Spencer Agnew – Real Estate Matters
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Spencer Agnew

Commercial Real Estate, Office Real Estate, Real Estate Trends, Twin Cities Real Estate

North Loop Among Top 10 Tech Submarkets for Rent Growth Nationwide

The North Loop neighborhood of Minneapolis is among the top ten tech office submarkets for rent growth in the nation, according to a recent report by CBRE. Office rents in the area have shot up by more than 20% in just two years, which is double the rate for the overall Minneapolis office market. The North Loop also ranked fifth nationally for net absorption growth, which was at 8.2 percent during the same period. These numbers put the North Loop among an elite class of tech office submarkets in the nation, posting similar numbers to San Francisco’s SOMA and Austin’s Northwest submarkets.

Source: CBRE

Source: CBRE

The growth is driven by demand among tech firms for non-traditional office space with features such as brick-and-timber construction and exposed ceilings, features common to the North Loop’s many historic warehouse and light industrial buildings. The demand has led to low vacancy rates and created an environment ripe for new development, something developer Hines Interests hopes to capitalize on with its T3 project which will incorporate many of the design features that tech firms want and which are typically only found in historic buildings, such as exposed wood ceilings.

Hines hopes to capture some of the North Loop tech office demand with its new construction T3 building.

 The trend is also likely to drive additional conversions of historic buildings to office space. One example of this is the recent announcement that Artic Cat will move its corporate headquarters to a renovated warehouse in the North Loop in order to help attract new employees.

Recreational vehicle manufacturer Artic Cat recently announced it would move its corporate headquarters to the renovated Western Container building in the North Loop.

It remains to be seen whether the North Loop can sustain continued growth in absorption and rents for tech office space. A recent Start Trib article on the CBRE report quoted Tyler Kollodge, a Minneapolis-based CBRE broker: “The high demand and low vacancy rate has allowed landlords to push rental rates; however, most of the tenants in the area have been there for several years and are facing sticker shock when they see the new proposed rental rates on a potential lease renewal.”

However, national and local trends point to continued growth in the tech office market. The CBRE report noted that the high-tech software/services industry has created over  700,000 new jobs nationally since 2009 (at a growth rate of 34%), which accounts for one-fifth of all new office-using jobs. And in a recent Bureau of Labor Statistics report, Minnesota ranked number one for tech job growth in 2015, growing 8.3 percent in the first six months of this year.

The full CBRE “Tech-Thirty 2015” report is available here.

Uncategorized

Iconic Rotterdam Project Uniquely Combines Open Air Market and Housing

October saw the opening of an innovative development in Rotterdam, Netherlands which features a combination of uses found nowhere else in the world. The innovative design includes the Netherlands’ first indoor covered market hall, which is enveloped by a 230-unit apartment building. In addition to the covered market with 100 vendor stalls, the property contains space for restaurants, a supermarket and underground parking.

Markthal in Rotterdam

It was designed by Dutch firm MVRDV, which was among the wave of “Superdutch” architects that emerged in the Netherlands in the 1990s. Despite being enclosed, the market space feels open-aired due to the vast space enclosed by the 11-story building. Perhaps the most striking feature of the market is a vast mural along the market’s ceiling which is intended to help transform the cavity into a welcoming public space.

A view of the interior of the market hall, which is overlooked by windows of the apartment units. (Source: The Guardian)

The horse shoe shaped arch of the building consists of housing from the third to the eleventh floor, in total 102 apartments and 126 condo units. Each unit has an Continue Reading

Architecture & Design, Commercial Real Estate, Green Building, Office Real Estate, Real Estate Trends, Think Outside The Box, Twin Cities Real Estate

Shipping Container Building Proposed for Minneapolis North Loop

A unique office building to be constructed of shipping containers has been proposed for a small site in Minneapolis’ North Loop neighborhood. The project is being developed by Akquracy, a Minneapolis-based marketing firm that will be the primary tenant for the office space. Its located just blocks from Target Field, near two other recent creative office developments in the Ford Center and the new Be The Match headquarters building.

Steelcase

The building will be about 18,000 square feet, consisting of office space and a small café/restaurant space with outdoor seating. The design involves fifty shipping containers, each 75 feet in length. The containers will be stacked three levels high, with a portion of the building elevated over a public plaza. To minimize foundation piling due soil conditions on site, one triangular half of the building will sit on top of an existing underground parking structure, while the other half is shifted one level upwards. The lifting of half the building allows for the creation of covered plaza space and opens up the street corner.

