Des Moines Business Record

Des Moines Business Record

11-05-06

Downtown dance

By Sharon Baltes

With new entertainment venues, quality-of-life projects and numerous housing developments, progress in downtown Des Moines was cruising along rather nicely last year when Saks Inc. announced the closing of its downtown Younkers store.

Fourteen months after shuttering its doors, the Younkers building with its 141,000 square feet of retail space, still sits empty. The slow process of securing a developer for that building leaves many to wonder what the future holds for retailing in the central core of the city.

Developers and city leaders are banking on the notion that "retail follows rooftops," but some business owners worry that the challenges facing downtown retailers are too plentiful for the area to support significant new retail development. Yet one thing that everyone agrees on is that downtown needs more retailers to support its growing residential base and make the area a destination beyond the 8-to-5 workday.

"I think retail is a big component for the continued success of downtown," said Erin Olson-Douglas, a consultant working with the city of Des Moines on a downtown Des Moines planning project. "But whether it's going to expand on its own or whether it's going to take a number of people putting their heads together and working hard to make it happen is yet to be seen."

Housing grows

Olson-Douglas, who began her one-year project in June, describes the relationship between retailing and housing in downtown as "a dance" that Des Moines is in the middle of right now. She said there has been some growth already with new independent retailers downtown, and she expects more rounds of retail development to follow as additional housing units are completed.

"It's a bit of back and forth, and the residential market tends to lead that charge," Olson-Douglas said.

According to Tim Leach, vice president of economic development for the Downtown Community Alliance, the number of housing units downtown will exceed 5,700 when projects currently under way are completed, nearly double the number of units available prior to 2004.

B.J. Knapp is in charge of sales for condominium units in the Equitable Building, a former office building that is being rehabbed into a mixed-use building with high-end condos on the upper floors. Knapp said units should be ready for occupancy by next spring, and so far, 10 of the 54 have been sold. Four of those were in the $1 million range.

Knapp would like to see a stronger retail presence downtown to support the growing residential population, but he said his customers don't seem too concerned about current retail conditions when deciding whether to purchase a condo.

"The people buying have the same vision as anyone in the city and the developers, that as more people come down here, more will happen," Knapp said. "The people buying downtown feel strongly about it, or they wouldn't be investing."

Olson-Douglas agrees that some people will move downtown based on the notion that more retailers, restaurants and service-type businesses open in the near future, but she said other people are going to want those business here before they make the decision to move.

"I think retail is going to become a real necessity in order to continue to evolve our downtown residential population," she said.

The white elephant

Before Younkers closed 14 months ago, Greg Edwards, president and CEO of the Greater Des Moines Convention and Visitors Bureau, could brag to meeting planners during tours of Des Moines that the city still had a major downtown retail anchor. Since the store closed, Edwards said he doesn't draw much attention to the building. If he does talk about it, he focuses on possible development there in the future.

"We talk a lot about the renaissance of the downtown area and all the new housing available and the attractions we have from the Science Center [of Iowa] to the Iowa Events Center," Edwards said. "With those things come more people living downtown, and with that more retail. We approach it as the chances being very good for having more retail here in the next few years."

Olson-Douglas believes it is important that the Younkers building not sit vacant in the middle of the downtown core.

"For our downtown population of employees and residents, I think it would be a morale booster to have something go in there in a relatively short future," she said.

People who live and work downtown are still adjusting to life without Younkers. Jeff Johannsen, a downtown resident and vice president of the Downtown Neighborhood Association, said he misses the store, where he used to shop for clothing and kitchen items. David Starlin, owner of the Roc's and Etc. gift stores in the Kaleidoscope at the Hub, wants to see retail in the Younkers building as soon as possible.

"I would just like to not see it empty," Starlin said. "Full is better. More retail options would help businesses like mine."

The city of Des Moines is currently in discussions with Palatine-Ill.-based developer Joseph Freed and Associates LLC for a $40 million redevelopment of the Younkers building. Freed is proposing a mixed-use building with retail on the ground floor and skywalk levels, residential units on the upper floors and parking for residents in the basement. The plans call for retail bays ranging in size from 1,600 to 19,000 square feet, suitable for a mix of local and national tenants.

According to Matt Anderson, an economic development cooridnator for the city of Des Moines, Freed is still completing its due diligence on the building to determine the feasibility of the project. Anderson said the company indicated it would seek alternative funding sources such as Historic Preservation Tax Incentives and New Market Tax Credits to "close the financial gap" on the project.

