Downtown Minneapolis Office Market

Downtown - North Loop - Mill District - Elliot Park - Loring Park
twincitizen
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Re: Downtown Office Market

Postby twincitizen » July 26th, 2013, 10:42 am

http://www.bizjournals.com/twincities/b ... eiman.html
What's left for Star Tribune HQ after the Neiman Marcus sale?

I don't think any of these are realistic options. Strib has explicitly stated that they are not seeking Class A. Clearly they don't need to be in the middle of the CBD either, just close to it. In fact, being close to government and sports downtown is probably more important than any other proximity concerns. Getting to put their name on a building is a bonus. I don't think they will be buying any buildings, as Sam Black speculates in that article. They are almost certain to lease rather than buy, given the unpredictable business of newspaper publishing.

Here's a good question: Why aren't they part of the big Ryan development? They could be in the (potential) building at the end of the park, with their name on it, facing the stadium. Or they could be the potential development on top of the parking ramp, which Ryan is retaining "air rights" to.

mattaudio
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Re: Downtown Office Market

Postby mattaudio » July 26th, 2013, 10:52 am

I'm still hoping for the Block E idea, especially if a developer could get one or two other media tenants in there to create a 24/7 active media vibe above street level with studio windows, signage, tickers, etc. Along with further subdividing the street level and building better connections to the skyway, this could be quite the hub rather than the fortress it is today.

Bob Lux seems to still be hoping for a casino, however.

Tyler
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Re: Downtown Office Market

Postby Tyler » July 26th, 2013, 1:32 pm

Or they could be the potential development on top of the parking ramp, which Ryan is retaining "air rights" to.
This would be amazing. Especially if the turned the first level into a lobby/retail/whatever, and moved the first floor of the ramp to level 2.

I had thought the old HGA HQ would be a good fit as well. But it looks like only 60K sq ft are available. I thought it was completely empty? Anyone know what's up with that building?
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twincitizen
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Re: Downtown Office Market

Postby twincitizen » July 31st, 2013, 7:02 pm

Well this news certainly doesn't bode well for any large office announcements anytime soon.

http://www.bizjournals.com/twincities/b ... arket.html

Viktor Vaughn
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Re: Downtown Office Market

Postby Viktor Vaughn » August 5th, 2013, 12:40 pm

The new C&W survey reported that second quarter office space absorption was essentially flat. In the Twin Cities positive absorption was only 3,776 square feet and downtown Minneapolis actually had NEGATIVE absorption of 104,272 square feet. First quarter TC absorption was a much healthier 345,780. Burl Gilyard (who must have moved from F&C to Twin Cities Business, when I wasn’t looking) reports that office space absorption is a crucial gauge of the general economy.

http://www.minnpost.com/twin-cities-bus ... ets-slower

My first thought is that the second quarter could be a blip. The low numbers could just relate to few companies actually signing leases in the quarter. We know that a host of companies are looking for office space; just not that many were counted in this one quarter’s statistics.

And then there’s the question of whether looking at the whole market is really the most important statistic for predicting office development. Even if one drills down to just stats for just Class A space in downtown Minneapolis, that would hide the very tight market for space along the southern end of Nicollet Mall. If we were to have new spec office development, wouldn’t a very specific market like that be more relevant than the broader market? Or perhaps the Class A DT market would have to tighten enough to get high enough rents on the southern end of Nicollet Mall to make new spec development pencil out…?

Also, how companies use office space has changed. Telecommuting has reportedly become more common as meetings have gone virtual with participants spread across the metro or even the world. Do you think this trend has hit a plateau? Or will we see telecommuting continue to increase? Personally, I find it very important to physically be in the office, although most of my job could technically be done from anywhere. Face-to-face interaction is vital, and since our company moved downtown a few years ago, business has benefited greatly by being physically close to those who refer us work. As it turns out - place still matters.

I know some self-employed attorneys who office pool by sharing a receptionist and meeting rooms, but generally work from home when not meeting clients. Co-working space (like Co-Co) is still a small part of the market, but I think it will continue to increase in importance.

