Sandwich shop owner Fabian Orozco believes in southeast Colorado Springs.

Despite the area’s high crime, poverty and unemployment rates, he recently opened his third Taste of Philly restaurant in a storefront at the Hancock Plaza shopping center on South Academy Boulevard.

Orozco has lived in the southeast for years. Neighbors who’d eaten at his two north side Taste of Phillys — the first of which opened more than a decade ago — asked when he planned to open a location closer to home, he said.

As Orozco sees it, southeast residents spend more money to eat out these days. His delivery drivers are happy and the area shows signs of improvement. More than two months since opening his southeast-side Taste of Philly, business is good at the new location, he said.

“I know the area here,” Orozco said during a break from making lunchtime sandwiches. “It’s a very good area. I’ve lived here for 20 years. And I don’t want to move from here.

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As Taste of Philly owner Fabian Orozco sees it, southeast residents spend more money to eat out these days. His delivery drivers are happy and the area shows signs of improvement. (Photo by Christian Murdock, The Gazette)

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“I can tell you and I can tell the other people, if they want to open here, it was a very good decision (for me) to open here.”

It’s a vote of confidence in an area that has long been in need of one. The trouble is, not enough businesspeople, employers and developers seem to share Orozco’s view.

While the rest of Colorado Springs enjoys near record-low joblessness and a sizzling real estate market, the southeast remains mired in the same economic doldrums that have kept it from sharing in the city’s prosperity. Mom-and-pop businesses are all well and good, area advocates say, but the southeast also needs large employers, more jobs and bigger paychecks.

Real estate developers concede it’s tougher to launch projects there, and many retailers covet faster growing and wealthier parts of town. Even city economic development leaders say parts of southeast Colorado Springs are unattractive to prospective employers.

Yet, local residents and supporters say southeast Colorado Springs can become an economic force — if only the business community, governments and institutions would invest in the area.

“There’s a ton of opportunity to start and grow businesses down there,” said Taj Stokes, a southeast resident who's worked as a financial adviser and now is executive director of Thrive! Colorado Springs, which teaches small-business people to become entrepreneurs. “It’s just overcoming the stigma. Because the stigma is, it’s the poor side of town.”

An ethnically rich area

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Major roadways — such as South Circle Drive, Hancock Expressway and Airport Road — are home to strip malls, small office buildings and apartments. King Soopers moved to the shopping center in 2003. (Photo by Christian Murdock, The Gazette)

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In many ways, southeast Colorado Springs businesses and services are no different than other areas of town.

South Academy, between Platte Avenue and Drennan Road, is a busy retail corridor with shopping centers, new car dealerships, smaller strip malls and fast-food restaurants. Walmart, Starbucks and Walgreens are among South Academy’s familiar names.

Office space — including Class A properties — is available near Academy and Fountain boulevards, while the Postal Service operates its main post office near the intersection.

Powers Boulevard to the east, the area’s other major north-south corridor, is a newer mix of warehouses, distribution centers, offices and hotels a short drive from the Colorado Springs Airport. Defense contractors occupy some of Powers’ office space; residential areas line portions of the corridor’s west side.

Other major roadways — such as South Circle Drive, Hancock Expressway and Airport Road — are home to strip malls, small office buildings and apartments.

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Like other parts of town, southeast Colorado Springs has its success stories. Long lines of pastry fans are common at Amy’s Donuts, the popular eatery along Fountain Boulevard just off South Circle Drive that opened in 2013.

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And like other parts of town, southeast Colorado Springs has its success stories.

When he opened his third Taste of Philly in early September, Orozco added 16 jobs in the area. A few miles away, long lines are common outside Amy’s Donuts, the popular eatery off Fountain Boulevard and South Circle Drive that opened in 2013.

Ben Westridge, who opened Warrior Fitness Center six years ago near Academy and Drennan, is doubling his facility to 5,000 square feet to accommodate his 70 members.

“I don’t think this area’s a bad area,” said Westridge, who lives off Fountain and Aeroplaza Drive in the southeast. “I don’t think this is a dying area. I could be wrong. I could go out of business soon. But we’ve had some growth down here.”

Craddock Commercial, a longtime family-owned real estate company in the Springs, bought the former Kmart building at Airport and Circle about a decade ago. After a remodeling and several years of marketing, the building is 90 percent occupied, said CEO Matt Craddock.

Last year, the Janitell family of Colorado Springs constructed a 9,600-square-foot retail building on South Academy, north of a Walmart Neighborhood Market. It’s one of the corridor’s newer buildings, and commercial broker Paul Kuyper of Riverside Real Estate said at least two businesses have shown strong interest in leasing more than one-third of the space.

