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Mill Avenue's new direction

As longtime tenants leave, Tempe's iconic downtown works to reinvent itself

by J. Craig Anderson - Jul. 5, 2009 12:00 AM

The Arizona Republic

The Mill Avenue commercial district in downtown Tempe has a history of leading the way for other local downtown areas when it comes to embracing the next business or real-estate trend.

The downside to having such high visibility is that people are more likely to notice when you stumble and fall.

A decade after the high-tech office boom and bust, in which downtown Tempe was a major player, Mill Avenue is facing new economic challenges in the form of stalled development projects and the departure of major retailers, including Borders Books & Music, eclectic home furnishings and art seller Z Gallerie and Coffee Plantation coffee house.

Much of the negative attention has been focused on Centerpoint, a large office-and-retail complex on the downtown Tempe promenade's southern end.

But business owners, real-estate brokers and economic-development officials in the area, north and west of the main campus of Arizona State University, say that recent reports of the district's demise have been greatly exaggerated.

Though they acknowledged problems such as high rent and the departure of beloved merchants, area leaders said customer traffic was as strong or stronger on Mill Avenue than anywhere else in the Valley.

New projects have risen from the ashes of the old ones, they said, such as a multistage music-and-theater venue called the Mill Avenue District Community Arts Project - MADCAP for short - at the former Harkins Centerpoint multiplex, and a mini-office complex for startups that offers small, inexpensive suites that share centralized meeting and research space.

Harkins moved its theater about 2 miles east, to Vestar Development Co.'s Tempe Marketplace, which opened in 2007. While it was a major loss, Nancy Hormann, executive director of Downtown Tempe Community Inc., said an upside exists.

"Fun things are happening, almost like silver linings that never would have happened if the bottom hadn't dropped out of the real-estate market," said Hormann, whose group represents area merchants.

She said that Harkins was the only Mill Avenue merchant to relocate to "that place."

Unfinished towers

Perhaps the most noticeable and talked-about signs of the recession on Mill are the unfinished Centerpoint condominium towers, casting long shadows across the outdoor mall's concrete and stone walkways.

The high-rise condo project was financed with private investments brokered by the now-bankrupt commercial real-estate lender Mortgages Limited and its leader, Scott Coles, who committed suicide in June 2008.

Centerpoint developer DMB Associates Inc., based in Scottsdale, sold the land for the condominiums to developer Avenue Communities LLC, which filed for Chapter 11 bankruptcy reorganization in December.

DMB had its own plans to build loft condominiums at Centerpoint as part of a major redevelopment, but the developer pulled back when the real-estate market collapsed in 2007.

Karin Taylor, DMB executive vice president, said that the company still believes in the project, which would include placing a luxury hotel on the DMB-owned property where MADCAP theater now stands.

"When the economy comes back, there's probably no better place in the Valley to be," Taylor said.

Notable departures

The Mill Avenue District, once dominated by small, independently owned merchants, has undergone a gradual transformation through the decade.

One by one, many of the small businesses were supplanted by larger, national brands that paid better but detracted from the area's reputation as a one-of-a-kind experience.

In the past 18 months, many of those chain operations have shut down their outlets on Mill Avenue as part of nationwide cutbacks spurred by sagging sales.

Some of the familiar independents have left, too.

Z Gallerie and Coffee Plantation were decades-old institutions on Mill.

Still, the Downtown Tempe Community noted that 22 new businesses have opened in the district since January 2008, while only 15 have shut down or relocated.

Some of the merchants that shut down belonged to large retail chains facing financial struggles across the country, Hormann said. Two others closed because the owners reached retirement age and decided to take it easy, she said.

Other merchants, including Coffee Plantation, were in DMB-owned locations that the developer was planning to tear down and redevelop.

Taylor said she anticipated the company would go through with those plans at some point, but for now is seeking new tenants to fill the vacant spaces.

Light rail's boost

Jose Ramirez is a real-estate agent at Tempe-based Urban Realty & Development. He said that he specializes in the downtown areas of Tempe and Scottsdale, and that his business has actually doubled since 2006.

One reason the Mill Avenue commercial district is so attractive is that it has public transportation via Metro light rail, and because people can live, work, shop, dine, have drinks and find entertainment without wearing out their heels.

"Office space down here is very desirable, because it's one of the only downtowns in the Valley that offers this type of lifestyle," Ramirez said.

Another draw is the availability of "mini-offices" that range from 300 to 500 square feet and can be rented for as little as $700 a month, Ramirez said.

He also said that, lately, a lot of his clients are people striking out on their own in business, "either because they got laid off, or because they see an opportunity."

While merchants say some landlords have been reluctant to reduce monthly lease payments for tenants, Phoenix commercial real-estate broker Brian Kocour said average rent has dropped significantly.

It generally is lower than it was in 2001, when the huge Brickyard development was completed and Borders opened there. That space is now vacant.

The asking price in some newer projects exceeded $35 a square foot in 2001, said Kocour a vice president at Grubb & Ellis/BRE Commercial LLC.

Now, desirable locations such as the former site of the Coffee Plantation are advertising at $28 per square foot. Kocour said he suspects the actual price will be even lower.

"If a landlord wants to get a deal done, he's going to have to be extremely creative," Kocour said.

Julian Wright, whose latest concept is called La Bocca Urban Pizzeria, is a three-time Mill Avenue restaurateur. Wright returned to Tempe in March after leaving Arizona for three years to start projects in California and New Mexico.

Wright opened his second business on Mill Avenue, the Library Bar & Grill, in 2002 and sold it three years later.

Before that, he had opened the former Jax Thai Bar in 2000.

When he started work on plans to open La Bocca, it was early 2008. Wright said he still believed at the time that the transition toward upscale dining and lifestyle that began during the real-estate boom would continue.

Wright said he figured Centerpoint condominium residents would become some of his best customers. While those diners have yet to materialize, he said business has been steady.

Wright said he always preferred the small-business, family-owned Mill Avenue District of 10 years ago, and he sees the economic slump as a way to bring back the old vibe.

"I just kind of enjoy the buzz of the street, the kind of funky energy," he said.

Worth the trip

Mary Fox, a resident of Phoenix, said she visits Mill Avenue regularly, mostly for the restaurants. Although she enjoys perusing the Mill Avenue boutiques, Fox said she does the bulk of her shopping at Tempe Marketplace.

"Some of the things down here (on Mill) are a little bit expensive," she said.

Jean-Paul Awe was walking along Mill Avenue on a Friday afternoon, taking in the scene but trying to avoid spending any money.

Awe said he has been out of work for about nine months and is "pretty much broke." He comes to downtown Tempe partly for its free access to wireless Internet.

"Of course, one has to eat," he said, "but one eats care- fully."

Butch Neuman, another resident of Phoenix, was meeting a friend that evening at the Valley Art, one of the area's oldest surviving movie theaters.

Neuman said there are multiplex theaters closer to his home, but the single-screen Valley Art is worth the trip because it shows independent films that can't be found elsewhere in the Valley.

"I try to catch whatever movies they have," Neuman said. "It's different."

Reach the reporter at craig.anderson@arizonarepublic.com or 602-444-8681.