By MAURA WEBBER SADOVI
January 30, 2008; Wall Street Journal
In Detroit, a city starved for retail options, plans for the first department-store-anchored shopping center since the 1990s look a little shaky.
Chicago-based General Growth Properties Inc., one of the country's largest mall owners and developers, says it had hoped to start construction last year on a 370,000-square-foot center on the Detroit side of Eight Mile Road, which separates the city from its wealthier suburbs. Now General Growth has pushed the planned construction start to the summer, citing the need for time to obtain the right mix of tenants.
Construction on a 370,000-square-foot shopping center in Detroit was supposed to begin last year.
The delay isn't surprising. There are few places where things look bleaker for retailers than in the Motor City, which was struggling to show signs of prosperity even during the recent period of national economic expansion.
By almost any economic yardstick that retailers use to decide where to open stores, the Detroit area's prospects don't measure up. The city's population has fallen roughly by half since 1950 to about 900,000. Despite pockets of wealth, the area continues to bleed jobs and people and its November unemployment rate of 7.2% was the highest of the 49 largest U.S. metropolitan areas, according to the Bureau of Labor Statistics. Additionally, home-foreclosure rates are sky-high. Average area office, retail and apartment rents are in decline or stagnant, according to Property & Portfolio Research Inc., a Boston-based real-estate research firm.
It also doesn't help that even previously fast-growing retailers like Starbucks Corp. are expected to be more discriminating about expanding nationwide this year, according to Michael Dee, national director of retail in Dallas for Grubb & Ellis, a real-estate services firm. The Detroit area's dwindling population, which stands now at about 4.6 million, is also a worry for retailers who typically chase locations with growing populations, he says. "Detroit is not going to be on top of the radar screen," says Mr. Dee, noting that leasing the Shoppes at Gateway Park will be challenging.
To be sure, Detroit has had some mixed success in its efforts to shore up a core that has been marred in past decades by empty storefronts and office buildings. The MGM Grand Detroit opened last year, the first casino in the city's central business district, and Quicken Loans announced late last year that it would move its headquarters and about 4,000 workers from suburban Livonia to downtown Detroit. At the same time, efforts to develop a museum to commemorate the city's Motown ties fizzled after the proponents were unable to raise the funds, says George Jackson, Detroit's chief development officer.
For its part, General Growth says it is up to the challenge of delivering Detroit's newest center. Lyneir Richardson, vice president of urban retail for General Growth, says it is working to persuade retailers to locate in the center. The 170,000 residents in a three-mile radius around the center have an average income of about $55,000, he says. Mr. Richardson says he has a letter of intent from J.C. Penney Co. to locate a store in the site, which would be the first department store for the city since the 1990s. "We have to overcome perceptions, misperceptions and bad information and show the opportunities," says Mr. Richardson. "There clearly is a void."
January 30, 2008; Wall Street Journal
In Detroit, a city starved for retail options, plans for the first department-store-anchored shopping center since the 1990s look a little shaky.
Chicago-based General Growth Properties Inc., one of the country's largest mall owners and developers, says it had hoped to start construction last year on a 370,000-square-foot center on the Detroit side of Eight Mile Road, which separates the city from its wealthier suburbs. Now General Growth has pushed the planned construction start to the summer, citing the need for time to obtain the right mix of tenants.
Construction on a 370,000-square-foot shopping center in Detroit was supposed to begin last year.
The delay isn't surprising. There are few places where things look bleaker for retailers than in the Motor City, which was struggling to show signs of prosperity even during the recent period of national economic expansion.
By almost any economic yardstick that retailers use to decide where to open stores, the Detroit area's prospects don't measure up. The city's population has fallen roughly by half since 1950 to about 900,000. Despite pockets of wealth, the area continues to bleed jobs and people and its November unemployment rate of 7.2% was the highest of the 49 largest U.S. metropolitan areas, according to the Bureau of Labor Statistics. Additionally, home-foreclosure rates are sky-high. Average area office, retail and apartment rents are in decline or stagnant, according to Property & Portfolio Research Inc., a Boston-based real-estate research firm.
It also doesn't help that even previously fast-growing retailers like Starbucks Corp. are expected to be more discriminating about expanding nationwide this year, according to Michael Dee, national director of retail in Dallas for Grubb & Ellis, a real-estate services firm. The Detroit area's dwindling population, which stands now at about 4.6 million, is also a worry for retailers who typically chase locations with growing populations, he says. "Detroit is not going to be on top of the radar screen," says Mr. Dee, noting that leasing the Shoppes at Gateway Park will be challenging.
To be sure, Detroit has had some mixed success in its efforts to shore up a core that has been marred in past decades by empty storefronts and office buildings. The MGM Grand Detroit opened last year, the first casino in the city's central business district, and Quicken Loans announced late last year that it would move its headquarters and about 4,000 workers from suburban Livonia to downtown Detroit. At the same time, efforts to develop a museum to commemorate the city's Motown ties fizzled after the proponents were unable to raise the funds, says George Jackson, Detroit's chief development officer.
For its part, General Growth says it is up to the challenge of delivering Detroit's newest center. Lyneir Richardson, vice president of urban retail for General Growth, says it is working to persuade retailers to locate in the center. The 170,000 residents in a three-mile radius around the center have an average income of about $55,000, he says. Mr. Richardson says he has a letter of intent from J.C. Penney Co. to locate a store in the site, which would be the first department store for the city since the 1990s. "We have to overcome perceptions, misperceptions and bad information and show the opportunities," says Mr. Richardson. "There clearly is a void."
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