Broker Jay Carlson of Front Range Commercial, who has marketed retail properties in the area for years, including along South Academy, said many national names like the corridor’s traffic counts and visibility.

“It just doesn’t happen to be the glamorous, high-end stuff,” Carlson said.

Southeast Colorado Springs also has become a popular location for restaurants, beauty salons and other mom-and-pop businesses.

Cheaper lease rates provide opportunities for smaller businesses, Carlson said. In the third quarter, retail lease rates averaged under $9.50 a square foot, compared with nearly $23 per square foot on the trendier northeast side, according to Xceligent Inc., a suburban Kansas City. Mo-based firm that collects commercial real estate data nationwide.

Pockets of African-American, Korean, Hispanic and other minorities also make the southeast side a racially and ethnically rich area, Carlson said.

Southeast Demographics: Click the highlighted areas below for detailed information

“You’ve got concentrations of those kind of folks down there, and so you’re seeing a lot more of those kinds of businesses flourish,” he said. “I’ve made a good living leasing space to all those kinds of businesses. There’s a lot of brokers and landlords that don’t want to deal with those kinds of businesses because it’s not signing a five-year lease with Best Buy. Those folks work harder than anybody else to stay in business and most of them stay there a long time.”

Big boxes depart

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The former Smuggler's Inn restaurant lies abandoned in October along Fountain Boulevard in southeast Colorado Springs. (Photo by Christian Murdock, The Gazette)

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While some individual businesses do well in southeast Colorado Springs, numbers tell another story about the broader area.

Empty storefronts are more common on the southeast side; its third-quarter retail vacancy rate of nearly 17 percent was the highest in the Springs and more than double the citywide rate of 7 percent, Xceligent says.

Even though Walmart opened a Neighborhood Market in 2013, it also closed and relocated a Sam’s Club on South Academy two years later that remains empty.

Other big boxes and familiar names, including Best Buy and Red Lobster, closed South Academy locations in favor of the trendier northeast side. Target shuttered in 2013 at Academy and Platte Avenue, although a home furnishings store later filled that space.

Higher unemployment also plagues the area. U.S. census data from 2015 — the latest available — showed an 8.7 percent unemployment rate citywide, but the southeast side grappled with 12 percent unemployment. The unemployment rate soared into the high teens — upward of 18 percent — in some southeast-side neighborhoods, according to census data.

Citywide, median household incomes topped $54,500 in 2015, according to census data. But household incomes in several southeast census tracts were thousands less — as low as $26,752 in one area southwest of Academy and Fountain. And while southeast has a few relatively new residential areas such as Spring Creek and Soaring Eagles, many neighborhoods are composed of older and cheaper housing.

“The demographics are tough,” said Salida developer Walt Harder, whose company is one of three groups redeveloping portions of blighted Nevada Avenue south of downtown. “That’s a poorer section of the city. Retailers who look at it don’t typically like the demographics, which doesn’t drive new development, which doesn’t drive rejuvenation and newness. So things continue to decay. The area continues to decline in value and thus the lower-income people continue to move into that area. It kind of expands itself. It’s unfortunate.”

Developers also prefer greenfield — or vacant — sites where costs are lower. On the older southeast side, it’s pricier to buy several pieces of land, assemble them into a single parcel, raze older structures and then rebuild, Harder said.

If costs are more expensive, developers must charge higher lease rates to get a return on their investment. But they can’t necessarily get the higher rents they need on the southeast side, since many big-name retailers prefer faster-growing areas, Harder said. That means there’s little incentive to develop large shopping centers and mixed-use projects on the southeast side, he said.

“I think there’s lower-hanging fruit, right now, for developers,” Harder said. “And they’re going to continue to spend energy on the north and east parts of town, where the rooftops are.”

Streets that divide

Portions of southeast Colorado Springs also have a rundown look that turns off potential employers, say some city and business officials.

A 2014 Colorado Springs report that focused on South Academy described the corridor as “cluttered with overhead transmission and power lines, concrete medians, minimal landscaping, and a hodgepodge of billboards and signage. Vacant buildings are deteriorating and in disrepair. There is no continuity or character, or sense of place”

A shuttered building that two decades ago housed the Smuggler’s Inn restaurant on Fountain Boulevard, west of Circle Drive, has been an eyesore for years, said Tammy Fields, senior vice president of economic development for the Colorado Springs Chamber of Commerce & EDC.

