Developers Eyeing Detroit

[English]

It's all been tried. It failed. It doesn't work because it doesn't follow the algorithm.

Then we all might as well pack up, and find another region to live in. Including those across the river in Windsor.

[erikd]

Student housing and retail are apples and oranges. Comparative sales deal with residential and multi-res. Commercial real estate is a whole new ballpark. You can buy a vacant commercial store for $100K, then get a 10 year lease signed by a AAA tenant like McDonald's or CVS Pharmacy and get the building refinanced for a million dollars 4 months later. Comparative sales have little to do with the value of leased commercial buildings. The value of commercial buildings is based on the leases, not replacement cost or recent sales. On the tenant side, commercial tenants are basing their decisions on the algorithm, whether it makes sense to sign a 10 year bonded lease.

The algorithm counts residents' income only. They base it on tax data from the gov't census. Anything else is just pure speculation. The proof is in the pudding. You haven't seen big box stores in the city for decades. But, you see tonnes in the suburbs where all the high wage earners reside. Even for something as small as Whole Food, they need a huge gov't subsidy to override the traditional algorithm. Otherwise, these CEOs are showing their shareholders that they are being wreckless with other people's money. It's not a good formula for a CEO who wants to have a long future with their corporation.

The traditional algorithms used by chain big box stores are based on criteria that has proven to be successful in suburban markets. Factors such as average income, population within a predefined radius, and high automobile traffic counts on major surface streets are the key components in these big box algorithms, as well as the ability to purchase a large amount of contiguous land in a highly visible location.

However, these criteria simply do not work in urban environments. If you look at the major big box retailers, you will find that they have very little presence in urban areas. Wal-Mart, for example, is the largest retailer on earth, yet they are virtually non-existant in our major cities. The Wal-Mart store locator shows that they have no stores in NYC, San Fran, Seattle, Boston, or Detroit. The store locator also shows that Wal-Mart has one store in Miami, one in Portland, one in LA, and one in Chicago [[plus a smaller "neighborhood market" store). To my knowledge, Meijer doesn't have a single store located in any major city. The rest of the big box chains also have a similar dearth of urban locations.

These facts lead us to two possible explanations: either major cities are not able to support big-box retail, or the standard suburban big-box algorithms and store designs don't work when applied to urban environments.

One of the best recent examples of the failure of suburban style algorithms being applied to the city was the Kroger store built on Gratiot, just south of 8 Mile. The tried-and-true suburban algorithm showed very high traffic counts on both of these surface streets, and a high population within a 3-5 mile radius of the store, but the algorithm failed to account for the fact that half of that radius was in Warren, and the residents of Warren will not cross 8 Mile to shop in the city. Period. This flawed algorithm also failed to account for the fact that almost all of the growing areas of the city are nowhere near 8 mile and Gratiot, and the fact that there are many similar types of grocery stores located in inner-ring suburbs that are much quicker to get to from these core city neighborhoods. For example, it takes ten minutes or less to drive up I-75 from downtown or midtown to get to the Kroger on 9 Mile and John R in Hazel Park. It takes about twice as long to get to the failed Kroger that was located on the fringe of the city on Gratiot. If Kroger would have built a store in the city core instead, they could have captured the growing core city market, but instead they relied on their algorithms which counted on the fatally flawed assumption that many, if not most, of their customers would be suburbanites crossing 8 Mile to buy groceries.

As for the shareholders and CEOs of the big box chains, I think that they are starting to see the limits of their suburban stores. The suburbs are filled with these stores, and have basically reached a point of market saturation. Due to the housing/mortgage crisis, new suburbs are not being built like they have been over the last 50 years, and these companies are starting to look to previously untapped urban markets as growth sectors.

The smaller retail chains, such as CVS, Rite Aid, and Walgreens have proven that chain retail can be profitable in the cities, if it is properly scaled and marketed in a fashion conducive to an urban setting. The big box stores haven't quite figured out how to do that yet, but they are starting to experiment with it, and it is highly likely that they will ramp up their efforts as the their traditional suburban markets continue to show little or no growth.

[mikestl]

If Target does open a store, I would bet it would be its new urban concept store "City Target". While I don't have the extensive knowledge of algorithms big box retailers use to open stores, I would imagine they use different factors. The customers in the suburbs would have different needs than a customer in the city. For example, Walmart just opened a Walmart Express in the southside of Chicago, and plans to open 3 more stores. The store is 10,000 square feet offering fresh groceries, dry goods and pharmacy.


I wish this concept existed when I was in college. It would've saved me a lot of money. Target and Walmart are usually cheaper than walgreens and cvs.



