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CHANGE IS IN THE AIR IN UPTOWN
8/12/2004
Published in the Thursday, August 12, 2004 issue of Finance & Commerce
By Burl Gilyard, F&C Real Estate Writer
The Uptown neighborhood of Minneapolis has always been wary of change. More than two decades ago, developer Ray Harris’ ideas for a retail center were denounced as “Updale” by critics who feared the suburbanization of the city neighborhood. But the ultimate project, Calhoun Square, has proven to be something of an anchor in the neighborhood.
Today change is under way again in Uptown.
Harris and partners sold Calhoun Square for $28.1 million in a deal that closed in June. The property is now owned by a joint venture between Cincinnati-based North American Properties and Des Moines-based Principal Real Estate Investors.
North American Properties has a local office in Eden Prairie.
In a late March press release, North American outlined ambitious plans for the property, saying it would “upgrade the quality of the tenant mix in Calhoun Square by adding several new upscale retailers.”
The touted plans also called for expanding the center’s office space, adding on to the existing parking ramp and adding residential condo units to the site.
For the moment, however, North American partner/principal Jay Scott said that it’s tough to talk specifics. He’s still in the process of acquiring additional parcels of land. All told, the joint venture has either acquired or is in discussions to acquire five additional parcels around Calhoun Square, including the building housing Music Go Round at 1301 W. Lake St.
Scott said that he’s planning a public unveiling of the plans in October. Redevelopment of the site won’t start until 2005. At the moment, he said, he’s reviewing a variety of concepts from architects.
“Retail will be the first and primary focus,” said Scott. “Uptown is obviously very successful today as an entertainment/restaurant destination. What it’s lacking in my opinion is an established retail base. Calhoun Square is the perfect opportunity to stabilize the area as a retail destination.”
Generally, over the years, the amount of available commercial space in Uptown hasn’t changed much. But that’s changing thanks to some new developments.
Two blocks east of Calhoun Square, the new retail/office building Uptown Row is nearing completion. The building, at 1221 W. Lake St., will offer 19,000 square feet of retail and another 19,000 square feet of office space. The project sits across the street from the new 163-unit Uptown City Apartments complex, a boost to the area’s residential market.
Developer Ross Fefercorn, president of RMF Entities, saw a demand for additional office space and service retail in the market: “I would say that Class A office space is limited in Uptown,” said Fefercorn.
“Uptown is not a place where development sites become available very often. The housing market is strengthening. For so many years the whole area was a little dormant. The police garage site didn’t produce any activity,” said Fefercorn.
Three retail tenants are currently in the Uptown Row: Wild Noodles, the Planet Beach tanning salon, and Keep In Touch Massage. Also destined for the space is a Fantastic Sam’s hair salon. The Lowry Hill Dental Clinic has signed a lease for office space.
Terese Reiling, vice president with Welsh Cos., is handling the leasing for the retail component; Welsh associate Chad Anvary is handling the office section.
Fefercorn’s own firm, currently based in Edina, is planning to move into the new building in December. Meanwhile, behind Uptown Row, Fefercorn is also developing Emerson Row Townhomes: six townhomes starting in the $400,000s.
Stuart Ackerberg, president of The Ackerberg Group, said that the overall Uptown market remains strong.
“It’s a niche market. But for those people that choose to be in the Uptown area, there’s not a lot of inventory or supply,” said Ackerberg. “The perception of Uptown is that it’s lower-priced. In many categories, our prices are higher than downtown or the suburban markets.”
He said that office rents in the area can range from $22 to $30 gross per square foot. “There isn’t much office space available for lease,” said Ackerberg.
Ackerberg’s company owns about a dozen buildings in the neighborhood. Ackerberg’s company made an unsuccessful bid for Calhoun Square.
“If anything, I think the market is a little fragile right now,” said Ackerberg, who expressed concern that the market is skewing too heavily toward entertainment tenants. “I think long term, for Uptown to continue to be healthy, we need to have a little better balance.”
Some key sites in Uptown are in flux. The original home to the Walker Library, 2901 Hennepin Ave., is vacant again after the Pagoda spa failed in the venerable space. Owner John Johannson, a senior vice president at Welsh Cos., said, “We’re marketing the space. There’s a fair bit of interest.”
Meanwhile, the possibility of a possible mixed-use development on the current subterranean site of the Walker Community Library across the street has been floated. The Minneapolis Public Library board has commissioned a study of the site.
Minneapolis City Council Member Dan Niziolek said he’s interested in finding ways to attract more businesses to locate offices in Uptown.
“This is a great place to be; why not locate your business here?” said Niziolek. “Who can we land there to really create more of an employer center? How do we take Uptown to the next level?”
But other observers suggest that could be an uphill battle. “It’s easy to want it; it’s hard to create it,” said Johannson. “The market determines what happens. It’s hard to create the market.”
Photo Captions included in article:
Uptown boosters want to take the neighborhood to the next level, but that may be easier said than done in an area that has a history of resisting change.
Minneapolis City Council Member Dan Niziolek wants to attract more businesses to Uptown . "This is a great place to be," he says. "Why not locate your business here?...How do we take Uptown to the next level?"
Uptown Row is a part of a recent redevelopment spurt in the area. "Uptown is not a place where development sites become available very often," says developer Ross Fefercorn, president of RMF Entities.
Calhoun Square was a controversial project when it was built more than two decades ago in the heart of Uptown. Now firmly established as the anchor of the neighborhood, the building is expected to undergo changes after being sold for $28.1 million in June to a joint venture group. Jay Scott, one of the principal players in the purchase, says retail will be the primary focus of the redevelopment effort. “Calhoun Square is the perfect opportunity to stabilize the area as a retail destination,” he says.
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