Page 27 - Michigan City, IN US Highway 421 Corridor Plan

Table 2.1, Regional Sub-Market Analysis (2014-2015), The recent loss of JC Penny pushes the mall well past the improvement districting, incentive-zoning and possibly special
highlights vacancy rates and the amount of retail and office as 40 percent vacancy rate that marks the “death spiral” of assessment financing or a combination of some or all of these.
Providing Neighborhood Amenities. well as cost within the regional area of Michigan City. conventional retail malls. The incidence of dead or dying malls Other proactive measures include assisting the formation of a
merchants association; developing (i.e. contributing to) corridor-
is an increasing and much written about national phenomenon.
Traffic Counts And although there are occasional cases of malls being specific marketing collateral and marketing campaigns; and
“Commercial - There seems to be successfully repurposed as office complexes, mixed-use creating special grant and loan programs specifically targeted to
a hole in local business profile. We Available INDOT data for 2014 shows that the Michigan City centers, warehousing facilities and data and call centers; most corridor businesses and buildings.
have a lot of manufacturing which segment of I-94 handles about 51,500 vehicles per day malls because of their irregularly shaped floorplates, narrow
accommodates high school and while the stretch of 421 between the I-94 interchange and corridors, and sheer physical size have proven stubbornly Because of its size and pivotal place in the corridor, perhaps
the greatest focus of city intervention will be at the struggling
US Highway 20 carries approximately 25,000 vehicles per
technical school graduates. Also, day. Daily traffic on US Highway 20 near its intersection with ill-suited to adaptation. Even successful re-uses have usually Marquette Mall site. The experiences of other similarly-
involved substantial demolition.
there are many small independent S. Franklin Street ranges from 13,500 (west side) to 16,800 situated communities suggests that the City will need to take
professional businesses, typically (east side) per day. These counts offer businesses along the Although eventual demolition of everything other than the core a significant co-investment role if it hopes to see this property
Sole Proprietors who need very US Highway 421 / S. Franklin Street corridor unusual pass-by office building at the Marquette Mall seems likely, possible redeveloped in a comprehensive way. The level of that co-
little staff. There seems to be few exposure and access. reuses for the existing mall structure(s) could include: sports- investment will be dictated by among other things: the amount
plex, medical offices / clinics, call / data center, fulfillment
of public debt-supporting “tax increment” generated by a
opportunities for college degreed Recruitment center, expo hall or tech college. Future retail uses could include proposed project; the verifiable size of the financial feasibility
professionals who are not looking a suburban auto-oriented power center, mixed-use town center “gap” faced by profit-motivated developers and their investors,
to start their own business. It would Although retail recruitment is typically not as incentive-driven or a specialty-niche retail arcade such as home design center or and the credibility and bankability of those developers.
be wonderful if we could attract a as other economic sectors (as no amount of incentives will boat or RV showrooms. Even these options however will involve The level of co-investment will also be driven by the scale
medium to large corporation to set outweigh the lack of solid market fundamentals for most a substantial reinvestment and redevelopment that may not and scope of the redevelopment vision. For instance, the
prove to be feasible or warranted given other re-use options for
retailers), some limited incentives particularly for tenant
up a headquarters here.” improvements and working capital loans can be a deal-cincher this strategically located site. proposed re-use of most of all of the existing buildings will
in many situations where a retailer is being courted by multiple probably demand less investment (albeit perhaps a more risky
players or where an extraordinary amount of building / site Conclusion investment given the non-traditional tenant-mix likely to be
renovations are needed. Therefore, the City should set up drawn to such a project), versus a more aggressive demolition
basic façade grant / loan programs as well as a low interest Because of languid (static) market dynamics in Michigan City as and rebuilding effort where many of the buildings would be
193,000 square feet under construction during that period, in most of the Midwest, new commercial / retail development in seen as having “negative value”. In the latter case, additional
Nationally, average rents rose to $22.65 psf (a 1.1 percent (revolving) loan program prior to any sustained recruitment the US Highway 421 / S. Franklin Street corridor in coming years public investment may be required to offset the differential in
increase over the previous quarter). Nationally, Class B and C effort. The use of tax increment financing (TIF) will likely be is likely to be relatively slow and incremental. Fragmented land real estate value attributed to existing property “improvements”
space – typical of the types of space available in Michigan City needed to facilitate the redevelopment of the Marquette Mall ownership and the interspersed mix of old and new buildings claimed by the owner / seller regardless of need to remove said
– rented for $20.26 and $16.55 PSF respectively. 4 site where significant site work and “loss-leader” rent discounts
for new anchor tenants may be required to spur full-scale means that, absent significant public-private land assembly improvements to redevelop the property.
