Motor City Restarts Its Engine

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December 13, 2022 | BY: xteamretail
National

For seven decades, the Motor City delivered a reciprocating engine that hummed and drove this nation’s economy from its heartland of innovators and can-doers. Then came a steep deceleration of the auto industry that began in the second half of the 20th century, which blanched the energy from this vibrant city that seemed unstoppable. Triggered by mismanagement and flawed government policy with destructive urban planning, shifting demographics, and riots, Detroit found itself on the ropes. In 2013, the city declared bankruptcy. It was the largest municipal bankruptcy in U.S. history.

It’s said that America has always embraced redemption and a good comeback story, and Detroit’s bad times may finally be in the rearview mirror. Nowhere is this most evident than in its downtown central business district. Today, walkable, clean, and perceptively safe, downtown Detroit is a far cry from the stark, empty lots and vacant buildings that peppered its corridors a few decades ago, keeping most people away.

The city is an urban development study in the power of collectivism, civic goodwill, and dedication to preservation that pulled it back from the brink. Detroit is being led once again by a new generation of innovators, visionaries, and creatives, whose ancestors initially built the city from its French eighteenth-century roots. The city is on its way up, laying a strong foundation for its spotlight on the national stage. For all the talk of divisiveness and incivility, one need only turn to Detroit to study how it righted its wrongs and bootstrapped its history to rebrand itself as a future city of industry and mobility 2.0.

A Perceptive Perspective Shift

Recently, X Team Retail Advisors, a national alliance of retail real estate advisory specialists met in Detroit to learn about the city’s plans to further develop its downtown retail district. X Team works with high-profile retail brands, real estate developers, and owners in major markets across the U.S. and Canada.

Jim Stokas and Jim Bieri principals of Stokas Bieri Real Estate, a Detroit-based retail commercial real estate brokerage firm, hosted the two-day event. They were delighted to witness the enthusiasm that they have for their hometown ignited in others. Bieri shares, “I genuinely think everyone had a great time. Stokas adds, “I overheard a discussion stating that we should hold the next meeting in Detroit, again. Several colleagues I spoke with looked at me with surprise and shared, “I love your city because it’s safe, clean, and walkable. It may be the greatest city in the country, right now.” The partners both chuckle and admit that a few decades ago these words would not have been uttered.

“First of all, we’re an overnight success that took about 15-20 years. I mean it’s been a real community effort,” Bieri concedes. “We have a great Mayor, Mike Duggan, and former Police Chief, James Craig, Detroit born and raised, who returned from a distinguished career in Los Angeles. He organized a strong community policing program that reached out to an influential group of ministers and other community leaders to create strong partnerships.” In recent years, the community-based policing model is being embraced as an effective strategy to build inclusiveness, understanding, and trust. Mike Duggan, who is often credited for overseeing the resurgence of Detroit, won a third term in office in November 2021.

Stokas adds,” When the Black Lives Matter Movement (‘BLM’) erupted in violence and property destruction in several major cities, Bedrock, a local commercial real estate developer, advised their worried national tenants that it wasn’t going to be necessary to board up their windows. This was being done in many major metropolitan areas, like Chicago, New York, and Los Angeles. Bedrock knew its community and was proven right. Peaceful protests and marches were held downtown, and that was all.”

Tapping Into A Rich Legacy

Downtown Detroit offered everything in one place, shopping, dining, tourism, and entertainment to create a synergy and energy all its own. Retail was centered around Woodward Avenue, originating at Campus Martius Square (re-established in 2004 as an active community park), near the Detroit River and spanning north to Grand Boulevard. This artery was the epicenter of the city’s retail trade and the location of its largest department stores, with smaller boutiques and specialty shops lining adjacent blocks. Department stores included Kern’s, B. Siegel Co. (a ladies’ fashion mecca), Kline’s, Crowley’s (a beloved institution that offered the less well-heeled a vast bargain basement), and the shopping crown jewel, J.L. Hudson Company (Hudson’s), which opened in 1893, and at two million square feet was considered the second largest store in the country after Macy’s Herald Square, in New York City. One only had to mention, “I’m Going To Hudson’s” to impart exclusivity and style. In the early 1950s, the store allegedly had 12,000 employees and made an average of 100,000 sales a day.

Those retail monuments may be gone but their legacy remains. Paradoxically, it was the neglect and disinvestment that petrified many of these grand buildings in amber, preserving their details. A few local property developers have devoted much of their mission to breathing new life into downtown’s vintage beauties, burnishing them for a new generation. Bedrock, downtown Detroit’s largest property owner, owns over 100 buildings across its entire portfolio, totaling more than 18 million square feet. The developer has reinvigorated retail across the downtown core. Its projects include the redevelopment of the old Hudson’s Department Store site, slated to open in 2024, and the landmark Book Tower into a mixed-use development. Book Tower will feature a 200-room hotel, office, ground-floor retail, 150 apartments, and event space.

Bedrock has curated a balanced retail tenant mix to include local businesses and national brands. There are more than 350 retailers in the Central Business District, leasing over 4 million square feet and drawing an estimated 150,000 daytime visitors.

Millennials, whose population grew by 117% since 2010, according to EMSI data, have made downtown their home, residing in roughly 10,000 residential units. An additional 8,700 apartments are being developed, continuing to draw residents, along with good-paying jobs and expanding services. It is estimated that the average income of downtown Detroit residents is expected to increase by 10% over the next five years. The economics of living, working, and shopping downtown bodes well for retailers and those businesses looking to expand to the urban core.

