The Downtown Minneapolis Vibrancy Conundrum
Downtown Minneapolis David Bowman

The Downtown Minneapolis Vibrancy Conundrum

Downtown Minneapolis achieved its long-standing goal of 50,000 residents, but downtown's problems remain the same.

Throughout the late 20th century, after decades of white flight from the city, downtown Minneapolis struggled at the end of the business day. Stores closed at 6 p.m. for lack of business, and restaurants that were packed at lunch could not turn tables even once at night. Streets and skyways were frequently empty of pedestrians. As a result, downtown felt ghostly, which made it a popular venue for opportunistic crime.

The cry went out, “How can we fix downtown?”

The answer from boosters and the mayor’s office was clear: The country’s most successful downtowns had people living there. Other than tourism, which is difficult to sustain in a place with a six-month winter, housing seemed to be the ingredient that kept downtowns vibrant. A goal was offered that would do the trick: 50,000 residents, a doubling of the downtown population from the year 2000.

“The goal was to be the first city to recapture the urban population,” says RT Rybak, mayor from 2002 to 2014. Along with his predecessor, Sharon Sayles Belton, the duo helmed nearly two decades of advocacy for downtown housing.

“The doughnut hole was depressed,” Rybak says, “and it has filled back in.”

At the Minneapolis Downtown Council’s annual meeting in January, the council revealed that downtown now has more than 51,000 residents, in neighborhoods stretching from the North Loop to Elliot Park.

Downtown East is another neighborhood with lots of new housing but little streetlife.

The North Loop is an exception to the vibrancy conundrum.

“It feels totally different,” says former developer and restaurant owner Ken Sherman, who lives downtown. “It’s become a big city. Ten years ago when I walked my dog there were a few dog walkers, but now there’s people everywhere.”

“In the early 2000s, even with [tax increment financing] subsidies, we couldn’t get a grocery store downtown,” says Downtown Council president Steve Cramer. “Now we have four.”

Mission accomplished? Apparently not.

“Downtown is dead too much of the time,” Sherman says. “Especially in winter. There is a malaise about downtown. The city has failed miserably to make new residents feel welcome and doesn’t really care.”

Despite a wholesale renewal of parts of the core—the births of the North Loop, Mill District, and Downtown East, plus infill housing near Loring Park—downtown boosters and detractors alike cite the same three problems in the downtown core, lower Northeast, and Elliot Park: struggling retail, a lack of street vibrancy, and a sense that downtown is still not safe.

So what has the residential revolution wrought, and why has it not proven the solution to downtown’s most vexing problems?

The Downtown Council’s map of downtown neighborhoods shows how most residential zones are scattered along the edges of downtown.

Read more from this issue

The Band Box Diner is an aging relic of the raffish and eccentric Elliot Park neighborhood, thought to be the next downtown zone to pop.

Downtown 2020

Even though Minneapolis was, like every American city, downtown-centric until the 1950s, most everyone around today has little memory of the era when downtown was the place to be. For most Twin Citians, Minneapolis is the biggest place they’ve ever lived, and a suburbanized, car-centric lifestyle is all they’ve known.

“This is not an urban culture,” says Rybak, who now leads the Minneapolis Foundation. “Most people are one to two degrees of separation from a small town.”

Timeline | Noteworthy Downtown Residential Milestones

1980
Loring Way Loring Park 186 units
1984
Centre Village Downtown Core 235
1985
110 Grant Loring Park 310
1998
Riverstation North Loop 360
1998
North Star Lofts Mill District 36
2005
The Falls Pinnacle Lower NE 252
2005
Eitel Apartments Loring Park 213
2007
The Carlyle Downtown Core 255
2014
Nic on Fifth Downtown Core 253

It is a two-mile walk from the North Loop at one end of downtown to Elliot Park at the other. Downtown Minneapolis encompasses a lot of land, a lot of square blocks. And the residential development in recent years has mostly taken place around its edges, in clusters of neighborhoods mostly disconnected from one another. The parts of downtown with the most potential for growth include three once-foreboding areas:
• Elliot Park (8,463 residents) is a transitional neighborhood on downtown’s southeast corner (bounded by the freeways on the south and U.S. Bank Stadium on the north) that contains most of downtown’s residential poverty. It’s viewed as the neighborhood with the most potential for development. “Elliot Park has seen 30 percent residential growth, but coffee shops and restaurants have failed,” says Dan Collison, director of partnerships for the Minneapolis Downtown Council and executive director of the East Downtown Business Partnership. “There’s a lot of poverty in the neighborhood; 1,500 [more] units of housing are being built, but it’s two years until residents move in.”

