Home Depot backs away from urban store

Cost of construction, price of real estate, uncertain economy, and lack of design precedent contribute to decision. Home Depot has pulled back from plans to build a mixed-use, four-story building in Portland, Oregon (see the April/May 2001 issue). The project, designed by new urbanist architects Lennertz Coyle & Associates, involved wrapping the big box with street-level shops below offices and apartments. The proposed building was sited next to the sidewalk, with two levels of structured parking hidden above the main store. The design enabled the store to fit on a four-acre parcel in a transit-connected historic neighborhood, where architectural guidelines had been enacted. The project, although not completely dead, has been “mothballed” for financial reasons, according to Frank Parisi, an attorney representing Home Depot in the Portland area. The main Home Depot store, with the tremendous weight of its inventory, and the structured parking above both required expensive Type One construction, Parisi says. The city also required masonry construction for parts of the building to be leased for shops, offices, and apartments. The bottom line was a building costing close to $100/square foot — a figure substantially higher than the typical Home Depot and greater than expected for this project, he says. The price of the real estate was relatively high, as well. Although Home Depot expected higher sales per square foot and was counting on leasing a significant portion of the building, “the numbers just didn’t pencil” — especially in an uncertain economy, Parisi explains. The project faced strong opposition from neighbors, but this was not a factor in the decision, he contends. Public officials supported the store. Lennertz & Coyle “did a wonderful job on the design,” Parisi says, adding that he believes this kind of building shows how similar big boxes could fit into underserved urban markets. One potential solution, which Home Depot did not pursue, would be to get public financing for at least part of the structured parking costs, he adds. Also, some value engineering needs to be done on the design to get costs down, he explains. Ultimately, an urban big box design must be built by some major retailer to demonstrate whether such a store can be as profitable as conventional suburban buildings. Apparently this won’t happen in the near future in the Hollywood neighborhood of Portland.