In the link pasted below, the VP of property management discusses the new concept.


http://articles.boston.com/2010-09-2...me-furnishings

[davewindsor]

The traditional algorithms used by chain big box stores are based on criteria that has proven to be successful in suburban markets. Factors such as average income, population within a predefined radius, and high automobile traffic counts on major surface streets are the key components in these big box algorithms, as well as the ability to purchase a large amount of contiguous land in a highly visible location.

However, these criteria simply do not work in urban environments. If you look at the major big box retailers, you will find that they have very little presence in urban areas. Wal-Mart, for example, is the largest retailer on earth, yet they are virtually non-existant in our major cities. The Wal-Mart store locator shows that they have no stores in NYC, San Fran, Seattle, Boston, or Detroit. The store locator also shows that Wal-Mart has one store in Miami, one in Portland, one in LA, and one in Chicago [[plus a smaller "neighborhood market" store). To my knowledge, Meijer doesn't have a single store located in any major city. The rest of the big box chains also have a similar dearth of urban locations.

These facts lead us to two possible explanations: either major cities are not able to support big-box retail, or the standard suburban big-box algorithms and store designs don't work when applied to urban environments.

I have to disagree that the big-box algorithms don't work in urban environments. Many major Canadian cities like Toronto [[the largest city in Canada) have had big box retailers like Walmart for decades. 2525 St. Claire West [[several blocks from Keele and Dundas) is not too far from downtown. Toronto has a tonne of different big box retailers. The City of Windsor alone has 2 Walmarts, a Sears, a Lowe's, 2 Home Depot's, a Rona, 3 Canadian Tires, 3 Zeller's [[which are being changed to Target's as Target spent $1.8Billion to buy the Canadian Zeller's out to expand into Canada), and pretty well every known big box retailer in Canada because the high average salaries in these areas pass the algorithm. The suburbs of Windsor in Windsor-Essex County also have Walmarts and not a single one has ever closed in this area. Big Box retailers are not oversaturated and the algorithm has been proven to work in smaller and the largest urban areas in Canada. So, I don't see any reason why the CEO of these Big Box Retailers would go out of their way to change their model and put their jobs at risk. The algorithm been proven again and again to work. There's no good reason to change it if it works.

[davewindsor]

If Target does open a store, I would bet it would be its new urban concept store "City Target". While I don't have the extensive knowledge of algorithms big box retailers use to open stores, I would imagine they use different factors. The customers in the suburbs would have different needs than a customer in the city. For example, Walmart just opened a Walmart Express in the southside of Chicago, and plans to open 3 more stores. The store is 10,000 square feet offering fresh groceries, dry goods and pharmacy.


I wish this concept existed when I was in college. It would've saved me a lot of money. Target and Walmart are usually cheaper than walgreens and cvs.



In the link pasted below, the VP of property management discusses the new concept.


http://articles.boston.com/2010-09-2...me-furnishings

I wonder what the average salaries of residents are surrounding that planned Target in Seattle or San Fransisco. I wonder what it is in the south side of Chicago.

[mikestl]

I wonder what the average salaries of residents are surrounding that planned Target in Seattle or San Fransisco. I wonder what it is in the south side of Chicago.

I thought about that too. I know these cities have higher salaries than Detroit. Even though this is probably a rumor, it still refreshing to hear some kind of development talk to revive downtown. I also thought about St. Louis' Culinaria grocery store downtown. Why can't something like that be replicated downtown Detroit? It's a tailored version of the areas local grocery store Schnucks.

[PeachLaser]

Get an Apple Store downtown and then watch what happens! Detroit should be courting Apple to entice them to the central area. Every Apple store I have ever seen has always been packed, even during these tough economic times.

[BrushStart]

I'm happy for the Big Box stores and all of their success, but I don't care much for their algorithms. I mean, is that all we are, algorithms? It basically boils down to adding up the rich people in an area, then deciding whether there's enough to build a store.

What ever happened to businesses taking risks, earning your loyalty, and building up the community? This is what most independent stores do every day. That's why I shop at them. It's also why I respect Whole Foods, despite the subsidy given to the developer. If Detroit's Whole Foods store tanks, somebody at that company put their balls on the line. WF is taking a risk on Detroit, and for that reason I'll do what I can to prop them up.

Could Target make a bold move by coming to Detroit? Absolutely. They would definitely have my business and loyalty over all competitors. I don't know how you plug that into an algorithm, but I think that's the difference between good businesses and great businesses. People like to know you give a shit.

[Magnatomicflux]

The suburbs of Windsor in Windsor-Essex County also have Walmarts and not a single one has ever closed in this area. .

Dave, wasn't this a Sprawl-Mart, over in Eastown Plaza?

http://maps.google.ca/maps?hl=en&ll=...26.92,,0,-7.55

There's already a Target which, so far as know, was never a Zeller's to begin with. It's in that same plaza as Lowes.

EDIT: I Forgot they shuttered this place in Eastown and shuffled a couple blocks to the west for a new store.

