Another large tenant of Block E in downtown Minneapolis could be on its way out. If so, it would be the latest setback for the retail and entertainment complex that was supposed to remake a key block in downtown Minneapolis and bring and keep people downtown.
Sega GameWorks, the video and game center that anchors the corner at 7th Street and Hennepin Avenue S., is attempting to sublease its two levels. It's being marketed by the Twin Cities office of Cushman & Wakefield, which has circulated a brochure on the property to other area commercial real estate brokers.
Skip Melin, a Cushman & Wakefield broker whose name is listed on the brochure, declined to comment Tuesday. John Leivermann, general manager of the Minneapolis center, said he had not received word the space was being sublet. Representatives of California-based Sega GameWorks and McCaffery Interests Inc., the building's Chicago-based owner, could not be reached for comment.
It's been a little more than a year since the Borders store in Block E closed after trying to sublease its space for several months. That 24,000-square-foot spot is still vacant. So is the space vacated by the Escape Ultra Lounge, which closed in 2007.
If GameWorks were to vacate its 38,000 square feet without finding another tenant, about one-third of Block E's retail space would be empty. By comparison, the overall retail vacancy rate downtown is about 11 percent, according to the Twin Cities office of CB Richard Ellis.
GameWorks was something of a game-saver for McCaffery when it agreed to be part of Block E in 2000. Previously, McCaffery had unsuccessfully tried to lure ESPN Zone, another entertainment-oriented restaurant and bar.
When GameWorks signed on as an anchor tenant, it paved the way for McCaffery to receive $58 million in private financing for the $150 million project, which also included a 15-screen movie theater and a hotel that is now the Graves 601. The city contributed about $39 million in subsidies.
With a restaurant, two bars and bowling alley, plus the video arcade, GameWorks also satisfied the overall vision for Block E as a destination venue and entertainment-themed link between downtown and the Warehouse District. Andrea Christenson, a retail specialist at the Twin Cities office of Colliers Turley Martin Tucker, said that may have been an unrealistic goal.
"We just don't seem to have enough of the downtown transient business from out-of-town visitors like conventioneers," she said. "When people do come to town, they seem to want to go out, instead, to the Mall of America."
That situation could change next year when the new Twins ballpark, just a short distance from Block E, opens, she said.
One deal fell through
Roger Lenahan, a broker with Edina-based Cambridge Commercial Realty who is trying to fill the Borders space, said there's virtually no market for larger retail spaces. He said he got close to signing a restaurant last fall, but the deal fell through when the economy collapsed. Lenahan said the listing is scheduled to be taken over soon by New York-based DJM Realty, which specializes in marketing surplus space for large national chains.
Another challenge in finding a replacement for Borders or GameWorks is that they're two-level stores, Lenahan and Christenson said. "A lot of store owners don't like two stories. They can be harder to manage and secure," Christenson said.
Susan Feyder • 612-673-1723