The above data, underscores the high variability and general redevelopment. efforts, most new commercial / retail development (with the The city and its redevelopment authority must exercise a
randomness of local office market conditions from one sub- likely exception of the Marquette Mall site), will probably be great deal of due diligence and financial savvy in any public-
market to the next. It should be noted though that in smaller The pursuit of (or assistance for) any chain retailers should be piecemeal single-project redevelopment rather than larger partnership development deal on this site. They must ensure
MSAs, one or two significantly sized projects, such as an accompanied by the implementation of urban design guidelines master-planned projects. that the developer has the vision, portfolio and the financial
intra-city move by a local mid-sized company into a “new” that prescribe “urban format” planning and architectural Meanwhile, the presence of large discount retailers such as wherewithal to carry out a project of this scale. It must assure
replacement building, can misleadingly skew the data in principles in order to protect or reinforce the desired aesthetic Wal-Mart and Menards present something of a double-edged that other investors are bringing most of the investment
one direction or another. Seemingly certain, at least for the of the US Highway 421 / S. Franklin Street corridor (extra sword. On the one hand these “category-killers” will quell the capital (and carrying most of the risk), and that the current
foreseeable future, is the end of the speculative, general- design requirements should also be mandatory for any projects entrance of new general merchandise retailers into the corridor. owners aren’t unfairly inflating the sale price by factoring
purpose office construction. New office development in the receiving public incentives and should be written into the On the other, they provide ballast to the corridor, pulling in a in the value of any public incentives intended to go to the
years ahead is likely to be more specialized (i.e. medical, tech development agreement). Sustained efforts to lure them into large customer base locally and from elsewhere in the county. end-developer. If the city suspects that it is dealing with an
etc.), and majority pre-leased before construction begins. the corridor may require a longer-term strategy to increase the
amount and density of housing in and around the corridor under All in all, and nothwithstanding the failing Marquette Mall unreasonable or unmotivated owner, it would be wise not to
The general stagnation in office construction throughout the the old adage of “the best retail strategy is a housing strategy.” property, market conditions along the corridor are stable with activate any incentive structure such as TIF until it either has
country (with the exception of major “tier one” cities such as Other tools include pro-active land assembly whereby suitable a relatively low rate of vacancy. A potential market-changer for secured a locked-in price for the property (such as through an
New York, Atlanta and Dallas), has been attributed to newer, sites are “served-up” to prospective users either with or without the corridor is the nascent medical campus taking root at the assignable purchase option), or has a development agreement
smaller open-plan office formats, an increase in temporary price discounts absorbed by the City. corridor’s south end. in-place with a 3rd-party developer. Meanwhile the blight study
contract employment, and the rise in telecommuting. All of Because of these factors, Michigan City leaders will need to used in the preparation of the TIF plan should be done with
these factors have caused a general reduction in the space Marquette Mall Redevelopment intervene using the usual tools of urban redevelopment if it particular thought to how it could position the city for a future
needs of office employers. condemnation action if conditions and circumstances warrant,
As touched on earlier, the failing Marquette Mall property is hopes to accelerate the pace of change in the corridor. These and if such action could be deemed legally defensible.
becoming a significant weight on the local real estate market. tools include things like: tax increment financing, commercial
4 Source: CoStar Group 2015

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Adopted: August 16, 2016 Background and Existing Conditions 2.0