What is the holdup on developing downtown properties and how can it be expedited?

[Detroitnerd]

Please, no malls downtown. Esp. not by Taubman. Taubman has zero experience building walkable environments, and everything he builds is either surrounded by acres of parking or set behind guard houses and fortresslike parking structures.

[mikeg19]

I was under the impression that downtown was almost maxed out on living space, so wouldn't that suggest there are plenty of people living in the downtown area to support more stores in the area?

[SWMAP]

Is the pilfering culture once so embedded in Detroit gone? Did you all note that the Border's store in the Compuware building ended up having to permanently close it's Woodward Ave entrance and make people walk all the way around, into the compuware lobby to get into the store. Do you think there was a reason for that and for the security guard that they had to employ to keep the panhandlers out? I think poor operating situations militate against retail downtown.

[canuck]

Is the pilfering culture once so embedded in Detroit gone? Did you all note that the Border's store in the Compuware building ended up having to permanently close it's Woodward Ave entrance and make people walk all the way around, into the compuware lobby to get into the store. Do you think there was a reason for that and for the security guard that they had to employ to keep the panhandlers out? I think poor operating situations militate against retail downtown.

I dont know if this is another attempt at making it real "Detroit Style", but it seems more indicative of an ingrained cultural distrust that has lead to the abandonment of downtown we speak of. I dont mean this as an insult, but as a question. Is running a business big or small really that bad in Detroit? Is there so much pilfering as you say that the city is ungovernable?

[BrushStart]

I was under the impression that downtown was almost maxed out on living space, so wouldn't that suggest there are plenty of people living in the downtown area to support more stores in the area?

I think the occupancy rate of developed residential space is at or near capacity. That is not the same as downtown being at total capacity for residential space. Remember that most of the new residential space downtown was not previously residential. Most of the buildings, including Broderick Tower served commercial purposes. There is a conversion process taking place.

[BrushStart]

Is the pilfering culture once so embedded in Detroit gone? Did you all note that the Border's store in the Compuware building ended up having to permanently close it's Woodward Ave entrance and make people walk all the way around, into the compuware lobby to get into the store. Do you think there was a reason for that and for the security guard that they had to employ to keep the panhandlers out? I think poor operating situations militate against retail downtown.

I don't think "pilfering" is any more of a problem in downtown Detroit than it is in other cities. I don't see it being a problem for the dozens of other stores downtown. Homeless people in Detroit are usually obviously homeless in appearance. It's pretty easy to identify them before they walk off with Steven Kings' latest classic. If you didn't notice, Border's has closed hundreds of stores nationwide and is going into bankruptcy as a franchise. Clearly, it must be due to all the "pilfering" at their former downtown Detroit store.

BTW, good use of the word "militate." It really gets your opinion across.

[fryar]

Did I read that right? The city is sitting on downtown retail property and not renting it out?

[Red Devil]

A retail development similar to the 16th Street pedestrian mall here in Denver would be good for downtown Detroit.

[citylover]

Detroit [[downtown) once had all the things you all wish for......what happened? And this was when living downtown was not the norm.People lived in neighborhoods.Detroit was a city of neighborhoods.

Both the neighborhoods and the downtown have been decimated; why?

As for stores like old navy etc they will not locate where the likelihood of "shrinkage" from employees and [[non) patrons is so high and in Detroit it is very high.

[SWMAP]

Yep. Border's did close lots of stores. Detroit was not the only one. But it did early close and lock it's Woodward St doors early on because of the street scene caused theft and security concerns. You go right on hoping for Old Navy but the truth is that Detroit has a deserved bad reputation. How do you have any idea whether Detroit's security and theft rates cost more than other cities? Start consulting with the retail industry and learn the truth. Canuck thinks the City leadership just needs to make some sort of effort to lure the Brands. But the City has been going to the mega- gathering of retail for years: the National Council of Shopping Centers annual Trade Show and finding no interest in opening in Detroit year after year despite impressive offers.

