With Nicollet Mall in limbo, downtown landlords and tenants band together

Minneapolis real estate brokers, building managers and tenants are banding together for a critical mission: to save retail on Nicollet Mall.

The Minneapolis Downtown Council established the group to push past competing business interests and resuscitate retail along five blocks that were at the heart of downtown shopping for decades.

The impending departures of Macy's and Barnes & Noble stores in the next few months will leave two large empty shells on a prominent corner — Nicollet and 8th. And the $50 million overhaul of the streets and sidewalks on Nicollet Mall, which started nearly two years ago, is far from finished.

"They need to be proactive now if they have any hope to revive downtown as a retail center," David Brennan, a retail industry expert at the University of St. Thomas, said. "Otherwise, it's going to increasingly unravel."

Nicollet Mall was built in 1967, when an eight-block stretch of Nicollet Avenue was closed to cars. The mall has been home to stores including Saks Fifth Avenue, Neiman Marcus and Dayton's and brands such as Gucci, Ralph Lauren and Mark Shale.

But the rise of suburban shopping malls, peaking with the opening of the Mall of America in 1992, lured shoppers away from the city. More recently, the popularity of online shopping and the resulting decline of department stores and other brick-and-mortar operations damaged the mall's relevance.

Still, downtown Minneapolis remains the core of the metro area. More than a third of all office space in the Twin Cities is in the central business district, according to the Downtown Council. Amid a boom in apartment construction, the downtown population has grown almost 30 percent over the past decade to surpass 40,000.

In 2011, the Downtown Council recognized that retail needed to be improved, and it outlined ways to turn the mall into a "must-see destination" in its 2025 plan. In one recent step, the Minneapolis Downtown Improvement District hired a "director of Nicollet activation" who will plan activities such as temporary art installations and pop-up events. The district also hired a five-person team of "livability ambassadors," who will intervene in disturbances and coordinate with law enforcement.

But any substantial change in the downtown retail landscape requires building owners, tenants, brokers and others to come together, said Steve Cramer, president and chief executive of the Minneapolis Downtown Council.

The council started forming the special Nicollet Mall task force about three or four months ago as rumors swirled about the potential sale of the large Macy's complex, said David Frank, task force co-chairman and the director of economic policy and development for the city of Minneapolis. The mall had recently lost Sports Authority and the Gap.

The group is focusing on 5th through 10th streets on Nicollet Mall. The task force, which has met a handful of times, is still forming and seeking more members.

"For sure we have problems, but we are at the cusp of this amazing opportunity," said Jim Durda, the task force's other co-chairman and executive vice president of the Minneapolis office of Zeller Realty Group. "Redoing Macy's is historic. This is a phenomenal opportunity and as you go up and down Nicollet Mall two blocks either way of Macy's, you see blank storefronts up and down. These are all great opportunities."

But Nicollet Mall can be a challenge. Rental rates are high because of its central location, a barrier to small or new businesses. Downtown parking is an expense and hassle that shoppers don't have to deal with at suburban malls. Stores aren't open uniform hours or days and neither are the skyways that connect them. There have also been concerns about downtown safety.

Some retailers have recently bet on the mall, such as Saks Off 5th and Nordstrom Rack, which will soon open in the IDS Center. Last week, Target announced it would invest $10 million into a renovation of its store along the mall.

With a growing number of people living and working downtown, retailers have access to residents who have more disposable income, said Andrea Christenson, a senior director with Cushman & Wakefield NorthMarq's Minneapolis retail team and the head of leasing at IDS Center. Retailers will also be close to other amenities that attract visitors such as new hotels and renovated entertainment venues, she said.

But a greater mix of destination stores is needed to draw in more shoppers than those who live and work in downtown, Christenson said.

"We need to function like a mall. That's the way we need to look at this," Christenson said. "At a mall, you will say there's a formula ... They need to have X amount of shoe stores. They need to have X amount of this to have the right tenant mix. But that's one ownership so it's easy to do. Here it's not so easy."

Thinking collectively is one thing, but with no central entity in charge of Nicollet Mall, retailers and other stakeholders are still free to put their business interests first.

Bob White, president of the century-old menswear store Hubert White and a member of the new task force, said he thinks it would be difficult to convince retailers to agree to every recommendation that might be proposed. "Will I necessarily follow everyone's dictates? That's the problem," he said. "That's the beauty, that people can be independent like that, but that's also the challenge."

And there are limits to what building owners and retailers can resolve. "Some of the bigger issues would be with dealing with the perception or the misconception of safety in downtown Minneapolis," said Kevin Lewis, executive director of the Building Owners and Managers Association Greater Minneapolis.

City Council member Lisa Goodman, whose ward includes the area of the mall the committee is concentrating on, said she thinks building owners play an active role in retail's success.

"It's expensive to be on Nicollet Mall," she said. "So unless property owners are willing to see retail as an amenity for their tenants and the community by providing reasonable rents, you are not going to see stores opening on Nicollet Mall."

As for the likelihood that the city could help with tax breaks or other incentives, Goodman said, "If the private sector can't make retail work downtown, I doubt the government can."

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