After years of blight, Boulder’s Diagonal Plaza could finally be redeveloped

Boulder City Council soon will have the chance to kickstart the redevelopment of Diagonal Plaza, the run-down strip mall at the southeast corner of 28th Street and Iris Avenue. With its numerous vacant storefronts and acres of empty parking lots, the nearly 60-year-old plaza is an eyesore and one of the few blighted areas in the heart of Boulder.

Currently slated for the Council’s Oct. 5 agenda is consideration of a special ordinance that would allow a portion of the run-down Diagonal Plaza strip mall at the southeast corner of 28th Street and Iris Avenue to be redeveloped into a mixed-use commercial and residential district with a community park.

A special ordinance would be an unusual step to spur a redevelopment project. That it is even being considered is a reflection of Diagonal Plaza’s long history of decline, its confusing mess of ownership and the desire of city officials to see the site improved after years of failed attempts.

“This is a very odd, unusual circumstance that we don’t often see,” said Elaine McLaughlin, senior planner for the city of Boulder. “Both the planning board and the City Council wanted this to be resolved because [the site] is essentially a really large parking lot that has been underutilized for years.”

The proposal

If the Council approves the special ordinance on Oct. 5, it would clear the way to redevelop the western portion of Diagonal Plaza and the surrounding parking lots into a mixed-use community featuring 291 residential units and about 27,000 square feet of commercial space. Seventy-three of the residential units would be permanently affordable. The rest would be workforce housing. The buildings would be split between one and four stories, with ground-floor retail space facing 28th Street and residential units up above.

The project is a partnership between Boulder Housing Partners, which operates the affordable housing development Diagonal Court directly south of the site, Trammell Crow Co. and Coburn Partners.

None of the few remaining businesses in Diagonal Plaza would be displaced by the project. The only occupied space in the western section of the mall is a Walgreens. Its employees and pharmacy will be moved to the Walgreens location at 28th Street and Valmont Road, just a couple blocks south of the plaza. Most of the space that would be demolished is a vacant former Sports Authority. And the majority of the redevelopment would not occur in the footprints of demolished buildings, but in Diagonal Plaza’s endless parking lots to the north, west and south of the mall building.

The project would also add new city streets and a new multi-use path through the plaza. Those would not only facilitate access to the new development, but also increase mobility for the residents of the existing Diagonal Court affordable-housing development, which currently does not have a protected way to drive, bike or walk to a city street or any nearby shops.

The tentative timeline for the project calls for building permits to be secured by the end of 2022.

How did we get here?

If the project goes through, it will be the culmination of years of efforts on the part of city officials to revitalize the plaza.

“It has been blighted for a long time,” McLaughlin said.

Diagonal Plaza, which was constructed in the 1960s, has been a struggling shopping center for some time. It was flagging as far back as the late 2000s, prompting the City Council in 2010 to authorize a technical panel to look at revitalization options.

Back then, Council members were completely divided on what to do with the space. In the 2010 meeting where they authorized the technical panel, some Council members brought up that a big-box store such as Lowe’s or Walmart could revive Diagonal Plaza. Others suggested department stores such as Kohl’s or JCPenney. One idea was to redevelop the whole mall into a Costco.

Over the decade-plus since then, numerous retailers have been churned through Diagonal Plaza, none of them sticking. There was, briefly and controversially, Boulder’s only Walmart, a Neighborhood Market. Sports Authority, Albertsons, Ross and PetSmart also opened and then shut down locations in the mall. Currently, the only nonvacant big-box space in the plaza is that occupied by a 24 Hour Fitness.

As tenant after tenant came and went, Diagonal Plaza delivered less and less tax revenue to the city, and the mall’s physical infrastructure deteriorated. Its parking lots also became home to encampments of homeless people living out of their cars.

Developer Coburn Partners, which could not be reached for comment, put it this way in a written statement it submitted to the city planning board:

“The Diagonal Plaza area has been a blighted strip mall for decades and the community has desired change there for many years,” the statement said. “The subject site is entirely paved, there are numerous issues with storm water and utilities in the area, the plaza has long-term vacancies and high tenant turnover, and large portions of the site are in disrepair.”

The challenges of redeveloping Diagonal Plaza

If the site is blighted and vacant, and city officials want it redeveloped, why has nothing happened yet? The answer lies with Diagonal Plaza’s confusing ownership and restrictive zoning.

Data from the Boulder County Assessor, Colorado Secretary of State, Boulder County Clerk and Recorder and county property tax records indicate 15 separate owners of various portions of the mall, in some cases with multiple parties co-owning the same parcel. Any large-scale redevelopment of the eastern portions of the mall would require agreement amongst parties with divergent interests.

Boulder developer Stephen Tebo, who owns the vacant building in the northwest corner of the mall parking lot, said he’d rather see more commercial space rather than residential in a Diagonal Plaza redevelopment, but that “whatever happens will be an improvement on what we have.”

The building Tebo owns on the site was formerly a 3 Margaritas Mexican restaurant. He said he is working with potential tenants and should have the space filled in the next few months, and that he’s working with developers and city officials to ensure the redevelopment still allows for adequate access to his building.

In addition to the 2010 technical panel, city officials have taken numerous shots at revitalizing the mall in the past, none of which came to fruition. In 2011, the City Council pursued a blight study that if it found the plaza to be officially blighted would have allowed the city to condemn it through eminent domain. However, the Council voted not to approve that blight study.

In 2018, the area was included as part of an Opportunity Zone, a program established as part of the Tax Cuts and Jobs Act of 2017 that allows investors to realize certain tax incentives if they put their money into projects within economically distressed neighborhoods. However, that also failed to spur redevelopment efforts.

Zoning has also proved an obstacle. Diagonal Plaza is zoned Business-Community 1, a designation that comes with strict open-space requirements if mixed-use spaces are built there. Current zoning regulations allow for the construction of only 56 new residential units on the site, a far cry from the 291 that are planned in the redevelopment proposal. Boulder has also historically been reluctant to rezone individual properties or change zoning rules when the zoning or rules are still in line with the city’s area and comprehensive plans, McLaughlin said. Meaning, those were not realistic options for the redevelopment project.

“Even though there was interest in redeveloping the site, the question became, ‘How could we manifest something here without having to go through rezoning or changing zoning rules?’” McLaughlin said.

That is why the Council will consider the special ordinance on Oct. 5. The ordinance would modify land use code standards for the portion of the property to be redeveloped, allowing developers and city officials to move forward without making changes to zoning.

What does the future hold?

If the ordinance passes, development plans have a tentative timeline that involves the project coming before the planning board in January 2022, with technical documentation submitted in March and building permit applications in by the end of the year.

As for the rest of Diagonal Plaza, another project has been submitted to convert about 37,000 square feet of the eastern portion of the mall into a veterinary hospital. If that is successful, it would leave few tenants left beyond 24 Hour Fitness and the Colorado driver’s license office.

It’s unlikely that the city would again look into eminent domain as a mechanism to spur further redevelopment, McLaughlin said.

“The city is probably not in a position to do that,” she said.

Instead, the hope is that the redevelopment efforts at Diagonal Plaza will catalyze further projects and encourage the numerous other property owners to explore redevelopment of their own.

“How can we make something happen when nothing has happened and it’s been so difficult to make things happen?” McLaughlin said. “We hope this might be a way to spur on the other property owners.”

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