[SWMAP]

And Brush - you would do well to look up the definition of "militate." it is not martial or pejorative.

[rjk]

I don't think downtown will ever be a shopping destination until Taubman builds his big outdoor mall next to Ilitch's new ice arena. A place like that could survive in the CBD because it could capture all of the sports fans, both local and out-of-towners, in one area.

Because the one thing that people attending sporting events want to do is go shopping?

The idea that Taubman wants to build a big outdoor shopping mall downtown is laughable.

[BrushStart]

Because the one thing that people attending sporting events want to do is go shopping?

The idea that Taubman wants to build a big outdoor shopping mall downtown is laughable.

Why is it so unbelievable?

Hypo 1:
Kurt and Sue Suburbanite come downtown for the afternoon before a Wings game, Kurt goes drinking with friends Dick and Larry, Sue goes shopping with Dick and Larry's wives. Later, they all meet up and go to the game.

Hypo 2:
John and Sharon Clevelander come downtown for a Pistons/Cavs game at the new dual purpose arena. Because they have to drive several hours home, they decide to go shopping instead of getting shitfaced at the bar.

Hypo 3:
Carl and Martha Windsorite like to come to Detroit for dinner twice a month. They really enjoy the food at Roma Cafe. Because of the exchange rate, they decide to go shopping because the Loonie is up against the dollar.

Hypo 4:
Jerry and Elaine Newyorker come to the North American International Auto Show every year. Jerry is a car enthusiast, but Elaine dislikes cars. While Jerry is ogling over the new Ford Fusion, Elaine is splurging on new shoes at the downtown mall.

Hypo 5:
Matt, Jacob, Sarah, Andy, and Alexis are all 12th graders at Livonia Stevenson High School. There is really not much to do in Livonia on Saturday afternoons other than hang around Laurel Park, which is pretty boring. Instead, they decide to come downtown and chill where it is more exciting. Each buys a new top at Aeropostale and a compact music disc at Sam Goody.

Hypo 6:
Beth and Erica are yuppies who work for Compuware downtown, but live in Grosse Pointe. Because there are no malls in Grosse Pointe, and it is easier to go shopping after work in the city than it is to make a special trip to Somerset or Great Lakes Crossing, Beth and Erica each buy a new blouse at Macy's.

Hypo 7: Derrick and Natasha are lifelong Detroiters. They are just happy to finally have a mall in the city, so they go shopping at new downtown mall twice a month and at Christmas time to buy gifts for their family members.

Hypo 8:
BrushStart, a middle-class downtown resident goes clothes shopping at the start of every season to pick up new digs. Because BrushStart absolutely abhors going into the suburbs for anything, he will surely patronize any stores in Detroit first. In April, he buys a new pair of sneakers, some T-shirts and jeans for spring and summer.

[DetroitDad]

10,000 residents has been mentioned as an ideal goal for Detroit's central business district. Hit that, and you will have many of the amenities that you'd find common in an urban area. Right now Downtown Detroit is just pushing 6,000. While further 2010 census data will not be available until June 2011, there is expected to have been a significant rise in young professionals and females in the central business district over the past decade. It should be noted that Detroit's central business district is expected to have grown an estimated 20% since 2000, although Detroit as a whole is expected to have continued to see population loss. [1][2]

Until recently, many of the building owners you are probably speaking of, were the ones charging mall grade rents for pretty desolate locations with little to no foot traffic. Lack of residents isn't the issue. No one is going to wonder down to a street that has not been activated. Case n point, the Ellington, Merchant's Row/Lofts at Woodward Center, Studio One, Greektown Casino, MGM Grand, Compuwer, The Kresge Mall, and the Renaissance Center all have an issue with filling space and have had long term vacancies in those spaces.

The other reason a lack of residents isn't too much of an issue is that any further development that is too large, will require additional infrastructure to access it. Since Metro Detroit is not serviced by sufficient sustainable transit [[mass transit), we require additional parking spaces. We are also forced to deal with even greater traffic congestion, in some cases.

