Department Stores in Center City Philadelphia

At some point in the near future, Center City will be without a traditional department store for the first time in approximately 150 years. 

Department stores defined downtown shopping in American cities for more than half of the 20 ^th  century, but their role within the world of retail has been in gradual and uneven decline since the 1960s. Despite the slow diminishment of department stores across the U.S., Macy's announced departure from the Wanamaker Building is undoubtedly devastating news for many Philadelphians. Since the building was commissioned by President Taft in 1911, this city block has arguably remained Philadelphia's most beloved and iconic retail destination for more than a century. Despite numerous name changes and the gradual reduction of shopping floors from ten to five and then ultimately three when Lord & Taylor took over in 1997, the store's renowned architecture, pipe organ, and holiday offerings have kept it in the public consciousness. 

As we await the Wanamaker Building's next chapter, Center City District offers this look back at department stores in Philadelphia and their role in the broader retail landscape. 

The Rise: Seismic societal shifts in the 19th and early 20th centuries made department stores possible and successful. The Industrial Revolution and the subsequent emergence and explosion of the American middle class created the preconditions necessary for mass production, distribution, and consumption of an ever-expanding list of products. Before any American family owned a car, electrification enabled the construction of subways, streetcars, and rail lines that reinforced the centrality of downtowns by connecting huge swaths of the population to them with unprecedented ease, convenience, and comfort.  

The Heyday: Fueled by these macroeconomic and demographic changes, American department stores emerged in the late 19th century and flourished in the early 20th century. American cities were growing rapidly thanks to immigration and the ongoing transformation of the economy from agrarian to industrial. The New Deal and other federal policies lifted more and more of the population into the middle class, creating more spending power than ever before, including amongst women who had previously lacked the means to shop independently from men at any significant scale. With cars just starting to enter mass production, city centers were necessarily the uncontested hubs of retail and commerce.

The Fall (Part 1): Post-war suburbanization and the Interstate Highway System de-centralized the U.S. population, tore through the urban fabric of most major cities, and created demand for retail and services closer to where their customers now lived outside of urban areas, leading to the next great retail transformation: the creation of the shopping mall. Department stores adapted, expanding from single locations in cities to anchor these new destinations (Cherry Hill being among the first nationwide).

The Fall (Part 2):  What department stores have been less able to adapt to is the redistribution of wealth and shifting demographic mix in the United States. Particularly since the Great Recession, a series of structural shifts have created serious headwinds for department stores:

1) Online shopping has grown: The Census Bureau of the Department of Commerce data show that while the e-commerce share of retail sales has held largely steady since the pandemic, the onset of COVID caused a jump. Coming out of the 2008 recession, online sales made up around 5% of all U.S. retail sales. On the eve of COVID-19, that share had steadily climbed to 10%. By mid-2020, online sales made up 15.5% of retail commerce, and data from Q3 of 2024 shows that we are still at that level.

2) The middle class is shrinking: The last 15 years have seen a  "great retail bifurcation"  as spending power has dwindled for those in the shrinking middle class. Strong macroeconomic performance is not reflected in the lives of everyday Americans. Per a Deloitte analysis on the topic, the top 20% of households own 93% of the stock in the S&P 500 index, and in 2017, " the top 1 percent grabbed 82 percent of all wealth created in the United States. " The result in the retail sector has been a bifurcation in spending: discount and off-price retailers have surged as people on fixed and shrinking incomes have become a broader swath of the population, and luxury brands have flourished at the other end of the spectrum. With only a few exceptions, the business model of department stores is built on serving a reliably large middle-class with discretionary spending power. With non-discretionary spending on housing, health care, education, and food all up to varying degrees, the aggregate spending power of America's middle class has plummeted.

3) "Category killers" did their job: Big-box retailers, sometimes referred to as "category killers" for their ability to decimate small and locally owned competition, have also played a role in undercutting department stores on several levels. From a cost perspective, big box retailers have achieved scale that allows them to offer goods at rates no other business model can approach. From a spatial perspective, big box retailers have created retail hubs that are separate from both urban downtowns and established malls, pulling traffic and attention away from both of the places where department stores are most often established.

4) Younger consumers don't know or understand department stores: Millennials and Gen Z Americans (who in 2025 will be between the ages of 13 and 44) make up a combined 43% of the population. While some millennials are old enough to have a vague nostalgia for the department store, these generations have generally come of age in a fast-moving digital world that provides remarkable personalization, customization, and convenience. Newer digitally native brands with sophisticated online platforms are able to target and capture Gen Z spending power. For those shopping in-person, departments stores have generally done little to create unique experiences in the store, and inventory is generally perceived to be outdated or hard to navigate.

At its peak, Market Street boasted six department stores between 7th Street and City Hall: Strawbridge & Clothier, Gimbels, and Lit Brothers clustered around 8th and Market, and Snellenburg's, Frank & Seder, and Wanamaker's between 11th and Juniper Streets. They collectively sold almost every imaginable product at a range of price points catering to Philadelphia's ever-expanding middle class workforce as well as its wealthier residents.