“The weeds are sky high,” Fields said. “There needs to be some changes made there to even make it semi-attractive.

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Vehicles commute east and west on the Martin Luther King, Jr., Bypass in October. The highway splits the southeast part of Colorado Springs. (Photo by Christian Murdock, The Gazette)

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“I talk about this all the time,” she said. “When I’m hosting companies in the community, as I’m driving them around, they’re looking at our community. It’s much like staging your home for sale. You want it to be the most attractive that it can be so that you’re showing it well. Some of those areas don’t show well. ”

Southeast Colorado Springs also appears to have been developed without master-planned neighborhoods, and lacks strategically laid-out subdivisions, regional parks or other amenities that employers like, said John Maynard, the longtime urban planner and former owner of the N.E.S. land planning firm in Colorado Springs.

The area’s network of criss-crossing arterials has the effect of cutting off large neighborhoods from each other, he said.

“Streets can do two things,” Maynard said. “They can either be a vehicle to unite across the street or they can be a vehicle to separate. I think a lot of them in southeast separate, rather than unite. The (Martin Luther King Jr.) 24 Bypass is, to me, a good example. And the Milton Proby Parkway is another good example. You wouldn’t, by design, walk across the street.”

Services also can be problematic. City Councilwoman Yolanda Avila, who represents the southeast side, says there are too few buses serving the area, and their intervals are too lengthy, she said.

Avila, who is legally blind, said she walks a mile just to reach a bus to take her downtown to City Hall. Stokes, of Thrive! Colorado Springs, recalls a one-way, two-hour bus ride he once took to reach the El Paso County Citizens Service Center on the far northwest side.

Limited bus service isn’t just an inconvenience; many southeast-side residents must reach the Citizens Service Center for job training and other assistance from the Pikes Peak Workforce Center and other agencies, Stokes said. If they can’t get the help they need, chances decline that they’ll land a job.

“You’re a single parent, and you’ve got one car,” he said. “And that car breaks down. Then you’re stuck on this side of town. It’s a hard row to hoe.”

Many reasons to look elsewhere

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Weeds grow though the cracks of the empty parking lot outside the old King Soopers at the Mission Trace shopping center Monday, Oct. 30, 2017. King Soopers left the shopping center in 2003 and moved across South Academy Blvd. to the Handcock Plaza shopping center. (The Gazette, Christian Murdock)

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The southeast’s problems were identified years ago, and yet little seems to change.

The 2014 report that highlighted South Academy’s troubles stemmed from the city’s earlier declaration of the corridor as an economic opportunity zone. Late last year, the Colorado chapter of the Urban Land Institute held a panel discussion that again highlighted southeast woes.

“Most of the businesses are kind of migrating northeast, kind of leaving the south side out,” said Elizabeth Gardner of Xpressions Beauty Studio in the Mission Trace shopping center, southeast of Academy and Hancock. “But there’s still people here, there’s still a community here, there’s still a need here. So, we can’t give up over on this side of town.”

In fact, southeast advocates insist there’s growing optimism that change can come to the area.

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City Councilwoman Yolanda Avila who represents the southeast side. (Photo by Rich Laden, The Gazette)

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“From a business perspective, you’ve got a lot of positive things,” said Jariah Walker, executive director of the Colorado Springs Urban Renewal Authority. “You’ve got cheaper rents. It’s much more affordable to get into a space down there. You’ve got a lot of opportunities as far as less competition. If you’re going to go in and you want to start a project or you want to start a particular service, there’s a lot of success to be had around here.”

This year, the Colorado General Assembly created a small business loan program designed to make $5.8 million available over three years to assist small businesses in southeast Colorado Springs and Aurora.

“How do we develop these areas?” asked Avila, the city councilwoman. “And who’s going to give these persons a loan? So, there’s this funding source. Now they don’t have to go to a bank.”

Thrive! Colorado Springs, meanwhile, continues to work with small-business people to train them how to either get started or enhance their businesses, Stokes said. The training program, which lasts a year, was launched in September 2015.

“Our primary goal is to help people get jobs or create jobs for them,” he said.

A year ago, the Springs-based El Pomar Foundation committed $350,000 over seven years to support the RISE Coalition — more than 30 public, private, nonprofit and community agencies that are seeking to improve conditions in the southeast.

Walker, of the Urban Renewal Authority, says the agency is looking for redevelopment projects with interested developers. While some have kicked the tires on projects in southeast Colorado Springs, nothing is in the works.