[davewindsor]

Dave, wasn't this a Sprawl-Mart, over in Eastown Plaza?

http://maps.google.ca/maps?hl=en&ll=...26.92,,0,-7.55

There's already a Target which, so far as know, was never a Zeller's to begin with. It's in that same plaza as Lowes.

EDIT: I Forgot they shuttered this place in Eastown and shuffled a couple blocks to the west for a new store.

First off, that picture is not what the area currently looks like. Half of it was knocked down and rebuilt and re-leased to Liquidation World [[which was recently bought out by US HQ'd "Bigger Lots"). The building was originally a K-Mart or Woolco built in the 70s and then it was bought out by Walmart. Then, Walmart built a much larger superstore a couple blocks from there and moved. East town plaza is fully leased and they are currently building new structures around it.

As for the Lowe's Plaza, that's "Target Apparel", not "Target". It's nowhere near the retail size of a Zeller's in Windsor [[I would guess it's around 5,000 sq. ft.). I've been in there and all they sell are mostly clothes and some plastic jewelry and mirrors with prices that are not competitive with Walmart. I'm not sure what their affiliation is with "Target". Also, that area is known as the retail Power Center of South Windsor. It's a higher income area of Windsor with some of the highest commercial real estate prices in the city. That area also has a Costco, a Home Depot, a Canadian Tire, Future Shop, Best Buy, the Real Canadian Super Store, Silver City IMAX, and a lot of other major franchises.

I'm not sure how a higher income area like this relates to Detroit. Zeller's would never fit inside a "Target Apparel."

[Magnatomicflux]

First off, that picture is not what the area currently looks like. Half of it was knocked down and rebuilt and re-leased to Liquidation World [[which was recently bought out by US HQ'd "Bigger Lots"). The building was originally a K-Mart or Woolco built in the 70s and then it was bought out by Walmart. Then, Walmart built a much larger superstore a couple blocks from there and moved. East town plaza is fully leased and they are currently building new structures around it.

As for the Lowe's Plaza, that's "Target Apparel", not "Target". It's nowhere near the retail size of a Zeller's in Windsor [[I would guess it's around 5,000 sq. ft.). I've been in there and all they sell are mostly clothes and some plastic jewelry and mirrors with prices that are not competitive with Walmart. I'm not sure what their affiliation is with "Target". Also, that area is known as the retail Power Center of South Windsor. It's a higher income area of Windsor with some of the highest commercial real estate prices in the city. That area also has a Costco, a Home Depot, a Canadian Tire, Future Shop, Best Buy, the Real Canadian Super Store, Silver City IMAX, and a lot of other major franchises.

I'm not sure how a higher income area like this relates to Detroit. Zeller's would never fit inside a "Target Apparel."

Ah....ok because I was in there and I was like "this is a Target? What's the big deal? Who gives a shit about this stuff?" lol

I know it doesn't look like that anymore, and what's around Lowes, living here and all that. I was just giving a reference to people that don't live here.
Meh, maybe you're describing the location for people that don't live here too.

Oh...it was a Woolco before Wal-Mart.

[louis]

thats all very nice but its also been newyorkers buying up woodward hoping it would develop its self

[detroitbob]

In Chicago Target is opening its urban concept store, "City Target" in the Sullivan designed Carson Pirie Scott building [[now Sullivan Center) ---the heart of Chicago retailing row...It will be smaller than a normal Target and they just announced a Pret a Manger [[from Great Britian) food operation in the entrance which will open at 7am. The Target will be on two levels and will feature what the downtown worker/resident/hotel guest needs...so the merchandise mix will be probably developing as the store opens...Target has a major "super store" down on Roosevelt Rd, about a mile south and stores throught the city [[10 stores). As the building is landmarked the normal bulls eye signage will not be allowed on the facade of the building.

See http://www.wbez.org/story/carson-pir...scott-building
and google can provide more information of the landmark Sullivan building.

[animatedmartian]

Target has a 126,000 sq ft store in East Harlem. Does that fit any algorithm?

http://ny.curbed.com/archives/2010/0...odega_more.php
http://www.eastriverplaza.com/html/h...ighlights.html

[davewindsor]

Target has a 126,000 sq ft store in East Harlem. Does that fit any algorithm?

http://ny.curbed.com/archives/2010/0...odega_more.php
http://www.eastriverplaza.com/html/h...ighlights.html

I'm confused with your point about the algorithm. What does the Harlem have to do with Detroit? Are you claiming that east Harlem is low income like Detroit or are you pointing out that it's a high income urban area and that's why they got the Target, as someone pointed out earlier that NYC doesn't have a Target?

