Target is opening a store in the heart of Uptown, anchoring a new building with apartments and offices on the bustling site.

The Minneapolis-based retailer is building its smallest-format store in one of the city's hippest neighborhoods, which is a magnet for young professionals. The new store, to open in October 2017, will occupy the ground floor of a new office and apartment building on the site of the former Cheapo music store along Lake Street.

"We know guests in this neighborhood are driving to Target stores whether it's the downtown Nicollet Mall store or the St. Louis Park store," said Kristy Welker, a Target spokeswoman. "So this is about bringing a Target to the neighborhood for that added convenience."

CPM Development, a Minneapolis real estate developer that specializes in the Uptown and University of Minnesota areas, is putting together the $40 million, six-story project. It will have one floor of office space and 125 apartment units.

To make way for the development, Cheapo, a neighborhood landmark for decades, relocated last year to a smaller space at Nicollet Avenue and 26th Street. Before Cheapo, one of Best Buy's early stores was in that spot in Uptown.

The half-block site borders Fremont Avenue S. and is wedged between Lake Street and Lagoon Avenue. After razing the one-story Cheapo structure, the new building will be similar to its immediate neighbors that are also newer apartment buildings with ground-level retail.

Daniel Oberpriller and Nick Walton of CPM have been working to develop this site for five years and are confident their mix of unit size and style are needed in Uptown.

"It's basically a new housing unit that young professionals can afford," Oberpriller said. "We think the retail mix that Target brings will strengthen the housing market in Uptown. They have a real understanding of the market."

Under Chief Executive Brian Cornell, Target has begun homing in on smaller-format stores as the main vehicle to expand its reach into more dense, urban areas where its big-box stores do not easily fit. About 18 of Target's 1,800 stores are currently in these smaller footprints. And of the 11 new stores Target is planning to open in the U.S. this year, 10 of them will be smaller stores.

Not all retailers have been happy with smaller formats. On Friday, Wal-Mart announced that it would close all of its 102 Wal-Mart Express stores, which are about 12,000 square feet, as part of 269 store closings worldwide.

Target's Uptown store will be about 21,400 square feet, or about one-sixth the size of its typical suburban big-box stores. That makes it roughly on par with Target's two other small stores in the Twin Cities — a store in Dinkytown that opened in 2014 and one in St. Paul's Highland Park neighborhood that opened last year.

The smaller Target stores have a slightly different array of products to cater to the needs of the various neighborhoods in which they are located. For example, the Dinkytown store has lots of Gophers apparel while the Highland Park store has things like toys and diapers that Dinkytown doesn't.

The Uptown store will have home goods geared toward small living spaces, apparel, ready-to-eat meals, baby items and a pharmacy. It will also have 23 underground parking spots.

This will be Target's fifth store in Minneapolis. It has full-size stores downtown along Nicollet Mall, in the Quarry in northeast Minneapolis, and in midtown at Lake and Hiawatha.

Demolition begins on the Cheapo building next week, with construction to begin as soon as the site is cleared.