It was recently reported the esteemed law firm Moss & Barnett will be moving from one of the top floors of the Wells Fargo Tower to Fifth Street Towers. The managing partner was quoted in the paper saying the firm will need a lot less space in the new building, not because the company is smaller, but because they need much less support personnel than the old days. Rather than dictating a letter to a secretary, attorneys these days sometimes type their own emails. Also, the formerly Mad-Man-esc corner office suites for top attorneys have become less lavish. In this vein, office space demand may not keep pace with the economy due to using space more efficiently.

This new idea that everyone works in one room with no walls or doors is the trend I'm most skeptical of. Some companies are doing it though, and this is another way to pack employees into less space.

http://finance-commerce.com/2013/05/kno ... ice-space/
http://finance-commerce.com/2013/05/acc ... raw-crowd/

I love having an office door to close when I take a phone call. It’s hard to imagine that many executives who make office space decisions would voluntarily put their desk in a big room with the worker-bees. But then maybe they’ll give themselves offices, and make the decision everyone else works in a collaborative environment. Do you think this type of office is a trend we’ll see more of? Does anybody who works with an open and flexible office layout like this want to comment about what you like or don’t like about it?

So, I’m wondering, maybe net absorption used to be a good measure of the general health of the economy, but do you think the factors outlined above may allow the economy to grow without a corresponding demand in office space?

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FISHMANPET
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Re: Downtown Office Market

Postby FISHMANPET » August 5th, 2013, 2:12 pm

I share offices because the my University department is crunched for space, not any new age office philosophy, but I hate it. I always end up being most productive when everybody leaves and I can turn my music up and talk to myself and do whatever.

Also setting up meeting rooms for good teleconferencing can be really expensive, because it's not really a simple problem.

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trkaiser
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Re: Downtown Office Market

Postby trkaiser » August 8th, 2013, 2:38 pm

Okay, it's officially time for a the next US Bank tower:

"U.S. Bancorp was the most profitable big bank of 2012 and third-best overall performer, according to new rankings by Bank Director magazine."

http://www.bizjournals.com/twincities/b ... 1375994166

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Avian
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Re: Downtown Office Market

Postby Avian » September 9th, 2013, 2:32 pm

Just in case people missed this tidbit from our good friend posted in the TCF Atrium thread about future development downtown.... ;) Some nice things in bold.
retiredbanker wrote:@ at40man, I would agree with you, the TCF atrium is under-utilized, needs some life to it. Perhaps the renovation will be when the block south of the Campbell Mithun tower gets developed, creating more traffic flow through the building. And @ Matt Steele, you mentioned a "1000-footer" in singular terms (maybe you're referring to the old Ryan Co. proposal for that site), I would prefer to use the 1000-footer in plural terms. Depending on final designs, the probability of multiple tall towers is "highly likely." As quoted previous on this site, building super-structures are very complex, a developer/financier can't afford to make a mistake on design/construction. A person also needs to keep in mind, a super tall tower doesn't need large floor plates, which is the case of several of the designs I'm well-acquainted with concerning downtown Minneapolis. There is w/o question, developers who are looking to reach-for-the-sky in Minneapolis. Without naming names, I was in discussion with a major investor this past May about a particular situation his firm was involved with. He later asked my opinion about a proposal that his firm is in the conceptual stage of, after stating my thoughts, he kept saying "taller", I again gave him another opinion, he said, "taller, yet." The person finally stated what he was thinking of concerning design/size/height and it floored me. If the firm is serious about that development which I believe they are, dynamics will change dramatically downtown, considering financing will not be an issue. Patience is a requirement on major development, in my humble opinion, downtown Minneapolis development is only in Stage/Phase I. Downtown is in for a "very long" period of development over a period of decades.

“Wise men speak because they have something to say; fools because they have to say something.”
― Plato

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Re: Downtown Office Market

Postby Unity77 » September 9th, 2013, 3:02 pm

I, like the majority of people here, would love to see additional towers added to the Minneapolis skyline. However, all the speculation over the past year has boiled down to nonsense. While I understand there is a process, there has been nothing reported, no timetables, and no tower renderings released. If these proposals, including a hotel and multiple office towers, were legitimate there would be some news, including comments from the developers and renderings. Honestly, I don't know how many times I've come across patience while reading about some of these grand developments.

