Guest post by By Brent Erickson
Cushman & Wakefield|NorthMarq
Downtown Minneapolis is developing a multiple personality disorder, and that’s an overwhelmingly good thing.
At every corner of the city’s CBD, there’s more going on than a typical person can remember.
Continued interest in new development and redevelopment projects has spurred new growth, with entire districts with distinct personalities popping up where there had previously been underutilized properties or vacant land.
The result is that Minneapolis’ CBD is growing in size and attracting more people than ever before. Both in the commercial real estate world, and life in general, this isn’t the downtown previous generations were used to.
East Town: A neighborhood rises
Look at an aerial photo of Minneapolis, and it’s easy to spot the biggest change in the city of the past several years: U.S. Bank Stadium.
The $1.1 billion project, which has been paired with the City of Minneapolis’ $20 million-plus Commons park project to the west just beyond a highly used light rail station, has created a district on its own that has drawn nearly $2 billion in other private and public investment.
The result is a brand-new neighborhood dubbed East Town, complete with just about everything you could ask for.
Workers in the area are mainly coming from the $300 million Wells Fargo regional headquarters development, which contains about 1,000 employees in 1.2 million square feet of space. Soon, more workers will come from the $225 million Hennepin County Medical Center expansion on the southeast end of the neighborhood.
All the development has fueled demand for new entertainment, hospitality and dining options, and those options are sprouting quickly all over the area.
Hundreds of housing units are popping up in East Town, with apartment projects such as Edition and East End offering highly amenitized rentals, while Portland Tower and other developments provide for-sale condominium units.
The hospitality sector has already seen a Radisson Red added to the East Town fold, and more is on its way with a Marriott Moxy, Canopy by Hilton and others soon to start construction.
The neighborhood will only get more livable with a Trader Joe’s grocery store and great neighborhood eateries and bars like McKenzie Roe, Erik the Red and others popping up elsewhere.
With all the amenities in East Town creating popular places to eat, live, go to games and concerts, we expect that office demand will only follow. There aren’t many options today, but with one building already on the way and others under renovation or on the drawing board, that sector could be one to watch for growth in East Town.
The North Loop gaining refinement as office destination
The North Loop neighborhood in Minneapolis has already established itself as a top place to live, work and shop in the Midwest, if not beyond. Apartment units alone have increased nearly five-fold since 2010.
But until recently, it was hard to find a place in the area to move an entire company. With new properties opening up for office uses and others starting or nearing construction, that’s about to change.
As much as 800,000 square feet of new office construction is expected to break ground or open to its first tenants within a four- or five-block radius in the North Loop. That includes T3, the brick-and-timber office building that has already attracted a potential tenant, Amazon.com.
With ongoing intense leasing demand for this type of space in the North Loop, there’s little doubt that there will be plenty of continued interest from companies to move into the area. United Properties, Schafer Richardson and developer Ned Abdul are each planning warehouse-style offices in the North Loop as well, each totaling around 200,000 square feet.
As those properties near opening, other companies are already establishing themselves as new tenants nearby.
Arctic Cat moved about 200 jobs into 55,000 square feet in the Western Container building, which had sat for years underutilized. In similar developments, marketing firm GdB will lease the entire former Gardner Hardware building in Washington Avenue, and it’s been reported that Amazon will commit to a large chunk of space in the T3 building.
It’s not just office gaining steam in the neighborhood, either. In The Washington, a Washington Avenue property known best as a former adult novelty store, Bonobos plans to open a showroom for men, adding yet another ground-floor retail use to the neighborhood’s arterial street.
In the hotel sector, the boutique Hewing Hotel will open in the next few months, and it’s been reported that West Elm is looking for a site to open a hotel of its own.
Traditional CBD reinvents itself
So what about the downtown Minneapolis you know and love, along Nicollet Mall? There’s plenty going on there, too.
Crews are hard at work on the $50 million overhaul of the mall, Minnesota’s main street. When the project wraps in 2017, the expected result is a focal point for the city and the area.
Some retailers and property owners are preparing for the transition already: Nordstrom Rack plans to open a mall-adjacent store in the IDS Center, the YMCA Minneapolis will open a completely revamped center in the former Gaviidae Common and companies such as Xcel Energy and CenterPoint Energy have relocated their regional headquarters to the mall in recent months.
The traditional core of Minneapolis remains the strongest area for lunch options, thanks to the skyway system and the majority of the area’s food trucks parking on main thoroughfares. Some trucks have even parlayed their success into bricks-and-mortar spaces in the skyway, such as Velee Deli and Green and the Grain.
For traditional CBD office buildings, it’s a tale of two ends of the spectrum. Class-A and premier properties continue to lease as well as they have in recent memory. For Class-B and lower buildings, the name of the game is repositioning.
Properties such as 510 Marquette have undergone extensive renovations and reopened with new amenities, and more work is underway or to come at buildings including the TCF Bank building, the 15 Building, Baker Center, Northstar Center and others.
The result is a wider mix of property types in the CBD, meaning a traditional Class A location can be home to office space that feels like it belongs in the North Loop.
Northeast Minneapolis emerging as “next”?
It wasn’t long ago that Northeast Minneapolis’s main offerings were established bars and restaurants and a thriving arts scene.
But the area is growing into more of a housing hotspot, with many flocking to live just across the Mississippi River from the traditional core of downtown, and just west of the University of Minnesota campus. It wouldn’t be surprising if office users started to follow.
Residential buildings such as Mill & Main and the A Mill Artist Lofts filled quickly (within hours, in the Artist Lofts’ case), and more residential units are on the way with projects such as NordHaus under construction and others at the former Washburn-McReavy and Nye’s Polonaise sites about to start.
Meanwhile, the extended parts of the neighborhood are emerging as a creative office hotspot, much in the same way the North Loop did in the beginning of this century. Large companies such as Blue Cross and Blue Shield of Minnesota and UCare have moved in or increased their footholds in Northeast, while plenty of small companies gobble up boutique spaces in creative and unique developments making new uses of out outdated properties.
Will more office development follow? The demand seems to be there, but only time will tell. Northeast, much like East Town and the still-hot North Loop, is still carving out their own identities and extending the borders of what we consider “downtown.”
Brent Erickson is executive director of Cushman & Wakefield/NorthMar in Minneapolis.