Subway will be first retail tenant in downtown Ann Arbor's 4 Eleven Lofts student high-rise

When Subway opens this fall, it will be the first storefront at the corner after developers sought to expand both housing and retail options in the city’s “midtown” blocks.

“We’re working on a lease now,” said Kip Klopfenstein, Subway real estate representative for several counties in Michigan. He added that he anticipated the deal would be done just after Labor Day.

The location is good for the sandwich chain because of its proximity to campus, including the 9 floors of student housing above the street-level retail space in the 4 Eleven Lofts building, Klopfenstein said.

But it’s also strong because it’s close to the traditional downtown business district and employers like Google, located a block south in McKinley Towne Centre.

“We also hope to draw from the downtown area,” Klopfenstein said.

Subway - one of the nation’s largest food franchises - has more that 32,000 locations in 90 countries, according to its website. Many of those locations are co-located with other brands or paired with convenience stores instead of operating in standalone settings.

The new Subway, which will be 1,800 square feet, replaces one that closed on South Main Street after it lost its lease as the Black Pearl took over that location.

The move to East Washington also gives longtime franchisee Denise Monroe the chance to acquire another outlet after she owned multiple stores but sold them when she planned to move out of state.

That move didn’t happen, so Monroe - who also owns a store in the Downriver area of Metro Detroit - found the Ann Arbor location and sought the help of Klopfenstein to make the deal happen.

Subway “is a great franchise,” said Jim Chaconas of Colliers International.

But to succeed in that East Washington Street location - which still has retail space available in both 4 Eleven Lofts and the northern portion of McKinley Towne Centre - the restaurant won’t be able to count on just nearby students for its customer base.

Aspects of the franchise - like its affordable pricing and healthy product lineup - should help it reach other customers.

“It’s going to have to become a destination,” Chaconas said, since that part of the street isn’t generating significant foot traffic.

Increasing pedestrian traffic along the street will take time, real estate experts said. The downtown restaurant scene expanded from the west a few years ago as Blue Tractor and Café Habana opened. As U-M’s North Quad dorm opens, the increased residential base near South State Street could strengthen the Division corner.

Investments continue to be made in the corridor, said Newcombe Clark, an agent with Jones Lang Lasalle and a member of the Downtown Development Authority. Some of the improvements come from DDA funds to add on-street parking nearby.

Success from the foot outlet could drive more commercial activity, Clark said, including destination retail.

4 Eleven Lofts was developed by Joseph Freed and Associates, which also developed Ashley Terrace on West Huron Street. That property has been targeted for foreclosure earlier this year, as Freed battles with a lender.

Freed spokesperson Jane Thompson said that a solution to that foreclosure has not been resolved.

At 4 Eleven Lofts, the residential component of the property is managed by the Chicago-based Scion Group, which also managed 4,800 bends in student communities in several states.

The building opened in 2009 as two other major student-oriented projects near the University of Michigan also opened: Zaragon Place and The Courtyards, near North Campus.

This fall, as North Quad opens, two other high-rises - 601 Forest and Zaragon Place 2 - continued in the development pipeline.

Freed continues the leasing of the retail space at 4 Eleven Lofts, with about 6,300 square feet still available at the corner of Division Street to the eastern end of the building along Washington.