Wednesday, April 9th, 2008

Simon Company Enters High Rise Residential Market

In an announcement that spurred quite a bit of discussion over on Property Lines, the Simon company announced a proposal for a 47-story residential tower in Boston called Copley Place. This tower, which would be that city’s tallest residential building, would sit atop a Neiman-Marcus anchored retail development. Here’s a rendering:

This development prompted the natural question, if Simon can do something like this in Boston, why not in their hometown of Indianapolis?

I think that’s a legitimate question to ask. Clearly Indy is not Boston. However, it is intriguing to think about Simon being part of a high rise package at, for example, the old MSA site, especially if a retail center were incorporated. We’ll just have to see.

One thing it is not reasonable to expect is that Simon would undertake such a project if it didn’t make financial sense. While I think one would expect a company to try to do right by their hometown, investing in money losing projects that harm the long term viability of the company is the wrong move. The best way to make sure valued hometown companies stay valued hometown companies is to make sure they are well-managed and very profitable. Still, one would hope that a company like Simon would at least give the MSA site a look. Particularly if they could control a significant retail component, participating could make some sense.

As for the notion that Simon could bring a Neiman’s to town, I’d say forget it. Indianapolis has money. What it lacks is a culture of high end consumption and connoisseurship. That’s not necessarily a bad thing, but it limits high end retail possibilities. Admittedly, most fashion is women’s oriented, and Yours Truly is a dude, but I must say that the Saks men’s assortment at the Keystone store is sorely lacking in comparison with larger market stores. Until you start seeing a store like Saks carrying higher end lines (think Kiton and Oxxford suits, not Canali and Armani), I don’t see much of a prospect for higher end retail.


Cities: Indianapolis

19 Responses to “Simon Company Enters High Rise Residential Market”

  1. Anonymous says:

    I’m a little surprised that they are moving forward with this project as economic indicators would suggest otherwise. Seems even more risky to venture into new business areas (moving from retail to residential)during uncertain times.

    Just a thought

  2. Crocodileguy says:

    I agree. The Indy Saks is “OK” but certainly not high-end enough to compete with others.

    Of course, the Houston Galleria (another Simon property) is a shopper’s nirvana–Saks and N-M in the same mall. Plus every other imaginable department store along with every standard mall retailer.

  3. Anonymous says:

    I don’t see Simon doing much more than it has already done in the Indianapolis market. They have already shown a solid relationship and commitment to the city of Indianapolis. The Pacers would most certainly not be here if it weren’t for the Simons, and it looks like they as well as the NBA are concerned about their future sustainablity here.

    Additionally, they have a solid well postioned high end mall on the northside and a maturing mall in downtown. And what I mean by maturing is the mall is beginning to move away from high end retail toward middle of the road retail, which is more inline with what downtown office workers and this market can afford. At this point I don’t think downtown has the crticial mass to support a great deal more retail, let alone something like a N-M.

    I believe the MSA site is going to remain a gravel surface lot for several more years. The Mayor’s office has already indicated it isn’t very interested in handing out incentive packages given the finanical state of the city. And,
    Ballard seems to be a litte misdirected with his dreams of a “Chinatown” for Indy. I would love for someone to explain to me the thinking behind that idea. Besides that, nothing will happen in that area until the ramp is removed and some major upgrades are done to East Market Street.

    After this little mini boom of downtown in fill building, mostly driven by Lucas, is over I am starting to have a rather pessimistic view of the future of downtown being much more than it is today for sometime.

    The cost of engery is going to create some long term serious problems with our economy and will continue to do so. Given that, I don’t think what we are seeing is just a little economic adjustment. More like a tipping point for our economy. We don’t have really any major employment players downtown and none on the horizon that I know of.

    I think we will probably see more people working out in the suburbs closer to the office parks in the outer ring. It really is a more cost effective apporach for households given the high engery costs we are facing and the horrilbe and lack of mass transit this city has.

    So yes, while it makes some sense for the Simons to enter into something like this into a city like Boston. It doesn’t really make any sense here at all.

  4. Anonymous says:

    Who are the Pacers? What is this NBA thing you speak of?

  5. Anonymous says:

    Looks to me like Simon is just doing what any good comapny would.
    The market is moving toward mix used dvelopment. Simon is adjusting it’s developments to meet the deman.

    No, Indy is ready for anything like this yet.

  6. Anonymous says:

    anonymous #2:

    The Market Street ramp is being torn as we speak and the street is being improved.

    The Pacers have a state-of-the-art stadium and the only negative is fan attendance, which has to do with the team’s on and off court behavior. You put a winning, well-behaved product on the court and people will go see it.

    Most large projects don’t get off the ground without some city support. The new 1,500 room JW Marriott hotel that will begin construction later this year in DT Indy was made possible through nearly $50 million in bonds issued by the city.

    And as gas prices increase, people will migrate back to the city center, where the development is more dense and walkable.