“Elliot Park remains to develop,” says Mary Bujold, president of Maxfield Research, which tracks the Twin Cities housing market. “It’s a complicated neighborhood with a different street grid and geography that makes it difficult to connect up.”
• Downtown East (4,021 residents) is a work in progress. Anchored by U.S. Bank Stadium and powered by Wells Fargo’s twin office towers and a bunch of new hotels, it nonetheless feels deserted outside of event/business hours. “We’ve got a lot of infill to go and a lot more office density needed before Downtown East feels like a vibrant neighborhood,” Collison says.
• Downtown Core (6,462 residents): The central business district of downtown is home to a growing number of office building conversions and high-rises clustered around and off Nicollet Mall. Proximity to downtown’s LRT corridor was the catalyst for most of this development. Many of these buildings lack ground-floor retail activity and so appear vacant, though most are fully occupied, Bujold says.

The North Loop’s Recipe for Success

There’s universal acclaim for Minneapolis’s North Loop as a template for the optimal downtown neighborhood. The North Loop works because it mixes all uses so seamlessly, suggests mayor Jacob Frey. How did it come together? It was hardly planned.

“It happened on its own,” North Loop Neighborhood Association president Tim Bildsoe says. But it didn’t happen overnight.

“North Loop has the full live-work-play dynamic,” says developer Chris Sherman of Sherman Associates, but he notes that it took 20 years and there was a lower cost of development because of tax credits for historic renovation. And there was also another trifecta at work. “The North Loop is about the intersection of investment, and wealth, and entrepreneurs like MartinPatrick3,” the men’s apparel and home store, says the Downtown Council’s Dan Collison.

“It feels like a neighborhood,” explains Jennifer Gordon, president of multifamily housing for the Excelsior Group. “Heights, character of architecture, a diversity of retail and restaurants. It’s hard to create that by design in a downtown.”

The North Loop is outside the Downtown Improvement District and doesn’t receive a lot of city help, so the community’s businesses work together to maintain its edge. “We pick up trash. We purchase pedestrian crossing signs. We’re building a pocket park and monument near the I-394 ramp,” Bildsoe says. “We fight to keep businesses and retain them. The secret sauce is neighborhood involvement.”

No Condo, No Problem

The vast majority of existing and under-development housing in downtown is rental apartments. Condo development has been almost nil for a variety of reasons.

“We can finance rental much easier than [condos],” says Chris Sherman, senior vice president for developer Sherman Associates. “You need half of your units pre-sold to get [condo] financing, and labor shortages are adding 50 percent to build times. Waiting 30 months to move in from making a deposit is hard to get people to do.”

Most developers (Sherman is an exception) quickly off-load their apartment projects after construction. “The pattern I’ve noticed is they find an equity partner and sell to a REIT,” says city councilmember Lisa Goodman, who represents part of downtown. “It’s easier than building and selling condos.”

Condo construction all but stopped in the Twin Cities several decades ago as liability obligations increased for builders. The state eventually provided some relief, but developers say it’s been inadequate to justify the risk, when they can sell an apartment building before it’s even occupied. “The city and state still need to provide more protection to developers,” says Chris Sherman. “Opportunistic lawyers are regularly in touch with homeowners associations [to pitch lawsuits].”

Sherman says if Minneapolis wants to stimulate the owner-occupied market, it could consider offering bridge financing so developers could start construction quicker.

Despite a Trader Joe’s, new offices and housing, and an absence of skyways, Downtown East only feels lively when there are events at U.S. Bank Stadium. The theory is more residents and workers are still needed.

Who Lives Downtown?

The image of a young, freewheeling professional may be off the mark. “The average renter is 40-ish; very few have kids,” says Jennifer Gordon, president of multifamily housing for the Excelsior Group, which develops and manages residential projects. “That might be a reflection on costs and unit sizes, or [a lack of] schools.”

Rents are high because new housing is expensive to build and taxes are high downtown. “Real estate taxes in downtown Minneapolis are up 60 percent in the last six years,” notes Chris Sherman.

The city is requiring an affordable housing component (known as inclusionary zoning) in all new developments, but it’s not clear that is going to move the needle due to simple economics. “We [expect to] see a lot of projects not moving forward due to inclusionary zoning,” Sherman says. “[Equity buyers are] less interested in mixed income buildings.”

Who can’t afford to live downtown? Most downtown workers, for one. “The downtown workforce earns 60 to 80 percent of area median income,” says Bujold, “so they can’t really afford to live downtown.”

