Des Moines Business Record
11-05-06
Downtown dance
By Sharon Baltes
sharonbaltes@bpcdm.com
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 mid1980s 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 glitteryeyed 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 noreadmission 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.
"Saturdays have really picked up from when I started," said Heitzman, who has
owned his bookstore since 1999. "There was practically zero business back then,
but now it's turning a corner."
Starlin said he would consider extending his hours into the evenings if customer
demand warranted it.
For the first time in its 21 years of existence, the Kaleidoscope shopping mall
reached full occupancy earlier this year and now has a waiting list for tenants,
according to Rachel Flint, public relations manager for Hubbell Realty Co., which
manages the property.
"We hovered around 70 to 80 percent for many years," she said.
Flint said interest peaked in the Kaleidoscope's retail spaces after Younkers
closed. "When one door closes, another one opens," she said.
Full occupancy at the Kaleidoscope doesn't mean there aren't other options for
retailers who want to be downtown. T.J. Jacobs, assistant vice president of
transaction services at Terrus Real Estate Services, said the Bank of America
Building, which his company manages, is being redesigned for street-level retail.
"We thought about doing office space on that floor or going with the retail
concept, and we thought there was definitely a demand for retail," Jacobs said.
To the west, the Davis Brown tower under construction on 10th Street will include
25,000 square feet of retail space on two levels, according to Teri Wood, a
project manager for Ladco Development Inc., one of the developers. The 13story building will also include parking and office space. Wood expects the
building to attract lifestyle and service retailers such as a book or music store, a
computer store, a dry cleaner or restaurants.
On the horizon
Olson-Douglas is optimistic that infrastructure investments from the city will help
make downtown a more attractive place for retail.
"We're making it easier for people to get into downtown with the [Martin Luther
King Jr.] Parkway extension," Olson-Douglas said. "As we extend that to the
east, it will open up more opportunities."
She added that streetscape improvements, such as those the city has completed
in the East Village, should also help boost foot traffic if those types of
improvements are extended into the downtown core.
"One of the things that a number of our neighbors have done, and what Des
Moines is doing well, is making downtown a more inviting place to walk, which
gets people on the streets in those more retail-oriented areas," Olson-Douglas
said.
The Downtown Community Alliance is hoping to increase pedestrian traffic on the
streets with new signs in plans to install soon. Matt McCoy, the DCA's vice
president, said signs will direct people to downtown's points of interest and inform
them about skywalk-level businesses. The next step he wants to take is to redo
skywalk-level signs to direct people to street-level businesses.
"We think Des Moines has a lot to offer people on foot," McCoy said. "We are
doing this because we want to improve the environment for people who live, work
and shop in Des Moines."
After living in the Civic Center Court Apartments for 11 years, Johannsen of the
Downtown Neighborhood Association said he thinks downtown is finally at the
point where retail growth is imminent. The types of new stores he would like to
see include an outdoor apparel store and specialty food markets carrying wine
and cheese, fresh fish and meats, breads and pastries. Maybe even a Vespa
dealership selling motor scooters perfectly suited for zipping around downtown.
Leach often talks with potential retailers on behalf of the DCA to try to attract new
stores downtown. He said people often ask why the city can't secure a store such
as Whole Foods Market. He said the downtown demographics aren't yet at the
point to fit the demographics of a store like Whole Foods, but "that doesn't mean
we haven't been talking with them."
"You'll know we've turned the corner in downtown retail when we see a chain,"
Leach said. "Chains are followers. In the meantime, the people who will build
downtown are owners of stores like The Stadium in the Kaleidoscope and Simply
for Giggles and others in the East Village."
Even without a coveted store like Whole Foods expected anytime soon, Leach is
confident that downtown retailing is headed in the right direction.
"When Younkers closed, the initial perception was that it was a big blow," Leach
said. "But there are a lot of retail stores that have opened since then in the
Kaleidoscope. There was a downtown before Younkers and there will be a
downtown after Younkers."