Because of Harlem's commuting distance to Manhattan [[the most expensive real estate market in the nation) it's become the new Soho. This is where professionals who work in Manhattan now commute from if they can't afford to live in Manhattan. 325 listings on Trulia and not a single one under $230K and plenty for over a million bucks. http://www.trulia.com/for_sale/5131_nh/CONDO_type/

[[quite unlike Detroit where real estate prices start at a buck).

[iheartthed]

There are newly constructed Target stores in NYC [[South Bronx, East Harlem) that are located in neighborhoods with similar income stats to downtown and midtown Detroit.

[bartock]

Target did come to Detroit. They had a store on 8 mile. And they were not given $5 million dollars and their store actually had some square footage. And it wasn't located next next to the largest same campus medical school in the United States. The area the store was in was not wealthy. My ass that Whole Foods is taking a chance...and when is that groundbreaking again?

[davewindsor]

There are newly constructed Target stores in NYC [[South Bronx, East Harlem) that are located in neighborhoods with similar income stats to downtown and midtown Detroit.

I doubt it. Show me the stats that prove it. You won't find any. They all follow an algorithm.

[iheartthed]

I'm confused with your point about the algorithm. What does the Harlem have to do with Detroit? Are you claiming that east Harlem is low income like Detroit or are you pointing out that it's a high income urban area and that's why they got the Target, as someone pointed out earlier that NYC doesn't have a Target?

Because of Harlem's commuting distance to Manhattan [[the most expensive real estate market in the nation) it's become the new Soho. This is where professionals who work in Manhattan now commute from if they can't afford to live in Manhattan. 325 listings on Trulia and not a single one under $230K and plenty for over a million bucks. http://www.trulia.com/for_sale/5131_nh/CONDO_type/

[[quite unlike Detroit where real estate prices start at a buck).

East Harlem is still quite poor. The homeownership rates in East Harlem, and New York City in general, are significantly lower than Detroit. Also, NYC has at least five Target locations that I know of off the top of my head [[probably more than 10 altogether). Most of those were built in areas that were retail deserts, similar to most of Detroit.

[iheartthed]

I doubt it. Show me the stats that prove it. You won't find any. They all follow an algorithm.

Median income zip code 10035: 14,896
Median income zip code 48201: 12,262

[bartock]

Median income zip code 10035: 14,896
Median income zip code 48201: 12,262

Target opened in 2010 in East Harlem.

Your figures are from 1999.

http://factfinder.census.gov/servlet...ab=&redirect=Y

[davewindsor]

Target did come to Detroit. They had a store on 8 mile. And they were not given $5 million dollars and their store actually had some square footage. And it wasn't located next next to the largest same campus medical school in the United States. The area the store was in was not wealthy. My ass that Whole Foods is taking a chance...and when is that groundbreaking again?

8 mile is not mid-town or downtown. The Whole Foods that's taking a chance is in mid-town. Apples to oranges on locations. Whole Foods is taking a chance on mid-town; otherwise, they wouldn't need a gov't handout to make it happen. It's also a fraction of the size of a Target. The bottom line is that the data doesn't support a Target in mid-town or downtown and pure market forces without gov't aid will not get a Target in this area of the city because it doesn't pass the algorithm.

[bartock]

8 mile is not mid-town or downtown. The Whole Foods that's taking a chance is in mid-town. Apples to oranges on locations. Whole Foods is taking a chance on mid-town; otherwise, they wouldn't need a gov't handout to make it happen. It's also a fraction of the size of a Target. The bottom line is that the data doesn't support a Target in mid-town or downtown and pure market forces without gov't aid will not get a Target in this area of the city because it doesn't pass the algorithm.

Yeah, no geography lessons needed for me, but thanks. And I agree with your last statement. The statement I addressed was that Target could make an impact by opening a store in Detroit. My point is that they have done that, and in a much poorer area - albeit more populated at the time.

Target took a much bigger chance than Whole Foods ever will [[that Target closed, by the way). Whole Foods has a taxpayer-funded hedge on their bet, so it isn't exactly living on a limb. Ironically, everybody is assuming that this is a done deal, even though it isn't scheduled to open until 2013. We've seen this sort of thing before. Those companies truly taking chances are the Lafayette Foods and such, who are doing it without being backed by millions of dollars of taxpayer money. Let's not celebrate Whole Foods as being some independant retail champion taking some huge risk on the big, bad city. It isn't even close to that.

[iheartthed]

Target opened in 2010 in East Harlem.

Your figures are from 1999.

http://factfinder.census.gov/servlet...ab=&redirect=Y

We only do our census once per decade in the U.S.

[bartock]

We only do our census once per decade in the U.S.

Aw snap?

Well, whatever you think fits your argument. You know, sometimes these marketing and business types manage to update their statistics more than once a decade.

You are trying to compare this:

http://www.city-data.com/zips/10035.html

To this:

http://www.city-data.com/zips/48201.html