The developer for this project commissioned New York-based architectural firm LOT-EK to design the building. The firm is known for its use of “up-cycling,” or repurposing unique materials in order to create unique designs and build sustainably. Shipping containers have become an increasing popular building material in recent years, having been used for everything from small homes to multifamily and office buildings.

Retail Real Estate, Think Outside The Box, Twin Cities Real Estate

Eagan Outlet Center to Feature Snow Melter

The new Twin Cities Premium Outlets center opening in Eagan next month will feature a unique piece of equipment to help manage snow in the winter. Rather than store snow on site or pay to have it hauled away, the property will use a stationary snow melter made by Trecan, a Canadian company which specializes in the design and manufacture of the machines. With capacity to melt 40 tons of snow an hour, the snow melter will help the property management keep the center’s sidewalks and 1,400 parking spaces accessible to customers during the winter months.

The snow melter at the new Twin Cities Premium Outlets in Eagan (source: MSP Business Journal)

The Trecan snow melter at the new Twin Cities Premium Outlets in Eagan (source: MSP Business Journal)

The Trecan machine melts snow that is dumped in by plows by mixing it with hot water heated by a natural gas burner. The snow melt then drains directly to the municipal storm sewer. A filter collects trash and other debris before it enters the sewer.

The Twin Cities Premium Outlet will be (surprisingly) the first shopping center in Minnesota to feature an on-site snow melter. It will also be the first in Simon Property Group’s portfolio of 300 shopping centers worldwide, although the company also plans to install one in a Montreal mall opening later this year.

By using the snow melter, Simon hopes to keep operating costs lower for tenants. The machine can melt 200 cubic yards of snow per hour at a cost of about $110, substantially less than the cost for haul away and off-site disposal of a comparable amount of snow. Additionally, because the property won’t need space for snow mounds the developer was able to build fewer parking spaces and keep more of them available for customers during the winter months.

The 409,000-square-foot outlet mall is set to open Aug. 14th and will have more than 100 stores. It was developed by Simon Property Group and Paragon Outlet Partners.

Retail Real Estate, Twin Cities Real Estate

Walgreens Considering Flagship Store for Downtown Minneapolis

The MSP Business Journal recently broke the news that Walgreens is considering adding a “flagship” store on Nicollet Mall in downtown Minneapolis. The news come off the heels of the announcement that Saks Off 5th will close its current downtown Minneapolis location when its lease expires next January. United Properties hopes that a Walgreens flagship store could absorb part of that space when it is vacated.

Walgreens Flagship Store in Chicago (Source: MSP Business Journal)

The move would add to Walgreen’s growing portfolio of flagship locations, which have more upscale finishes, wider variety of retail offerings, and different layouts than its typical stores. The flagship locations are all located in dense urban areas, with stores already open in Chicago, Boston, L.A., D.C., and Philadelphia. While formats vary, most feature expanded food offerings such as juice bars, grab-and-go sandwiches & sushi, and self-serve froyo. Some stores even sell beer and liquor where allowed by local law.

In an interview with NPR, Walgreens Vice President Beth Stiller said that the flagship stores are somewhat of a Continue Reading

Retail Real Estate, Twin Cities Real Estate

Twin Cities Retail Vacancy at Lowest Point Since 2008

The latest Colliers Retail Market Report for the Twin Cities pegs vacancy at 5.2%, the lowest its been in six years. This continues the downward trend from a peak of 7.3% in 2010. Trade areas with the lowest vacancy included Ridgedale (0%), Rosedale (1.7%), and Eden Prairie (1.9%). The highest vacancy was in the Maplewood trade area, at 8.8%. Net absorption during the first quarter of 2014 was 168,000 square feet, setting pace to top the 2013 absorption of 432,000 s.f.

Minneapolis - St. Paul Retail Trade Area Vacancy (1st Quarter 2014, source: Colliers)

Minneapolis – St. Paul Retail Trade Area Vacancy (1st Quarter 2014, source: Colliers)

Leasing activity in the quarter was led by the opening of a 49,000 s.f. Hobby Lobby in Woodbury, its first store in the Twin Cities market. The Oklahoma-based arts and crafts retailer is also planning locations in Blaine and Maplewood in the coming months. Additional lease commencements included the 400 Bar’s relocation to 25,000 sf at the Mall of America, DSW Shoes’ new 18,000 sf location at Eden Prairie Center, and a Cost Plus World Market at Arbor Lakes (also 18,000 sf).