To diversify downtown housing costs, older buildings have to come in the mix. “The challenge on rents is creating affordable workforce housing. We need conversions [of older buildings],” says Chris Sherman. “Too much downtown housing is new and it’s very hard to build new, affordable housing without subsidy.”

Another audience priced out of downtown is seniors on fixed incomes who could benefit from the all-weather access to skyways. Rybak would like to see older class B and C office buildings converted, but there is little market incentive right now.

“The city made a very intentional effort to include affordable housing downtown,” Goodman says, “but it has been very difficult.”

The implication is developers aren’t interested. That’s because “no matter how you break it down, you have to subsidize,” says Mayor Jacob Frey. “Minneapolis is investing more per capita [in affordable housing] than any city in America, but we need partners.”

One thing that would lower rents is oversupply/overbuilding of apartments. It’s been forecast for years. It hasn’t arrived. “We see softness every winter and it evaporates when the weather improves,” Gordon says. “We continue to see good demand downtown.”

Root District

There’s a little-known downtown neighborhood that may be getting ready to pop. It’s called the Root District, a new name to describe the unsightly, windswept expanse that contains the Minneapolis Farmer’s Market.

In a few years, the neighborhood will be home to a Green Line LRT stop on the Southwest extension. At that point it’s expected to draw interest from developers. The city owns 30 percent of the land in the low-rise neighborhood, which contains mostly commercial and light industrial buildings, plus newcomers Hennepin Made lighting company and its sister business Parallel Café. The Root is zoned for new buildings of 10 stories or higher under the city’s 2040 plan.

Bildsoe, whose neighborhood is across Hwy 55 from the Root, suggests stakeholders learn from the North Loop’s successes. “You can be deliberative or let developers make all the decisions,” he says. “That’s what’s starting now. The Root District is like Downtown East a decade ago. Underutilized. Affordable.” He suggests a development moratorium until there’s a detailed plan.

The Retail Rut

The American cities with thriving downtown retail scenes can probably be counted on one or two hands. Minneapolis isn’t one of them. The city has succeeded in certain respects; as Cramer notes, there are now four grocery stores serving 51,000 residents, where there once were none.

“But if you live at Skyscape [Elliot Park], you don’t have a coffee shop close to you,” Goodman says. “Portland Avenue has thousands of units and no retail.”

“I live near Loring Park,” Bujold says. “I have to go to malls since Macy’s closed.” Nicollet Mall and Downtown East have ever more vacancies as restaurants close and apartment buildings sport empty ground floors. “There has been a great displacement of small business,” Goodman says.

“It’s dead Monday to Wednesday on Hennepin,” says Ken Sherman. “The theory is a lot of these new residents are house-poor and have no money for theater and sports.”

But the most popular theory is that most downtown landlords don’t want the kind of small retail tenants who thrive in the North Loop.

Downtown zoning code requires commercial space on the first floor of large buildings. But the bulk of rentable space is in large-square-footage floor plates that are unappealing to small, independent business.

“I’ve been making the argument for years: Break up the space,” Frey says. “It helps on several fronts and adds a dynamic to the street that is unparalleled.”

But there’s nothing to motivate landlords who often are content to tolerate a long-term vacancy. “They want no-risk national tenants they are familiar with, and they don’t seem to value occupancy,” Goodman says. “They would rather have that space vacant than lower the price and divide the space.”

Her solution: “Lower rents. Shrink the spaces 20,000 square feet. But the landlords don’t want to be bothered.”

One option is to require less retail and allow that space to be made over to tenant amenities. “We need to be more selective where we require [ground-floor] retail,” says Chris Sherman. “I’d like to see it on major corridors but not secondary streets.”

San Franciscans voted in March to impose a “blight” tax on landlords who leave spaces unrented for more than six months. “You’re going to need that,” says attorney Joe Tamburino, who lives downtown and until recently chaired the Downtown Minneapolis Neighborhood Association. “That will force rents down.”

Not all landlords and building managers are closed to solutions. “I’d support efforts to be more creative about the ground floor,” Gordon says. “It hurts vibrancy when it’s vacant.”

Of particular focus is Nicollet Mall, which has lost a number of restaurant tenants and struggles with vibrancy due to vacant spaces and the still-shuttered Dayton’s building. “There was not a single string of Christmas lights on Nicollet Mall this year,” Rybak says. He believes the core’s vibrancy rides on the Dayton’s project: “It is critical to downtown’s success.”

As for restaurants, there is also a variety of perspectives. “I feel like the restaurant closings reflect the challenging nature of that business more than anything,” says Gordon, who cites rising wages and other industry factors.

