased the project last spring in Las Vegas at a major retail real estate conference, said such concerns were "unfounded."
"First of all, we don't hire brokers to fill our malls," he said. "They have no basis for forming that opinion.
"We're in the midst of a transformative, complete 180-degree turnabout of this property," he said. "I want to deliver a message that says, 'Here's the tenancy of FOP [Fashion Outlets] and your readers will say, `I get what they're doing.' We are not doing it piece by piece. Period."
Coradino said his partners, including Macerich, a mall developer, tell him that "in the outlet world, piecemeal announcements are a sign of weakness."
So far, 82 tons of steel out of 355 tons needed is in place, according to PREIT spokeswoman Heather Crowell; 240 cubic yards of 3,400 required cubic yards of concrete are in place; and 4,642 tons of debris have been taken away, with 92 percent recycled.
Crowell said the demolition of the entire interior of Gallery I is complete, while demolition is underway at Gallery II, which closed in early January.
"This spring and summer, formal rebuilding and transformation into Fashion Outlets Philadelphia will begin," she said.
Coradino is simultaneously trying to find tenant replacements for two Macy's stores, a JC Penney, a BCBG Max Azria, and one American Apparel store that are due to close at his other area malls.
Larry Steinberg, a senior executive at CBRE Inc., who has brokered several deals on Walnut and Chestnut Streets, said the new mall "is well-positioned" to attract the retail segment that continues to be successful: off-price and discount retailers.
"Even if the leasing up of Fashion Outlets takes longer than expected, the rest of the Center City market will not be adversely affected," Steinberg said. "Center City is too big and diverse, continues to grow its population base, and attract new office construction. The necessary market fundamentals are here."
Jason Dempsey, a value-added developer who works in Philadelphia and Pittsburgh, said, "Oversupply can create a downward pressure on rates, and if that occurs, there will always be a flight to quality by a tenant to a better product."
But, Dempsey said: "You really can't predict till it all takes place. All you can do is watch the market and see what retailers are being pursued. A good merchandising plan that understands the demand of the market will result in the success of the project."
Coradino described his vision this way: "The consumer wants fashion and wants it inexpensively and changing every season. And they want a significant food component. At the end of the day, what I want to create at FOP is a place where people will say, `I gotta go.'
"That's why it's so important that the announcement we make – when we make it – conveys that message.
"We're moving full speed ahead."