Imagine you're in charge of an old postindustrial city with little open land and a perennially anemic economy. Then a vast district you never knew existed is discovered. It's like a scene from an experimental Czech novel: Pass through a secret door and there's a ghost street grid, handsome buildings from a grand era just out of reach, empty warehouses as big as tankers, and ships as grand as castles. Most of all, a broad waterfront, as close to the sea as your city is likely to get.

If your city is Philadelphia, and quite a bit more real than surreal, you've merely walked down South Broad Street, under I-95, and into the Navy Yard. This hidden world just might be the key to the city's future.

"Clearly you're in a different place," says Mark Sanderson, whose architecture firm DIGSAU is busy on two Navy Yard projects.

Indeed, it's the one place in Philadelphia that's a boomtown of commercial real estate. Rents are up, cranes are flying, and technological innovation, high design, and progressive urbanism are combining to lift our expectations of what this city might be.

The pace of development, and its increasing quality, is raising the stakes for architecture and design and heightening the likelihood that both residential development and a Broad Street subway extension will one day be approved.

Almost everyone at work here is using the place as a living laboratory for building technology, workplace design, and sustainability. "You can see that this place could be a model," says James Freihaut, technology and operations director for the Greater Philadelphia Innovation Cluster, the U.S. Department of Energy co-laboratory based at the Navy Yard. The goal of GPIC is no less than to reinvent the building industry using an integrated systems approach demonstrated on Navy Yard structures.

The first active demonstration, to be built next year, will transform a former Navy recreation center into the GPIC headquarters. The Philadelphia firm KieranTimberlake architects, which designed the American embassy in London, will design it and a second demonstration building across the street.

This year, Liberty Property Trust and Synterra Partners will complete the Philadelphia headquarters for GlaxoSmithKline, designed by Robert A.M. Stern; a Marriott hotel, designed by Erdy McHenry Architecture; and a headquarters for the emergent pharmaceutical firm Iroko.

"The amount of prime-time, high-design talent in this space is incredibly impressive," says Brian Berson, Liberty's director of leasing and development at the Navy Yard. Berson says so knowing that it's his team at Liberty, headed by John Gattuso, that is responsible for making good urban design a priority.

It didn't begin that way. In the late 1990s, Philadelphia Industrial Development Corp., the quasi-public agency in charge of redevelopment here, imagined the Navy Yard as a fairly conventional corporate park. A 2004 master plan by Stern's firm extended the corporate park model slightly with a residential marina district. But then, says Berson, "no professional real estate people were thinking about the Navy Yard."

"When we started the work on the master plan for the Navy Yard," says Stern, "people said 'Navy Yard?' with a kind of gigantic question mark at the end. Now it's 'the Navy Yard!' So the Navy Yard is suddenly, I would say, quite hot, and deservedly so."

Part of the draw is the yard's designation as a Keystone Opportunity Improvement Zone, which rewards companies that employ and invest there with aggressive tax breaks. In 2005, Liberty, the publicly traded real estate company based in Malvern, opened the Stern-designed One Crescent Drive, a suburban office building with a curved glass facade that delivered views across I-95 to Center City and a balcony facing the Navy's collection of mothballed ships. The building filled quickly. Then the following year Urban Outfitters moved its corporate headquarters to the Navy Yard's "historic core."

Employees quickly fell in love with the campus feeling and the background of the ships, so stark gray that only their form is apparent. Urban Outfitters' exquisite reuse of 19th-century brick and terra-cotta workshops signaled that going forward, this couldn't be just another corporate park. Moreover, as Liberty and PIDC began to install infrastructure, they paid careful attention to urban design: All buildings would have front doors that faced the street; all streets would have on-street parking; and all sidewalks would be lighted by streetlamps. "From a suburban developer's point of view," says Sanderson, "that's a pretty massive shift in paradigm."

The shift accelerated at Three Crescent Drive, an unconventional office building designed by Erdy McHenry, who took inspiration from the ships. "The ships are what they are," says Scott Erdy. "There's no architect putting his style on them. Rather, it's about how they perform."

Liberty opened the building in spring 2009, at the height of the recession. It took only a few months to rent the entire building. "The question about whether you could do good design without scaring away tenants flipped to the other side," says Dave McHenry. "Good design became an attraction."

Scott Erdy says Gattuso asked him to "make the building as urban and lively as possible." Unlike Stern's One Crescent and Glaxo, the design intentionally accentuated the first floor as public space tied to the emergent life of the street.

That street, Diagonal Boulevard, runs between Three Crescent and Stern's Glaxo headquarters, a bulky mass that seems to communicate most closely with the stadiums directly across I-95. The goods here are inside, where Stern has designed an entirely communal, light-filled, collaborative work space.

The newly paved boulevard will start to fill in this year with the Iroko headquarters, a small cafe-retail building also by DIGSAU, and the Marriott. Iroko and the Marriott will face a new central park, for which Liberty has taken the promising step of running a competition between two of the world's best landscape firms, Olin Partners and Field Operations.

Iroko, likely to grow by 100-200 percent by 2013, is a kind of poster child for the Navy Yard. Its current offices in One Crescent are decorated with photographs taken by chief financial officer Fred Krieger. He's spent the last three years wandering around the Navy Yard shooting the ships, the details of buildings and machinery, birdlife, the sunset. For all its wonder, the place has gotten inside him.

It's no surprise then that Sanderson and DIGSAU partner Jeff Goldstein have taken their cues for the Iroko building from the place itself. Goldstein says the building is meant to be buoyant, like a docked ship, and yet also intrinsically kinetic. The architects use fins, which are also solar panels, to convey movement and speed. It's a small thing, but indicative of this place so confidently moving forward.

Nathaniel Popkin is coeditor of Hidden City Philadelphia, Contact him at nathaniel.popkin@