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Avian
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Re: Downtown Office Market

Postby Avian » September 9th, 2013, 3:19 pm

^Yes, but retiredbanker is not speculating. He is directly involved with multiple developers. And it takes much more than one year to put together these projects.

“Wise men speak because they have something to say; fools because they have to say something.”
― Plato

Unity77
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Re: Downtown Office Market

Postby Unity77 » September 9th, 2013, 3:30 pm

Avian wrote:^Yes, but retiredbanker is not speculating. He is directly involved with multiple developers. And it takes much more than one year to put together these projects.
Thanks for the response Avian. My question is why does it have to take so long? We have had multiple proposals presented to us over the past 5 years, some of which have been by the same developer and none of them have come to fruition. If there is truly a demand for a new tallest or even a 500ft tower then why aren't these developers dusting off some old plans and starting where they left off?

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Re: Downtown Office Market

Postby retiredbanker » September 9th, 2013, 4:22 pm

@ Unity77, there are many intricate details in any project, especially large complex towers. It requires a great deal of time just to get from conceptual design to the final design, so the project isn't cost-prohibitive. Then a developer can approach possible tenants about leasing space. Now, there are many factors and variables concerning financing such a tower, too many to list at the moment, however, there are numerous options that are better than others. I've always recommended the partnering and self-financing if at all possible. Debt-laden projects are fine, however, you best have the best possible (debt/equity) ratios to make the project to be successful in the near- and long-term.

Concerning any leaks about projects that are on the drawing board, I can say w/o question, these projects are on a need-to-know basis only. I only mentioned what I did for those who have an interest in downtown development that projects are coming on line. Now, soon to many on this site and elsewhere is more than likely much different than how I would assess that.

Yes, I'm directly involved in numerous projects. As mentioned way back on Minnescraper that I had retired for a few years, however, I was itching to work behind the scenes to help developers get projects from the drawing boards to actual construction. And by the way, I do the work as a "no-charge". I do it for free. To me, it's far more important to get people back to work than for me to make money on a deal. You want to solve social ills, get people a job. It's that simple to me, that's how I look at it.

I should also mention that there are other situations that perhaps have hampered development and leasing of buildings, both office and retail space. Example, I have 2 major apparel stores (not presently in the Twin Cities) that would've required a sizable amount of retail space. I did all the negotiating, only for the leasing agent not to follow up on closing the deal. Now, I did the work, the leasing agent(s) were inept and incompetent. I can assure you that I'll never work with them again. Now, I did save the retailers from not considering having a store downtown. It'll take a few years now to get them here, which will require new development. Situations like that make project/development designs to change to accommodate those retailers.

I can also add that small & medium size international firms (corporations) are very interested in the Minneapolis-St. Paul marketplace. I have a list of 700+ international retailers interested in downtown Minneapolis alone, as well. Now, not every retailer or corporate office is going to locate here all-at-once, it requires the proper location and situation, that takes time. Several major international entertainment venues are also interested in downtown Minneapolis, which I personally paid their expenses to visit Minneapolis to get them interested in particular locations along with reviewing development designs of projects. If those multiple entertainment businesses come to Minneapolis, there will be a wave of them coming. We'll push Miami into the Atlantic if they come.

An observer might very well think that months go by and nothing is happening, that couldn't be further from the truth. I've been in the finance business for 40 years and I've never seen so many opportunities in my lifetime, like the present. It often takes 5-6 years to go from conceptual stage to completion of projects depending on the size and/or scale. If one is that impatient, one would never make it in the finance/development business because things change on a daily basis. It takes a well-versed and even-keeled person to see projects through, and it isn't easy. If you don't smoke, you will by the time all the pieces of the project are in place.

As I had mentioned in an earlier posting on this site. Multiple projects are connected to others. Once a major project (not the stadium) is announced, there will be others to follow shortly thereafter. One project might be vital for the success of another, it all ties together. Be patient, things are much farther along than one might think.

