Commercial to residential zoning

Mankato’s land-use plan originally envisioned the WOW Zone and adjacent Hy-Vee to be surrounded by retail and service businesses. Instead large apartment buildings are surrounding it with two more now proposed for a vacant lot to the northwest.

MANKATO — The booming retail area of recent decades on Mankato’s east side prompted city leaders to set aside large tracts of land for commercial uses.

That decision is now being reconsidered as Americans increasingly do their shopping online and more and more big box retailers are shuttering stores. Unlike cities with declining populations, however, Mankato is still seeing interest by developers in the vacant lots — just not for retail stores.

“What would have been reserved for commercial development is now being developed as multi-family residential,” said City Manager Pat Hentges.

That’s particularly apparent around the Hilltop Hy-Vee shopping complex. Land east of the WOW Zone family entertainment center has become home to the mammoth Woodside Apartments complex on Roosevelt Circle. Seven buildings totaling more than 350 units with a combined assessed value of about $35 million have been constructed on land Hentges said was originally envisioned as a commercial area. An eighth is under construction.

Now, Madison West Partners is asking the city to rezone from “highway business district” to “office/residential” the vacant lot north of the Hy-Vee/Office Max building.

The developer plans to build two apartment buildings on the 5.2 acre lot spanning the distance from the Good Will store to the western edge of the Woodside Apartments complex. A concept plan filed with the city as part of the rezoning request doesn’t detail the size of the buildings or the number of units, but the parking lot has nearly 200 stalls in addition to some enclosed parking.

The proposal reflects not just the demand for rental homes in Mankato but also the declining fortunes of retail stores. It’s not a local phenomenon.

In February, online sales overtook brick-and-mortar store sales for the first time, according to the Department of Commerce. CNBC reported on Saturday that Coresight Research has tracked 7,062 store closings nationwide so far this year, a pace that would shatter the previous record of 8,139 closings for all of 2017. In the first half of this year, 3,017 stores opened — less than half the number that closed.

The so-called “retail apocalypse” will require cities, landowners and developers to rethink how land along busy roadways — once-coveted locations for stores — will be used.

For years, Hentges has seen previously prime retail spots in Twin Cities suburbs transformed into a variety of residential developments. The trend is likely to accelerate in Mankato as landowners recognize that the chain stores are not going to be offering big bucks for their east-side property.

“They may be looking at converting it to service uses or industrial uses or, if it fits, multifamily residential uses,” Hentges said.

Land hosting vacant big-box stores might be facing the same fate. The former Kmart building, later converted to now-closed Gander Mountain and Gordmans stores, finds itself in an area that’s becoming more residential even as it sits just across Highway 22 from the River Hills Mall.

Owners of that property might have to decide whether its future sits with the residential growth to its east and join that trend, Hentges said.

“It may. It may,” he said. “ ... Or something dramatically has to change in the commercial market.”

Hentges doesn’t sound concerned that rezoning commercial land into other uses will leave the city with a future shortage of retail development options. Plenty of undeveloped land — along with a growing number of vacant retail buildings — remain zoned for commercial use.

The looming shortage might instead be in single-family lots. Approximately 300 lots are available, he said: “Our absorption rate is 100 per year. So its starting to tighten up a little bit.”

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