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Lansing development slows down in tight economy

By Rob South, WKAR Radio News

Lansing, MI – Lansing, MI (WKAR) - When Virg Bernero took the Mayor's office just over three years ago, he promised to transform the City of Lansing, making it Michigan's Downtown. Bernero said construction cranes in the air would be a sure sign that new development was transforming the city "from good to great." One central component to a revitalized Lansing was getting people to move downtown. There have been some stunning announcements in those three years. But the national economy has taken its toll on the mayor's vision.

In his State of the City address in January, Virg Bernero proudly announced the success of his economic development plan for the city. And how new construction would put Lansing men and women back to work.

"They will build the new Capitol Club Tower on Grand Avenue, and they will create a new entertainment and commerce district along our downtown riverfront, anchored by the $25 million Market Place project," Bernero said. "This transformational project will include a new home for the historic Lansing City Market."

Ground breaking of the Lansing City Market's new home closer to the Grand River is slated for mid April or May and construction of Market Place would start as soon as the City Market is finished either late this year or early 2010.

But getting the $25 million to build Market Place could be tough. Mac Pena is an Equities analyst with Morningstar investment research. He says banks are lending money, but only to the BEST developments. Pena says the developer has to show that the project is needed before the bank will risk a loan.

"So, if you're planning on huge developments, for instance, for residences, and there's simply no demand, or people for some reason don't want to move to that area because they cannot afford it it's hard to see how that will be really productive," said Pena.

The residential housing component of Market Place was a crucial part in the city's decision to sell the old City Market to developer Pat Gillespie. Market Place is on the books as a "mixed use" project with housing, office and retail in one space. Gillespie also owns another mixed use development -- the Stadium District -- a block away.

Vince Villegas is a realtor whose office is in The Stadium District.

"This space is significant because of where it's positioned and located in the building," Villegas explained. "It, of course, is on the Michigan Avenue side. We have great views of the capitol building, but it really overlooks what Pat Gillespie and the Gillespie Group is doing next, which is Market Place and Ballpark North. So this positions us in a great location to look out on the future of Lansing; what's coming."

Ball Park North is another Gillespie plan. Again, it's mixed use, just north of Oldsmobile Park.

Getting a piece of this urban lifestyle comes with a cost. Condos at Stadium District start at more than $160,000 for 600 square feet and one bedroom.

Bob Trezise is the Director of Lansing's Economic Development Corporation. He says the city wants to capitalize on its state capital status and get the state's power players living closer to the dome.

"When we talk about Lansing in terms of government, we should be thinking in terms of lobbyists, attorneys, that tens of billions of dollars of decisions on behalf of the entire state are made here in Lansing," said Trezise.

But in this tight economy, Stadium District is struggling. The condos aren't selling as fast as Gillespie had hoped. Seven of its 20 condos are still unsold.

Not far away, is another high-profile development Capitol Club Tower.

Developer Shawn Elliot bought Lansing's South Grand Avenue parking ramp last October. His plan is to build a luxury condominium high-rise here. Supporters of the project say it would be like nothing the city of Lansing has ever seen, with units ranging from $200,000 to $650,000.

When it was first announced 18 months ago, Capitol Club Tower was planned to rise as high as 24 stories making it the tallest building in Lansing. Elliot says as the housing market collapsed, he had to take a step back and reevaluate the project which will only rise 12 stories, when and if it gets built.

"We just realized that we had to make the building a nucleus of activity," explained Elliott. "So we have a health club and restaurant space; we have a lot of really neat stuff coming into the building and it's given us some time to establish those relationships and really review them and make them as smart as possible for this market. So we still feel very strongly that we'll be breaking ground on this in the next few months."

Capital Club Tower has already been delayed a year, and necessary demolition on the site has yet to get started.

But a delay these days is a good thing. Other projects announced with much fanfare and hype by the Bernero administration are little more than dusty elevation drawings today.

The Lenawee, a Hollywood-quality film and video studio and the Kalamazoo Gateway are all on hold. Gateway developer Gene Townsend says his mixed-use, green project couldn't meet the strict financing guidelines needed to get it going.

"For a loan to go forward, there have to be lease commitments for a certain percentage of the space," said Townsend. "We've had some very valuable tenants look at it."

But no takers. And no Gateway.

Townsend is still hopeful for another housing project he's working on across town: Sobi Square. The eco-friendly community would be a mix of town homes and low-rise condominiums, designed to add a buffer between the Genesee neighborhood and downtown.

At the northwest corner of Grand Avenue and Sycamore, Townsend was granted a zoning change so he could add retail and office space to Sobi Square. He wanted the change to make the project easier to lease and easier to get financing. But groundbreaking likely won't happen this year. Sobi Square is also on hold.

But it's not all doom-and-gloom on the development front. A recent market study of Lansing's Downtown showed a need for more "affordable" housing.

Lansing Economic Development Corporation Director Bob Trezise says more and more people are looking to live downtown. He says projects like Sobi square have a market waiting to be tapped.

"That's what's frustrating about this time period," said Trezise. "There are so many projects, real people, real businesses, real need. Literally, we just cannot get a bank to do the appropriate kinds of loans to get these projects going, and I assume that that will begin to loosen up later this year."

Trezise says the redevelopment of the Accident Fund headquarters being built at the Ottawa Street power station, The new state police headquarters and an expansion of the Jackson National Life headquarters will bring even more people to Lansing.

Back at the Stadium District, Vince Villegas is ever the optimist. All of Stadium District's rental units are leased, and management started a lease-to-own program last year to help fill the condos.

Villegas says Stadium District is well positioned to capitalize on the demand for the city's new workers.

"We knew that our clientele was going to be that next generation buyer," Villegas said. "Our clientele was going to be the new Accident Fund employees. Our clientele is going to be the Jackson National Life employees. Our clientele is going to be all of the growth that's coming to Lansing."

Growth that's coming, but many wish was already here.

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