Thanks to their diversified economy, Minnesota’s Twin Cities’ real estate activity is picking up.
Minneapolis-based firms such as 3M, Target, Cargill and Carlson Companies as well as government and healthcare are starting to drive job growth, says Patrick E. Mascia, senior vice president, Minneapolis-St.Paul Operations at Duke Realty Corporation of St. Louis Park. “Our industry requires jobs to thrive, so we are taking a step in the right direction,” says Mascia. “Leasing activity seems to be picking up across all sectors, but rents are flat and concessions plentiful. We expect modest progress in the Twin Cities in 2011 as things slowly start to tighten up.”
Duke has a preliminarily approved plan for 1.1 million square feet of new office space at its West End project in St. Louis Park, but will not start a speculative office project until the market will support it. “We will seek build-to-suit projects that would be a good fit for our sites,” Mascia explains. “We recently sold an acre in our West End project to a local multifamily developer who plans to start a 120-unit multifamily project next spring.”
Rick Collins, vice president of Development at Ryan Companies US, Inc., of Minneapolis, an integrated development, design and construction company, adds that the area unemployment rate is currently about 7.1% — much lower than national average. “We are seeing a shift — albeit slowly — to more positive momentum in the market,” he continues. “Recent bright spots include improving performance in hotels and restaurants.”
Collins notes there is little development occurring except for build-to-suit projects. “Capital is seeking good return opportunities that may be found with appropriate acquisitions of distressed or underperforming assets,” he explains. “Larger national and regional housing developers appear to be planning for their next developments to be ready to deliver new products as the market improves.”
Smaller, close-in suburban single family projects are being reported including a few well-located, primarily upper market residential rental projects, points out Michael Lander, president of Minneapolis-based Lander Group – an urban infill, mixed-use real estate developer — and a member of the ULI Advisory Council. “Student housing is still strong at the University of Minnesota,” says Lander. “Financing is still very tight, but appears to be loosening a little. Underwriting guidelines are very strict.”
The Lander Group is planning two small residential rental projects in south Minneapolis. “We are also working on master plans for two light rail stations scheduled to open in 2014,” he continues. “At one of those stations, we are pursuing a major, 700-employee firm that wants to relocate from a suburban off ramp to a ‘mixed-use, transit served, walkable’ area. It’s a very positive development.”
The ULI Minnesota Council is seeking to energize the region and is working with the Brookings Institute to develop a metropolitan business plan for the area that will create a culture of entrepreneurship and innovation, says Colleen Carey, LEED AP, President of Richfield-based The Cornerstone Group, a real estate development firm with a focus on sustainable, transit-oriented redevelopment.
“We have convened the Regional Council of Mayors to educate elected officials about important issues in the region so that they can work together for the common good,” adds Carey, a member of ULI’s Transit Oriented Development (TOD) Council. “Thirty-four mayors are working together to analyze where the region’s economic strengths and weaknesses lie, what challenges and opportunities key industries face and what can be done to capitalize on strengths or fix problems. We are also integrally involved in the planning efforts along our new light rail corridors and are helping to shape future development along those lines.”