Tuesday, November 17, 2009

Does a sluggish economy encourage inferior design?

Say what you want about aesthetics; I’m not talking about exposed power lines today. The unfortunate development featured here has undoubtedly already faced the scorn of many urban advocates, but I don’t want to offer a critique as much as a narrative. I have obliquely featured the near-northside Indianapolis neighborhood, Fall Creek Place, multiple times in this blog so far, though it has never been the focal point of a post. Even in this instance, the property in question is on the periphery of this rapidly gentrifying neighborhood. Lincoln Park Place was a widely heralded new project at the intersection of 25th and Central Avenue when it was announced a few years ago, signaling that Fall Creek Place had come along enough to attract a relatively high-density condo development with first-floor retail. Witness the rendering:

The design may appear unremarkable to some, but at least the developer was maximizing potential in an area in which new development would have been unthinkable a decade ago. The fact that its location on Central Avenue puts it on the eastern edge of Fall Creek Place (most of the neighborhood stretches to the left in the photo/rendering above) made it that much more audacious. Alas, reality rears its head and fails to live up to expectations. As of the fall of 2009, this is what we see at that busy corner:

The sign announces a fall 2008 opening, but in actuality the “repurposed” Lincoln Park Shops has only been finished a few weeks. Aside from the date listed, the rest of the sign accurately captures what we see there today:

Pretty much a strip mall. My first reaction when I saw this was bewilderment and annoyance at how the community could allow this. I would hardly marvel at whether the City’s Department of Metropolitan Development would allow it, because it typically approves any project regardless of its negative impact on urban character. But wouldn’t at least someone in the area want to see something better go up at this intersection, especially considering that it’s just a few blocks from the dapper Douglas Point Lofts? For that matter, wouldn’t the developer want to maximize the property’s potential IRR through higher density as well as remain competitive to the superior retail offerings in the neighborhood?

The simple story here should surprise no one: Teagen Development, Inc. stumbled into the dreadful timing of a faltering market cycle and could not get financing for a project with the ambition (and expense) of a four-story, 26-unit condo development, after the demand for condos—and home sales overall—plunged. So he downgraded. The result, however, isn’t the garden variety, suburban strip mall, despite the abundant parking along both Central Avenue (seen above) and 25th Street (seen below).

No, what we see here would not pass muster in the suburbs, at least by today’s standards. The roof and (I’m pretty certain) the siding are both made of corrugated tin.

The fenestration on the front, particularly the recessed portion, isn’t open or contiguous enough to appeal to many retailers.

And the rear of the building doesn’t allow vehicular access, inhibiting good opportunities for the unloading of merchandise.

This is more akin to the type of strip mall one might see in a rural or unincorporated area, where both the lack of regulation and a less discriminating customer base would foster far more lenient design standards. Suburban strip malls are so abundant these days that they have adopt a fresh, reasonably tony design to attract tenants. Will the repurposed Lincoln Park Shops achieve as much? It already has secured a yoga studio—no doubt the perfect urban tenant that demands considerable GLA without a need for window frontage or merchandise.

I must now put an end to the criticism and supply some historical context that explains why this might have been a very shrewd decision on the part of the developer. Thankfully, this jerry-built storefront is not new or original construction. It’s an old building that previously hosted the Tim and Avi’s salvage store, and though I have no photos of its previous appearance, a pretty good representation exists on Google Street View. The developer reclad the structure, upgraded the piping, added the windows, and poured the asphalt lot to the east and north sides. Ultimately the changes to the existing structure were modest; it probably only required a basic renovation permit, but it certainly didn’t need to be vetted for complying with urban character—in terms of massing, the structure remains the same as before. Though it was never what he envisioned for the site, one has to respect the fact that he had carrying costs, and the longer he let the building sit unoccupied, the more it could deteriorate. Some critics may charge that he could have reinvented the project as apartments, but most condo developers have no intention of being property managers. Banks may have been just as hesitant to finance an apartment in a location still perceived as risky. The developer might also have been able to renovate the old warehouse with personal equity or a significantly lower loan-to-value ratio, since he was able to forego demolition costs, among others.

Instead of new construction, the neighborhood gets urban adaptive re-use, a compromise resulting from the relentlessly sour economic circumstances. The fact that the developer chose lightweight and relatively low-cost materials for his renovation of the old warehouse suggests that the current manifestation is not a permanent one; even the website suggests that Lincoln Park Place was “deferred due to market conditions.” My conversation with the developer was less promising: he said it will remain in its current form for at least five to ten years because he’s already secured leases with several tenants for that duration.

Were the decisions that led to the demotion of Lincoln Park Place the most prudent given the circumstances? Perhaps the carrying costs were modest, and if the developer waited until a favorable market cycle, he could have easily secured financing and struck gold. But it wouldn’t be the first development proposal to go bust at this intersection. Across the street is a much more imposing structure:

Local blogger Dig-B reported last year that this site, too, once held promise as a condo conversion but has since fallen off the map completely. The intersection may see its day in the sun in just a few years. Even if the prolonged depression has significantly curbed the public’s appetite for condos, it shows no sign of stifling the appeal of urban living; most apartment developments in downtown Indy are continuing progress, and a few new ones have begun in recent months.

Investigating the full narrative arc behind the underwhelming Lincoln Park Place has tempered my initial frustration to a mere disappointment. Sometimes a stalled development caused by a poor economy can serve as a blessing in disguise; after all, it can stymie a potentially bad development, with the passage of time allowing the site to culminate in something much better down the road. If this strip mall is the result of risk aversion, no doubt the neighborhood could have done much worse. What remains the most vexing about this output is that it suggests that, even in a location that is ostensibly growing more desirable with each passing day, a developer and bank would perceive something scaled to the needs and density expectations of the neighborhood as risky, but a suburban or exurban commercial strip remains a surefire bet. Perhaps if the economy were booming, we could witness the same sloppy results—a more laissez faire attitude to new projects because they are numerous, and none of them receives the same scrutiny they would if the pace of development were slow and steady. No doubt better things are in store for the intersection of 25th and Central, but it might require the middle-of-the-road pace of life and development that frequently characterizes Indianapolis to achieve those desired results. “The truth is somewhere in the center,” says the Midwest yet again.


Kevin said...

Well said. We are certainly navigating some murky waters at this point. The winners will be the ones who are flexible and innovative.

Curt said...

I travel past this intersection at LEAST once a week on my way to school and have had the same frustratoin as you looking at it. But after reading your investigation it makes a lot more sense. There are still opportunities in thie neighborhood though. I think its a Family Dollar (or similar type of store) is in the area that could prove to be a good space in time. Im sure residents would agree (and they wouldnt miss the cop cars I see sitting there often) as well.

thundermutt said...

Here's reality: no developer buys anything with his own cash (or worse, borrowed money) and can afford to sit on it with no return.

If the picture-perfect dense development can't pre-lease and pre-sell, it can't get financed.

So plan B would be to renovate as lightly as possible, attract tenants, earn some revenue, and effectively "bank" the property until the market offers another opportunity in 5 or 10 years...or find a buyer for a leased-up property and exit.

The alternative would probably have been a less-attractive form of land-banking: self-storage, or a centralized service-company warehouse-dispatch operation (plumbing & heating type).

AmericanDirt said...

Thanks for the comments everyone--I'm aware that, even for a seemingly modest property such as this, carrying costs can be punishing. The fact that the structure already existed at this site mitigates its lack of appeal. The market will probably offer another opportunity in 5 to 10 years, if not sooner--and my guess is the owners of structures with more urban configurations (such as 25 and Delaware) will be able to command higher rents.