As stores go dark, cities rethink aging shopping centers

Stores up and down Robert Street in West St. Paul were bustling with shoppers this weekend. All but one.

A former Kmart has been sitting empty for a year and no prospects have yet emerged to fill its sizable space. "Obviously, we have our wish list," said Jim Hartshorn, West St. Paul's community development director.

Over the last two years, thousands of retail stores have closed their doors, transforming suburban landscapes and leading municipal officials and property owners to reevaluate long-held assumptions and priorities about shopping centers.

New centers are being built in the Twin Cities on a smaller scale than in the past. Developers and officials are luring different varieties of tenants and relying less on traditional clothing stores. Some go even further by mixing in offices and residential property rather than relying solely on retail.

"Retail is still active, it's just a different version of retail," said Jesseka Doherty, vice president of leasing for Mid-America Real Estate-Minnesota and recently appointed president of the Minnesota Shopping Center Association.

On the 2.5-mile stretch of Robert Street that forms the main commercial corridor for West St. Paul, shopping centers surrounded by vast parking lots sit on every corner.

The Signal Hills Shopping Center between Moreland and Butler avenues used to be a place where people could catch a movie or shop at department stores like J.C. Penney and Herberger's. The center started as a strip mall before it was enclosed in the early 1960s. But after the Mall of America opened in 1992, the shopping center and others around the metro began to decline and Signal Hills was again converted into an open-air shopping center.

In 1999, a Big Kmart was announced as a new anchor at Signal Hills. But it shut its doors late last year as part of a nationwide closure of 64 stores by parent company Sears Holdings Corp. Several ideas have been proposed for how to reuse the old big-box store, including installing a go-kart course or a gun range. Nothing has stuck.

Hartshorn would like a developer to remake Signal Hills into a multiuse development. "We would like to give it a whole face-lift," he said.

Instead of viewing the changing retail landscape as an industry apocalypse, it should be looked at as a chance for developers and cities to improve aging centers, said Ted Gonsior, a senior vice president who focuses on retail leasing, sales and development at the Twin Cities office of Colliers International.

"It's really an opportunity for shopping centers to refresh, replenish and be relevant again," he said.

Vacant big-box stores that used to anchor strip malls are being turned into retail that offers hands-on buying experiences that can't usually be replicated online like fitness centers, food outlets, and discount stores, Gonsior said. For example, Wisconsin-based Xperience Fitness is opening a gym in the former Gordmans department store in Roseville.

"Consumers have so many choices today, so if someone is going to go into a store there's got to be some sort of experience," said Howard Paster, president of St. Louis Park-based Paster Properties, which owns, develops and manages shopping centers around the metro area.

Several strip malls under construction have added space for other property types in their development like apartments and office buildings.

In Mendota Heights, Paster Properties is working on an expansion of the Mendota Plaza shopping center at the intersection of Hwy. 110 and Dodd Road. Paster partnered with St. Paul-based At Home Apartments to develop a four-story, 139-unit apartment complex on a 5-acre parcel adjacent to the mall. The development is scheduled to be complete next year.

Paster also wants to build a 6,000-square-foot restaurant and a nearly 5,000-square-foot, free-standing retail building.

"For a suburban community that was basically, if you went back 50 years was just farmland, this becomes kind of their downtown," Paster said.

CityPlace in Woodbury has gone even further as owners have continued to add more and more parts to the 100-acre mixed-use development. CityPlace, the former site of the State Farm office campus, has been developed with a 75,000-square-foot Tria Orthopedic Center, two hotels (one still under construction), and a retail center that includes Nordstrom Rack, Whole Foods, and several other shops.

Earlier this month, owner Elion Partners announced plans to build a three-story, 54,000-square-foot office building on the site. A two-story medical office building is under construction. Elion Partners is also in discussions to potentially add a residential component as well as a fine dining restaurant.

"We were really intensely focused on how we can create a place that can foster interaction and connectivity around the site," said Juan DeAngulo, managing principal at Elion.

Suburban shopping centers have historically been more parking-focused with large lots in front of stores that are oriented toward the main boulevards of the centers. By contrast, CityPlace has been built so that the parking is not the focal point with the main arteries in and out of the development being faced with the buildings and not the parking.

CityPlace doesn't have the traditional large anchor tenants seen in many local shopping centers. It has only two clothing stores both discount concepts Nordstrom Rack and Sierra Trading Post. The rest of the retail stores have relatively smaller footprints between 2,000 and 5,000 square feet, DeAngulo said.

The shops offer experiences that can't be easily copied online such as the CycleBar indoor cycling franchise, the premium kitchen supply store Sur La Table, which also offers cooking classes, and the numerous fast-casual dining options like Piada Italian Street Food and Qdoba Mexican Grill.

"We tried to stay away from too much big-box," DeAngulo said.

Other new shopping center developments in the Twin Cities are also mixing up their catalogs with less common retailers. Central Park Commons, built on the former Lockheed Martin site in Eagan, finished its second phase of development this past spring. It is now home to retailers such as Five Below, Hobby Lobby, and Naf Naf Grill.

Even with the new ideas on tenant mix, developers say a successful redevelopment of a shopping center still depends most heavily on location.

"Location, location, location remains an enormous factor in the formula for real estate success," said Gonsior, who admitted that some underperforming centers may need to become entirely non-retail uses, such as housing and medical office buildings.

Back in West St. Paul, there is movement to help enhance the shopping center landscape in the city. The city is working on improvements to Robert Street that would make it more pedestrian-friendly and attractive. The city is also working on establishing a multiuse town center area near Wentworth Avenue.

Nicole Norfleet • 612-673-4495

Twitter: @nicolenorfleet