Parking lots tend to discourage pedestrians. Parking garages are better, but not by much, as they either add cement walls [[undesirable conditions for pedestrians) or a glut of retail spaces [[blight) that must survive without much help from tenants in the floors above them.

I agree that number of downtown residents does play a factor, but like I said, how many buildings in ready-to-rent condition are unoccupied because the property owner has repeatedly turned down business tenants? I know of two prime buildings where that's the case, but I'm sure there are many more. Obviously, you can't force them to rent, but you can force them into keeping the place in good condition, shoveling the sidewalk, etc. If number of downtown residents is truly the cause, then the addition of new residents in Broderick Tower should have a corresponding effect.

1. Harrison, Sheena [[June 25, 2007). DEGA enlists help to spur Detroit retail. Crain's Detroit Business. "New downtown residents are largely young professionals according to Social Compact."
2. Halaas, Jaime [[December 20, 2005).Inside Detroit Lofts. Model D Media.

[DetroitDad]

BrushStart, you've got it! But, you're wasting your time trying to convince the wrong people, on possibly the wrong medium.

Well, except for the "compact disc" part. Who buys compact discs anymore.

Why is it so unbelievable?

Hypo 1:
Kurt and Sue Suburbanite come downtown for the afternoon before a Wings game, Kurt goes drinking with friends Dick and Larry, Sue goes shopping with Dick and Larry's wives. Later, they all meet up and go to the game.

Hypo 2:
John and Sharon Clevelander come downtown for a Pistons/Cavs game at the new dual purpose arena. Because they have to drive several hours home, they decide to go shopping instead of getting shitfaced at the bar.

Hypo 3:
Carl and Martha Windsorite like to come to Detroit for dinner twice a month. They really enjoy the food at Roma Cafe. Because of the exchange rate, they decide to go shopping because the Loonie is up against the dollar.

Hypo 4:
Jerry and Elaine Newyorker come to the North American International Auto Show every year. Jerry is a car enthusiast, but Elaine dislikes cars. While Jerry is ogling over the new Ford Fusion, Elaine is splurging on new shoes at the downtown mall.

Hypo 5:
Matt, Jacob, Sarah, Andy, and Alexis are all 12th graders at Livonia Stevenson High School. There is really not much to do in Livonia on Saturday afternoons other than hang around Laurel Park, which is pretty boring. Instead, they decide to come downtown and chill where it is more exciting. Each buys a new top at Aeropostale and a compact music disc at Sam Goody.

Hypo 6:
Beth and Erica are yuppies who work for Compuware downtown, but live in Grosse Pointe. Because there are no malls in Grosse Pointe, and it is easier to go shopping after work in the city than it is to make a special trip to Somerset or Great Lakes Crossing, Beth and Erica each buy a new blouse at Macy's.

Hypo 7: Derrick and Natasha are lifelong Detroiters. They are just happy to finally have a mall in the city, so they go shopping at new downtown mall twice a month and at Christmas time to buy gifts for their family members.

Hypo 8:
BrushStart, a middle-class downtown resident goes clothes shopping at the start of every season to pick up new digs. Because BrushStart absolutely abhors going into the suburbs for anything, he will surely patronize any stores in Detroit first. In April, he buys a new pair of sneakers, some T-shirts and jeans for spring and summer.

[Richard]

Hypo 9

Mike and Sally are living in the burbs ,it is sunday and they are bored so they hop on the trolly and venture downtown not really planning on spending any money but knowing that their day can be filled window shopping in the many local businesses that are located on the bottom floors of the high rises,they do see some things that they would like to buy but because of the budget they know that they will have to save for that, as they are sipping coffee or a glass of wine outside of the sidewalk cafe Mike is truly content in the knowledge that the credit cards are safely tucked away in the dresser drawer back home.

