Duluth looks to housing to revive stagnant, post-COVID downtown
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Eight blocks apart in downtown Duluth, like bookends on either side of Superior Street, construction crews are working on two buildings city leaders believe provide an answer to the challenges of revitalizing Duluth’s historic urban core.
On one end, workers are about a third of the way through building what will eventually be a 15-story luxury high-rise dubbed Lakeview 333 next to the new $1 billion Essentia hospital. When it’s completed by the end of the year, it will offer 200 housing units with stunning views of Lake Superior.
Meanwhile, on the western side of downtown, near the library and St. Louis County Depot, a local developer is converting the 7-story Ordean building, which formerly housed nonprofit office space, into 30 new apartments.
Together, the two projects are expected to add 600 residents to the city’s downtown, nearly halfway to Duluth Mayor Roger Reinert’s goal of increasing the city’s downtown population by 1,500.
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“We’re not where I’d like to be,” Reinert said, standing across the street from the Lakeview 333 project, a construction crane pivoting far overhead. “But we’re definitely making progress.”
Reinert, who campaigned in part on revitalizing Duluth’s downtown core, said, like many downtowns, Duluth’s began as a retail district, built to support the working waterfront on Lake Superior.
Then “they became professional and commercial,” Reinert said. “But their future is residential."
That’s the bet that downtowns across the country and around Minnesota are making, five years after the COVID-19 pandemic fundamentally changed the work patterns that have sustained urban cores for decades.
Prior to the onset of COVID, about 18,000 workers came to downtown Duluth every day. While officials aren’t sure exactly how many have returned, a couple years ago they estimated that up to half of workers hadn’t come back.
"When you see that just mass exodus, you realize how much our businesses rely on all of those employees,” said Kristi Stokes, President of the organization Downtown Duluth.
Some workers have begun to come back. Many employees now work hybrid schedules, and may come downtown Tuesday through Thursday.
“It’s encouraging to see more people back,” Stokes said. “But we know we’ll never get back to those numbers that we had before. So that’s where we kind of pivot and say the next step is really seeing the residential growth in our downtown.”
At the same time fewer people were coming to work, shopping and going out to eat downtown, there was also a spike in homelessness in Duluth and other urban centers. People struggling with mental health and substance use issues were more visible.
After the pandemic, vacancy rates downtown reached 21 percent. Closed storefronts still line 1st Street, one block up from Superior.
That sparked the creation of a downtown task force by former Mayor Emily Larson, and has led to a new initiative called Imagine Downtown Duluth. Consultants are helping the city brainstorm new ideas for bringing new life and vitality downtown.
Jay Renkens, a national planning consultant with the firm MIG, who’s helping spearhead the effort to envision a new downtown Duluth, uses the term “neighborhoodification.”
“So the idea of ‘neighborhoodifying’ downtown Duluth in that we want more residents, which means more housing units. To do that, we need to have more neighborhood services and amenities,” Renkens said.
Renkens, along with city officials and boosters, say downtowns like Duluth’s are at a tipping point.
“We have a couple directions we can go,” said Duluth Area Chamber of Commerce President Matt Baumgartner.
“We have the capacity to have a lot of housing in the downtown and create more of an 18-hour downtown where you’ve got people who are working and then dining and recreating in that same area,” Baumgartner said.
“Because the alternative is you continue to slowly erode at the number of office workers, at the number of retail stores, and then that becomes a self-fulfilling prophecy, where it just becomes emptier and emptier.”
Office to Apartment
Developer Brian Forcier walks into a two-bedroom unit under construction on the top floor of the Ordean Building in Duluth, which his company, Titanium Partners, is spending $6 million to convert to 30 new residential units.
A line of windows offers commanding views of Lake Superior. Forcier says the building’s ample windows make it a prime candidate for converting from offices to apartments. It’s also built out of solid concrete, which makes for extremely quiet rooms.
He’s planning to landscape a plaza next door and create a new entrance to the building. There are also plans for a ground-floor coffee shop and other retail.
Forcier is convinced this will be the first of many office conversions in Duluth.
“I think you have to see this happen in our urban centers, not just Duluth, everywhere, otherwise you’ll have a lot of empty buildings,” he said.
