April 5, reporter Susan Feyder, writes:
Despite high construction costs, market conditions may bode well for office development in Minneapolis for the first time since 2001.
It's been six years since downtown Minneapolis got a new office tower, but the signs are growing that at least one could be announced sometime this year.
The vacancy rate for office space has dropped for the past two years, and the rate for top-tier Class A space stood at 13.6 percent at the end of 2006. Typically, developers begin considering adding office buildings when the vacancy rate gets down to 10 percent.
Space is even tighter in office buildings along Nicollet Mall, where the vacancy rate is just 6 percent, according to figures compiled by Bloomington-based United Properties. At year's end, the IDS Center's vacancy rate was 3 percent, while 50 S. 10th St. (formerly Retek on the Mall) was completely full.
"There's a high likelihood we'll see someone come out with plans for a new [downtown] office project within the year," said Brent Erickson, a senior associate at United who specializes in the downtown market. Erickson said the economy is expected to stay relatively healthy, keeping companies growing and in need of more space.
Even so, Erickson said a couple of things will have to change before a developer moves ahead with plans for a new office project. Rental rates have risen in the past couple of years but would need to increase more to get close to the cost of newly built space, creating the equilibrium that would encourage demand from tenants for new office space.
In addition, an anchor tenant for a new building would have to emerge. "You can figure that any new office building that goes into the downtown core will be at least 600,000 square feet," said Russ Nelson, president of the real estate brokerage firm of Nelson, Tietz & Hoye. "You would probably be looking for an anchor that would take about 300,000."
April 6, Jim Butcha reports:
Downtown condo plan goes retail
The developer shifted gears in a saturated downtown condo market. The new plan has Whole Foods and possibly a Best Buy.
A Seattle company has pulled the plug on plans to build a 290-unit condo building planned for the Downtown Jaguar site at Hennepin and Washington Avenues in Minneapolis. Instead, the company is proposing an all-retail complex that will include a Whole Foods and what could be downtown's first Best Buy store.
This is the second luxury high-rise downtown condo project to alter plans in response to a sluggish market, and one of several that's being redrawn for commercial or retail purposes.
In recent days, for example, the group that had planned to build the 350-unit Nicollet condominium tower along the Nicollet Mall announced plans to make it a mixed-use project. Some downtown condo projects are on hold indefinitely.
Many applaud the changes at what was once called the Two Twenty Two project, because it will take some pressure off an already soft condominium market. And it will add much-needed retail to a historic burgeoning riverfront neighborhood that's packed with new housing, sprawling parks and a growing number of cultural attractions.
"This would just be dynamite," said Fritz Kroll, North Loop livability chairman and a sales agent for an Edina Realty office that's in a renovated 1800s hotel down the street from the project.
"It says that there's enough housing already on the market and that there's already enough housing here to support some substantial retail growth."
[italics added] There's more detail to both items, especially the second, but with regard to Ramsey real estate dreaming, is any of this a good message?
Ramsey competed for that dense housing - Downtown is a more attractive location for that market segment, clearly, whereas Ramsey has prospered on a steady not heady growth by offernig more house and lot for the money - until recently when, with James Norman as City Administrator and with more than a gentle nudge from the Met Council (wanting to gain sewer connection and usage income from us), there was a shift in goals and direction.
Retail? Downtown's after that also, to match its advantages in dense housing. Elk River has its new shopping growth, and Riverdale's been built out. Retail saturation is a worry any potential Ramsey retailer would have to face and weigh in decision making.
Office? Downtown on the move again. What Ramsey has been good at, and successful with, has been the 1 to 1-1/2 acre lot and single family home, and the suburban small shop and warehouse job growth along the BNSF track corridor from the Anoka Business Park (where businesses such as E-Street Makers are housed in Anoka) up to the edge of the near vacant "Town Center" acreage west of Ramsey Blvd.
What has our city council and esteemed set of planners, in hand with Met Council, achieved via its latest trend in decision making?
Can you say "Mistake"? Can you say "Failure"? Can you say "Nedegaard Bankruptcy"? Can you say "Escalating Taxes"? Can you say "Leveled Public Services"?
Get a broom? Make a clean sweep in 2008? Or hold onto a questionable status quo and hope and dream some more into mid-century? Realism, or the romance of growth and the myth of over-saturated humongo numbers of new rooftops aiding us and not just Met Council's cashflow?
John Feges came to Council saying "Upscale" and "The Developer will pay for everything," then in the Monday May 19, 2003, front-page "Billion dollar urban village" article it became, "The developer could pay for everything." After a publicly funded $19 million was blown for City Hall moving and Ramp funding, plus upfront City millions spent for fronting sewer/water and other infrastructure for this private profit-seeking venture, we have a reported developer bankruptcy situation (without having paid for "everything" by any measure). We had Mayor Gamec expressing "doubt" in years-past City minutes about the level of housing exceeding 500 units, whereas we see thousands are planned. We see developer price-cutting and rent-to-own. That does not ring "upscale" to my hearing. Is there any sense of wanting to hold people accountable? How will that be achieved with who accountable for what, exactly?