[3WC]

Brushstart, you have clearly and thoughtfully articulated your views about the problems and possible solutions with respect to reviving downtown Detroit. It's clear you are a Detroit enthusiast with much hope for the future. The problem is, you don't have a clue. [[I don't know how to soften that observation and I don't mean to be condescending or confrontational.)

There are many simplistic scenarios which you and others on this thread have put forth. But it appears that neither you, Brushstart, nor most others have any real estate background whatsoever. Or, general business background or experience for that matter.

You lay much of the blame on speculators. Like who? I know many commercial owners in downtown Detroit although I don't get back there as much as I used to. [[I still have a couple of small real estate interests downtown.) I don't know any so-called speculators. You seem to think there's this large number of owners who have high expectations for Detroit's rebirth and are holding on to their properties with the intent of making a windfall. Nonsense. I don't know anyone and particularly in the real estate business - who remotely believes Detroit will ever really turn around. Most owners downtown would love to sell their properties - I would - but nobody wants them. In Chicago, New York and most other cities, the real estate, even in this terrible nationwide market, would sell sooner or later - mostly sooner.

The Penobscot Building, First National Building and Cadilac Tower Building are all in foreclosure [[the last time I checked.) I know for a fact there are a couple more landmark, well known buildings which are on the brink.

There is NO conventional financing available for commercial development. Reports are that B of A has money invested in the Broderick Tower but I doubt it's in the form of a conventional loan. Probably a tax credit deal, but that's just a guess. The ONLY financing available for residential are certain types of tax credit deals and HUD loans. I'm told there is a 2 year + processing time for a HUD loan on those deals that have, perceptually, a chance of financial success. [[Two and a half years ago B of A sent letter to borrowers with $3 billion of loans outstanding advising their customers they would not be renewed; the letter went to virtually all B of A's commercial borrowers. Possibly one reason B of A is reputed to be a lender to Broderick Tower is that it has a huge government CRA problem and has to get a few million out on the street to get in compliance.)

Don't you folks realize that there are building owners downtown that spend most of their waking hours trying to find tenants, office and retail. Tenants are few and far between. I have never heard of a building owner who has turned away a QUALIFIED tenant. [[Better make the distinction.)

Somebody said there's a 22% vacancy rate. The rate is much higher and I'm told that evictions are increasing all the time..

Finally, there may not be as much crime as people think, but PERCEPTION is what counts. Detroit is perceived, in my opinion, as a step above a third world city in many respects.

There are the Dan Gilberts of the world, like Henry Ford II before him, who want to save the city. Ford was an idealist who had the same idea and built the Ren Cen. That was the most devastating thing that ever happened to downtown. Not only was it not well thought out in most ways, it permanently devastated the office market -- forever. His friend, Al Taubman, while viewing the digging of the basements, told him to do the city a favor and fill it in. He should have followed the much smarter Taubman's advice and done so.

I have been involved in many successful businesses, many of them real estate related, for 48 years. Much of that experience was in downtown Detroit real estate. I see NO scenario by which Detroit will ever enjoy its former prestige, good name and prosperity. Sorry

[mwilbert]

I

Most owners downtown would love to sell their properties - I would - but nobody wants them.

I have the utmost respect for your knowledge in this area, but I have to ask for more explanation of this. Nobody wants their properties at any price? If so, why pay the taxes? The only explanations I can think of is that either the owners are making something on rentals or think they could at some point in the future, or they think they might get something more for the properties eventually.

[BrushStart]

I have been involved in many successful businesses, many of them real estate related, for 48 years. Much of that experience was in downtown Detroit real estate. I see NO scenario by which Detroit will ever enjoy its former prestige, good name and prosperity. Sorry

With all due respect, the lending situation is one that can change in a matter of months. And, while demand for office space is not high downtown, it is not much higher anywhere else. There is obviously a demand for residential space downtown, and if Broderick Tower is a success, other lenders will be lining up to finance the next development. Which do you think is a riskier proposition for a bank manager, lending $50 million to a startup company or lending that same amount for the development of a building? One acts as its own collateral, the other does not.

