Minneapolis Downtown Council explores pop-ups pilot for vacant retail space

With the lights turned off and production posters gone, it was easy to imagine the empty former community theater as a blank commercial canvas.

Dan Collison looked around the vacant space in the City Center building in Minneapolis with an eye for what it could become. "This is a sweet place," he said.

Collison, director of downtown partnerships for the Minneapolis Downtown Council, wants to start a pilot program to open "pop-up" temporary stores in vacant spaces that dot the city's core.

The initiative, which is still in its early stages, would mostly focus on businesses run by people of color, women and others. Researchers at the University of Minnesota's Carlson School of Management are in the middle of a feasibility study of the idea. Earlier this month, Collison invited a group of downtown advocates and business people to discuss the potential program.

"What we are trying to do is cast a vision for how these vacant spaces can be used. … These [entrepreneurs] will help us become a more diverse and vibrant downtown and that will help everybody," Collison said.

It's also one answer to the challenges that landlords are facing as retailing is reshaped. Over the past 15 months, some of the nation's biggest store chains have shrunk or collapsed, including Toys 'R' Us, which decided to shut down earlier this month.

In downtown Minneapolis, Sports Authority, Barnes & Noble and Macy's closed along Nicollet Mall, the city's pedestrian thoroughfare. Other vacancies have persisted in the skyways and ground floor plazas of several downtown buildings.

As of the end of last year, the retail vacancy rate in downtown Minneapolis was 9.9 percent, significantly higher than the 5 percent experienced in the overall metro area, according to the city's Community Planning & Economic Development (CPED).

According to CPED data cited by Carlson researchers, there have been long-standing vacancies in some locations in downtown. But asking rental rates still remain as high as $35 per square foot, not including the added costs of property taxes and common area maintenance fees.

Early research indicates that some building owners are willing to accept empty space rather than lower rates to fill it, a move that could devalue the property. For them, the trade-off could be worth it because retail space is relatively small compared to space for offices.

"The priorities of these large buildings is normally floors three through X, not one and two. … The sweet spot would be taking some risk to animate the street level more and have it be an amenity," Collison said.

For small business owners, downtown offers a large amount of visibility to customers with high incomes, however, businesses moving to the central business district have to face higher costs and other barriers such as limited hours of operation and longer lease terms.

There have been successful pop-ups in downtown Minneapolis, the most recent coming during the lead-up to last month's Super Bowl. More than 35 businesses opened kiosks and occupied vacant space on the first two floors of the City Center during the 10 days before the game.

The pop-up market generated additional visibility and revenue for the local businesses that set up shop there, said retail consultant Mich Berthiaume, who curated the vendors. Several official NFL apparel shops also sprung up in vacant retail space around downtown.

A large event like the Super Bowl is obviously helpful for making pop-ups a success. While having a continued pop-up market could be "tricky" and largely dependent on the location, the downtown council's idea could work, Berthiaume said.

"It's never been done in downtown. … Somebody needs to test it and do it," she said. "I think it's a perfect time."

Vacant downtown storefronts have also been utilized for art. In 2013, the Hennepin Theatre Trust launched the "Made Here" project that has utilized empty space to create elaborate art installations. According to its website, Made Here has produced more than 330 window displays in commercial spaces with seven downtown spaces being leased within a year of participating in Made Here.

The Carlson researchers suggest that the Downtown Council, or some other entity, try to lease retail space at a lower-than-market rate and then sublease it to small business owners for brief periods. Collison doesn't think the council will be the main leasing agent, but he is actively looking for partners that could.

The Carlson research team is expected to finish and present their study in May. There is still a lot of work to be done including identifying entrepreneurs who could participate.

Minneapolis Downtown Council president and chief executive Steve Cramer said the program could "address the challenges in downtown, we do have vacant spaces, but do it in a way that creates a win for the community as a whole."

The pop-up project aligns with the goals of an inclusivity think tank that the council recently started with the Greater Twin Cities YMCA. The work group started to meet this month to begin to address issues of inequity in downtown as they relate to workforce development, housing, public safety and other topics.

Kevin Lewis, executive director of the Building Owners and Managers Association Greater Minneapolis, has met with Collison to discuss the pop-up program. He said he didn't think property owners would be opposed to a program if there was an agency that was responsible for subleasing the space. However, Lewis cautioned that building out a space can be expensive and that brokers usually want to secure multiyear leases for space.

"There's probably a little better opportunity and flexibility if they don't need to be in a skyway level right smack down in the core," Lewis said, of possible pop-up locations.

Berthiaume has helped put together more than a handful of pop-ups for local brands at the Mall of America. The latest RAAS (Retail As A Service) Local Market at the mall opened earlier this month and features all women-run shops. There has been talk of the Mall of America introducing a more permanent space to host emerging businesses for three-, six- and even 12-month stays, Berthiaume said.

"I think the sky is the limit," she said on retail pop-ups. "I think it is definitely the way of the future."

Nicole Norfleet • 612-673-4495 Twitter: @nicolenorfleet