Costco deal in Pittsfield Township signals end to long search for local store site

Now the nation’s 9th-largest retailer is reviving efforts to open a local store in a deal that appears to be shaping up as one of the region’s largest retail deals in recent years.

“Costco is looking at Ann Arbor as the most viable place in Michigan,” said Jim Chaconas, broker at Colliers International.

After years of searching for a site to build a store and enter the Ann Arbor market, Costco has a deal to build a store on Ellsworth Road, west of State Street and Tyner Furniture, in Pittsfield Township.

The location, said Chris Grant of First Martin Co., “is fantastic.”

Yet it also is not the most likely spot to envision a new warehouse store in a chain where the average footprint of a new store tops 143,000 square feet.

Costco operates 567 stores, 414 in the U.S. It opened 25 stores per year as recently as 2005, but that will slow to 7 new stores in 2010.

A previous location sought by the retailer in Washtenaw County would have given it visibility from I-94 and access from the Zeeb Road interchange in Scio Township. And other locations in Michigan typically feature similar highway proximity and visibility.

In the Ann Arbor market, those types of locations can be rare, forcing - at least in times of major retail expansions - a chase for buildable property on the outskirts of town. So while established centers like Brarwood Mall and Arborland didn’t have the space for a Costco, property on the outskirts was overpriced, too far out or tainted by political hurdles to development.

With the Pittsfield Township deal, Costco apparently has overcome all of those barriers.

And in the meantime, it found a location close to a major interstate and to the county’s population core.

“It’s not Briarwood, but they don’t need the Briarwood draw,” Grant said. And by turning away from Jackson Road, Costco’s move will further anchor Pittsfield Township’s regional retail dominance.

The State Street corridor, said Supervisor Mandy Grewal, “is one of our main gateways into the township.”

Traffic on South State is estimated at 33,000 cars per day south of I-94, a number fueled in part by the concentration of office space along the corridor. Even with a vacancy rate of over 20 percent, an estimated 50,000 people work within three miles of the intersection, according to Landmark Commercial Real Estate.

Meanwhile, Ellsworth accounts for another 14,000 cars per day.

The location also sits between two key shopping districts on State: Briarwood in the city and the new Walmart-anchored shopping center at State and Michigan. And the Ellsworth Road frontage connects the location to the shopping at Lohr and Ann Arbor-Saline Road and, to the east, at Carpenter Road.

Yet the location also will require demolition of existing office buildings in Airport Plaza, along with zoning from the township.

It’s unclear today how Costco will choose to pursue the rezoning, said Grewal. One possibility is for the chain to submit a PUD, seeking spot zoning for the store and gas station instead of a traditional rezoning.

Either way, the move makes it likely that the Planning Commission and Board of Trustees will consider how the entire corridor could be reshaped in coming years. The township already is rewriting its master plan, with attention to two key drivers for the township: Economic development and land preservation.

Areas in existing high-traffic corridors that can be redeveloped to attract new businesses play a role in both efforts, according to the township.

"This is a perfect example of maximizing space and doing infill development," Grewal said. "Costco ... is in line with the types of businesses we've been recruiting to increase the vitality of the State Street corridor."

Attracting Costco to the location on Ellsworth also helps advance several development and redevelopment efforts initiated in recent years near the State and Ellsworth intersection.

They include:

• First Martin’s property at 3965 South St., formerly Enzo’s. The 2.23-acre property at the northeast corner has been approved for a 8,451-square-foot retail center, with a listed rental rate of $19 per square foot.

• The former Pinter’s Flowerland at 3930 S. State, which is listed for $999,000. The township has approved a 9,200-square-foot retail center for the corner property.

• A 5.75-acre parcel just east of the southeast corner that developer Howard Frehsee has submitted site plans to turn nto a 15,750-square-foot retail center with a free-standing building on an outlot.

• A rebuilt Speedway gas station at the southeast corner, which would share access from Ellsworth with Frehsee’s center.

Since 2005, two multi-tenant office buildings also were construction on Ellsworth Road in the township: The Bank of Ann Arbor building and the Covington Office Building.

All of that activity eclipses the building that’s housed Tyner Furniture for 18 years in a former Kmart store set back from the northwest corner.

Owner Fred Miller says he’s talked to developers over the years, and they include representatives of Costco.

“But they were just conversations,” he said. “That was it.”

Miller said he hopes the value of his property goes up due to the Costco proposal, just as he hopes it helps the sale of the former Pinter’s property.

Both Costco and more retail development will increase traffic and visibility at the corner, he said. “It would have to be a plus for me, just from people driving by.”

In the meantime, he’s also open to the possibility of joining a redevelopment effort - but emphasizes that his store, family run for 53 years, will stay open.

“We would talk to anybody,” he said. “We’d consider anything.

“But are we for sale? No,” he said.

Across the street, Frehsee’s project came into the pipeline several years ago then stalled along with the economy. He revived it in anticipation of recovery, and now the Costco news signals that traffic could increase beyond his projections.

“The fundamentals of the intersection (development) were still there,” he said as his reasoning for reviving the plans for his upscale project. “… That corridor is a very solid corridor.”