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Strolling down the avenue: The renaissance of East Washington continues

By Joe Vanden Plas, InBusiness Magazine, November 2013

Perhaps it began in earnest with the reconstruction of this venerable Madison street, or perhaps it can be traced back to the decision of Shopbop, the Internet-driven retailer, to move its local operations to “The Avenue.” The area was already home to three business incubators — the Madison Enterprise Center, Main Street Industries, and the Metro Innovation Center — so maybe the real entrepreneurial juice came from these facilities and the opening of Sector67, which has found a permanent home in the corridor.

Or maybe the East Washington Avenue renaissance is really due to years of work reflected in the city’s own economic development studies and the East Washington Avenue Gateway BUILD Committee, which many credit for laying the groundwork for what’s happening here.

“We’ve had numerous emails from business owners saying, ‘Hey, it’s great building, it interacts with the neighborhood, and since you have been occupied, our business has gone up $600 a day.’” — Otto Gebhardt, Gebhardt Development, on The Constellation

Whatever milestone you choose, there is a fair amount of nostalgia woven through the activation of what city fathers and mothers call the Capitol East District, also known as the East Washington Corridor. Several development executives who are working with the city to reshape “East Wash” actually grew up in the area, and reclaiming its full potential is personal to them.

Among them is Brad Mullins, a top executive with the Mullins Group, who as a boy would pedal his bike down East Washington to Sears & Roebuck, as it was then known, to buy his fishing lures. Mullins, whose family-owned firm is planning the Yahara River Technology Campus for the 1200 and 1300 blocks, still remembers when the street was a vibrant manufacturing hub featuring names like Gisholt Machine Tool Co. (later acquired by Giddings & Lewis).

Now that the city has turned away from expanding outwardly and has focused on urban infill redevelopment, Mullins is convinced that East Wash can become more vibrant again with new developments served by multiple modes of transportation, additional park development, and a robust underground technology infrastructure that basically runs parallel to the street. “The City of Madison came to recognize that area as the key to the future development, urban infill, within the city,” he noted. “There are only so many cornfields left that Madison can expand or annex into.”

Pam Christenson, economic development director with Madison Gas & Electric Co., says the East Washington Corridor has the potential to connect the energy of downtown Madison with the East Isthmus sense of community. “It’s exciting to see what was an underutilized industrial corridor transform into an entrepreneurial and employment hub for the Madison region,” she says.

Christenson noted that Sector67 began as a place for talented entrepreneurs and young technology startups to collaborate and grow, and morphed into the StartingBlock Madison project, a group of entrepreneurs and civic leaders working to build an entrepreneurial hub within the Capitol East District. In many ways, the East Washington story is one in which one new development led to another, as sources IB interviewed for this story confirmed there is strong interest in further development activity beyond what is profiled here.

Inside these pages, IB looks at four current and future developments that are giving East Washington a new character: the Constellation (700 block); new designs for the 800 block of East Washington; the proposed Yahara River Technology Campus in the 1200 and 1300 blocks; and Union Corners, which could begin to reshape the intersection of East Washington and Milwaukee Street as early as next summer.

Commerce amid the stars

The Constellation, a high-rise development that consumes the 700 block of East Washington, is already built and filled with tenants, but commercial space will occupy the lower three floors. Some of the commercial occupants — the Madison offices of Google, plus Star Bar, Cargo Coffee, and Andersen Dental — are already known, but some of the Constellation’s 30,000 sq. ft. of commercial space is still available for lease.

By economic necessity, the 220-unit Constellation actually pushed the envelope on its 12-story height. Developer Otto Gebhardt was able to convince city planners that it could only work financially at that height, and he received the green light to reach for the stars. According to Gebhardt, the $39 million building is not only working for East Wash, it’s already a boon to other nearby streets, which speaks to the ripple effect an upscale development can have.

“The local businesses have given us nothing but praise, the people on Johnson and Willy streets,” says Gebhardt, owner of Gebhardt Development. “We’ve had numerous emails from business owners saying, ‘Hey, it’s great building, it interacts with the neighborhood, and since you have been occupied, our business has gone up $600 a day.”

The revamping of East Washington Avenue into a residential and commercial hub does not have to be developed by chain reaction. The Constellation’s first floor is all retail — hence the presence of Star Bar and its focus on craft beer and cocktails, and the “drive-through” Cargo Coffee — but rather than bring in a national or regional chain restaurant, Gebhardt favors a tenant mix that includes a local restaurant.

Gebhardt already has turned down a Qdoba Mexican Grill and various retail shops. “On the retail level, I very much want to get a local feel as far as local establishments,” he says.

Meanwhile, Google reportedly has signed a seven-year lease and will occupy most of the second floor, as it remains close to the young computing talent produced by UW-Madison. It’s an open question as to how much Google, which employs about 30 people in Madison, will expand its workforce, but it will have some room to grow.