Ken Sherman, who owns Seven Steakhouse on Hennepin, is rankled that taxpayer-financed arenas now have such compelling food options that event attendees don’t feel the need to grab dinner before or after. “Sports teams receive subsidies, and they have so many food venues that they capture every dollar of discretionary spending,” he notes.

Downtown East, which lost four restaurants around the beginning of the year, isn’t built up enough to sustain what opened to serve the Super Bowl and Final Four. “Those events simply were not enough to seed businesses,” Collison says.

Taxes are another problem. “The city has to stop increasing property taxes,” says Tim Bildsoe, president of the North Loop Neighborhood Association.

And it’s not only developers saying that. “The city is seeing huge growth in the tax base,” Rybak says. “It should look at tax changes in return for capping storefront rents.”

City officials seem more inclined to make requirements of developers. “I’ve never had a developer say ‘lower taxes or fees so I can lower rents,’” Goodman says.

Downtown East is home to four new hotels including the Canopy (pictured), but until the travel industry rebounds, they will not be the wind in the neighborhood’s sails.

Permanent Safety Concerns

Downtown crime stats are a moving target. Policing has been relaxed in recent years because many of the so-called quality-of-life crimes are not technically crimes. Being drunk, abusive, or aggressive to people used to generate a police response or even an arrest. But perpetrators would be released back onto the streets the next day. Now, other than for violent crimes, the police keep hands off.

Downtown does attract the occasional high-profile violent crime in areas the public frequents, and those crimes register with the public. “In Chicago, the killings are in the neighborhoods,” says Ken Sherman. “In Minneapolis they are downtown. … We’ve added 50,000 people and not a single police officer. If we added all those people, wouldn’t we add garbage collectors, bike lanes, inspectors?”

Joe Tamburino would like a downtown safety zone established with tighter enforcement. He suggests cameras with online feeds so people can see what’s happening. “Our council member believes there is no crime problem, just discomfort with people of color.”

Former mayor Rybak does not entirely accept the presumption that crime and panhandling are merely a problem of perception. “Overincarceration and criminalization of people of color is a complicated issue,” Rybak says, “but safety is very relevant and you have to stay on it. There are livability issues related to panhandling. If the community continues to support panhandlers with their money, it will continue.”

When people don’t come downtown, and downtown residents stay indoors, downtown feels empty. This is common on weeknights and evenings in the Warehouse District, Downtown Core, and Downtown East. Some are unsure the issue is solvable.

Caption for photo

The city is cold six months of the year and the skyways are an inevitable respite. “Believe it or not, the core is mostly fully leased,” Bujold says. “The lack of street vitality is due to the skyways and winter.”

What about the North Loop and Lower Northeast, both of which do have street vibrancy? They have one thing in common—no skyways. “Lack of skyways is a big part of North Loop’s success,” cracks Bildsoe.

This is where activating the first level of businesses and getting them leased is key. “Occupied first floors are activity and eyes on the street,” Goodman says.

What Will It Take?

Twenty years into looking for residents, downtown’s stakeholders have learned some lessons and have some suggestions.
• More coordinated efforts on vibrancy: “We need some quick fixes,” Rybak says. “There’s not enough activation. It’s way below the level of what this city should be doing. The individual entities marketing downtown spaces are in ineffective silos. We need a come-to-Jesus between the Chamber, DID [Downtown Improvement District], Downtown Council, and the city.”
• Don’t just focus on residents: “Downtown’s most important constituency remains its 210,000 workers. How do you capture them?” asks Rybak. “Chicago has this happy hour culture [where people stay downtown after work] but it’s because the commute is so bad.”
• Put everything everywhere: The North Loop works because it mixes all uses so seamlessly. “We want a diversity of use in all parts of downtown,” Frey says. “All of it together.”
• 50,000 is not enough: More housing at the middle market could be added by designating mid-century buildings as historic. “The North Loop had a lot of conversions,” says Chris Sherman. “We need to think about designating buildings from the 1950s and 1960s historic [for tax credits to facilitate conversion] to workforce housing.”

Goodman says a better goal might be 75,000 or even 100,000 residents. “I just don’t think 50,000 is enough people.”

Closing In On 10

Downtown St. Paul is gaining density, but needs more to be sustainable.

Weekends were slow in 2015 when Sue Zumberge opened Subtext Books in a stately red sandstone building on West Fifth Street in downtown St. Paul.

“There was a Sunday when I walked out, and I’m not kidding, there were real tumbleweeds blowing down the empty streets of downtown,” the bookseller recalled. “But boy, that’s not the deal anymore. Now weekends are as big as our weekdays. And a lot of the people who come here live downtown.”

