Retail revival in apartments

By: Frank Jossi December 23, 2014 7:05 am

The Revival Wine, Beer and Spirits store is a tenant on the skyway level of the Pioneer Endicott building, a historic property redeveloped into 230 luxury apartments in downtown St. Paul. “Lowertown is hot,” says owner Jeff Huff. (Staff photo: Bill Klotz)

The once-vacant skyway level of the Pioneer Endicott apartment building in downtown St. Paul has brightened up considerably with the arrival of two new tenants — an artisan chocolate maker and a new liquor store.

Legacy Chocolates, which once had a store on Marshall Avenue in St. Paul, has moved its production facility from Wisconsin to a skyway spot where passersby can watch the chocolate being made and walk in to purchase it.

“More than 16,000 people make their way through this skyway every day,” said Legacy Chocolates co-owner Lorraine Dixon. “We’re seeing business from people walking by, from people in the building, from big corporations in the neighborhood. Downtown is on the upswing.”

And so are retail establishments in multifamily buildings. Legacy Chocolates and the Revival Wine, Beer and Spirits stores are tenants in a historic building redeveloped into 230 luxury apartments. It’s not the only retail apartment combination in downtown St. Paul, with a Lunds grocery store anchoring the Penfield at 101 E. 10th St. and Big Rivers Pizzeria soon to occupy a space at the city-owned Lofts at Farmer’s Market, 260 E. Fifth St.

Retail spots once considered hard to fill in mixed-use residential buildings are drawing tenants. Andrea Christenson, vice president of the Minneapolis office of Cassidy Turley, said this segment of the retail market seems to be doing better after struggling for several years.

She points to her own work in filling retail in Latitude 45, a swanky apartment building under construction at 301 Washington Ave. S. in downtown Minneapolis. The 319-unit building will include a 6,120-square-foot restaurant from Ryan Burnet, who developed Bar La Grassa, the Burch Steakhouse & Pizza Bar, and the Barrio Tequila Bar.

Among her favorite examples of mixed-use apartment buildings are the Pioneer Endicott and two in Minneapolis — the Soo Line Building at 501 Marquette Ave. and the Dock Street Flats at 337 Washington Ave. N.

One of the selling points of a new or adapted apartment building is the presence of a restaurant on the premises, she said. “Residents will pay more for apartments if you have a restaurant below,” she said, adding that other types of retail help sell the building too.

This was not always the case. In the past, Christenson said, cities required street-level retail but developers created store spaces that were too narrow for restaurants in particular or for stores requiring a deeper footprint. No room existed for venting, for example, a requirement for all restaurants.

“Some buildings had a lot of empty space that was empty because it was not functional,” she said.

That has changed as developers see a new population of apartment dwellers who have disposable income for dining out and no desire to get in their cars to find a restaurant, she said. The restaurant space usually ranges in size from 4,500 to 6,000 square feet, though a larger spot will require several millions of dollars in annual sales to work, Christenson noted.

Restaurants anchor many new apartments in Uptown, the North Loop, downtown and even a handful of suburban projects. Boutiques, yoga studios and coffee shops are other desirable retailers for downtown buildings, she said.

The historic Pioneer Endicott, 141 E. Fourth St., straddles the middle of downtown St. Paul, halfway between downtown and Lowertown. The complex, which consists of two interconnected buildings, received a $45 million transformation by developer Rich Pakonen and property management executive Clint Blaiser.

For some developers, luring the right clients will be a big asset in attracting tenants to apartment and condo buildings. Blaiser credits Pakonen with thinking hard about what retail would be an attractive mix for tenants and then recruiting businesses that fit his vision.

“Rich always tries to get retail tenants that are more of an amenity to the building,” Blaiser said. “We’re going to be making our money on the apartments upstairs.”

Blaiser and Pakonen paid for the build-out of Legacy Chocolates and liquor store Revival, each of which leases around 2,000 square feet. A restaurant will soon be added to the mix, leaving the Pioneer Endicott with no retail space left to lease.

On the Pioneer Endicott’s first floor, the Minnesota Museum of American Art is raising money to expand to take up the remaining space. Museum-goers will patronize the upstairs retail and create a great buzz for the building, Blaiser added.

Pakonen’s other properties in downtown St. Paul have been condo projects, including the Rossmor and Produce Exchange, both of which have active street-level retail operations, he said. The condo arrangement extends to the retail spaces, which are owned by the businesses, Blaiser added.

Dixon, the chocolatier, moved her 12-year-old retail and production facility from Menomonie, Wisconsin, to the Pioneer Endicott earlier this year. She’s confident enough in the neighborhood’s strength to stay open on weekends, when many other skyway vendors close, and she’s feeling good about being downtown.

Jeff Huff, owner of Revival, feels the same way. Even though Lowertown has a liquor store a few blocks away, he has managed to find customers after being open only since May. “I was a real estate appraiser for 15 years and this location is a no-brainer,” he said. “Lowertown is hot.”

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