"I wish I could say that it's a definite, but I can't," Anderson said. "I still hold out hope that it will come to fruition."

Anderson said no local developers have submitted proposals for the building, which he attributes to the high cost to redevelop it. "There aren't a lot of people in the Des Moines development community looking for a project of that scale as part of their portfolio," he said.

Changing times

Toby Joseph, president of Josephs Jewelers, worked in his family's downtown Des Moines store for 33 years. While working downtown in the 1970s, he remembers that every Josephs employee was required to work on Saturdays, the store's busiest day of the week. The store also stayed open Monday evenings, which was a big sales night. But as years passed, Joseph said the weekend and evening traffic downtown has declined significantly.

"It's still working economically for us, but business has gone off quite a bit," Joseph said. "It would be easier to maybe do it another way, but we have a commitment to downtown, so now we're trying to make it work."

John Berardi, who owns Berardi Bros. Custom Tailors with his father, Anthony, experienced a similar decrease in shoppers during his years working downtown. After nearly 55 years downtown, Berardi Bros. relocated this fall to the West Glen Town Center in West Des Moines.

"We used to have a Montgomery Ward's store, a J.C. Penney's and a Younkers downtown," Berardi said. "When Younkers, the last major retail store, closed its doors, you could see that over the past five or six years, the trend of retail in the downtown area just wasn't what it used to be."

Kari Smith, who started working at Schaffer's Bridal and Formal Shop in the mid-1980s when the store was located on Seventh Street, said the volume of traffic through Schaffer's was strong from about 1985 to 1998. Smith, who owned Schaffer's for 12 years until this fall, says many things contributed to the retail slowdown in downtown Des Moines.

"Retail downtown has changed, but retail in general has changed," she said. "There are much fewer independent retailers today than there were in the past. We used to have retail on each corner around us downtown, but when those stores closed, it meant less foot traffic through our store."

Smith moved Schaffer's from downtown to the East Village in 2004 when her building was demolished to make way for an expansion by Wells Fargo & Co. She recently sold her business to Ed Boesen of Boesen the Florist and Schaffer's relocated last week to a store at West Glen.

Lack of street life

Joseph and Berardi agree that another factor in the decline of downtown retailing was the completion of the Walnut Street Transit Mall in 1986.

"My father tells me that when the transit mall was built 20 years ago, that pretty much eliminated retail on the street level," Berardi said. "It eliminated the parking that there used to be on both sides of Walnut."

The transit mall, which runs on Walnut Street between Second Avenue and 10th Street, was intended to help spur development along Walnut Street while serving as a convenient place to catch a bus, according to Brian Litchfield, director of program development for Des Moines Area Regional Transit Authority (DART), the organization formerly known as the Des Moines Metropolitan Transit Authority.

But Joseph said the reconfiguration of the street resulting from the transit mall put many of his competitors out of business and "destroyed" foot traffic in the area, which hurt his sales. Other downtown business owners also see the transit mall as a detriment to business.

"The transit mall was well-intentioned to create more street-level retail, but it just didn't pan out," said John Heitzman, who owns The Book Store on the ground floor of the Equitable Building near Josephs. "People were hoping it would make the area more pedestrian friendly, but who wants to walk around a smelly bus?"

Other than a Walgreen's store and Burger King restaurant, there aren't many businesses on Walnut Street that attract pedestrian traffic. During much of the day, buses linger on the street waiting for passengers.

DART is attempting to address concerns about its buses' presence on Walnut through a study of transit mall alternatives. One solution, Litchfield said, would be to replace the transit mall with an off-street transit hub elsewhere downtown, which would open up the area to "some sort of revitalization effort." He expects a decision to come within a few months on whether DART will pursue development of a transit hub.

"The transit mall has done really well in serving the transit customer, but over the past couple of years, there have been some questions raised as to whether it is truly the best use of Walnut Street," Litchfield said.

Leach, the Downtown Community Alliance economic development official, is in favor of changing the transit mall to reopen that area to street traffic.

"Putting people back on the street makes sense when you're trying to do what we're doing with retail and residential development," he said.

Parking complaints

Berardi and Smith said the lack of convenient parking was one reason why their businesses left downtown. Berardi said his customers who just wanted to stop by his store to pick up a suit they'd had altered did not like the hassle of trying to find a parking place. Smith said bridal gown customers who spent two hours inside her store did not like interrupting their shopping experience to feed parking meters.

