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Minneapolis Blog

Strategic Real Estate Decisions

August 9, 2016

Written by George Boyadjis -

Cresa Minneapolis recently hosted a panel discussion on strategic real estate decision making for the Twin Cities Chapter of Financial Executives International. This gave us the chance to highlight the state of the market, current trends, and things to consider now. Some highlights follow…

INDUSTRIAL

  • With $2 billion of 2015 new construction spending in Minneapolis focused on office, residential, and retail spaces, industrial users are being forced out. New industrial buildings are being built in outer-ring suburbs like Rogers and Shakopee, where large parcels of land are cheaper and transportation infrastructure is available.

  • The inventory of existing industrial spaces available within the I494–694 loop is sparse, so users should think ahead and begin the strategic planning two years in advance in order to find, and possibly build the right space. Many new warehouse buildings are transitioning to smaller floorplates with higher racking (sometimes 36’ to 40’) and heavier floor load limits, enabling users to take less total space and manage more inventory. Gone are the days of 18’ clear heights and small loading docks!

OFFICE

  • In the last five years, over 25 different employers have migrated into downtown Minneapolis, bringing new jobs and increased competition for labor in multiple tight industry sectors. Many employers are driven by labor availability, and are evaluating the locations of their target labor pools and the types of amenities that may improve recruiting and retention of an increasingly urban, millennial workforce. For example, investments into public transportation, trends toward mobile and free address workspaces, bike storage and on-premises workout facilities, as well as access to multiple after-hours options score high with many employees. As a result, some landlords are showing more inclination to invest in these amenities within their buildings. Companies are recognizing that real estate is a cost, but can also be an asset used to appeal to their talent pool.

DESIGN/CONSTRUCTION

Labor Deficit and Construction Costs

  • During the recession, most builders were not growing their businesses, and have since been cautious of growing too quickly. The labor deficit we now face across most industries is especially acute among the construction trades, meaning that both construction labor and materials cost more, and that planning enough lead time for your project is especially important for an on-time, on-budget result. This has always been true for build-to-suit situations, but even relocation/tenant-improvement projects or lease renewal–in–place/site refresh projects are seeing the impact in today’s market.

Efficiency/Sustainability

  • Across industries, having the flexibility to adapt spaces for changing processes and products is key. The younger generation of workers is trending toward flexible, collaborative workspace, and the “standard” amount of square footage per person has dropped by 100 square feet in some cases.  
  • A denser population in a smaller space also means that infrastructure systems (ie: HVAC, Internet Connectivity, Restroom Capacity, etc.) may need to be ramped up, which can be a difficult undertaking in older facilities.
  • Energy efficiency adaptations can benefit employees and provide savings, and provides companies with a variety of ways to meet sustainability goals, too.

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