New construction openings included a 178,000-square-foot Walmart in Cottage Grove and a 17,000-square-foot Lunds Kitchen in Wayzata. Construction continued on the Paragon Outlet’s new center in Eagan, set to come online this Fall with 409,000 square feet of space. The center is expected to open 90% leased, with retailers Saks off 5th, Gap Outlet, and Michael Kors already signed. Construction also began this quarter on the Mall of Americas Phase 1C expansion, which will include 150,000 square feet of new retail space.

The Mall of America Phase 1C expansion will add 150,000 SF of retail space as well as a new hotel

Sales activity included the Ackerberg Group’s purchase of 177,00 sf Calhoun Square for $69.5 million. Addtionally, the closed downtown St. Paul Macy’s was bought by the St. Paul Port Authority for $3 milion, or about $8/sf. The property fetching the highest premium this quarter was a 14,500 sf Walgreens in Chanhassen, which sold for $8.5 million, or about $590/sf.

Going forward, Colliers expects continued strong absorption during the remainder of 2014, led by the opening of the outlet center in Eagan. The grocery sector will continue to be particularly active, with several national and local retailers all expanding, including Target, Walmart, Lunds, Whole Foods, Trader Joe’s, and Aldi. Also, Iowa-based Hy-Vee has announced plans to expand into the market, while Rainbow announced plans to close or sell many of its remaining Twin Cities locations.

Affordable Housing, Architecture & Design, International Real Estate, Real Estate Trends, Think Outside The Box

Could 3D Printing Revolutionize Building Construction?

3D printing has been around since the 1980’s, but in the last few years the technology has become much more affordable and accessible. Many are now speculating on the ways 3D printing could revolutionize the global manufacturing landscape. But could the technology have a similar disruptive impact on how buildings are constructed? Innovators and entrepreneurs across the globe are already trying to find out.

Last week, a Chinese company demonstrated the capabilities of a giant house-building 3D printer it has been researching for 10 years. The machine has the capacity to construct 10 houses in less than 24 hours, using predominantly recycled materials. The homes cost less than $5,000 to build, which means the technology could have a huge impact on improving housing conditions in the country. Despite rampant skyscraper construction in major cities across China, the country still has a massive need for quick, cheap housing, particularly outside of the major urban areas.

Workers in China assemble a house built by Winsun with a 3D Printer

Rather than printing the homes in one go, Winsun’s 3D printer creates building blocks by layering up a cement/glass mix in structural patterns (watch the process here). The diagonally reinforced print pattern leaves air gaps to act as insulation. The blocks are printed in a central factory and then assembled on site, with comparatively little labor required.

Back in the U.S., a University of Southern California professor is testing its own giant 3D printer. Unlike the Chinese technology, this printer would complete the entire construction process on-site. Professor Behrokh Khoshnevis’s design replaces construction workers with a nozzle on a gantry that squirts out concrete and can quickly build a home according to a computer pattern. It is “basically scaling up 3D printing to the scale of building,” says Khoshnevis, who labels the technology “Contour Crafting.”

Rendering of Contour Crafting technology being used to build a home

The Contour Crafting system is essentially a robot that automates age-old building tools normally used by hand. Once a site is prepared, the contour crafter system would be laid down on two parallel rails just beyond the eventual width of the building. From there, the computer-controlled system would take over, laying down concrete in layers with a gantry-type crane and a hanging nozzle. Once the frame is built, construction workers would hang doors and insert windows.

Contour Crafting could potentially slash the cost of home construction. It could also be a major help in responding to housing crises related to emergencies like natural disasters, where thousands can be left without shelter. Khoshnevis is particularly hopeful that the technology could be used to improve housing for the nearly one billion people across the globe currently living in slum conditions.

3D printing could reduce the labor required for building construction

It seems that it will only be a matter of time as to when 3D printing will begin to make a major impact in building construction. As Khoshnevis points out, “if you look around you pretty much everything is made automatically these days – your shoes, your clothes, home appliances, your car. The only thing that is still built by hand are these buildings.”

 

Government Policy, Residential Real Estate, Uncategorized

A Look at Property Taxes Nationwide

With income tax returns completed and filed (hopefully on time), the next big tax payment many people across the country will make will be property taxes. According to the findings of a new residential property tax study from the Tax Policy Center, in 60% of U.S. counties the reported property tax burdens average between $500 and $1,500 a year. But that might only cover a month’s worth of taxes on a home in the most highly taxed counties.

