Food for thought: As businesses crave space, Eastern Market looks to grow borders

Dec. 14, 2015 -- Eastern Market Development Lookback“Eastern Market gets hot,” read the front page of the Dec. 23, 1985, issue of Crain’s Detroit Business.

The story was about a spike in demand for properties as food companies built more warehouse space.

It’s a headline that would work just as well now. Retailers regularly announce shop openings in the district. The Saturday public market has grown under the management of Eastern Market Corp., the nonprofit established by the city in 2006. When TV advertisers co-opt the gritty Detroit comeback narrative, they never fail to include a shot of an Eastern Market shed.

Now, Eastern Market wants to make itself bigger by stretching the district’s boundaries. President Dan Carmody said about 25 companies — mostly food wholesalers, processors and distributors that already operate in Eastern Market — want to expand but have run out of room. Wolverine Packing Co.E.W. Grobbel Sons Inc. and Baratta Brothers Inc., which does business as Fairway Packing Co., are among them.

“If we don’t find space for those companies, some of them are going to have to go somewhere else,” Carmody said.

The district is bounded roughly by Mack Avenue to the north, I-75 to the west, St. Aubin Street to the east and Gratiot Avenue to the south. A large wall map in the nonprofit’s offices shows new boundaries extending eastward two blocks to Chene Street and enveloping areas south of Gratiot. Carmody would not confirm these as the final boundaries, saying those lines are tentative; the boundary could end up being a little east or west of Chene.

A second phase could see the northern edge moved beyond Mack.

These plans would fall under the purview of a new entity Eastern Market wants to establish in the first quarter of next year to promote development. The nonprofit entity would have its own board, filled with property development folks and community residents, Carmody said. It would seek a for-profit joint partner whose job would be to get land ready for development.

Part of a $550,000 operations grant from the Troy-based Kresge Foundation will support this entity.

Eastern Market, in its quest to preserve the authenticity of the market, has a bias for food businesses, and its new development entity would carry that same slant. But it also would make room for residential and retail, mirroring another responsibility of the corporation, that of balancing the interests of varying parties within the district. To that end, it has been looking into the possibility of developing Shed 4 as a mixed-use project with housing on top.

Terminal problem

Regular business growth is pushing companies like Wolverine, a meat distributor, to expand.

Another factor in play is the 2011 Food Safety Modernization Act, aimed at preventing contamination, particularly among produce companies. The U.S. Food and Drug Administration released guidelines last month. To meet them, many companies must revamp facilities or build new ones.

Eastern Market itself within five years will have to build a refrigerated facility for its wholesale growers, something in the range of 20,000-30,000 square feet, Carmody said. Facing the same pressures are the eight produce companies that run the 300,000-square-foot Detroit Produce Terminal, which sits on 26 acres on West Fort Street.

The idea has come up to build something bigger — in an expanded Eastern Market district — to accommodate everyone. Eastern Market is spending $70,000 to look into it.

The Detroit Produce Terminal would need to spend $15 million just to meet the new federal requirements, and in the end would still have a “1925 facility that isn’t energy efficient and is terrible with regard to materiel logistics,” Carmody said.

“Nearly everyone in the wholesale distribution of fruits and vegetables in Southeast Michigan is going through the same calculus.”

Joseph Kuspa, vice chairman of Eastern Market’s board, said locations being considered for this are east of St. Aubin, outside current district borders.

Slow pace

Wolverine Packing President Jim Bonahoom is all for expansion. The company has been using the I-75 service drive as a parking lot because it has run out of space to park trailers.

Development “has been slower than we like,” Bonahoom said.

To alleviate the problem, Wolverine this past summer bought a 3-acre parcel of city land between Rivard Street and the service drive to use as a staging area. The deal took two years to close, even though it was the city that first approached him.

The lack of progress is frustrating for some.

Eastern Market’s development efforts pale in comparison with those of Midtown Inc., whose chief, Sue Mosey, has orchestrated a boom in construction, said Kimberly Hill, one of the owners of Mootown Ice Cream & Dessert Shoppe on Russell Street. Hill was executive director of the coalition that was Eastern Market Corp.’s predecessor prior to 2006.

“What development?” Hill said. “They still have not developed any pieces of city land.”

Karen Brown has run her Eastern Market shop, Savvy Chic, for 17 years and is a board member of Eastern Market Corp.

“People want to move here, but there’s nowhere to go, no new buildings,” Brown said.

There were about 60 acres of city-owned land as of 2012, according to Eastern Market Corp.’s management agreement with the city. Eastern Market was unable to provide updated details.

Kate Beebe was president of Eastern Market Corp. the first two years of its existence and came up with the plan eventually approved by Detroit City Council to form the nonprofit.