I happen to know something about the Detroit real estate market as well. My ideas may sometimes be lofty, but they are not without merit. I hope I don't need to post my CV to get some credibility. Like I said in my OP, there are at least two buildings downtown [[that I know of) that have been sitting on the market for 5+ years that have had many offers for development. The investors simply do not care. You don't think that's a problem? I know first hand that some building owners are scrambling or are on the brink, but what makes you think that this will continue indefinitely? Well-run buildings are surviving just fine, or are even adding new tenants. Lousy buildings have to up their game to compete. Maybe they'll get lucky as I think the market is starting to trend up.

I also know of developers looking to buy downtown but are not willing to pay the outrageous prices being asked by some of the speculators. The majority of undeveloped buildings downtown fall into one of three categories: [[1) they are owned by the city and should either be sold or developed, [[2) they are owned by an investor who is either too rich to care, or too poor to develop, or [[3) they are decayed beyond the point of profitable restoration.

The majority of buildings fall into categories 1 and 2, and fortunately, the city has the ability to affect both. First, it can start by developing its own vacant properties for use by local merchants who will pay a reduced rent in exchange for moving out on short notice if the building is sold to a private party or developed by a bigger fish. Second, the city can put pressure on speculators to either sell or develop by levying fines for failure to keep up with codes and ordinances, which is what any responsible city does. Detroit should not be an exception.

Reputation? The city's reputation is nothing more than some decent PR. You have positive news stories broadcasted about Detroit in the national media for 1-2 years about redevelopment, light rail, and entrepreneurial incubation, and this city will shine in the court of public opinion. Just look at what a 2 minute car commercial did during a football game.

Detroit can easily make a comeback, especially if the only area most people see and consider is less than a three square mile loop. Today, it's Dan Gilbert, and while you write him off as a naive visionary, he's just a businessman looking for an opportunity. Add a few more like him and the wheels really start turning. Downtown Detroit could snap back so fast it would make our heads spin. By the way, the RenCen was a failure in terms of urban planning, but the additional office space was only a burden on the market because the city had a polarizing mayor and the region caught a near-fatal case of suburbanization syndrome. Those days are over. Real estate in the city has nowhere to go but up, and that's exactly where I expect it to go if the conditions above are met.

[LeannaM]

Somebody said there's a 22% vacancy rate. The rate is much higher and I'm told that evictions are increasing all the time..

I think that was me that said 22%. I was talking about St. Louis and its current rise in data centers, suggesting that Detroit might also look into businesses such as data centers to fill space.

As far as malls, they did try that in St. Louis in the 1980s. It failed miserably and closed around 2005. The building is currently being turned into a parking garage [[for a nearby tower) with first-floor retail. The people generally didn't come to Downtown to shop, as most of them, especially suburbanites, had malls near their homes. The mall apparently became kind of an eyesore and even had some crime issues. I think generally people come Downtown to go to games, drink at bars, eat, food, and visit attractions. The retail that does work in Downtown St. Louis tends to be more of the smaller businesses with regular customers, rather than the new chains that pop up. Even then not all of them make it, even though Downtown's population is about 11,000 and the amount of workers Downtown is higher.

To me, and I'm not an expert, in order to draw Downtown residents what any Downtown probably needs most is effective public transit, grocery stores, basic services, and some retail.

Malls are generally not a long-term answer. People who do not live Downtown tend to go there for fun, and shopping at a mall is something they can probably do closer to home. If they worked Downtown they might be more likely to shop there, but that depends on where they live. Chain stores are also pretty common, not really unique to any city or any area. Often one attribute of Downtowns, one reason that people visit, is their uniqueness. In my opinion, with maybe a few cities as the exception, the days of people going Downtown for big shopping trips are over. The suburban malls are often more convenient to them and when a person goes Downtown, especially for a game, they are probably more likely to eat out or drink at a bar.

