Hopes for neighborhood retail at troubled Ann Arbor site slowly fading

ANN ARBOR, MI — When the Georgetown Mall on Packard Street was demolished nearly a decade ago with the help of over $1 million in public funds, there were high hopes for a mixed-use development with ground-floor retail.

Neighbors mourned the loss of a Kroger grocery store and surrounding businesses in the strip mall, but the Ann Arbor City Council gave some hope by approving a developer’s plan for a $48.2 million redevelopment called Packard Square, calling for 230 apartments above nearly 24,000 square feet of new retail spaces around a front parking lot.

After years of delays and troubles surrounding the development, real estate firm McKinley Inc. was placed in control of the property in 2016 through a court-ordered receivership as the original developer fought for control.

With the complex rebranded as The George, McKinley announced in 2018 residents were slated to move into the first of what would be 247 units. But hopes for neighborhood retail have been slowly fading as the ground-floor spaces still sit empty, their windows covered with posters.

While neighbors and city officials still would prefer to see those spaces filled with shops, the city’s Planning Commission somewhat reluctantly this month approved a new developer’s plan to convert the 23,462 square feet into 42 one-bedroom apartments, which would increase the number of residential units at 2502 Packard St. from 249 to 291. However, the developer has hinted at possibly not fully going through with the conversion and still keeping a minimal amount of retail.

The developer, New Jersey-based Somerset Development, plans to construct mezzanines within each new unit to provide sleeping areas, but the building footprint will remain the same. The facade will change as each apartment gets its own door.

Ken Gold, Somerset Development vice president, appeared before the Planning Commission on Aug. 3 to discuss the conversion. He’s working with Hobbs and Black Architects.

“This project, I know, has a long history with a lot of issues with the previous developer,” he acknowledged.

Gold said his company entered a contract to buy the property — which previously sold for $75 million in 2018 — last December and eventually closed in June. City assessor’s records online do not yet show the sale price.

“The entire time that we were under contract through now, we have been marketing the retail space,” Gold said. “I have not had a single phone call. I have not had a single request. I have not had a single tour. There’s no interest in the space.”

City Planner Jeff Kahan recalled the history of the Georgetown Mall, noting it was built in the 1960s and by the 1990s and early 2000s it struggled to maintain tenants.

Real estate firm Colliers has the new commercial spaces at The George listed as being 2,000 to 10,314 square feet and available as retail or office space at $28 per year per square foot, equating to monthly rents from about $4,700 to $24,000, not inclusive of taxes. Noting the apartments are nearly fully occupied, the listing boasts the retail spaces come with a large customer base without much competition in an easily accessible location.

The city still has a strong interest in seeing retail at the location, Kahan said. However, the city code doesn’t require it and what the developer aims to do is permitted, he said, adding there was never a formal agreement committing the development to provide a certain amount of retail space.

Lauren Sargent, who lives in the neighborhood, said she moved near the Georgetown Mall years ago because she wanted walkability and she walked to Kroger, Rite Aid, the post office and the dry cleaner. When The George was built, there was an understanding there would be new retail, she said.

“We have now lost two Krogers, we have lost the Packard food co-op, we lost Food and Drug Mart, we have lost all kinds of services that existed in that neighborhood,” she said. “My walkability walked away from me.”

While the city wants to get people driving less, Sargent questioned how that will happen without neighborhood retail.

“This is a really bad decision,” she said before the Planning Commission unanimously approved the conversion.

Ellen Abramson, who said she lives about a 10-minute walk from The George, said as a longtime resident she remembers all the amenities of the Georgetown Mall.

“There’s been a lot of excitement among the neighbors and a lot of patience over many, many years to see some walkable retail installed there,” she said, adding she had imagined it as a place she could meet a friend for coffee, while younger children had hopes for an ice cream shop or candy store.

She suggested the developer could reel in retail tenants by bringing down rents. She also suggested a compromise to retain some retail while converting some of the space to housing.

The George isn’t the only new mixed-use development in Ann Arbor that has struggled to fill ground-floor retail spaces in recent years and there are others around the city with spaces long sitting empty. One is The Yard on South Main Street, which has had no trouble filling the hundreds of apartments atop empty ground-floor retail spaces that have been vacant since the building opened four years ago despite being marketed by Colliers. The retail spaces there were to be a replacement for the old South Main Market that was demolished for the project.

Lisa Disch, City Council’s liaison to the Planning Commission, asked the new owner of The George what type of retail could potentially fit there and whether parking is a factor.

“I would love to stand here and tell you that I could fill this space up with retail — I’d love to do that,” Gold said, adding the first time he looked at the site in October 2021 he immediately said, “Retail will never work here.”

That’s because of the configuration of the building, which is set down below the road level and there’s a retaining wall, so the visibility is poor, Gold said.

“You have to drive in under the building to get to the retail area, which is very confusing — no one really knows how to get in there,” he said, arguing the building wasn’t designed well for retail and there would need to be a variance approved to allow signage atop the building to try to make it work.

“I’d love to put Kroger here, but Kroger needs 25,000 square feet contiguous,” he added.

Gold said he previously told Colliers to market the spaces without rents specified and there still were no bites.

Planning commissioner Wonwoo Lee, chief real estate officer at Oxford Companies, agreed with Gold’s assessment that retail at that location would be difficult, saying retail in general is tough in the age of Amazon.com. Noting he has a retail listing by Packard and State streets that has attracted close to 20 inquiries since May, Lee said there still are businesses looking for spaces, though, and he asked if Gold was willing to compromise to keep some retail based on community feedback.

“I’d love to put a coffee shop here,” Gold said, adding he’d be willing to preserve a couple of small retail spaces ranging from about 1,100 to 1,200 square feet where something like a coffee shop or convenience store might work.

That still could mean converting most of the vacant retail space to 38 new apartments, but commissioners decided against writing that into the development plan, instead approving the full conversion to 42 apartments, which officials said now gives the developer flexibility to do either a full or partial conversion since there’s no obligation to build all 42 units.

Commissioner Lisa Sauve, a local architect who does commercial renovations, said she has talked to clients who’ve looked at the space there and walked away.

The amount of money tenants would need to invest in spaces is an obstacle, in addition to how long it would take to become successful from a profit standpoint, she said.

“Those are just very big hurdles in this space and it’s a silo,” Sauve said.

Due to historical chemical contamination of the property by a dry-cleaning operation, Kahan noted there’s a vapor barrier installed under the building as part of the previous mitigation plan for the development. Since that was previously approved for commercial use, the developer needs approval from Washtenaw County and the state for the conversion to residential, Kahan said.

Read more Ann Arbor development stories.

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