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Anondson
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Re: Downtown Office Market

Postby Anondson » September 9th, 2013, 4:38 pm

Makes you wonder what the constipating element is that could be fixed and unblock all this development in the wings.

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Re: Downtown Office Market

Postby Minnekid » September 9th, 2013, 10:10 pm

retiredbanker wrote:@ Unity77,

I can also add that small & medium size international firms (corporations) are very interested in the Minneapolis-St. Paul marketplace. I have a list of 700+ international retailers interested in downtown Minneapolis alone, as well. Now, not every retailer or corporate office is going to locate here all-at-once, it requires the proper location and situation, that takes time. Several major international entertainment venues are also interested in downtown Minneapolis, which I personally paid their expenses to visit Minneapolis to get them interested in particular locations along with reviewing development designs of projects. If those multiple entertainment businesses come to Minneapolis, there will be a wave of them coming. We'll push Miami into the Atlantic if they come.

An observer might very well think that months go by and nothing is happening, that couldn't be further from the truth. I've been in the finance business for 40 years and I've never seen so many opportunities in my lifetime, like the present. It often takes 5-6 years to go from conceptual stage to completion of projects depending on the size and/or scale. If one is that impatient, one would never make it in the finance/development business because things change on a daily basis. It takes a well-versed and even-keeled person to see projects through, and it isn't easy. If you don't smoke, you will by the time all the pieces of the project are in place.

As I had mentioned in an earlier posting on this site. Multiple projects are connected to others. Once a major project (not the stadium) is announced, there will be others to follow shortly thereafter. One project might be vital for the success of another, it all ties together. Be patient, things are much farther along than one might think.
The talk about the 700+ international firms/retailers is all hypothetical correct?

Also one topic that wasn't covered in this interesting comment is that it takes people first before you get this retail interest. Another reason why it takes time. It is all a big circle. If you think of any major city; Chicago, San Francisco, New York, their density and sheer population in a respectable area causes vibrancy and various retail firms to be together. When they have enough people, various districts appear, very distinct districts. These districts have very distinct retail to them. Some areas with a large amount of people have a lot of local stores, others have major corporations (national and international alike) because that is a tourist spot. Big cities normally have tourist attractions, resulting in districts like these, but that is a different topic. So minneapolis retail/entertainment will come with an influx of people, and even though that seems obvious, it's more important than it seems. It is impossible to complain that there isn't enough entertainment or good retail to get people to move to Minneapolis, but I feel that is incorrect. Retail cannot open without people, they would have no revenue. People come first and then the cycle starts, the people are the ignition, and people+entertainment is the engine (only in that category) One will feed on the other.

In terms of corporate offices, I believe it is once again much more important on people living in the city to have office space grow. In cities like New York or Chicago, there is no reason for a mid-major corporate office to take up space in a suburb, when all the professionals live in New York. That is exactly the point here, they live in the city. In the twin cities metro, there are a lot of people in the suburbs, resulting in a corporate center of Bloomington and Minneapolis, not just Minneapolis. Once people start moving into MInneapolis more rapidly combined with the relatively educated population we have, and the high class universities offices will move to Minneapolis more. (Quick note: Minneapolis must improve high schools to keep population, sorry that it is off topic, just saying.) Why would they move to Minneapolis more? Because you see that the professionals are living there, why place your employees' offices in Bloomington, you give them the amenity of having their office within public transport or walking distance. This starts a different cycle, more professionals living and staying their whole careers in Minneapolis, more offices open downtown, resulting in a better job market, resulting in more people, and so on. This then feeds into growth of retail, and that helps attract certain people, which helps further retail and vibrancy, and so on.

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FISHMANPET
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Re: Downtown Office Market

Postby FISHMANPET » September 9th, 2013, 11:24 pm

Another way of phrasing what you said about locating downtown is that it can be looked at as a perk of employment. If I was given a choice between two jobs, exactly the same, the only difference being I had to drive to one but I could easily take public transit to the other, I'd pick the public transit option. And the reason this is important is because generally the young people moving into cities today are the creative class. Demographically speaking, the employees that companies want to hire are the ones that tend to live in the city and would prefer to take transit to work and/or live close to their job. At that level companies are competing for employees, not the other way around, so job amenities matter, and location can be an amenity.

