Saks City Center lease may lead the way

Sak Fifth Avenue’s lease include the former Office Depot store and 16,000 square feet on the skyway level. (Staff photo: Bill Klotz)
Despite closing its former store on Nicollet Mall earlier this month, the Saks Fifth Avenue Off Fifth outlet will not leave downtown Minneapolis for good.
The retailer has signed a lease for 40,321 square feet at the City Center retail building along Nicollet Mall and will occupy the space in the former Office Depot store. Saks and City Center owner Shorenstein Properties jointly announced the lease Tuesday.
Saks could be the first of several major retail announcements in downtown in the coming months, said Andrea Christenson, vice president of the Minneapolis office of DTZ, formerly Cassidy Turley. At least one retailer is expected to announce shortly and others are nosing around – eager to follow the uptick in downtown residents.
“It’s a dream demographic,” Christenson said, noting most downtown residents are empty- nesters or young people with disposable income. “They have money to spend on shopping and entertainment.”
Jonathan Greller, president of outlets for the Hudson Bay Co. (Saks’ parent company), said in a prepared statement that Minneapolis “has been a strong market for us, and Minneapolis City Center provides us with a vibrant location in which to serve our exceedingly loyal customer.”
The 250,000-square-foot City Center retail area is part of the 33 South Sixth complex and sits on the block bounded by Nicollet Mall, Sixth Street and Seventh Street. The complex includes a 50-story office tower and a 583-room Marriott hotel.
Saks’s lease will include 16,000 square feet on the skyway level. The store’s entrance will be near the intersection of Sixth Street and Nicollet Mall.
Beyond economic activity, new retail brings safety as more businesses have their lights on and there are more eyes on the street. The move will also alleviate some blight at the City Center building – a prime corner that shouldn’t have been blighted in the first place, Christenson said.
“Saks Fifth Avenue Off Fifth is a tremendous addition to the retail component of Minneapolis City Center and we continue to see strong interest in the remaining ground-floor space from other national and regional stores,” Glenn Shannon, president of Shorenstein Properties, said in a prepared statement. “We believe that tenant interest will absolutely be enhanced as a result of this addition to the project.”
Saks Fifth Avenue Off Fifth’s former space, at 655 Nicollet Mall in the Gaviidae Common building, was sold for $7.5 million by the Nightingale Group in early December. Bloomington-based developer United Properties plans to transform it into an upscale Walgreens store.
The move didn’t come as a surprise to retail consultant Jim McComb, president of the McComb Group. The Gaviidae Common space was far bigger than Saks needed so it made sense for the retailer to move to a relatively comparable location, McComb said Tuesday.
“They obviously want to remain in downtown Minneapolis and capture and maintain the business they were doing in their original location,” he said.
The City Center building – originally built as a Donaldson’s department store – has always been a great retail location, he said. Office Depot’s closing had more to do with its merger with Office Max and declining sales in the office supplies market as more sales are done online.
The new Off Fifth store might look more similar to its location in the Twin Cities Premium Outlets in Eagan, McComb said. The finishes in the Gaviidae Common location were nicer because it was originally a full 84,000-square-foot Saks Fifth Avenue department store.
Minneapolis Downtown Council President Steve Cramer said he was aware Saks was looking for a new location downtown and he’s happy to see a retailer with a proven track record take up a 40,000-square-foot lease. The reaction to the outlet’s official closing this month showed that the store has a “devoted clientele,” he said.
The new store is expected to open in April 2016.
With several property owners between Fifth and Seventh streets pursuing tenants, Cramer said he’s hopeful Saks’ move will signal a trend. The retail market is evolving and he expects those properties to lease up in different ways.
“We’re out of the era that lasted for a very long time in Minneapolis of having multiple department stores downtown,” he said.
The $50 million Nicollet Mall renovation will add to the momentum, he said, as property owners position their retail and office spaces for potential tenants.
Correction: The original version of this story incorrectly reported that Saks sold the space it occupied in the Gaviidae Common building. The Nightingale Group sold the property. This story has been updated.

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