Detroit offers St. Paul a downtown turnaround blueprint
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Downtown St. Paul's real estate market needs help. Photo: Michael Siluk/UCG/Universal Images Group via Getty Images
As downtown St. Paul's real estate scene grows bleaker by the week, Detroit's 15-year renaissance offers one example for how to end such a doom loop.
Why it matters: The recent loss of 300-employee engineering firm TKDA, Dark Horse Bar & Eatery and, soon, downtown's only grocery store underscore a major problem, decades in the making, that can't be fixed easily or quickly.
- Bringing government workers back to the office more often could help. So could office-to-apartment conversions.
- But neither would move the needle in a major way, at least not without the massive subsidies required for apartment conversions.
The intrigue: St. Paul developer Ari Parritz raised an idea in an interview with Axios, saying that the city is ripe for a billionaire large business owner to relocate employees to downtown and buy large chunks of real estate on the cheap.
- This is what Rocket Mortgage founder Dan Gilbert did in downtown Detroit, starting in 2010 when he moved thousands of employees to the struggling city.
- The city's resurgence is on display today as billions of dollars in development is under construction, headlined by a $1.4 billion, 681-foot mixed-use tower. Downtown's even got a Gucci store.
Between the lines: For years, there's been hope that a big company would relocate its headquarters to St. Paul, but that never happened.
- The most recent opportunity was the 3M spinoff Solventum, but the new Fortune 500 company chose Eagan for its 1,000+ employee headquarters.
- Parritz's idea would be a bit different because it would be a company relocation and a long-term real estate play.
Reality check: Downtown St. Paul is not nearly in as dire a position as Detroit was during the Great Recession, due mainly to an otherwise healthy regional economy.
Yes, but: There's a stark reality for St. Paul: Many of the buildings are worth nothing, or next-to-nothing.
- Parritz says city leaders should be marketing this possibility to a Gilbert type, with the selling point being that they could buy so much real estate that they create their own ecosystem.
How it worked: Gilbert's companies, as detailed in a 2024 Wall Street Journal story, bought more than 130 properties in downtown Detroit, using some for his new Rocket headquarters and converting others to apartments, hotels and retail.
- He hired guards and cameras to make his employees feel safe, the WSJ reported.
- Gilbert also bought nearby buildings to make sure they wouldn't be scooped by speculators or left to decay.
Zoom in: Such a business titan would have an easy first play in St. Paul.
- Madison Equities put all 10 of its downtown properties up for sale nearly a year ago, and they total 1.6 million square feet, roughly a quarter of all multi-tenant office space downtown.
Those buildings are more than half empty, and recently one of them, Alliance Bank Building, stopped paying its utilities and the city ordered all the tenants to leave.
- A memo by the fire department said that the bank that lent landlord Madison Equities money to buy the property doesn't want it.
- That bank, Royal Credit Union, said in an email that it's "reviewing all options."
What they're saying: "While the city is interested in bringing a diverse set of investors to downtown, we are open to all possibilities," Mayor Melvin Carter's spokesperson Jennifer Lor said.
The bottom line: The Dan Gilberts of this world are rare, but if there's another one out there, St. Paul would be a prime target.