City hopes incentives will help fill vacant storefronts

City officials and the Downtown Milwaukee Business Improvement District are creating an incentive package in an attempt to attract retailers to open storefronts downtown and make the area a shopping destination.

Downtown Milwaukee has struggled for years to attract retailers. The downtown retail lineup slumped even more during and after the Great Recession as a growing number of storefronts have been vacated, especially along Wisconsin Avenue and in The Shops of Grand Avenue.

The city is providing $75,000 and the Downtown BID is providing $25,000, for a total of $100,000, for an incentive program to be used for attracting retailers to downtown. The funds will be used for “white box” grants to improve vacant retail spaces and for loans to retailers that will be forgiven over a five year period. The incentives will be targeted for street level stores along Wisconsin Avenue between North 4th Street and Milwaukee Street and streets crossing Wisconsin Avenue between Wells Street and Michigan Street.

The $100,000 incentive program is unlikely to make a big difference in the downtown retail lineup, but if it can attract a few stores the program could be expanded, officials say.

“It’s a pilot,” said Richard “Rocky” Marcoux, commissioner of the Department of City Development. “If it works, then I think we have to take a hard look at how we fund that in a bigger way.”

“It’s a very small amount of money,” said Deanna Inniss, the downtown retail recruiter for the Downtown BID. “But if that money gets us two retailers in the next six months we will be in pretty good shape. We will have credibility and can go back and ask for more (incentive funds).”

Even with an incentive package, it will not be easy to attract more retailers downtown, according to some in the retail real estate industry. Although about 78,000 people work downtown and about 15,000 people live downtown, according to the Downtown BID’s annual report, that is not enough people to attract retailers, some retail real estate industry professionals say.

“A large part of it is just a numbers game,” said Cory Sovine, a retail broker with Siegel-Gallagher. “You don’t have enough people that live and shop downtown to attract retailers. The lifeblood of retail is to sell to people who are shopping. If you don’t have the people you aren’t going to get the retail.”

Retailers have avoided downtown Milwaukee because many of the stores that have operated downtown have performed poorly, said one retail real estate professional who declined to be named in this report.

“There just aren’t any retail dollars being spent downtown,” he said. “You can’t sell downtown Milwaukee on retail sales, because it doesn’t exist.”

One problem is that there is a disconnect between the demographic of downtown employees and the products of some downtown stores, he said.

“The offerings cater to a lower demographic profile,” he said.

Inniss was hired by the BID about a year ago to work on selling downtown to store owners. So far she has attracted one store, Boutique Larrieux, an upscale plus-size women’s boutique, which opened in March at 717 N. Milwaukee St. It took nine months of prospecting to attract one retailer downtown, but Inniss said, “we thought that was pretty good. Especially with the economic climate we are in.”

The biggest obstacles to attracting retailers downtown is the lack of retail spaces that are in good condition and the lack of incentives, which the new program will address, Inniss said.

The city also needs to pressure building owners to improve the condition of their storefronts, especially properties on Wisconsin Avenue, Marcoux said.

Inniss is focusing on attracting unique, independent retailers to the downtown area, and not national chains. National chains only go to areas that are already highly successful for retailers, she said.

“The nationals don’t go in until the risk has been taken (by independent retailers),” Inniss said. “The independent retailers are the pioneers that establish an area.”

Brady Street and the Third Ward have been able to attract successful, independent retailers so there is no reason downtown cannot do the same, Marcoux said.

“The Third Ward has managed to create a destination,” said Peter Glaser, a retail real estate broker with CB Richard Ellis. “It has managed to bring in people from all over the metro area. But it has taken 10 to 15 years to develop.”

Downtown cannot rely on just downtown residents and workers to support its retailers, and needs to also attract shoppers from the suburbs, Inniss said. That is another reason why the downtown area needs to focus on attracting unique, independent retailers instead of chains because suburban shoppers are unlikely to come downtown to shop at chain stores that are already located closer to their homes, she said.

In seeking more independent retailers, city and BID officials are trying to find more retail entrepreneurs like Clai Green.

Green is the owner of Luci Boutique at 532 N. Water St. and White Star at 524 N. Water St. Four years ago he opened Fred at 522 N. Water St., which remains open under different ownership. The three stores are on one of the few successful retail blocks downtown.

Green dismisses those who say downtown Milwaukee does not have enough residents or employees to sustain a strong retail district. He has found an ample supply of customers from downtown employees and residents.

“I’m doing extremely well here,” Green said. “My business is extremely successful.”

Some retailers that have been unsuccessful downtown have not done a good enough job of promoting their stores, Green said.

In addition, some retailers that fail downtown are not offering the right product, Green said. Stores with conservative offerings will not succeed downtown, but stores with “hip and trendy” products will, he said.

Another issue is that the neighborhood and business groups in and around downtown, including the East Town Association, Westtown Association and the Downtown and Third Ward BIDs, need to work together to promote all of the retailers in the downtown area, Green said.

Wisconsin Avenue, the main street of downtown Milwaukee, is struggling mightily to attract retailers because many of the building owners have unrealistic expectations and are charging too much for rent, Green said.

The incentive program to attract more retailers downtown is a good idea, Green said. City and BID officials should encourage successful store owners to open additional stores downtown with different concepts, he said.

Meanwhile, while city and BID officials work to attract more street level stores more retailers are moving out of downtown Milwaukee’s mall, The Shops of Grand Avenue.

Retail real estate brokers say the owner of the 425,000-square-foot mall, New York-based Ashkenazy Acquisition Corp. is doing everything it can to attract tenants, but to no avail. A representative for Ashkenazy did not return a phone call seeking comment.

“They have gone above and beyond trying different approaches,” Sovine said. “There is no benefit to them to have vacant space.”

Some think The Shops of Grand Avenue will need to be dramatically transformed with a shift to first floor retail that connects strongly to the street and non-retail uses on the upper floors.

“That’s probably the best bet for its survival,” Sovine said.

“I think they have to repurpose it,” Marcoux said. “I think they have to look at a different mix there.”

City officials are in constant talks with Ashkenazy about how to improve the mall and “anything is on the table,” Marcoux said. However, no plans are imminent, he said.

Despite the bleak downtown real estate picture, it is important to remember that downtown Milwaukee is not the only area that is having problems with retail space vacancy in the wake of the Great Recession, Glaser said. The metro Milwaukee area has an 11.3 percent vacancy rate, though the downtown vacancy rate is probably higher, he said.

More than anything the downtown retail market needs the overall economy to recover, Glaser said.

“As the economy picks up there will be renewed interest in the area,” he said. “I just don’t think vacancy is a problem exclusively to downtown Milwaukee. Retail has struggled, but it’s starting to come back.”

Inniss said she is seeing signs of improvement.

“I do feel things are picking up,” she said. “If it takes one storefront at a time, I’m going to do it.”

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Andrew is the editor of BizTimes Milwaukee. He joined BizTimes in 2003, serving as managing editor and real estate reporter for 11 years. A University of Wisconsin-Madison graduate, he is a lifelong resident of the state. He lives in Muskego with his wife, Seng, their son, Zach, and their dog, Hokey. He is an avid sports fan and is a member of the Muskego Athletic Association board of directors.

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