Written by Michael T. Lund, Retail Tenant Specialist
Image of Minneapolis
The Twin Cities are back in a big way. Healthy job growth, increased gross domestic product and one of the nation’s lowest unemployment rates (3.8%) have contributed to a rapid post-recession recovery. Minneapolis–St. Paul takes the cake, figuratively, for the healthiest major city in the country, and Forbes recently named the city #1 in the country for the highest quality of life. So how have these economic drivers impacted downtown Minneapolis, and how has the active and vibrant economy affected downtown retail?
The Twin Cities have caught the national spotlight for investment and development. Landlords, developers, bankers, private equity firms and construction crews are extremely active. Cranes can be seen all over the state from Rochester to Duluth. While high-profile projects such as the $325 million Mall of America expansion take focus, Minneapolis’ downtown certainly shines as the epicenter of development activity.
Minneapolis is the economic and cultural focal point of the state. It is continually recognized on a national level for its parks, access to outdoor activities and a harsh winter or two. In many ways, Minneapolis has what many city planners would kill for: diversification of sectors. Minneapolis has 35 million square feet of office, 8,000 hotel rooms and enough high-end restaurants to keep any avid foodie occupied. Key downtown employers include Target, US Bancorp and Ameriprise Financial. Minneapolis is also home to three of the state’s four major sports franchises. Retail, residential and job growth are all happening in the urban core. A few major developments include a $50 million Nicollet Mall expansion, a $400 million Downtown East redevelopment, a $225 million Hennepin County Medical Center expansion and a new $1.3 billion Vikings Stadium.
Investment activity and downtown amenities have attracted Baby Boomers and Millennials alike to the downtown lifestyle. The Minneapolis Downtown Council has carefully guided a formal population growth plan with an objective of increasing the population of downtown from 45,000 to 70,000 by 2025. This official growth plan, a healthy economy and a limited supply of apartments have created a perfect storm for developers. The rental market has caught fire. In 2013, 2,763 units of Class A apartments were delivered in the Twin Cities. In 2014, 4,391 units were delivered. Of these, 1,441 were in downtown Minneapolis. Developers are still building, trying keep pace with demand. Notable apartment projects include Mill & Main, Nic on Fifth, 222 Hennepin and Latitude 45.
In addition to housing growth downtown, traditional suburban office tenants are also moving jobs downtown. Retailers are following suit, hoping to meet the new demands of downtown residents and increasing daytime population counts. Downtown Minneapolis hosts 2.2 million square feet of retail and is growing steadily. Much of this retail extends along a 12-block outdoor shopping mall known as Nicollet Mall, which has a vacancy of less than 4%, nearly half of the Twin Cities' overall retail vacancy. The rest of the retail can be found in the eight miles of climate-controlled Skyway, linking 80 blocks of downtown office and residential buildings. Notable downtown retailers include Macy’s, Saks OFF 5TH, Target, Banana Republic, The Gap, Brooks Brothers and Allen Edmonds. Local retailers include Hubert White, Len and J.B. Hudson. Notable transactions include a new Walgreens store, which will take a portion of the old Saks OFF 5TH space. Saks is set to move to City Center, along with Sports Authority - two very big deals for downtown Minneapolis. Four full-service grocery stores now serve the growing residential and daytime office community, including the addition of Trader Joe’s, which was announced this fall.
Although retailers are moving downtown to take advantage of its ballooning daytime population of 185,000 employees, not all are headed towards the skyways or Nicollet Mall. Retailers are also looking for positions in the distinct and vibrant neighborhoods of downtown. Ranked as one of the hippest neighborhoods in the US by Forbes Magazine, the North Loop, known as the Warehouse District, has become the most desirable urban Minneapolis neighborhood in which to live, work, eat, shop and play. The North Loop offers a healthy mix of craft breweries, bars, eclectic shopping and farmers' markets. Here you will find restaurants and retail concepts that are organically grown and home to the Midwest. Mixed-use projects and building rehabs in the Warehouse District have allowed the retail space needed to service the growing population. Chef-driven restaurant concepts such as Spoon and Stable, one-off fashion-forward retail such as Wilson and Willy’s and a boutique hotel are all new to the neighborhood and line the streets of the North Loop. Although retail is hot in the North Loop, national retailers have had a tougher time penetrating this market.
Another notable and upcoming neighborhood is Downtown East, which is currently undergoing a $400 million redevelopment centered around the new $1.3 billion Vikings Stadium. The redevelopment of Downtown East will add upwards of 40,000 square feet of retail. This development also includes 1.1 million square feet of new office space for Wells Fargo, which plans to move 5,000 employees to these buildings. Plans for public parking, nearly 200 units of housing and a public park in the heart of downtown are also included.
It is not the fact that the Minnesota Vikings hold the lead in the NFC North that explains why Minneapolis is set to hold Super Bowl 2018. Rather, favorable economic conditions have spurred development across the state, specifically in downtown Minneapolis. Multi-family apartments, office towers, hotels, retail, parking, public space and an athletic complex are all working in conjunction to bring more people to downtown Minneapolis to live, work, shop and play. Market conditions are good, and retail is back in downtown Minneapolis.
Michael T. Lund | Retail Tenant Specialist
Mid-America Real Estate – Minnesota, LLC
5353 Wayzata Boulevard, Suite 650 | Minneapolis, MN 55416
Direct: 952.563.6611 | Fax: 952.563.6633
email@example.com | www.midamericagrp.com