Spend some time in downtown Minneapolis and the truth starts to reveal itself: Underneath all that shiny beauty, nestled between the giant trophies of art and commerce, are holes and pockmarks — acres of empty land that promised developments that never came to pass.

Over at Second Street and Washington Avenue, a precarious chain-link fence encircles a field of dirt that was supposed to be the anchor for Brighton Development’s Portland project. The developer, which was responsible for much of the riverfront renewal, likewise halted plans for its Warehouse District Live/Work project late last year.

In fact, an increasing number of plans for downtown development continue to be suspended in mid-air with little hope of completion. Just today, it was announced that Minnetonka developer Opus has pulled out of the Nicollet, which was heavily touted as the tallest residential tower in Minneapolis, and loaded to the gills with high-class amenities to boot (pictured above in a design rendering). The Nicollet hasn’t pre-sold enough units to secure construction financing. And with the credit crunch increasing requirements for both commercial and residential financing, its future looks bleak.

Earlier this week Finance and Commerce wrote about the North Loop neighborhood, which sits in a sort of development purgatory as the Twins Stadium gets assembled in its center and plans get stalled all around it. The Pacific project, the paper notes, has been scrapped. The original plan included 327 condos, a 133-room hotel, and retail space. The reason, according to developers, is that financing dried up.

But the other major hurdle downtown developers face is selling the condos. Not only is the condo market in glutted mode (there’s presently a 12.5-month supply of condos in Minneapolis); stricter lending standards are simultaneously making condo sales more difficult. Condo buildings composed of rental units and retail space are considered…

Continued: Click “Read More”high-risk to lenders because so many businesses fail. Condos with a high number of rental units on top of abandoned businesses are hard to resell.

For those reasons, the North Loop Village (developed by the Hines group) has been altered from what was slated to be a quaint downtown community imagined as “Twinsville” all the way down to a 350-unit apartment building, and even the latter is still only a faint possibility at this point. Originally North Loop Village included 1,250 residential units, 120,000 sq. feet of office space, and 45,000 sq. feet of street-level retail on eight acres of land.

So what will become of all those empty holes? And what does this mean for downtown? It means the city will have to spend more money to court developers and finance projects if it wants to continue with its long-range North Loop Master Plan, a tableau that includes mixed-use development, retail space, walkable streets, and mass transit like the Northstar Commuter Rail Line.

According to Beth Elliott, Minneapolis’ principal city planner, the slowdown or halt in development won’t affect the plans for the Northstar, which is slated to open in 2009. “The two aren’t very related at this point,” she tells Minnesota Monitor. “Obviously we want development around transit lines. But its path is more based on people who are coming into downtown from the suburbs.”

And as for development of the North Star Village around the transit line, Elliott says that Hines is currently going through an environmental review process of the area, meaning that all options — from more apartments to fewer, more retail to none — are still possible.

Elliott says the city hasn’t seen a lot of new projects proposed for the area suffering from a serious and unplanned slowdown. “A lot of properties have already been converted,” she says. The plan for the city now, she notes, is to court development on “trickier” sites by offering potential for financial support. “What the city will do is continue to support development with potential for financial subsidy,” she says.

“Everything is slowing down,” she adds. “But in places were we own sites, like the Mills District, our plan is to move forward with RFPs.”