Property Taxes by County

Average Residential Property Taxes by County (source: CNN)

Some of the highest average property tax burdens can be found in the New York. Westchester County, N.Y. ($9,647 a year) and Nassau County, N.Y., ($9,080) (both New York City suburbs) had the highest average residential property tax burdens. Many other counties in New York also have high property taxes, a result of duplicative local government units (one county alone had 941 separate governments, including towns and villages as well as police, fire, and school districts) and an education funding system that relies predominantly on property taxes.

On the other end of the spectrum, 24 counties nationwide had annual property taxes below Continue Reading

Office Real Estate, Twin Cities Real Estate

Jones Lang Lassalle Releases 2014 Skyline Review

Jones Lang LaSalle recently released its 2014 Skyline Review, a report on CBD office markets in major cities across the country. The review offers an inside look at occupancy in urban office centers across the country. As the “Skyline” term indicates, the review focuses on Trophy and Class A buildings in office districts known for high-quality assets, market-leading rents and high demand from institutional investors.

The Minneapolis Skyline building set includes 22 buildings and currently has an overall vacancy of 11%, down from 12% in last year’s report. However, absorption has been slow despite increases in office-using employment. This is mainly attributable to tenants “right-sizing” their space to use less square feet per employee.

2014 Minneapolis Skyline Review (Source: Jones Lang Lasalle)

Six Minneapolis Skyline buildings sold in 2013, as the market saw increased interest from institutional investors. Total sales volume was approximately $600 million on transactions for 3.4 million square feet of space. Skyline buildings sold for an average of just above $150 per square foot, which was higher 2012 levels but still below historical peaks above $250 psf in 2007 and 2010. One of the buildings sold was the IDS Center, which was acquired by joint venture of Beacon Investment Properties LLC and two Israeli companies for $253 million.

The IDS Center, Minnesota’s tallest building, was one of six Skyline buildlings in Minneapolis that was sold in 2013. Inland American Real Estate Trust sold it for $253 million after buying it for $277 million in 2006.

Capella Tower currently has vacancy of 15% on 1.4 million square feet, but that will change when the Star Tribune moves in next year.

 

 

 

 

Occupancy and rents continue to vary widely among the Skyline buildings. As in 2013, the lowest vacancy can be found at 33 South Sixth Street, with occupancy at 99.4% on 1.1 million s.f. of rentable area. On the other end of the spectrum is Fight Street Towers, which continues to struggle with vacancy of over 35% on about 1 million square feet. Minneapolis’ three tallest buildings continue to perform well, although vacancy has increased slightly at the IDS Center at 9%, up from 5% last year. Wells Fargo Center maintains 98% occupancy and the highest direct rents of the Skyline at $37.56 per square foot.  Capella Tower has had higher vacancy than its two tall peers, but that will be helped somewhat by the recent news that the Star Tribune will soon call the building home.

Residential Real Estate, Student Housing

MN Court of Appeals Upholds Winona’s “30% Limit” on Rental Licenses

In a case being followed by many college towns across the state, the Minnesota Court of Appeals recently upheld a City of Winona ordinance limiting rental licenses.  The ordinance caps the number of properties elgible for rental certifcation to 30% of the properties on a block. Licenses are granted on a first-come first-served basis. Rental properties existing prior to the adoption of the ordinance are exempt from the requirement.

The ordinance was adopted in 2005 as a result of an increase in the number of rental properties and concerns about off-street parking. A City task force found that rental housing comprised about 39% of Winona’s housing units, but were resonsible for 52% of complaints. The task force paid special attention to neighborhoods surrounding Winona State University, which has enrollment of 8,900 students, and found that rental properties tended to “become run-down and unnatractive.”

The appellants in the case are the owners of three house who were each denied rental licenses due to the 30% cap. One homeowner wished to rent his home while he was on military duty in Afgahnistan, while another sought to rent his property out after he was unable to afford his mortgage payments. Their attorney Anthony Sanders stated their case as “an issue of whether you can take a perfectly safe home and rent it out to perfectly safe tenants, of whether you can be denied that right because your neighbor’s already done it.” According the Sanders the plaintiffs will ask the Minnesota Supreme Court to consider the case.

In its ruling the MN Court of Appeals found that it could “easily conclude that the public has a sufficient interest in rental housing to justify a municipality’s use of police power as a means of regulating such housing.” In upholding the lower court’s decision, the Court of Appeals found that the 30% rule was rational, and did “not delegate legislative power to other property owners,” it affirmed the district court’s award of summary judgment to the City.