A Lot of Nothing

by Deborah Bolling

A few months ago, Universal Companies and Pennrose Properties jointly announced to the South Philadelphia business community that the Avenue of the Arts would soon boast a new commercial development at Broad and Catharine sts.

The two developers are hoping to break ground by April on a five-story office building that would also offer street-level retail outlets. However, a criterion for beginning construction is having at least half of the proposed 124,000-square-foot office space pre-leased. To date, though, not a single tenant has committed.

"We've been in discussions with potential tenants, but nothing's been finalized," says Pennrose Chairman John Rosenthal. "We're looking for a major tenant who will take half of the building or even three tenants who'll take half. So far, we have nothing yet, but we're trying to do something as soon as the market permits."

Abdur-Rahim Islam, president of Universal, says the original plans for the project -- as well as the acquisition of the $1.2 million space that occupies just under an acre of land -- were initiated prior to Sept. 11, 2001.

"When we first purchased the space, we had two large potential tenants who had customer service-related businesses," he says. "But 9/11 killed that plan. That whole industry [customer call centers and corporate satellite offices] was hit very hard by 9/11. Now, we're evaluating tenants based on who they are and what they can bring to this community. Frankly, though, the market is soft."

Both developers hope that in addition to competitively marketing the space for $20 per square foot, a 149-space on-site parking lot will be another attractive lure for lessees.

"We're embarking on an aggressive campaign to let potential tenants know that we'll be offering them brand-new facilities, as well as private parking," Islam says. "We see the parking lot as a real asset. Plus, we're only seven blocks from City Hall and the core of Center City is only a few blocks away."

The viability of Philadelphia's real estate market will ultimately determine the property's future. Purchased through a deal with the city's Redevelopment Authority (RDA), the unoccupied land could sit vacant for a fairly long time.

"We generally grant extensions for development when the market is soft," says Herb Wetzel of the RDA. "And, based on whether or not the developer is making a good faith effort to redevelop the property, we could keep granting extensions for as long as we want to."

So far, Islam says there is no working plan B but if all else fails, the developers may opt to cover the land with blacktop, convert the space into a giant parking lot and wait out the dry spell.