Here's an article about downtown malls. http://www.urbanophile.com/2009/02/0...be-demolished/

I'm not saying a Downtown mall would not work, especially since I don't know this specific situation. That said, to me, most Downtowns share some similar characteristics and Downtown visitors around the country [[usually) don't go there to shop. Although enclosed malls that face inward may be worse than the ones that face outward, because they can seem more difficult to navigate and like more of a big shopping trip, which people generally don't go Downtown for.

Just my $0.02 as an outside who has studied these things on my own, so take my opinion for what it's worth. I realize I was speaking more in general terms than in this specific situation, but, looking at other cities, Downtown malls usually aren't long-term solutions. I can't imagine that Detroit would be that much different.

[Richard]

A vacant building has a fixed cost, taxes,so if your going to buy the building you know worse case scenario it is going to cost x amount a year period.

I cannot go into the write off aspect because I am not an accountant.

So then you have somebody that wants to put a restaurant in, first they want a 10 year lease,now you have tied up a portion of your investment ,a buyer comes out of the woodwork ,you have already knocked down your potential pool of buyers because most buyers want to renovate the building,maybe for reuse not including a restaurant so now somebody needs to buy out that lease. It has now become a headache.

So say you are collecting x amount of dollars a month for that restaurant and the heating system breaks what is it going to cost? 10k 15k now you are in the position of it is costing you to have that restaurant in there, not even going into build outs. electrical, plumbing, O and now because you have a tenant your taxes increase.

Well then you have somebody standing in line at the restaurant and they slip and fall hurting themselves who is the lawyer going to go after ? Both the restaurant and the building owner sure you have insurance but who needs the headache ? It was already costing you money to even have the restaurant in there to begin with now you have the added litigation ,but because business is slow the restaurant is behind on their rent but you still have to pay the utilities and taxes etc. because it is your building.

So what are your options? Pay X amount of dollars every other year guaranteed and bide your time hoping the market increases to the point that you are getting more then you paid for the building including taxes or create a headache renting it out?

Not saying if it is right or wrong it is just the way it is,

[3WC]

Some very interesting comments above, which I hope to respond to tomorrow.

Richard, you have expressed several very valid points and observations in your last post in my opinion.

[rjk]

BrushStart, you've got it! But, you're wasting your time trying to convince the wrong people, on possibly the wrong medium.

I remember similair comments about anyone who questioned the viability of the Shoppes at Gateway developement.

Where did this Taubman outdoor mall idea come from anyway? I'm hoping you have more than the speculation of the guy who owns the Temple bar.

[Richard]

Most owners downtown would love to sell their properties - I would - but nobody wants them.

Okay lets work on the expedite part.

3WC Do you have 5000 to 8000 sqft of retail space available in a walkable area of downtown and how creative would you willing to be ?

The reason I am asking is because I am working on another large project and the thing I am finding with property owners is the attitude that they are sitting on a pot of gold , this is being based on an outsider bringing business in so one does have to keep in mind that there are other cities in this country that are more hungry for business then Detroit seems to be,I have been buying and selling properties most of my life also and given the currant market conditions everywhere property owners are needing to be more creative in the way they are doing things.

I am not saying give the property away just open ones mind to creative ways of doing things.
The other property that I am doing is requiring a investment just to walk into the door when compared to other states of $7,000,000 the property owner had the audacity to say to me that I should pay the last years back taxes also .I am paying $600,000 over the value of the property worth to begin with, and people are wondering why there is zero external investment.

For $7000000 I can go in any other major city with half the problems and buy a property for what I need to do without the time factor of buying a stripped out trashed building .But I broke the #1 rule of not being emotionally attached to a property ,but my patience is wearing thin real quick.

Anyways all of that aside if you have a piece of property for a respectable resale business that I have already run the numbers on albeit in another state,but it is a proven successful enterprise in a down economy and would also be a nice fit for downtown,does not require tons of $ to get off of the ground comparatively,just maybe if I hand that information over to somebody they can find a fit for your building as I have moved up the scale a bit.