St. Paul business advocates: We need housing at Sears site more than business – St. Paul Pioneer Press

The shuttered Sears department store on Rice Street north of downtown St. Paul, photographed on Feb. 19, 2020, is next to the Minnesota State Capitol complex. A coalition of economic development organizations has met monthly to discuss key opportunities for the property. (Scott Takushi / Pioneer Press)

The future of the shuttered Sears department store on Rice Street north of downtown St. Paul remains uncertain.

Business advocates from the St. Paul Downtown Alliance generally feel that while the 17-acre Sears site has its merits, it isnt the right fit for business.

We should see a residential development there, said Joe Spencer, president of the Downtown Alliance. A lot of the people at the Capitol want more retail amenities, but you need the residential base to support the retail amenities.

But doesnt St. Paul need more jobs to expand its tax base?

If were going to concentrate jobs, Spencer said, lets put them downtown.

That sentiment, echoed to varying degrees by members of the 18-month-old East Team business coalition, could put some of the most visible economic-development gurus in the city on a collision course with an unlikely competitor former St. Paul Mayor Randy Kelly. Kelly knocked on doors at the state Capitol to pitch an alternative proposal during Sears final days.

Kelly, now a business consultant with St. Paul-based Synergetic Endeavors working closely with Minneapolis-based Kraus-Anderson Construction, has spoken to Minnesota Department of Administration officials about converting the Sears site into a mixed-use office, retail and residential destination.

At least for now, however, the state is more focused on the locations plentiful parking stalls. The state already owns vacant property it could develop at Rice Street and University Avenue, including the empty Ford Motor Co. building, which dates to 1913.

The Department of Administrations more immediate interest is that the state leases approximately 500 parking spaces in the sites surface lot, said Curt Yoakum, legislative and communications director for the department, which oversees state government property. About two years ago, Randy Kelly and Kraus-Anderson did share early development concepts for the site. Since then, we have not received any further details or proposals about what the owner, Seritage, plans for that site.

Given changing demands for office space, not even the state quite knows what its needs are.

In his capital budget, Gov. Tim Walz recommended an 18-month, $1.5 million real estate strategic plan, which would guide the department as it locates, builds or leases new state facilities.

The last 20-year plan was published in 1993 and became obsolete as of 2013, according to the governors office.

Neither Kelly and nor officials with Kraus-Anderson returned calls for comment. But they arent the only groups pitching concept plans.

Planning for the 60-block area around the state Capitol falls in large part to the Capitol Area Architectural and Planning Board, which maintains certain zoning, planning, design and development controls.

Paul Mandell, the 12-member boards executive secretary, said Seritage Growth Properties, the Sears sites property owner, presents mixed-use concept plans to his board annually but never leaves anything concrete for the board to review.

Kraus-Anderson has been exploring a relationship with Seritage, Mandell said. I dont know that its official at this point, or that theyve signed any papers. Its hypothetical. At this point, we dont have any designs in hand.

Mandell said multiple studies and concept plans in past years have called for a restored street grid hosting multiple uses, including five- to seven-story residential, mixed-income buildings, with restaurants and retail mixed in.

He assumes privately owned office buildings might lease a few floors to state government, though Mandell said state ownership was not in his boards vision.

Mandell, who said he sees the Sears site as an extension of downtown, said hes eager to break away from the binary bind of buildings that are only occupied 9 to 5, or only in use from 5 to 9. A broader mix of uses would inject more life into the location.

We continue to be looking at Sears redevelopment, as we have for the past decade, as mixed-use not strictly housing, not solely one purpose, Mandell said.

B Kyle, president of the St. Paul Area Chamber of Commerce, said she, too, envisions a mixed-use site, heavy on residences, with private-sector tenancies both office and retail that might serve housing, as well as the Capitol operations and employees in the nearby area.

Kyle acknowledged, however, that the private sector may come to the table with a different vision.

When Seritage/Kraus-Anderson are ready to share their plans publicly, we very much look forward to advancing their development for maximum positive community impact, she said. Big things are brewing in St. Paul, and we very much welcome a project on this site, as well.

Officials with Greater MSP and the St. Paul Port Authority two other St. Paul-based economic-development groups active in the East Team said their agencies are not generally focused on housing projects and have not been heavily involved in the Sears site.

Spencer said office jobs at the Sears site would do little to support new retailers. If that were a successful strategy in the area, it would have worked by now.

Having a mix is fine, Spencer said. But if the state were to be willing to pay lease rates, they should do that downtown. Thats my opinion. Right now, around the Capitol area, you have a lot of jobs. By adding more jobs, basically doubling down on the same mix of uses you already have, youre not going to get any different result than they currently have.

Spencer highlighted a 46-page report from the Brookings Institution, which recently charted the degree to which job growth in America has become concentrated in areas that are already robust with jobs.

In other words, businesses are increasingly clustering, which is good news for New York, Chicago, San Francisco and Seattle but a tougher hurdle for cities with a smaller retail, financial and innovation footprint, such as St. Paul.

The Where Jobs are Concentrating report, which echoed similar findings from Smart Growth America, found more job growth in highly urban counties than in less-dense suburban ones, and that growing numbers of business leaders are starting, expanding, or moving their firms to downtown locations in order to attract and retain educated workers, to be closer to their customers, and to collaborate with other firms and institutions.

Sears opened at the Rice Street location in the summer of 1963, riding a wave of national enthusiasm for department stores that brought large discount appliances into the homes of middle-class workers alongside clothes, tools and everyday goods.

The Sears model, ill-suited for the internet age, may have officially run its course when the national retailer declared bankruptcy in October 2018.

The Rice Street complex closed in January 2019.

Between them, Sears and Kmart have closed more than 3,500 stores nationally in the past 15 years, according to USA Today.

The Rice Street site spans 187,000 square feet on 17 acres of land, and when the location shut down, so did the department store era in and around downtown St. Paul. A Macys department store formerly Daytons closed downtown in 2013.

As far back as 2012, officials with Sears Holdings Corp. had seen the writing on the wall and courted the possibility of restructuring the strip mall-like layout and its parking spaces for a mixed-use retail, office and residential makeover.

Sears Holdings identified 10 locations across the country for potential redevelopment, including the Rice Street location.

Concept plans shared with the city at the time called for more than 100 new apartments, 18 townhomes, an office building, a parking ramp and more than 100,000 square feet of new retail buildings, in addition to updates to the Sears store itself.

Proximity to the Metro Transit Green Lines Capitol/Rice Street light-rail station and the Minnesota state Capitol complex offered a selling point.

With no visible movement on those plans, Sears later transferred ownership of the property to Seritage, a publicly traded real estate investment trust that leases stores back to Sears.

Seritage lists the complex including a Sears auto center and the surrounding parking on its website for lease.

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St. Paul business advocates: We need housing at Sears site more than business - St. Paul Pioneer Press