Like other cities, St. Paul has experienced a downtown residential revival, as millennials and retirees have sought out the convenience and charm of dense urban living. Brick warehouses in Lowertown have been converted to upscale lofts. Office buildings in the downtown core have been renovated into apartments, and a burst of mixed-use construction has risen from parking lots near Xcel Energy Center.

The number of downtown residents doubled from 4,900 in 2010 to 9,845 in 2019, according to Maxfield Research and the Greater St. Paul Building Owners and Managers Association. In the same period, apartments jumped 70 percent, from about 3,600 units to 6,200.

The new renters brought life to the city’s sleepy streets on nights and weekends, especially in Lowertown. Even so, the small number of people living downtown can’t support a robust retail scene, and restaurants rely heavily on events to draw customers.

“Go to a Saints game this summer. You’ll be shocked how vibrant that part of St. Paul is,” says Exeter Group principal Jim Stolpestad. “But if the Saints aren’t playing? In the dead of winter? There just aren’t enough people.”

According to Maxfield, downtown in 2000 was home to about 3,800 people living in a mix of senior and affordable housing, condos, and artist lofts. As employers left for the suburbs, St. Paul leaders encouraged even more residential development.

“We couldn’t simply promote retail, because retail follows people,” says Cecile Bedor, Saint Paul’s Director of Planning and Economic Development from 2006–2014 under Mayor Chris Coleman. “We had to get people downtown.”

In the wake of the 2008 recession, the city took the unusual role of developing two private projects that had stalled. The 58-unit Lofts at Farmers Market opened in 2012, followed by the Penfield in 2014, with 254 upscale units plus a Lunds & Byerlys grocery store. The city later sold both to out-of-state investors.

“The Penfield was really important to us to prove to lending institutions and developers that St. Paul is a good investment,” Bedor says. “And that’s exactly what happened.”

More apartments followed as the economy improved. Stolpestad’s Exeter Group converted the former U.S. Post Office on Kellogg Avenue into Custom House, with 202 luxury units boasting river views and a rooftop pool. It opened in 2016.

The next year, Sibley Square at Mears Park Lowertown converted to market-rate apartments from offices. In 2018, the former Pioneer Press building at 345 Cedar became 144 affordable units. Other Lowertown projects are under construction, including 93 units in The Donegan, which will open in September. “I’m building off the momentum a lot of other people started,” says developer Jim LaValle.

The growth has helped restaurants and the handful of shops around downtown. Alicia Hinze opened the Buttered Tin in 2013 and it is crowded at breakfast and lunch with visitors and downtown regulars. “I opened here because I lived in the neighborhood and I wanted a place to go to. I wanted to be that neighborhood gem.”

But locals alone can’t sustain a vibrant restaurant scene.

“The new buildings add people, but it’s not such density that you really feel it,” says Tim Niver, owner of Saint Dinette. “It’s the events in Lowertown that bring people in.”

In summer, Saint Dinette and other restaurants ringing Mears Park get the crowds from the Saint Paul Farmers’ Market, Saints games, the Art Crawl, Twin Cities Jazz Festival, and other music events.

“But it’s like Don Henley’s song The Boys of Summer,” says Steve Lott, owner of Big River Pizza. “Once summer is gone, everybody goes.”

The western edge of downtown gets year-round visitors from Xcel Energy Center and the Ordway Center for the Performing Arts. The mini-entertainment district also now has more residents. The 191-unit Oxbo and a new hotel opened in 2017 on the site of the old Seven Corners Hardware. Last year, Minneapolis-based developer Schafer Richardson opened the 175-unit Irvine Exchange Apartments a hundred yards downhill on what had been a city parking lot. “Leasing has been very strong,” says Katie Anthony, senior development manager with Schafer Richardson. People want to live near the river and the dozen restaurants that pack a two-block stretch of West Seventh.

“The nightlife is more vibrant than it was five years ago,” says Anthony. It will get even busier next year when Bloomington-based Kaeding Development Group finishes a Courtyard by Marriott hotel and a 144-unit apartment complex on a long-vacant parking lot across from Xcel.

And yet, one thing that the residential development has not accomplished is to boost the market for office space. When government and owner-occupied buildings are taken out of the mix, downtown St. Paul’s commercial vacancy rate is 21 percent, its highest in the past decade and the highest in the metro.

“[Downtown] St. Paul needs to add another 5,000 to 10,000 people,” explains Joe Spartz, president of Greater St. Paul Building Owners and Managers Association. “Having workers local and dense becomes attractive for employers. But we’re not there yet.” —Maja Beckstrom

Adam Platt is TCB’s executive editor.