The Myth of the Instant Main Street

If you take away the personal issues, Tankenoff and others say, you are still left with a big, high-density project in a low-population area. This means that the retail, office, and residential components are highly interdependent: Retailers need the planned housing units to fill in order to have enough customers. Potential condo buyers want to see retailers, restaurants, and offices in place before they move in. Even if everything works, it is a rare retailer that can thrive exclusively on customers within walking distance.

Pat Mascia, senior vice president of Twin Cities operations for Indianapolis-based development firm Duke Realty Corporation, suggests a rule of thumb for predicting locations in which mixed-use developments will succeed: "To work well, each element has to make sense on its own. If the retail part doesn't work without the office or the residential, you get problems with mixed use."

In other words, Mascia says, the area's demographics should be such that retailers are not entirely dependent on customers who move into the development's housing and office units. That helps to explain why a project that succeeds in a first-ring suburb like St. Louis Park might be doomed in a more sparsely populated community. High-density has a better shot when medium density exists to begin with.

The Retail Piece

Developers agree that the retail element in mixed-use projects is the hardest piece to get right. When they speak of communities having visions too grandiose to make economic sense, "grandiose" usually translates as: The city, perhaps hungry for the most tax revenue it can get, is pushing for a development with more retail space than the project will support.

Though he declines to name specific developments, Winter suggests that a drive around the Twin Cities would reveal "a lot of areas with residential or office space over retail, where the retail is still vacant." The idea "sounds wonderful," he says: "a vibrant streetscape, full of pedestrians. But look at the 'for rent' signs."

Doran is especially outspoken on that point. "Right now," he says, "an untold number of projects are being proposed in the Twin Cities area with retail below and housing above—in locations where retail will not work." Most of these proposals, he says, are by people—"maybe housing or office developers"—who don't understand the retail-development business. "And nobody talks about the long-term implications when that retail fails. There will be a profound effect on the value and marketability of the housing and offices above it."

Doran himself had to accept slightly more retail space than he wanted in his Silver Lake Village development in St. Anthony on the site of the former Apache Plaza shopping mall, which was demolished in 2004. The $160 million, 65-acre mixed-use project incorporates a Main Street feature book-ended by a Wal-Mart and a Cub Foods supermarket. Silver Lake is "doing okay," Doran says, but some of the street-level Main Street shops still need to be filled. "That's an example where, to create what the community wanted, we had to build more square footage that was suited to the marketplace. So it's taking longer than we'd like to lease up."