Is Detroit's turnaround turning a corner? Development spreads to new neighborhoods

Posted on November 27, 2012

Unable to find a suitable site in busy Midtown for their Two James Spirits distillery and tasting room, partners Peter Bailey and David Landrum opted for Detroit’s Corktown neighborhood, where they’ll open in early 2013.

“Midtown always presents a really enticing opportunity,” Bailey said. “It’s one of the most energetic areas, with lots of diverse foot traffic.”

But Scott Benson, who helps develop businesses with the civic group Midtown Detroit, said it has become increasingly difficult to find the right space for potential commercial tenants in Midtown, including a major national bank anxious to locate a branch in that part of town.

“We’re looking around Mack and Warren but can’t find something that meets their needs,” he said.

The development spillover from the in-demand Woodward Avenue corridor to other parts of Detroit hints that progress in the district may be a boon to other parts of the city. Those hints are fragmentary for now, but could become more significant as Midtown and downtown continue to redevelop and as rental rates rise and more vacant space gets rented.

Despite the gains, Midtown development deals are still dependent on a hodgepodge of tax credits and other government subsidies, a seeming contradiction considering the competition for retail space and high demand for living quarters there. Deals for downtown development, where living space is in high demand, also require tax credits and other government support to fly.

Avis Vidal, a professor of political science at Wayne State University, has studied development in Midtown, defined as the corridor along Woodward between downtown and New Center that includes WSU, the Detroit Medical Center and the cultural district. She says Midtown’s progress is promising but remains far from booming. “Las Vegas was a boomtown. This is not,” she said, suggesting the progress might merit the term “boomlet.”

Rental rates for Midtown residential and commercial space, while rising, remain modest by national standards. Rent for apartments in Midtown and downtown have risen from about $1.25 per square foot to around $1.50 in newly opened projects such as the Broderick Tower on Woodward along Grand Circus Park.

But developers say the rental rates would have to rise to at least $2 per square foot before they could build subsidy-free projects.

That means most of the real progress in Midtown is still ahead, though it appears to be on its way, said Jonathan Holtzman, chairman and CEO of the Village Green apartment rental company, which owns the Detroit City Apartments on Washington Boulevard downtown.

“This is well beyond, ‘Does it have legs,’ ” Holtzman said. “I think you’re talking about a fundamental shift” because the younger generation wants urban living, not suburban living, and is more willing to do without acar and walk to work.

Those lifestyle trends are driving a boom, or boomlet, in Midtown and many other urban areas.

That desire for urban living helped bring Victor Seborowski, 26, from the suburbs to the Broderick Tower, a 1928 office tower that stood empty for decades until reopening this month. He works as a power plant operator in Dearborn near the Ford River Rouge Complex. He and two roommates share a two-story 1,270-square-foot apartment on the building’s 27th floor, for which they together pay $2,025 a month.

A red spiral metal staircase — once an elevator shaft — connects the two floors. They moved in earlier this month. Their unit features magnificent views of downtown and Woodward Avenue and offers a bird’s-eye view of right field in nearby Comerica Park.

“We came here for the Comerica view,” Seborowski said, “but we fell in love with the Woodward view.”

Trouble for developers

The enthusiasm might be matched only by the difficulties developers have in bringing such projects to market.

Michael Solaka, who owns the Ye Olde Butcher Shoppe in Detroit with his younger brother, Peter Solaka, opened the grocery store in late October at 3100 Woodward Ave. after more than two years of delays and setbacks. The previous occupant of the site, another grocery business, went bust.

“We opened this store based on the long-term view,” Michael Solaka said. “We did it because, No. 1, we felt there was a need and, No. 2, the space was so incredible.”

As a result of Midtown’s appeal, the district’s existing buildings are already mostly filled.

But Midtown’s curious mix of strong demand and modest returns on developer investment means it makes more sense for some projects to go elsewhere.

Bailey said that Two James Spirits had certain needs in terms of the type of building they needed and other factors that made Corktown a better fit than crowded Midtown. The distillery will open in early 2013 at 2445 Michigan Ave. with a tasting room and a large manufacturing facility to produce vodka, gin, whiskey and other spirits, some using local ingredients, such as Michigan cherries.

“We had some pretty significant space requirements around ceiling height and square footage,” Bailey said. “This space just seemed to fit much better. Hopefully, we’ll be drawing more traffic out that way and expanding.”

In the same way, the owners of the Detroit Vegan Soul restaurant recently announced plans to open in West Village after not finding what they needed in Midtown.

Kirsten Ussery and her business partner live in the neighborhood. They’ll pay about 20% less in retail rent for their West Village space and perhaps have a bigger impact than they would have in Midtown.

“I think what it boiled down to is that we ended up coming back to our neighborhood because we thought, ‘Where can we make the biggest impact?’ ” she said.

The comeback

After decades of decline in Detroit, new retail and residential development is welcome almost anywhere in the city.

James Cadariu, a Detroit native and current Royal Oak resident, is a partner in Great Lakes Coffee Roasting’s new café at the corner of Woodward and Alexandrine in Midtown. The 2,200-square-foot shop opened July 2 next to the offices of Midtown Detroit.

The café’s specialty is artisanal pour-over coffee, a brewing method with water poured directly onto a filter of coffee suspended over a single cup. The process takes about two and a half minutes.

“It’s sort of an old-fashioned way of doing things, but it’s become fashionable again, as is often the case in the coffee world,” Cadariu said.

The café also has a liquor license and serves wine, beer and cocktails. It serves a variety of nontraditional café fare, such as vegan porridge and octopus and squid. Its spacious interior is divided between bar seating and a large sitting room complete with wood reclaimed from a razed house in Hamtramck. There is an exposed ceiling and a lot of bare brick.

“This is a place that has a good amount of density, and it’s growing,” Cadariu said. “I grew up on the east side of Detroit. I have not seen this much development and growth in my entire life. …

“This whole block was blighted, so it’s real nice to be part of something coming back.”

John Gallagher, Detroit Free Press