Dude, where's my retail?

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June 13, 2005 // UPDATED 1:55 pm - April 26, 2007
By: Jeremy Stratton
Jeremy Stratton

Target built storefronts on its Downtown headquarters block partly to appease neighbors and enliven the area. Today, much is a dead zone.

There are many happy faces on South 11th Street between Nicollet Mall and LaSalle Avenue: sporty men in red and white tennis outfits toss Target logos past glamorous women with wild, styled hair who dance and smile at passing traffic.

Those happy revelers are printed on ad-like blinds that obscure the street-level windows of the retail space constructed in 2001 as part of Target Plaza South.

Four years have passed, and there has never been any retail there.

The 32-story building was Phase Two of a full-block renovation where more than 7,000 Target employees now work, Target spokeswoman Lena Michaud said.

The history of Target Plaza South's development - a saga of added heights, neighborhood upheaval and corporate compromise - is a cautionary tale for Downtown boosters who crave vibrant street-level retail, only to find that if you build it, they won't necessarily come.

Environmental pressures

Although Target contributes much to Downtown's culture and safety, not everyone fell over with gratitude when Target Plaza South was announced on the block bordered by 10th and 11th streets and Nicollet and LaSalle.

The building and its Phase One companion, the 14-story Target Plaza North, went through city environmental review together. This initial examination assessed both phases' impact on traffic, air quality, the skyline and streetscape, among other categories.

After the north building was finished, Target decided the south building should be 32 stories, rather than the original eight. That warranted heightened environmental scrutiny, according to Senior City Planner Michael Orange, who oversaw a second review.

Public comment came largely from Loring Park neighbors. (Loring Park's northern border is 12th Street, a block away from Target Plaza South.) Neighbors were worried about the burgeoning building's shadows - as well as lost restaurants and shops.

Target Plaza South replaced funky retail businesses along Nicollet Mall, including The Times Bar, Jitters caf, King and I Thai restaurant, and a couple of art galleries.

A March 1999 letter to the city from Dayton Hudson Co. (DHC) - Target's then-owner - states that "DHC has committed to provide more retail than currently exists, direct entrances from the stores onto the streets, and a covered arcade along [Nicollet] Mall and along 11th Street" that would widen sidewalks "next to adjacent stores and create a pleasant shopping environment."

Kim Havey, then president of the neighborhood group Citizens for a Loring Park Community, said the second city review "gave us the 'in' we needed to apply pressure for the needed design changes."

He acknowledged that Target made "major changes for the better."

Target built most of what it promised. The block sports 15,400 square feet of retail space in a four-story street-front faade, plus a small public plaza at 11th Street & Nicollet Mall with a public fountain, seating and flowers.

Orange noted that Target - as with many developments today - received "bonuses" for the inclusion of such public amenities, which allowed the company to increase the size of Target Plaza South. Street level retail alone earned Target at least a 2-point increase in the ratio of floor area to the total square footage of the land parcel.

The covered arcade was built on 11th Street; whether or not it widens the sidewalks is in the eye of the beholder. And while it may someday create a "pleasant shopping environment," there is currently no retail tenant to prove it.

Flexible, but unavailable

Chipotl, 1040 Nicollet Mall, is the sole retail business in Target Plaza South. Target's Michaud said that when a new tenant goes into the former Marketplace space next door - which she said will happen shortly - all 8,400 square feet of Nicollet Mall retail frontage will be full.

The 7,000 square feet of retail space along 11th & LaSalle is a different story. Small awnings are rolled up against the building. A peek past the edges of the blinds reveals metal shelving and merchandise.

Michaud said Target is using the space as storage "to keep the space flexible as we're looking for tenants," which she said the company is actively doing. Interest in the space has been limited, she said.

A former Target mailroom manager, who asked to remain anonymous, said Target Corp. buyers use the area for storage, testing and reviewing potential products. The former employee found it "really hard to believe" that Target is trying to lease the space, which is "filled to the ceiling" with product.

"I don't believe they ever intended it to be retail," said Bob Copeland, CLPC's current Land Use Committee chair. Although Copeland admits that Target built what the city agreement requires, he called the empty retail "disingenuous."

Orange said that permits are not dictates: "The city can't force Target to add retail where it proposed to have retail."

Andrea Christensen of real estate firm Colliers Turley Martin Tucker said the Target space should definitely interest some retailers.

"There's a lot of retail energy around there," said Christensen, an experienced Downtown leasing agent. "I don't think people are aware of the opportunity."

Christensen said Target might be waiting for the right merchants. "When you're talking about protecting a brand, you're better off to leave it empty than to put the wrong client in," she said.

The lost rent is "a drop in the bucket" for them, she added, and the space has marketing value: those smiling, dancing Frisbee models, for example.

Planning Supervisor Jason Wittenberg said that the window blind/ads were permitted under the old zoning code - and therefore grandfathered under "nonconforming rights."

And it's not as if Target has the only empty retail space Downtown, as Christensen well knows. "If people are being shut out of Downtown because there's no retail space, it might be an issue," she said.

The vacancy rate for Downtown retail was 16.9 percent as of May 2005, said Kathy Jalivay of Downtown real estate firm Welsh Cos.

Jen Helm, a United Properties leasing agent, said that, while the Downtown market is "soft," prices have not come down. That makes space difficult to sell, but "people are paying it," Helm said. "New stuff is opening up."

Christensen sees one source of potential demand. "Think of all the businesses being displaced by condo development," she said.

However, those vagabond retailers could find such new digs spendy. Although Target would not disclose what it charges for rent, Christensen estimated the area would cost $22-$30 per square foot per year, depending on the tenant and the space. That works out to $1,800 to $2,500 per month per 1,000 square feet.

In 1999, the Downtown Minneapolis Neighborhood Association (DMNA) voiced concerned about the demolition of the block's retail and restaurants that "provide vitality to our Downtown neighborhood."

Current DMNA board member and Hennepin Theatre Trust President Tom Hoch said the lack of retail "may be a negative," but because Target "employ[s] all those people, it is good for every other retail" business in the area.

Target contributes in other ways, Michaud noted. Target donates 5 percent of its "federally taxable business" to the communities in which it does business. Target fronted nearly $1 million for Downtown security cameras.

Then and now

Copeland, Hoch and Orange all said the city's review process is better now than it was under the old 1963 zoning code, which was rewritten in 1999 - just after Target's project was approved.

Orange said the revisions give neighborhoods more leverage. The city always required developers to offer to meet with neighborhoods, but, today, the Target project would require site plan review, land-use permits and City Council review - better tools for dealing with design, Orange said.

However, he added that the new code would have allowed Target Plaza. Ditto for the block's 1999 rezoning, which many complained allowed a taller Target Plaza South. (Not so, said Orange. Remember those bonuses for public amenities?)

Since the Plaza buildings were unsubsidized, Target would be free to use its prime retail space for storage if it chose. And because nearly all Downtown buildings are unsubsidized these days, others would have the same freedom.