Homegrown merchant, Shinola, has gained national attention as a lifestyle brand that makes beautiful watches, bicycles, and luxury leather goods. Most of the workers assembling watches are done by locals that were employed in automotive manufacturing. During its start-up, the company brought in veteran watchmaking experts to train these workers as watch assemblers.

While there continues to be a fluctuation in retail businesses opening and closing since the pandemic, this is evident across the nation as operators continue to evaluate their strategies. In recent years, Madewell, Nike, H & M, Lululemon, Warby Parker, Bonobos, and Under Armour have operated downtown. While a handful of these brands may have lacked staying power, others are being introduced. National retailers Sugar Factory, McMullen, and Gucci Detroit have recently opened their doors. Some eyebrows may be raised over a global fashion brand opening in downtown Detroit, but Gucci’s heart is in exactly the right place. Their Changemaker North American Impact Fund, begun in 2019, has identified Detroit as one of its 12 North American cities that will receive community grants to foster inclusion and diversity within the fashion industry, and across communities and cities. The brand is working with local nonprofits, artists, and funding scholarships to support education initiatives.

Pop and rhythm-and-blues singer Rihanna’s wildly popular subscription lingerie brand Savage X Fenty will be debuting downtown in 2023, along with a small-format Target anchoring retail developed for the new City Club Apartments, a mixed-use community in growing Midtown. Whole Foods Market Detroit opened its doors in 2013, and Meijer Rivertown Market, about one mile east of downtown, opened in the last year to serve the increasing number of residents living in apartment communities nearby.

X Team’s Dan Clark, Principal of Sitings Realty (specializing in retail tenant representation, and retail project leasing in Vancouver, Canada), previously visited Detroit in 2015 but had no occasion to return until X Team’s recent meeting. He shares his experience, “The downtown corridor was incredibly impressive to me in comparison to my earlier visit several years ago. I am amazed at the transformation in a relatively short period. The high-quality tenants and the vibrancy of the city were evident. People were friendly, open and everyone cared about the city’s transformation, and was immensely proud of its progress, as they should be.” He continues, “I believe that the beautiful architecture and character of downtown would be attractive to national retailers if they can identify the right footprint.”

Both Bieri and Stokas agree that although progress has been made there is still work to be done. Stokas, who grew up on Detroit’s West Side, shares that there remain blighted areas throughout the city. He would like to see more retail projects slated for underserved communities to help build them up. “We realized through the development of Gateway Center at 8 Mile Road, the impact that a quality retail center has on the community in terms of jobs, the tax base, and services available to buy food, clothing, and other essential merchandise. So, there’s more progress to be made, but I am tickled, and it is always great to get objective opinions about your city from your peers around the country. In the past, I might have been embarrassed about how the city looked to out-of-town visitors, but not anymore.”

A 2.0 Model For Innovation

Civic and business leaders understand that being a hotspot for creatives and entrepreneurs is envious, but without the infrastructure and opportunities to grow, the ecosystem cannot be sustained. Luckily, the private sector has stepped in to build that capacity through several public-private partnerships. Detroit’s planned innovation district, a collaboration between the Related Companies, the University of Michigan, and Ilitch Holdings, Inc., plans to break ground in 2023. Ally Detroit Center has attracted DT Midstream, IBM, Google, Microsoft, LinkedIn, and several banking and financial institutions, bolstering downtown employment. Apple has opened its first U.S. Developers Academy in collaboration with the University of Michigan. The organization trains young people in communities of color, coding, and app development to help prepare them for skilled jobs in technology, potentially backfilling and growing the workforce. The Academy chose to open in the First National Building downtown, purchased and renovated by Bedrock Development. This historic property, completed in 1922, is the oldest structure surrounding Campus Martius with views of the Detroit River. The 25-story tower was purchased in 2011 as one of the developer’s earliest acquisitions. Significant renovation and restoration increased the building’s value per square foot tenfold, proving the worthiness of preserving the past. Bieri opened his office in First National in 1976 and has had an envious birds-eye perch witnessing downtown’s epic turnaround.

The Ford Motor Company is perhaps undertaking the most audacious project in an intriguing twist on what is old is new again. The company is restoring Michigan Central Station in Detroit’s Corktown neighborhood. They have committed to spending upwards of $1 billion to restore the 1913 building and construct a new 30-acre mobility innovation district. The train station will be the centerpiece of the campus, expected to eventually house up to 5,000 workers comprised of Ford employees and smaller businesses. Ford has partnered with Google in a public-private partnership alongside state and local leaders in the project. The train station will offer a real-world testing site called the “transportation innovation zone,” so companies can pilot new technologies like electric and autonomous vehicles. One of the first projects announced is a one-mile roadway with an embedded wireless charging system designed to charge EVs while in motion or when parked. Corktown is Detroit’s oldest surviving neighborhood and is a locus of entertainment and dining. Settled in 1834 and named for its largely County Cork, Irish immigrant settlers, Corktown has been revitalized with the development of several new communities of apartments, townhomes, and other retail and hospitality as a major redevelopment push from the Ford campus nearby.

Detroit is composing the first chapter in what is potentially the great American manufacturing revival. Let us hope so. For those residents who held in memory and steadfastly believed in this great industrial city’s spirit and promise, it may be time to rewrite the script and rebrand the town. “The history of the city of Detroit was one of meteoric rise, great growth, and prosperity in the first half of the 21st century, and beyond.”