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Re: Downtown Office Market

Postby mullen » September 10th, 2013, 6:17 am

it takes years to go from conceptual stage to actual construction of these tall buildings and we've seen the ebbs and flows of the economy. the problem with huge developments like a 1000 ft tower is that it has to hit at the right moment in that cycle. this is mpls, not chicago. this market cannot just absorb a crap ton of spec office or residential dropped into the market like it's nothing and it will be absorbed and investment will pay off quickly.

and we don't have the volume of large users that a huge market like chicago has. everything has to hit at the right time. the interest of wells fargo in the ryan development near the vikings stadium is an example. no wells fargo and that project either doesn't happen or is drastically scaled back.

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Re: Downtown Office Market

Postby Viktor Vaughn » September 10th, 2013, 8:31 am

I'm hearing from partners at large law firms looking for space that building management is completely unwilling to grant concessions or help with leaseholder improvements to update the firm's current space. In one case, management won't even have a dialogue with a one of their biggest tenants, whose lease comes due in just two years.

This bodes well for the Class A office market. Prestigious law firms, who have long been leasers of the top floors in the best buildings, are being priced out by the investment banking operations. This is quite a flip from the recession when management would do whatever to renew the lease of a big tenant. Now, it's almost as if they want to push them out, so they can subdivide the space and lease it for more. Maybe spec office development isn't so far away.

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Re: Downtown Office Market

Postby min-chi-cbus » September 10th, 2013, 8:48 am

I am skeptical of all of this development talk for a variety of reasons, including, but not exclusively:

-the city has *NEVER* experienced a development boom like the kind that is being suggested -- residential and/or office
-there are plenty of local corporations with space needs, but few of them could or would bolster a super-tall, and one who would is taking the "urban campus" route (i.e. Wells)
-the office market nationally is still quite soft, and locally it's even softer, especially as a region. Building more space right now without tenants lined out the door would be foolish and go against the grain of how people typically do business in Mpls: conservatively
-one word: "NIMBYs" (this WILL be an issue if something breaches the "big three", even if it's zoned appropriately)
-I personally don't know of any major out-state or international clients who would consider occupying a large bulk of office space here in the Twin Cities, and even if there were to be any I'd expect baby steps
-nationally/globally we are still in a stagnant econony with bleak growth projections and in the face of imminent rising interest rates. The cost of doing business -- which is already expensive and high barrier to entry -- is going to only get tougher with each passing week.


My questions for RetiredBanker would be the following (if he is willing/able to provide the answers):

-What kind of timeline can we reasonably expect to START to hear public info about these currently private projects?
-How much space would the average supertall in question require (1.0M SF? 2.0M SF?), and how much of it would need to be pre-leased?
-What is the biggest threat these types of projects face in the current environment (micro or macro)?
-In your personal opinion, do any of the proposals that you have seen meet or exceed the asthetic benchmark beset by any of the current buildings in the city (i.e. will they be iconic)?

Tyler
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Re: Downtown Office Market

Postby Tyler » September 10th, 2013, 9:13 am

min-chi-cbus wrote: -What kind of timeline can we reasonably expect to START to hear public info about these currently private projects?
-How much space would the average supertall in question require (1.0M SF? 2.0M SF?), and how much of it would need to be pre-leased?
-What is the biggest threat these types of projects face in the current environment (micro or macro)?
-In your personal opinion, do any of the proposals that you have seen meet or exceed the asthetic benchmark beset by any of the current buildings in the city (i.e. will they be iconic)?
Plus:
- How many state mottos do you know without looking them up? (part of the vetting process)
- You have 23 minutes, and then pencils down.
- No peeking at your neighbor. We already don't trust you.
Towns!

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Re: Downtown Office Market

Postby MNdible » September 10th, 2013, 9:36 am

min-chi-cbus wrote:-one word: "NIMBYs" (this WILL be an issue if something breaches the "big three", even if it's zoned appropriately)
No. This is not a real issue.


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