Retailers: Detroit wants you! (And you should want Detroit.)
Detroit is one of the most encouraging and intriguing stories to develop in the wake of the Great Recession. With investment, development, and redevelopment booming downtown, office and multi-family momentum has spurred a retail revival. The Motor City is revving its retail engine and is well on the way to arriving as a true retail destination for the first time in decades.
Only five years ago, there simply were not enough people living in downtown Detroit to support any serious retailers. Dramatic investments from business leaders who believed in Detroit began the turnaround. Dan Gilbert moved the headquarters of Quicken Loans to downtown Detroit’s One Campus Martius building. Mike Ilitch renovated the city’s historic Fox Theatre and erected a new headquarters for Little Caesars Pizza and Ilitch Holdings. These bold moves ignited a spark that has grown into a legitimate blaze of investment and development in revitalizing the city’s urban core. With office projects leading the way, a spike in residential development has laid the groundwork for the retail to follow. Today, downtown Detroit’s residential offerings are at approximately 95% capacity, there are more people living and working downtown, and retail is surging in response.
It was Detroit’s decline that positioned it for its resurrection. In a retail world in flux, the stripped-bare condition of the city allowed developers to re-invent it. When J.L. Hudson’s 12-story flagship department store (once the nation’s second-largest) closed its doors in 1983, it was a headline-making departure that touched off a retail exodus from the city. Detroit was left with minimal, substantive downtown retail for well over two decades. In the last few years, however, that absence of retail has become its draw. National and regional names now see in downtown Detroit a rare opportunity to establish an early foothold in a valuable market.
Detroit retail has reemerged with noticeably more style. Millennials and Empty-Nesters craving vibrant city lifestyles represent a significant portion of emigres to downtown Detroit and they, in turn, have drawn brands the likes of Nike, Bonobos, Under Armour, Warby Parker, and Kit and Ace. Detoit’s new cool factor extends beyond the brands themselves. When Detroit native and legendary designer John Varvatos opened his eponymous menswear store downtown, features like the original cast-iron columns and decorative detailing from the historic Wright-Kay Building were included into the design of the store. Those details exuded a gritty and industrial vibe that felt right at home in a city that has long embodied those attributes in the American consciousness.
With so many historic buildings across downtown Detroit, renovation and adaptive reuse projects are a popular option for developers. Retailers are relishing the opportunity to make their own mark and establish some aesthetic and experiential distinction in a space that is truly one of a kind — though accommodating standard floor plans to irregular spaces means thinking and designing outside of the box. Believe it or not, that’s often not as daunting as it sounds. Having served as general contractors for several projects in Detroit, we have found that the permitting process can be fairly straightforward and efficient. What’s more, historic tax credits can be an attractive addition to the financial calculus.
At the 17,000-sq.-ft. Under Armour Brand House opening this spring in the old Kresge Building at the corner of Woodward Avenue and State, regulatory mandates have necessitated the preservation of original marble walls and historic handrails. It’s worth noting that Detroit is unique in its retail leasing because civic leaders have taken the responsibility to bring spaces up to code and ready for occupancy before retailers arrive downtown. Perhaps more so than most cities, Detroit is a city where new retailers may benefit greatly from working with established local brokers who know the city, have forged relationships with civic and community leaders, and can help identify potential opportunities.
The iconic Woodward Avenue remains the epicenter of Detroit’s retail resurgence. While the city’s financial district is clearly the hub of new retail activity, surrounding neighborhoods like Midtown and Eastern Market continue to add multifamily residential and office – valuable density that will support additional retail growth in the months and years ahead.
The restaurant and coffee shop scene is flourishing, and boutique independent brands are doing especially well. With more multi-family coming online, Detroit is likely to see (and need!) a boost in service retail. In the Brush Park neighborhood, opportunity exists to expand retail options that will become necessary as the population continues to grow. A small-format urban Target or similar concept would be a great fit for residents in need of quick grab-and-go items, along with convenience stores, hair and beauty salons, dry cleaners, and accessible grocery options.
Detroit is back on track to becoming the retail and restaurant mecca it once was, but there is still some way to go. As downtown continues to mature, additional retailers will be needed if the city is going to fulfill its retail promise and achieve truly sustainable prosperity.
Jeff Katkowsky and Chuck Hundley are, respectively, retail VP and director of retail operations at Detroit-based Sachse Construction. Katkowsky can be reached at [email protected].
Penney details stores marked for closing
The ax has fallen: J.C. Penney has released the list of 138 stores it plans to close.
On Feb. 24, the retailer announced it would close 138 stores, along with one supply chain facility in Lakeland, Fla., as it looks to cut costs and focus on growing sales at its best-performing locations. Texas, with nine stores slated to close, and Minnesota, with eight, were the states hit with the hardest. While most of the stores closing are in smaller market, the list includes several higher-profile locations, including the Penney at Palisades Center in West Nyack, New York, and the one at King of Prussia mall, in King of Prussia, Pa.
"We believe closing stores will also allow us to adjust our business to effectively compete against the growing threat of online retailers,” Penney CEO Marvin R. Ellison said in February. “It is essential to retain those locations that present the best expression of the J.C. Penney brand and function as a seamless extension of the omnichannel experience through online order fulfillment, same-day pick up, exchanges and returns.”
Most of the stores will close in June, Penney said on Friday, and the liquidation process in most will start on April 17.
Approximately 5,000 positions will be impacted by the closings. Penney said is trying to relocate certain “leaders” and will provide outplacement support services for eligible associates.
To see the list of store closings click here.
JLL names new West Coast leasing VPs
Jones Lang LaSalle has announced the hiring of two new vice presidents to handle leasing of third-party-managed retail properties in West Coast markets.
Jonathon LaChance joins JLL from the Lightstone Group, where he specialized in transitioning pure-play online retailers into the brick-and-mortar world. He served as director of leasing and brand curator at bio-nyc.com’s first location in the Chelsea neighborhood of Manhattan. As a senior leasing rep at Rouse, he was responsible for the redevelopment leasing of San Francisco Bay-area malls.
Bob Dishler returns to JLL from four years at GGP, where he leased assets in California, Idaho, Utah, Washington, and Wyoming. He will oversee Rogue Valley Mall and new-to-portfolio assets, while Lachance will handle Salem Center in Oregon and the Palladio at Broadstone and Hilltop Mall in California.
JLL is the third-party property manager for more than 1,000 U.S. retail centers.