She expected more resources to be put toward developing the areas surrounding the central market by now.

“A lot of good things have been done for the market. I don’t think anything’s been done that puts us further behind with respect to real estate development,” Beebe said. “It’s not too late.”

The Water Board building

When it comes to missed development opportunities in Eastern Market, the first property that comes up is the old Detroit Water Board building, which has been empty since the 1990s. The 100,000-square-foot property sits just east of Roma Cafe at Erskine and Orleans streets and has a history of plans that never got off the ground.

Joseph Kuspa, former owner of Metro Produce Inc. and current vice chairman of the Eastern Market Corp. board (as well as mayor of Southgate), had plans for the property as far back as 1995, including one to install a canola oil processing plant there.

Robert Heide, owner of the nearby FD Lofts on Russell and Erskine streets, also had various designs for the place, going back at least a decade. One of the more recent ones was a plan in 2011 for a mixed-use development targeted at creative entrepreneurs and food startups, a tilapia farm among them.

Amid these various plans, a zoning dispute broke out when Kuspa sued the Detroit Board of Zoning Appeals over its approval of a use for the site proposed by Heide. The zoning ultimately was upheld, but in 2007 the dispute almost reached the Michigan Supreme Court, which declined to hear it.

Last year, Garden Fresh Gourmet‘s founder and former owner, Jack Aronson, was working with Farmington Hills developer LoPatin & Co. to put a food business incubator in the building, but to no avail.

Meanwhile, the building sits.

‘Delicate balance’

Why hasn’t more happened?

Carmody said the years following Crain’s1985 story were tough ones as the national food industry went through rounds of consolidation. That led to the closing of slaughterhouses and warehouses in the 1990s and early 2000s.

Demand from food wholesalers and distributors has only arisen in the last two years, Carmody said. Before that, the glut of post-recession warehousing inventory was too easy to grab, even if it meant moving elsewhere, as Butcher & Packer Supply Co.did in 2010 when it moved to Macomb County.

The two dozen or so companies that have come calling are “an altogether recent phenomenon of large companies wanting to stay near the market.”

Kuspa has been on the nonprofit’s board since its inception and was a leading organizer of its predecessor. He said Eastern Market comes with special responsibilities that other neighborhoods don’t have to worry about: Maintaining the area’s authenticity as a center of food business, and managing the conflicting interests among retailers, vendors, wholesalers and residents.

“It’s a delicate balance,” Kuspa said. “Development for the sake of development doesn’t do a lot for an area with the uniqueness of Eastern Market.”

The nonprofit from its inception in 2006 had “three or four years to shore up its core,” meaning the traditional market, and also needed to figure out who actually owned various parcels of land.

While the nonprofit can’t force deals into existence on land it doesn’t own, it can bring parties together to make deals happen. “We have not been doing much of that for the past 10 years,” but the commitment is there now, Kuspa said.

Carmody ticked off a handful of projects completed or started within the past year. There was Wolverine’s purchase this past summer. Pellerito Foods Inc. bought city property next to the company’s headquarters on Mack. Eastern Market is assisting with plans for both Milano Bakery & Cafe and the FD Lofts on Russell Street to expand into adjacent city property.

As for the Water Board building, Carmody said the nonprofit is waiting for the right proposal. The building’s high ceilings, wide column bases and accessibility for trucks make it perfect for food distribution, and it “would be a sin to use it for housing or other smaller commercial uses,” he said.

Carmody said Heide’s plans, or at least the ones with which he was familiar, were mixed-use projects not suitable for the building. Such uses are better placed elsewhere in the district, perhaps along the Dequindre Cut, which only recently became feasible for development, he said.

One of those properties, potentially, is a former slaughterhouse that sat vacant and blighted for years. Exterior work now is being done on the building by its owner, Dennis Kefallinos, who has converted many old Detroit industrial and commercial properties into lofts.

But Eric Novack, senior project manager of Kefallinos’ Boydell Development Corp., said Kefallinos has no firm plans for the property. The exterior work is being done to pretty it up for the extension of the Dequindre Cut from Gratiot to Mack, which runs right next to the structure.

Eastern Market has been slow to join the crowd because cheaper space has been available on the outskirts of downtown and Midtown, Novack said. While Eastern Market has properties and stability, prices remained higher throughout the recession years, adding to already high costs of renovating old properties.

“Eastern Market is not overlooked,” but developers have put it on a longer schedule, he said.

George Jackson, former head of the Detroit Economic Growth Corp., was Eastern Market Corp.’s first chairman. He said development has only recently again become feasible as progress in nearby areas pushes demand outward.

“Nothing in Detroit happens overnight,” Jackson said. “I didn’t think it was going to move as fast as Midtown.”

— Dec. 21, 2015; Crain’s Detroit Business