Downtown Minneapolis retail evolves as residents move in

  • Article by: JANET MOORE , Star Tribune
  • Updated: June 14, 2014 - 9:49 PM

The upscale apartment boom’s demographic changes give retailers new opportunities.

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On the left are the new Soo Line Building City Apartments, center is the 510 Marquette Building and on the left the Nic on 5th. Construction in the northern stretch of Nicollet Mall where the new residents are moving in between Fourth and Fifth streets.

Photo: GLEN STUBBE • gstubbe@startribune.com,

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Come Aug. 1, residents will begin moving into Nic on Fifth, a $100 million luxury apartment tower on the northern flank of Nicollet Mall.

The 253-unit building is part of a continuum of residential development expected to stretch toward the Mississippi River — rising up from an unattractive panorama now largely made up of surface parking lots.

As hundreds move into upscale housing on or near the northern stretch of Nicollet Mall, they’ll have a heavy influence on the often-challenged retail market of downtown Minneapolis, where change is already afoot.

“Any time you bring more people downtown, it will have a positive impact,” said Bryan Moeller, manager of the R.F. Moeller jewelry store in Gaviidae Common I. The demographics of new downtown residents will bolster his business, he said: Affluent empty-nesters can well afford new jewelry, and millennials may be on the hunt for engagement rings.

The mall’s three major shopping centers — Gaviidae Common I and II and City Center — are all being repositioned by their relatively new out-of-state owners. At the same time, Saks Off 5th confirmed this month that it will close its department store at 655 Nicollet Mall, though the retailer said it may move elsewhere downtown.

In general, once the population in an urban area nears the 40,000 to 50,000 mark, “you’re at a tipping point in retail development or retail rebirth,” said Liz McLay, a Minneapolis retail consultant working with San Francisco-based Shorenstein Properties, owner of City Center. At that point, a city’s core becomes more of a 24/7 destination as opposed to a 9-to-5 weekday locale, she said.

The population of downtown Minneapolis now stands at about 37,000.

“Retailers will follow the residents,” McLay said.

Next step in continuum

Experts say downtown is fortunate to already have a Target store at 9th Street and Nicollet Mall and a new Whole Foods grocery on the 200 block of Hennepin Avenue, plus Lunds stores nearby in Northeast and near Loring Park. “Fifteen years ago, you couldn’t beg, borrow or steal to get a grocery store downtown,” said Steve Cramer, president and CEO of the Minneapolis Downtown Council.

The restaurant scene on the southern end of Nicollet Mall and in the Warehouse District and North Loop appears to be robust, too. The next step in the shopping continuum typically involves attracting “service-oriented” retailers — such as dry cleaners, drugstores and hair salons — as well as fashion-oriented local boutiques and then national retailers.

A good litmus test for retail along the northern stretch of Nicollet Mall is Gaviidae Common II, the former Neiman Marcus wing that is being renovated by KBS Real Estate Investment Trust III.

The top two floors of the mall, which include the former food court, are being converted into office space. The skyway and street levels will be devoted to convenience- and service-oriented retail, said Sonja Dusil, senior director at Cushman & Wakefield/NorthMarq, who is leading the leasing effort. While Ann Taylor and Talbots have departed, the D’Amico restaurant and Caribou Coffee outlet will remain.

Retail consultant Michael Berne said success along Nicollet Mall isn’t dependent on any one group of consumers. “While additional rooftops are an important part of the equation, one or two new towers only represent a tiny fraction of what a retailer would need to sustain the relatively high occupancy costs of a Nicollet Mall location,” he said.

Other “traffic drivers,” such as office workers and tourists, “also generate large pools of potential customers, and that ultimately, the retail mix in a downtown setting of this scale will require destination appeal and need to draw from further afield,” said Berne, who is working with the city and the Downtown Council on retail issues.

More office workers, too

On top of the anticipated surge in rental development, which will also include the 30-story 4Marq upscale apartment tower, the population of office workers on northern Nicollet Mall also will increase in the next two years.

The former Neiman Marcus building will become home to 350 CenterPoint Energy employees by early 2015. Opus has already begun construction of a headquarters expansion for Xcel Energy Corp. on the 400 block of Nicollet Mall, a stone’s throw from the recently converted Soo Line Building City Apartments and its skyway connection to downtown buildings.

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  • In the center, The Nic on Fifth Apartments, a 26-story luxury rental high rise. In the foreground workers clear a lot for a new Xcel Energy Headquarters. Construction in the northern stretch of Nicollet Mall where the new residents are moving in between Fourth and Fifth streets.

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