Forcier is looking at a couple other properties in Duluth he thinks have good potential as residential buildings. But there are challenges in converting them.
He says this building, constructed in 1971, cost as much to turn into apartments as it would have to erect a brand new structure. He had it added to the national registry of historic buildings, which made it eligible for a historic tax credit. Without that, he said, he couldn’t have afforded the project.
And he said older buildings would likely even be more expensive to convert.
“I think the challenge for Duluth is going to be, we do have a lot of structures that were built turn of the century, meaning 1900,” Forcier said. That means they were built out of timber, and would require huge investments to meet today’s strict fire codes.
He said building code updates are needed to help developers offset the costs of conversion.
Despite those costs, Forcier is bullish on downtown Duluth. There’s still plenty of commerce going on, he said. Plus, there’s an acute need for housing of all kinds throughout the city, and downtown has the available space to add it.
A study commissioned in 2023 by the city found the greater downtown area could support up to 2,500 new housing units.
“We desperately need the housing,” said Reinert. “And we have the excess space, and we have populations that want to live downtown, from young professionals to empty nesters.”
Retail adapts
For more than 30 years, downtown office workers in Duluth have turned to Mainstream Fashions for Men for suits, sport coats and other workplace attire. Pre-COVID, business was booming.
“2019, up until that point, was the best year we ever had in business,” said co-owner Ben Mork.
Streams of office workers came downtown every day. Weddings boosted summer business. Then, the pandemic hit.
“During that short window of time, when the world just stopped, we got to just kind of sit and watch a million dollars burn,” Mork recalled.
The store had just ordered hundreds of thousands of dollars in merchandise. But they were forced to close because they weren’t deemed an “essential” business. And they still had to pay rent and insurance.
On reopening, they quickly pivoted to more casual attire, as fewer people went to the office everyday. And a couple years later, business is thriving again.
“So we had the strongest year I’ve ever had, coming out of COVID in 2023,” Mork said. And sales have remained strong.
Elsewhere in downtown, newer entrepreneurs have moved in, taking advantage of cheaper real estate, optimistic Duluth’s core is on the cusp of a rebound.
Three years ago, Mariah McKechnie and her husband purchased the 19,000 square foot Bagley Building, home of a former longtime jewelry shop.
They pumped $300,000 into renovations, exposing brick walls, original hardwood floors and tile ceilings. Now she said the building is already worth more than what they bought it for. She employs more than 25 people at the special events company she runs, and a wedding dress boutique she opened last year.
“There’s such opportunity to invest and gain value, and the more of us that do it, the more we’re all going to rise together,” McKechnie said.
She acknowledged that businesses that rely on foot traffic downtown are struggling. “But we can continue to envision ways to pull people, because it's a destination, and that’s what people want now. If we do something cool, they will come.”
A perception problem
But businesses are also fighting against what many in the public see as pervasive public safety issues that have compounded and become much more visible after the pandemic.
As downtown workers left, “you started to see more individuals who were suffering from mental illness or addiction issues or were unsheltered,” said Stokes.
The Downtown Duluth organization Stokes directs hired an outreach worker with federal COVID funds to help people on the street and connect them with social services, and work with businesses to address safety concerns.
That program has been a huge success, Stokes said, and has helped connect more than 120 people with housing and treatment. But federal funding has expired, and Stokes is unsure whether the program will continue beyond this year.
The city council also recently authorized a study into the future of the city’s skywalk, where safety concerns including drug use and public urination have led to closures of some parts of the system.
“We have to admit that we’re struggling with three miles of an elevated skywalk system, along with 30 blocks of street level retail, and it’s impossible to both police and keep clean and safe both of those systems,” Reinert said.
Officials are hopeful that more residents living downtown will create more activity and foot traffic, and alleviate safety concerns.
“Because now you’ve got a perception problem,” said Baumgartner with the Duluth Area Chamber of Commerce. “Now you’ve got a narrative that’s out there, and so fewer people are coming back” downtown, he said.
As more residents move downtown, Baumgartner and others are hopeful that stores and restaurants will follow. But he and others are anxious for progress.
“We’re looking at the next chapter of our downtown so that’s really exciting,” said Stokes. “But it’s also overwhelming in the fact that we have to really figure this out. I mean, we have to do it right.”