Kim Chaeryung, who owns JNK Wear and the newly opened Boss men's clothing store in the Kaleidoscope, agrees that parking is not convenient for people coming in from outside downtown.

"My customers who come down here complain that they have to pay for parking and drive around to find a place," Chaeryung said.

Joseph is concerned with how parking rate increases may affect his business and other retailers. On Jan. 1, the first of four annual parking rate increases the Des Moines City Council approved last year went into effect, raising parking garage rates from 75 cents to $1 per hour. Parking meter rates will rise during future rate changes that take effect Jan. 1 of 2007, 2008 and 2009.

Gary Fox, the city's traffic engineer, said these rate increases were necessary to "maintain the financial viability of the whole parking system" and help cover the cost of newer structures such as the parking garage at the corner of Eighth and Mulberry streets.

"We needed to play a little catch-up," Fox said. "We had gone for five years without some rates increasing."

Fox said the city made a point to hold parking rates lower in two areas of downtown, Court Avenue and the East Village, for the benefit of retailers.

"We as a staff and a council wanted to be responsive for this need for cheaper retail parking to stimulate retail in these two areas," Fox said.

Ken Stone, a retired economics professor at Iowa State University, said expensive and inconvenient parking has been a longtime complaint of downtown store owners.

"Des Moines is a pretty good example of why some retail leaves downtown," Stone said. "The infrastructure downtown just isn't as pleasant as in the suburbs because of traffic and parking."

Suburban shopping

Des Moines' share of the retail sales in Polk County has dropped over the past 30 years, according to sales tax figures from the Iowa Department of Revenue. As more shopping centers have opened in suburban areas, Des Moines' piece of the retail pie has shrunk. Stone said this shift in spending comes from people wanting to shop close to home.

"Most people live in the suburbs, so shopping in the suburbs is more convenient," Stone said. "Ankeny is growing like crazy and pulling retail out of Des Moines and the same thing is happening in Altoona and West Des Moines. It's not hard to see why Des Moines is losing tax revenues."

This fall, Berardi Bros. and Schaffer's became the latest retailers to leave downtown for the suburbs. Berardi said he has had all positive feedback from his customers, who appreciate the convenient parking, and the move has helped introduce new customers to his business.

"It's a clean slate out here," Berardi said. "It's more of a destination where people live, work and shop."

Joseph said sales at his 16-month-old store at West Glen have exceeded expectations, partly due to some of his customers taking their business from downtown to the new store.

"We've had probably about 60 percent of the business that was done downtown come out to our West Glen store," Joseph said. "Most people live out here and it's easier for them to shop here."

Other challenges

Heitzman of The Book Store and Berardi said another trend affecting downtown retail relates to employers adding more on-site services for employees, such as cafeterias, fitness centers and dry cleaning pickup. Principal Financial Group Inc. is one example of an employer that has added numerous on-site amenities for its employees.

"A lot of companies are so self-contained that their employees never leave during the day to do shopping," Heitzman said. "And if they do, it's very brief."

But one large downtown employer has made a conscious effort to reverse this trend. Wells Fargo & Co. does not have dining services at its financial division's buildings at 800 and 801 Walnut or the banking division's regional headquarters at Seventh and Walnut streets. According to Steve Carlson, a Wells Fargo Financial spokesman, the company made this decision with the idea that "our team members will patronize downtown businesses, further benefiting the community."

Another issue bothering retailers such as Joseph and Starlin, the Roc's and Etc. owner, is the no-readmission policy enforced at the Iowa Events Center.

"Their no-readmittance policy hurts," Starlin said. "We used to see lots of glittery-eyed girls come to shop during a dancers convention, and now we don't see any of them, or if we do, the moms are complaining about the costs of leaving and going back.

Holly Kjeldgaard, assistant general manager and director of marketing for the Iowa Events Center, said the one-time admission policy is standard in the entertainment business for safety reasons. "We wouldn't want anyone leaving and bringing back something that could be dangerous to our other guests," she said.

Kjeldgaard added that Veterans Memorial Auditorium already had a no-readmission policy before the other buildings in the Events Center complex were completed. She said her staff is perhaps adhering to the policy more strictly now.

Early signs of progress

Starlin and Heitzman said their businesses have already started to see more traffic on Saturdays, which they attribute to an increased residential population.