Frank & Seder and Snellenburg's were the first to close in 1953 and 1962 respectively. Lit Brothers shuttered in 1977, the same year that Wanamaker's was first sold to an out-of-town entity. So nearly half a century ago, the "Big Six" had already been reduced to three stores along Market East, and Wanamaker's had already traded hands in an early sign of financial trouble. 

The city built The Gallery mall starting in the 1970s as an effort to compete with suburban centers like Cherry Hill that were increasingly poaching customers (but also benefitting from the widespread exodus from Philadelphia that resulted in a loss of more than 600,000 people between 1960 and 1990). Gimbels became an anchor in The Gallery mall, initially prolonging its life on Market Street but also leading to the demolition of its iconic building in 1980, creating an empty lot that has remained to this day. The Gallery location closed in 1986. Wanamaker's went through several more mergers and acquisitions. Strawbridge and Clothier hung on the longest, eventually shuttering in 2006, the same year that Macy's became the occupant of Wanamaker's three remaining floors of retail space. 

Data provided by JLL show that more than 1,800 department stores have closed nationwide in the last five years, with several middle market brands accounting for the vast majority of these closures. Macy's announced that it would close 150 stores in the coming years and has already shut down 100. Its 2024 closures alone are bringing 27 million square feet of retail vacancy to the market (source: CoStar, RetailStat, JLL). 

While Philadelphia had farther to fall given the sheer longevity and prominence of the "Big Six" on Market East, a similar story has played out across many large U.S. downtowns. 

Reuse and redevelopment of department stores is a universal challenge, and the solutions differ between downtown and suburban locations. Generally speaking, suburban department stores are purpose-built boxes, and rarely exceed 1, 2, or 3 stories. Often anchors at malls, their sheer size requires creativity, but there are a growing list of concepts well suited for repurposing these spaces in ways that can still recreate a department store's principal role in a mall: driving traffic to the remaining shops. 

Locally, solutions vary. The former Lord & Taylor along City Avenue in Bala Cynwyd is being redeveloped into 217 apartments. Rather than repurpose the department store structure, Federal Realty Investment Trust opted to demolish it and build anew on the site. This is a straightforward option in cases where the buildings are small enough - in this case, 120,000 square feet and two stories - and lacking in any historic or architectural significance.

Several miles away in King of Prussia, the former Lord & Taylor was initially proposed to become office space in early 2023. After that concept fell apart, the mall owners announced that Netflix House will open in 2025, bringing a new experiential anchor to the mall. Notably, the mall has weathered the demise of other department stores over the years, including JCPenney, though results have been uneven: the previously announced plan to introduce a brick-and-mortar Wayfair store into that space was abandoned last year, and nothing has been announced to take its place. The former Strawbridge's became The Pavilion in 2001 after closing in 1999. 

Major department stores in cities are another matter entirely. More often than not, they are 5-10 stories tall, massive in scale, and a century old. Philadelphia has already experienced decades of attempts to make better use of its three major department store buildings that remain: 

• Lit Brothers: the building was converted to a multi-tenant retail shopping center on its concourse and ground levels with office space above. Most notably, the upper floors became the corporate headquarters of Five Below in 2017. Its retail mix has fluctuated over the years, with Ross recently departing from 45,000 square feet on the western end to a standalone building several blocks to the west. Five Below remains in the building, but post-pandemic RTO policies have meant fewer employees on site.  
• Strawbridge & Clothier: the upper floors of what is now called 801 Market were also converted to office space. The bottom two floors as well as the concourse level have welcomed several retailers over the years, including Burlington, Century 21, Shoppers World, and Giant Heirloom. 
• The Wanamaker Building:  After the retail footprint within the building was shrunk to the bottom 3 floors in the '90s, floors 4 and up were converted office space (the Crystal Tea Room remained as an event space). The building's recent challenges with office leasing have been well-documented, with  reporting recently suggesting that residential might be a viable use  for the upper floors. 

Examples from other cities -  Boston's Lord & Taylor giving way to Dick's House of Sport , or the former  Wanamaker's in Manhattan now hosting the only truly urban location of Wegmans  - offer examples of a possible future, but creativity will be essential given the specific attributes of the building. A retailer - or multiple retailers - will need to figure out how to subdivide the space, and how to work around the historically protected organ and Eagle statue. The fact that the building offers two main entrances along two major streets - Chestnut and Market - presents an opportunity to stack and co-locate multiple larger format concepts into the building, while still retaining access via the Juniper Street entrance to uses on upper floors.

The massive floor plates, high ceilings, and structural integrity make it a plausible location for a wide range of retail and service-based concepts, including grocers, fitness, cinemas, apparel, sporting goods, and more.  Our summer survey of Center City shoppers  solicited hundreds of responses from residents on what they feel is missing from downtown's retail mix, and some of those responses - from Lifetime Fitness to more cinema screens, from Legoland Discovery Center for kids and Crate & Barrel for adults, from Wegmans and Eataly to IKEA and Dick's House of Sport - could be puzzle pieces in the Wanamaker Building's next chapter.

Department stores in other downtowns show potential paths forward. The Wanamaker Building's complexity and scale will require creativity - and substantial investment - to ensure that this critically located and historically significant building sees new life as a landmark commercial destination for Center City Philadelphia.