For commercial tenants interested in calling Google their neighbor, there is roughly 1,200 to 2,500 sq. ft. of available office space for lease on the second level. On the third level, there are a few thousand square feet of available space on either side of the dentist’s office.

The challenge with most commercial projects is financing. Gebhardt explained that financing works a little differently with rental apartments, which do not require preleasing here thanks to a strong market with low vacancy, but financing for the commercial piece involved more negotiation. “With the commercial units, we had to have a certain amount of escrow put aside until we reached a certain occupancy,” he noted. “When it comes to the commercial, the banks are much more sensitive to absorption than they are to the apartments. You do have to make some concessions to get financing for the commercial end.”

While the commercial side makes development tricky, Gebhardt maintains the development must feature interaction with retail, jobs, and residential in the same component in order to energize the block. “You don’t want one of these neighborhoods that is poorly planned out, where you have some jobs but at 5 p.m. the whole block kind of goes dark,” he says. “You’ve got to plan so that it’s successively being activated in the morning, noon, and night.”

Angela Black, an attorney with Whyte Hirschboeck Dudek who has been working with Gebhardt Development on the project, noted the skepticism that greeted the Constellation. One year after some were predicting its failure, she says the Constellation has kicked off what’s going to happen in the East Washington corridor over the next five to 10 years. “I can’t even tell you how many other people I’ve talked to who are planning to do other projects now,” she remarked. “It’s phenomenal.”

800 number

While the Constellation adds hundreds of residents to the area, they have to shop somewhere, and they have to shop for groceries. A couple of years from now, they might find a 50,000-sq.-ft., neighborhood-style grocery (no big boxes need apply) right next door as part of the first phase of another mixed-use development in the 800 block of East Washington, another prime piece of real estate.

Earlier this year, published reports identified that grocer as Metcalfe’s Market, saying the city and developers had reached a tentative deal on a $65 million, 10-story mixed-use project, but Otto Gebhardt says the grocer has yet to be determined. “Right now, it’s an undetermined grocery store,” he stated. “We’re working through the details. It will be a full-service, local type of a grocery store.”

That’s certainly not all there is to Gebhardt’s plans for the 800 block, once the home of a Don Miller auto dealership. Gebhardt, who grew up in the East Washington corridor, witnessed its slow deterioration and has had his eye on developing the corridor for 15 years. His plans for the Constellation and the 800 block are complementary in the sense that he intends to bring 24/7 energy to both.

“We plan on having a large portion of the 800 block for businesses and job creation, and it will have a retail level, kind of like the Constellation,” he says.

In addition to the full-service grocery, the development would feature another residential tower component that would rise partially above the grocery component and have between 175 and 240 living units, and between 50,000 and 100,000 sq. ft. of retail and office space surrounding and above the grocery. The development, which could be funded with the help of tax incremental financing, might also reserve some units for low-income residents and feature owner-occupied residences.

Gebhardt is in talks with the city to determine how high the residential tower can actually rise. “That has yet to be determined, but we definitely have to get a similar height [to the Constellation], because clearly this is one of the few spots in the whole city that you can develop effectively and properly integrate it with the surrounding neighborhoods,” he says.

Gebhardt acknowledged that his company is looking to acquire and develop other East Washington sites, but he added the firm will have its hands full developing the 800 block over the next two years.

Mulling the riverfront

The idea behind the Yahara River Technology Campus is to replace an underused area with an employment center that taps into a talented local workforce. With local business incubators already drawing technology startups to the corridor, information technology will be a focus of this multi-use plan.

According to Brad Mullins, the tech campus vision, which is just starting to be vetted by city staff, already follows the guidelines and principles of the Capital East Gateway BUILD plan, which is effectively the zoning plan for the area, without asking for exceptions or special variances.

“We were able to come up with a very intriguing and desirable plan that would incorporate and maintain some of the structures that have historical interest, like the 1245 E. Washington Ave. building, the 1301 E. Washington Ave. building, and others,” he stated.

The plan incorporates multiple occupants — including small retail (coffee shops, drop-off dry cleaning facilities), multifamily housing, and as many as six office developments — while also trying to “embrace” the Yahara River. “It’s been our position that the Yahara River is waterfront, and waterfront is always a desirable amenity in proximity to any type of development, whether it’s where people live, work, or play,” he says.

Combined with the city’s efforts to redevelop the Yahara River Parkway, Mullins envisions both projects providing greater connectivity, drawing more people to the area, and becoming “all of the above” in the live, work, and play equation.

“You have an area where there has always been the river, and there has always been a park on either side of the river, but it wasn’t really tied together as to the crossings at East Wash, Johnson Street, and the like,” he notes. “If you think of that area, we’ve got Lake Mendota, Tenney Park, just phenomenal facilities, but you really could not get from East Wash to Tenney Park if you were on the south side of the Avenue.

