Eastern Market makes plans to preserve affordability, 'core values' in changing food district

Eastern Market Corp. is creating protocols that it could use to score whether or not a private developer in the Detroit food district is abiding by the district's principles.

The list of a dozen points that's under development would address the "core values of the market," such as carving out 25 percent "affordable" space for small businesses, and could determine whether or not Eastern Market supports a developer's project, said Dan Carmody, president of the nonprofit.

Eastern Market Corp. manages the district's public markets and works to support food access in the city. It also aims to preserve the character and inclusivity of the historic neighborhood northeast of downtown in a time when many fear it's besieged by change. A building-buying bonanza that started nearly two years ago with Sanford Nelson and others shows no signs of slowing down. Planned investments by Nelson and others are likely to mean rent hikes in an area previously known for housing artists and businesses at low rates.

The district's growing pains came to a head this week when longtime fixture Russell Street Deli announced it would close in September due to a dispute with its new landlord, Nelson, over repairs and a proposed rent increase from $1,700 to $3,500 a month.

Carmody expressed concern about the closure of a popular, 30-year-old restaurant in the district and said Eastern Market Corp. would pitch in financially to help with the $50,000 in floor repair work need at the deli. While Nelson's team stated it would welcome the nonprofit's assistance, Russell Street owner Ben Hall told Crain's on Tuesday that is "unlikely" to change the situation.

'Fundamental shift'

Amid these changes, Eastern Market Corp. is developing a protocol that would outline what the nonprofit wants to achieve and preserve in the district.

There's been a "fundamental shift" in property values that "creates a lot of anxiety and stress around what that's going to do around rental rates initially," Carmody said. "It's a long-term process. We gotta work our way through it."

Carmody declined to elaborate on the specific items it would include in its protocol, but spoke about them in the context of rent affordability and how a project "respects the core values of the market."

Eastern Market Corp. doesn't have the "ability to tell people how to run their business," he said, but it could use this protocol to score a building project in the market and decide whether or not the nonprofit will give support to the project in the course of city of Detroit approvals.

As part of the same efforts, Eastern Market Corp. has a goal to preserve 25 percent of small-scale commercial space at rents below market rate, Carmody said.

He didn't put a time stamp on it, but said it would apply to properties leasing out commercial spaces smaller than 5,000 square feet in the "historic core" of the market — the area bounded by Gratiot Avenue, I-75, Mack Avenue and St. Aubin Street.

Eastern Market Corp. has no way of enforcing this with property owners, but it could include it as part of the protocol and request that developers abide by it.

"We would look for every opportunity, from suggesting that landlords old and new set aside part of their space for below-market tenants, as well as looking for creative ways to finance space we own or control or partnering with others who own or control space," he said.

Preserving lower rents

Nelson and several real estate brokers estimated market rate retail storefront rents in the center of Eastern Market in the mid-$20s per square foot. Renovated commercial space rates across the market currently range from $15-$20, according to Carmody.

Eastern Market Corp. expects work to start next week on 15,000 square feet of food accelerator space where it plans to house eight businesses for $7-$11 per square foot. It's leasing space along Adelaide Street from developer ASH NYC.

The nonprofit aims to start out offering leases of less than 50 percent of market rate, but those could vary over time to 50 percent-25 percent of market rate, Carmody said.

With the pricey renovations required for some of the older Eastern Market buildings, it can be difficult for developers to finance affordable space, some contend.

"The idea that somebody could buy a building and keep rent low is very difficult," said Ben Rosenzweig, a vice president of retail brokerage for Colliers International who is involved in projects in Eastern Market including the redevelopment of the former Detroit Water and Sewerage Department building and the Busy Bee Hardware property along Gratiot Avenue. "When you're buying properties to redevelop them, rents in some cases are gonna go up, but I think that there's a balance and things should be attempted to be preserved as somewhat reasonable."