National Retail Expansion in Upper Midwest Hits Roadblocks

In the Upper Midwest, the common progression of national retailers is to enter the Chicago market first, then go to the Twin Cities, then spread out to any one of a number of smaller markets, including Des Moines, Cedar Rapids, IA, Fargo, ND, and Rochester, MN. That’s according to retail brokers who talked Tuesday about their respective markets at the North Central States Idea Exchange, a program sponsored by the International Council of Shopping Centers in Bloomington, MN.

“When they get to Chicago, we are the next stop,” said John Johannson, a retail broker with Bloomington, MN-based Welsh Cos. Among the new retailers who’ve entered, expanded or are looking for space the Twin Cities market are Bed Bath & Beyond, Costco, JoAnn Etc, Wickes, Pep Boys, MARS Music and Von Maur department stores. “When they get to the Twin Cities, the next step is Des Moines or Fargo or other cities in the region,” said Mike Scott, a retail broker with Bloomington-based United Properties.

A common issue facing new retail development, even in smaller cities, is neighborhood opposition to big box development. Scott Olsen, a leasing representative with Cedar Rapids-based Skogman Commercial Group, said that Target has been turned down twice on the north end of Cedar Rapids, and is going before the city council again this week. Home Depot also has been turned down on one site and is on hold on with another.

A possible solution to this problem is a new shopping center in Maple Grove, MN, called Arbor Lakes, which was developed by Minnetonka, MN-based Opus Corp., Johannson said. The center combines big box retailing with a main street element, satisfying both the demands of the retail market and the city planners. “Maybe it’s the blend we need — planners like it and no city assistance is needed,” Johannson said.

Another common issue is the labor shortage — many retailers, especially small ones, are begging for workers. The Twin Cities jobless rate is under 2.5 percent, Scott said. “The biggest setback is that we can’t find people,” Olsen said. In fact, some of the vacancy problems at local malls such as Westdale Mall are expressly due to the labor shortage problem, he said.

In Fargo, the dominant demographic trend is people, especially young people, leaving the rural areas for the city. While the metro Fargo population has been growing nicely, a shrinking rural population has mostly offset that, said Brad Schlossman of Fargo-based West Acres Development. Schlossman noted his West Acres Mall is undergoing a $19 million renovation, which will include the addition of a food court.