  7. Anonymous says:

    Eli Lilly and Simon are just a couple of major employers DT. Don’t forget about DT’s entertainment venues and growing residential base as well.

  8. Anonymous says:

    And IUPUI is major economic engine in the DT area.

  9. The Urbanophile says:

    Thanks for the comments everyone.

  10. SpeedBlue47 says:

    Nice post here. I do not agree with one of anonymous commenters here in that it is without a doubt the chance of a lifetime for Indianapolis to foster development in the city center again. By lowering property and income taxes, and instead placing tolls on the highways leading into the old city to offset lost revenue for road improvements, there would be a huge shift in momentum back towards the city center. Sounds like something that would take a bit of political will, but it would most certainly be a plan that would resonate with the current mayor.

    If the rate of taxation is nearly equalized with the donut counties, and exurban commuting is no longer subsidized by old city residents, people might be willing to pay slightly higher home prices to save money on gas and tolls. Then builders should be able to develop downtown sites at market rates without city help(maybe a universal 3-year abatement or credit on local taxes for developers who redevelop lots not currently performing on the tax rolls?). Combine this with a new approach to transit in the old city, and you could have the beginning of a real urban renaissance downtown.

  11. thundermutt says:

    speedblue, I agree with quite a few of your suggestions. Since you live in Texas, you are familiar with their program of converting the exurban expressways to toll roads.

    However, those programs take vision, leadership, salesmanship, and a brass pair. I don’t think Indianapolis has had that kind of mayor since Goldsmith was run out of town by the status-quo arts-and-cocktail-party types.

  12. Anonymous says:

    The bonds issued for the JW were inked in place before Ballard came into office or about the time he came into office and there really wasn’t much he could do to stop it.

    Yes, I know the ramp is coming down now, but show me the “meat” when it comes to a development for the site and Ballard’s backing of anything for it. Beyond that he really has indicated he is not likely to go around handing out huge incentive packages. My personal opinion is he really won’t be much of an economic innovator for downtown simply because he doesn’t know how.
    He might be a good Army man and can handle the organization of the IMPD and Fire Departments, but beyond that I not so sure we shouldn’t have been more careful about what we wished for…we got it. His first state of the city address merely stated what he had done with the IMPD and Fire Departments then sort of rambled off into all kinds of different directions that really ended up out in the clouds somewhere.

    Yes, granted Iupui, Lilly and a few others are “fringe” downtown employers, but do you really see any major companys looking to relocate into downtown?
    One of the best kept secrets in this city is that Lilly has been downsizing for years and will continue to do so.

    I see no incentive for any of the companies in the burbs to move downtown…the expense, employee’s lack of wanting to pay parking and the possible higher cost of communting are becoming bigger barriers. Why go through the expense of moving downtown when there is plenty of empty cheap space in areas closer to the households of their employees?

    As far as the Pacers go…well attendence is the name of the game and they don’t have it. The Simons know it and are deeply concerned about it, the NBA is so concerned they have them on the”watch list” and is taking a keen interest in it. That franchise has a huge black eye on it that isn’t likely to go away anytime in the near future.

    To pull this all back in to the topic. The Simons development in Boston makes not sense for Indy.

  13. Anonymous says:

    Speedblue you will never see tolls in Indy…won’t happen.

  14. Marshall says:

    For the anonymous poster with the pessimistic view of downtowns future, it may interest you to know that the most recent reports on office vacancy rates (again) show a vacancy DECREASE downtown and an INCREASE in the suburban markets. And this most recent suburban vacancy rate can not, as in years past, really be blamed on speculative development because there hasn’t been much to speak of.

  15. Anonymous says:

    I didn’t say I see a demise of the downtown coming…I just don’t see it expanding much for a few years.
    Downtown office vacany rates here in Indy are in and around the national average. There is plenty of suburban office space out there, which really wasn’t the point anyway. The point is there isn’t any real for corporate or employee point of incentives for companies to go to the expense of moving into downtown. Nor is there a reason for people to go out of there way (commute wise) with the high price of gas to want to go from the burbs into downtown to work.

  16. Anonymous says:

    sorry about that last post..I was in the middle of something, but you get my point…the downtown incentive just isn’t there for companies or employees.

  17. Anonymous says:

    DT is more compact and is a natural migration point for businesses as fuel prices rise. The suburbs exist and flourish because of cheap oil. In countries with higher fuel prices, you see denser communities and better mass transit.

    Goldsmith had plenty of time to serve as mayor of Indy. “elitists” didn’t run him out of time, the voting public did. Too bad for him. And he was a bad mayor anyways, so I am glad he was booted.

  18. Anonymous says:

    The key word there is mass transit which really almost nonexist in Indianapolis.

  19. Anonymous says:

    There’s no demand for such a development at that location and Simon knows it. It has little to nothing to do with ties to the area. It has everything to do with profit/loss.

    I think it has more than a little to do with the fact that the Marion County Jail is across the street from MSA.

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