by Kris Schisel, Senior Associate – Retail Brokerage | Welsh and Colliers International MSP
Recently, major retailers have announced their exit from downtown Minneapolis and some believe this is a signal of weakening retail viability in the downtown CBD. However, it can be argued that the reset button has just been hit and we’re on the verge of a downtown Minneapolis retail refresh. The idea that retail is dying in downtown Minneapolis is a misconception, a more forward-thinking viewpoint is that retail is reinventing itself in downtown Minneapolis. Sure, there are major retailers leaving, but we’re on the verge of a revival and with the growth in office and residential – retail has the potential to gain major momentum in the near future. Consistently, the marriage between retail, office and residential is a more accurate measure of overall CRE health for urban markets.
Foot traffic in the day and night = strong retail opportunities
What creates a healthy environment for a thriving retail industry in a downtown area? Foot traffic, and foot traffic at all times throughout the week. With the explosion of residential development and the increase in high-end condos being filled faster than they can be constructed – downtown Minneapolis is breeding a perfect environment for a booming retail scene. The residential market in Minneapolis is growing faster than anyone anticipated with numbers exceeding projections exponentially. In 2016 downtown Minneapolis population was 40,864, a 31.5 percent increase since 2006. According to the Minneapolis Downtown Council, that number will double by 2025.
Increased residential foot traffic will help to strengthen downtown populations in the evening, but the healthy office industry is filling the sidewalks from 9 – 5. Office daytime population is a strong indicator for potential retailers and restaurants and the office economy in downtown Minneapolis is flourishing. Tech, public relations and creative firms are flocking to the exposed brick and timber vibes of historic office buildings. Traditional law firms and accounting firms are refreshing their Class A spaces to attract and retain millennial talent that is now the largest generation in the workforce. These office inhabitants are the people who are thriving in a healthy economy – which means they’ve got money to spend at restaurants, local shops and at grocers, like Whole Foods Market on their way home.
The Twin Cities continues to raise its profile when it comes to tourism, and tourism means more people walking our streets. Most recently, the metro area was named as the 4th best city for an affordable getaway by Food and Wine, the 12th best place to celebrate New Year’s Eve and the 10th best city for football fans, both by WalletHub. These accolades are proof that Minneapolis continues to be a growing tourist destination. New development, top restaurants, state-of-the-art sports venues like U.S. Bank Stadium and Target Field and our active social scene continues to drive people into downtown Minneapolis only adding to the potential to strengthen and define the best-fit retail presence.
What does it all mean?
We’ve proven that we have a captive audience in downtown Minneapolis with money to spend. Office, residential and tourism in a strong economy will only continue to drive the potential for successful retail in this market. The Twin Cities metro is a wealthy, educated community, but in true Midwestern-fashion, we expect and shop for value. A high-end big-box retailer may not succeed in this market as opposed to somewhere that Midwest values aren’t so widespread. The addition of Saks Off 5th Avenue and Nordstrom Rack could prove successful for the bargain-minded crowd. We’ve got a captive audience for retail and we love a good bargain, but one thing we’ll pay more for is to support our local retailers. We’re willing to look beyond value when it comes to supporting our local and homegrown products. Downtown retail is not dead…or dying. The reboot will lead to a reenergized market, but only if it includes retail options that fit market and consumer demands. A new era of boutique, local, catered and custom retail options will emerge along with scaled down big box retailers to create a uniquely Minnesotan twist on the new version of downtown Minneapolis retail.
See the full Minneapolis – St.Paul Q4 2016 Retail Market Report