Editor’s note: This article appeared originally in Alex Schieferdecker’s blog, “Pocket Track: A Blog About Cities.”
Stop me if you’ve heard this one before. Regionally beloved retail district falls on hard times. Brand name tenants start closing and their spaces aren’t filled. Festivals that were once lavishly supported by the local business association go dark. A steady drumbeat of articles start appealing with headlines like “Is ________ Dead?”
I could be talking about Nicollet Mall again. Last fall, I wrote about the successes and the struggles of downtown Minneapolis, with an emphasis on the “struggles” part when it comes to that particular corridor. But at least two other once-celebrated urban retail districts in the Twin Cities — Uptown in Minneapolis and Grand Avenue in St. Paul — are mired in a remarkably similar malaise. All three have seen the same pattern of exits by national brand retailers, event cancellations, and a rich and growing oeuvre of recriminations over who is to blame for the wilting of salad days.
An ironic similarity that links these three cases is how their respective discourses tend to place the blame on hyper-local factors. Downtown stakeholders have lamented the work-from-home revolution and loitering by the indigent. Uptown stakeholders have blamed a one-block reconstruction of Hennepin, as well as riots following the killings of George Floyd and Winston Smith. Grand Avenue stakeholders have complained about — seemingly everything? Always? (Though it is good to see that boosters have brought back Grand Old Day for the second straight year.)
But if the same thing is happening in three different places, it makes sense to see these stories as the outcomes of more universal factors, rather than unique bungling. The faster that area boosters can look beyond their erroneous pet grievances and myopic political point scoring, the faster they will recover.
Market Adjustments
Here’s the essential story: As all three retail districts became successful, they began to increasingly attract wealthier national chains and brands as tenants. At the same time, their real estate increased in value and drew the attention of wealthier national landlords. These two trends worked as a cycle to increase rents beyond the norm for the area and out of reach for smaller local retailers. Eventually, the rents became too high, high-profile tenants failed to renew and out-of-touch landlords were unwilling to take a haircut in order to keep the spaces leased. All of these districts were facing the prospect of a painful market adjustment before the major shocks of COVID and civil unrest, and are still navigating these choppy waters as the impact of the shocks fade.
The good news is that a big part of the solution is not so complicated. The more general of the two arguments I made in that piece about downtown was that boosters were mistakenly focused on bringing in people from the outside with marquee attractions, and this focus was coming at the expense of activating and supporting the population that was already there with everyday amenities. That fails to build organic momentum and instead requires continued infusions of one-off programming. Ultimately this strategy is self-defeating; it leaves downtown with fewer outsiders and insiders. A place with innate, inclusive and sustained vitality will ambiently attract new people on its own. A place with manufactured, exclusive and intermittent vitality will not.
I think the same is true for Uptown and for Grand Avenue if you recast the critique slightly. There’s nothing wrong with an Apple Store, a Victoria’s Secret or a Pottery Barn, just as there’s nothing wrong with the Aquatennial or Taste of Minnesota or the Big 10 men’s or women’s basketball tournament. But for most people, these retailers are not everyday or every every-month retailers. You might visit them once a year at the most. Crucially, this is true whether you live a 5-minute walk away or a 30-minute drive away. There’s only so many electronics/lingerie/home goods that one household needs.
These national brand retailers succeed because they sell premium products for which there is little competition. Their customer base is much wider than the immediate neighborhood. This also means that the characteristics of that immediate neighborhood are less important for their business. It doesn’t hurt Apple or Victoria’s Secret or Pottery Barn to have lots of apartments filled with entry-level Target employees nearby. But it also doesn’t help them as much as it might for a business that is more geared toward local customers. An Apple Store will do well in a lot of places.
What helps these national brand retailers is being in the same location as other national brand retailers, creating a convenient agglomeration where people can bundle their destination shopping. For a while, Uptown and Grand Avenue played host to a retail mix that contained some of the familiar faces you would elsewhere find in higher-end shopping malls. National brand retailers glommed together, offering a mall experience in an urban setting. The same was once also true along Nicollet, the only difference being that bigger retail spaces were rented by the national brands that serve as mall anchors instead of mall infill.
Looking for Local
As the mall format has declined around the country, it’s no surprise that the urban mall format has struggled as well. Nor should it be surprising that this has occurred despite significant housing growth in Downtown and Uptown Minneapolis. The broader trends buffeting national brand retailers (like the rise of internet shopping) do not have local causes, and because the causes are not local, neither are the solutions. Uptown had far fewer residents when Urban Outfitters opened than when it closed, but it didn’t matter, because it was operating independently of that condition. Step outside of the core-cities bubble and you’ll also find prominent vacant storefronts in unambiguously successful places like St. Louis Park’s urban/rural hybrid West End development. This is a much broader story than just parking woes on a given block or crime fears at a single business.
The major local factor that does influence the destiny of the Uptown, Grand Avenue or Downtown Minneapolis is not on the demand side of the ledger, but the supply. A critical problem plaguing these places is that of absentee or paralyzed landlords who haven’t adjusted to a new retail reality. These districts garnered attention from national real estate trusts during their heydays, in ways that more sedate retail corridors did not. Many of these landlords purchased their buildings near peak value, based on projections of revenue that assumed constant tenancy from national brand retailers. To mark down rents would be to accept both losses in the present and to set a lower anchor for rents in the future. For these landlords it may be preferable to stick to a higher number and hope for a revival that justifies the overall investment than to fill the space while writing down the building valuation at a loss.
This situation suggests both reasons for hope and for frustration. There is nothing fundamentally wrong with Uptown or Grand Avenue retail. Every space in each area could quickly be filled with a tenant and customers. What has happened to both places is a market correction. Values got too high, the market shifted, and the people stuck holding the bag at the end have been slow to adjust. They unfortunately have strong incentives not to budge and aren’t so susceptible to “good neighbor” appeals. Much of the recovery of these areas, then, is a waiting game for the pressures of vacancy to force a correction or a sale.
In the meantime, dubious narratives about why these places are struggling should not be given more oxygen than they deserve. Multi-family buildings have been built, street redesigns imposed and protests staged all across the Twin Cities. To blame these factors for the malaise of Uptown or Grand Avenue is spurious. Instead, it may be the case that these changes are laying the groundwork for a more successful post-readjustment bounce back. Whenever Uptown or Grand Avenue landlords want to discover it, there is a tremendous market for the kind of local-serving or locally run businesses that have remained in and sustained these places (Magers & Quinn Booksellers or Golden Fig Fine Foods) — and will continue to be their bedrock.