Craddock, whose company owns the old Kmart building and five of nine buildings that make up the Mission Trace shopping center, acknowledges new development in the area has been sparse and finding retailers to move into empty spaces can be a challenge.

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Elizabeth Gardner of Xpressions Beauty Studio in the Mission Trace Shopping Center, southeast of Academy and Hancock. (The Gazette)

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Yet, he has talked with potential new tenants for Mission Trace, while the coming together of Thrive!, the RISE Coalition, El Pomar and other groups shows the southeast side is poised for improvement driven by local leaders, residents and businesses.

“I see the change coming from within the community as opposed to regentrification and kicking people out,” Craddock said. “Organic growth versus growth by proxy.”

Colorado Springs planners who are amending the city’s Comprehensive Plan — a blueprint to guide land uses citywide — are paying close attention to the southeast side’s needs, said Peter Wysocki, director of planning and community development, and Carl Schueler, comprehensive planning manager.

The city’s Economic Development Division, which has a handful of tax incentives it can use to help lure businesses, is exploring whether to ask the City Council to give it authority to use those incentives — such as sales tax rebates — without first obtaining the council’s OK, said Bob Cope, who heads the economic development office. The goal would be to streamline the use of incentives when potential employers and businesses come along.

Cope, who also has worked as a commercial real estate broker, says he’s optimistic that efforts by the city, the Urban Renewal Authority, the state and others will encourage change in the area.

“Once you have a growing economy, people are going to start looking at all of our existing areas for reinvestment, because we won’t continue to grow outward always,” Cope said. “As people start looking where they want to live and where they want to work, they’ll start looking at our existing areas. At some point, it’s going to make them start reinvesting in homes and commercial properties throughout the city. Including southeast.”

Even those optimistic about the southeast’s future know nothing is guaranteed, however.

As city staffers develop Colorado Springs’ new comprehensive plan, they acknowledge it’s only a guide.

“You can have a good one, but it can’t generate the market,” Wysocki said. “It can’t force investors, developers, businesses to redevelop their properties or build new businesses. It can be used to support those activities. But it’s not a ... it is not a stick, so to speak.”

True enough, said Randy Dowis, a commercial broker with NAI Highland in Colorado Springs, adding that many businesses would have ample reason to look elsewhere.

The north side with its many amenities, the Powers corridor where sites are zoned for industrial and office uses and have utilities installed, and even a proposed office park near the Colorado Springs Airport all have a leg up — giving larger employers little reason to consider a southeast location.

“I don’t see what would ever be the draw to go into that geographical area,” Dowis said. “I don’t know what would drive a major employer to go there.”

A SNAPSHOT LOOK AT SOUTHEAST BUSINESS CONDITIONS

  • A greater percentage of empty storefronts. Shoppers are likely to find more vacant spaces in southeast Colorado Springs. The area’s third quarter vacancy rate of 16.8 percent for shopping centers and retail buildings was more than double the 7 percent rate in the Pikes Peak region, including Colorado Springs, the Tri-Lakes communities north of town, Fountain-Security-Widefield to the south and Manitou Springs and Woodland Park to the west.
  • Cheaper commercial rents. With several older shopping centers and competition from newer areas, commercial landlords in the southeast can’t necessarily command as much in rent. The cost to lease retail space in southeast Colorado Springs averaged $9.36 per square foot in the third quarter. Across the rest of the Pikes Peak region, retail rents were several dollars higher — averaging $13.74 during the same period.
  • Lower property values. Single-family homes sell for less on the southeast side. The median value of single-family homes in 2015 across southeast side census tracts ranged from $108,400 to $199,400. Citywide, median values were $212,700.
  • Comparable rents. The median gross rent paid by southeast side apartment dwellers in census tracts that make up the southeast side ranged from $659 to $1,359 a month in 2015. In the rest of the city during that year, the median gross rent was $922.
  • Lower to comparable household incomes: Southeast-side residents generally have less money in their pockets. Of 18 census tracts that make up the area, 16 had median household incomes in 2015 that were less than the citywide figure. In those 16 census tracts, household incomes ranged from $26,752 to $54,308; citywide in 2015, the median household income was $54,527.
  • Higher unemployment: Jobs are harder to come by in southeast Colorado Springs. The unemployment rate in the 18 census tracts that make up southeast Colorado Springs was 12 percent in 2015 — and 18.7 percent in one tract. Citywide that year, the rate was 8.7 percent.

Sources: Gazette research; U.S. Census Bureau; Xceligent Inc., Kansas City, Mo.

Burt Hubbard contributed to this story.