“It wasn’t very convenient because you had to cross six lanes of East Wash, which is really Highway 151. The city’s investment in Yahara River Parkway, creating the Yahara River bike path, has been phenomenal, so literally now you can Rollerblade, walk, stroll, jog, or bike from lake to lake.”

As the city reviews the Mullins Group’s concept for a phased development, the developer talks to would-be business tenants. The company has had discussions with IT groups that would want somewhere between 30,000 to 60,000 sq. ft. of space, and while they are not yet ready to move forward, Mullins says they have identified this area, and some of the Mullins Group’s properties, as places they’d like to be.

Economic realities still dissuade bankers from speculative lending for the project’s commercial pieces, and Mullins would not proceed without securing anchor tenants or preleasing commitments. “It’s really a process of working through those goals before you can really pull the trigger and do a new project,” he stated.

While he doesn’t envision a market within the development for condominium or owner-occupied housing, there is a housing component — and that would be within walking distance of the technology employers where occupants might work. Mullins believes that one reason Madison’s rental housing market is so strong is the Great Recession changed the calculus for many would-be homeowners. The Madison market benefits from the housing needs of employees at Epic and other fast-growing tech companies, but there is more to it than that.

“People aren’t buying houses like they used to,” Mullins stated. “Their kids are in college, or they are grown and gone. Why would they want the burden of a house? Why would they want to put all of their money into a house and see it depreciate when the housing bubble bursts?”

Union dues

At long last, Gary Gorman and Gorman & Co. might be on the verge of developing the long-vacant but important property at East Washington Avenue and Milwaukee Street. After several fits and starts that included the demise of a previous development proposal under a different developer, Gorman & Co. is close to executing a purchase agreement with the city.

The latest tentative deal comes after six months of talks and some concerns about Gorman’s TIF application with the city, but the developer sounds pretty confident that Union Corners is close to being a done deal. “We’ve got a couple of details to work out, but nothing of real substance,” Gorman says. “I can’t say that it’s signed, but the general concept has been approved by the City Council, so it’s now at the staff level, where they are working out the details.”

Local residents have hoped for a quality development for several years, in part because of the impact it could have on the neighborhood. Madison Mayor Paul Soglin calls the 11.4-acre site a very important property that makes a statement about the city, which acquired it for $6 million. In anticipation of development, the city already has made several public improvements.

Gorman has an $83.9 million development proposal that has the support of Madison alder Marsha Rummel, who represents the area. Groundbreaking on the first phase, a UW Foundation medical facility, could be held in the June to August 2014 time frame. There would be four phases in all, but the immediate focus is design work being done by the architecture firm Plunkett Raysich and the UW Medical Foundation staff on a 60,000-sq.-ft. medical clinic.

“With respect to the timetable, we are well into the design process,” Gorman says. “We’ve had a series of meetings between the architects, our firm, and the UW Medical Foundation staff, where they have brought in administrators, nurses, physicians, other health care folks to talk about planning and linkages between exam rooms and records, and they are very, very thorough in planning their facilities in an efficient way.”

The medical facility would require some non-surface parking, whether it’s a ramp or underground, and some surface parking for the convenience of patients. Several sustainable features are also under consideration. “We’re very sensitive to groundwater preservation in that area,” Gorman noted. “We’ve used solar before. We’re looking at materials and a level of LEED certification for the medical facility.”

Phase II would bring a still undetermined number of housing units (most likely 100), with a townhouse-style configuration along Winnebago Street being a distinct possibility.

Like the 800 block project, Union Corners will feature a local grocery store, although more in the 20,000-sq.-ft. range. “Nothing is final, but I think that would be a great addition to the neighborhood,” Gorman says. “I really don’t want to name names because it’s in a preliminary stage, but it would be more of a neighborhood-oriented grocery store as opposed to a big box.”

The grocery, which would be added in Phase III, would face East Washington and be situated to the west of the medical facility. The third phase could also include retail and office space, and a new public library branch.

Phase IV would bring a local restaurant to the existing Sales Center Building site fronting East Washington, on the corner of East Wash and Sixth Street. “It would be a local restaurant group,” Gorman confirmed. “We’ve talked to several and it’s preliminary at this point. There is nothing signed and nothing committed, but we think a restaurant on this site would be a great use.”

Since Union Corners is a multiphase project that will take several years to develop, Gorman currently has no plans to acquire more real estate along East Wash. “We’re just looking at Union Corners at this point, so we don’t have any options for any of the other land along East Wash,” he says.

Gorman grew up in Monona and remembers traveling past the intersection of East Wash and Milwaukee Street for years. During most of that time, it was the site of a Kohl’s store, and having been raised on the east side of town, Gorman would love to see the entire corridor redeveloped.

“I think all the development is great because it’s been an underutilized part of the city for a long time,” he stated. “To have that become an area where there is some density, and to bring people in with purchasing power to support retail and restaurants along the East Washington Avenue strip, it’s a great idea.”Union Corners aerialfromnorth