What's Up With Uptown?

No one denies Calhoun Square’s struggles. But some Uptown folks say the bigger gloom-and-doom picture is media hype.

Aaron Rubenstein is no Babbitt. He’s the zoning chair of CARAG, the neighborhood group that includes Calhoun Square and has cast a critical eye at local development. Nevertheless, he says, “what tweaked me about the Strib story is that the day after it ran, they did a very positive story on the two hotels scheduled to open here. It’s like the Strib was schizo—one day, Uptown is headed down the toilet; the next day, it’s headed for stardom.”

The story also omitted the “why” behind many retail departures: redevelopment. For example, Tibet’s Corner closed so that clothier North Face could build a sparkling new “entertainment-retail” facility next to Urban Outfitters. Josi Wert, which was located just east of the Lagoon Theatre, closed because of MoZaic, The Ackerberg Group’s $150 million development featuring a ten-story condo tower, retail, a Graves hotel, 800 underground parking spots, a bridge over the Midtown Greenway, and a public plaza. Panera Bread was quickly replaced by Amazing Thailand, a locally owned restaurant that—unlike its cookie-cutter predecessor—is as vibrantly decorated as some of the human peacocks on the street.

The one-step-backward/two-steps-forward pattern was repeated less than a month after the story ran. The national chain American Eagle Outfitters announced it would close its doors in the former Pier 1 space after just a year. Another resounding failure? Not exactly; its replacement, American Apparel, is the buzz-worthy retailer of the moment and will open next month. And even better news is on the way: Victoria’s Secret will take over the dormant Gap space and debut a “Pink” concept targeted at college-age women, according to commercial real estate sources.

Jeff Herman of Minneapolis-based Urban Anthology, who brokered the American Apparel, North Face, and Gap deals, says solid fundamentals overcome dire circumstances. “When you look at commercial corridors, you ask, ‘What is the foundation?’ ” he observes. “The Uptown area has amazing housing stock—as upscale as it gets, yet as creative as it gets. You have mansions, and you have houses chopped up into six units with twelve people in them, full of young people on their way up. Forty percent of the [metro’s] creative services industry lives around Uptown. The lakes are the third-biggest tourist draw in the state, behind the Mall of America and, believe it or not, Cabela’s.”

When The Gap opened its first nonmall Minnesota store in Uptown in 1992, it was the American Apparel of its day. By 2007, the chain wasn’t just failing at Hennepin and Lake—it had closed 300 of the 1,600 stores it operated in 2002. Express, a women’s apparel store in Calhoun Square, is expected to leave. It also has financial troubles: Limited Brands, its owner, is struggling.

What’s helping Uptown stay on its feet, Herman says, are unique retailers who know that the area is still the best place for urban retail concepts. Uptown is now a beauty mecca, he argues: M.A.C. cosmetics, kitty-corner from Figlio, is a major success, as are many spas and high-end clothiers, such as Intoto. Chains that everyone thinks are independents—such as Paper Source at 31st and Hennepin—are thriving. When it comes to  the endless argument about chains versus independents, Herman is agnostic. He thinks what matters are exclusivity and community sensitivity, no matter where the headquarters are located. North Face and American Apparel plan their only Minnesota stores at Hennepin and Lake. While both could morph into a Gap, Uptown will reap several years of competitive advantage. And Herman adds that, unlike American Eagle or Express, the newcomers give local managers autonomy to customize and market their stores. “American Eagle did absolutely no marketing, none, to the surrounding populace,” he says.

The price of a prosperous Uptown is massive rent increases, often described as an impediment to local businesses and startups. The Great Frame Up’s Lewis, for example, saw his rent go from $3,000 a month in 1997 to $6,900 when he closed, a good chunk of the hike due to rising Minneapolis property taxes. The nut for the next newcomer will be bigger and harder to crack, but the economics still work for the right small business, says Tom Harlan, owner of Golden Leaf, Ltd. His tobacco shop has about $1 million in revenues, and just racked up its best sales since the cigar boom of the mid-’90s. That’s partly because in 2005 he moved across the street to a Hennepin storefront not controlled by Principal.