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03-27-01
City of Lakeville Economic Development Commission Regular Meeting Agenda Tuesday, March 27,2001, 6:00 p.m. Lakeville City Hall -City Council Chambers 20195 Holyoke Avenue 1. Call meeting to order. 2. Approve February..27, 2001 meeting minutes 3. Proposed TIF Ammendrnents a.) TIF District No. 9 -Amendment No. 1 b.) TIF District No. 10 - AmendmentNo. 2 4. Progress on Strategic Plan Items a.)'Strategic Plan Item: Develop a proactive approach_to expand the supply of affordable :housing -:Mark Ulfers, Executive Director of Dakota County Community Development Agency, on affordable housing b.) Strategic Plan-Item: Identify Resources to Meet Employers' Recruitment and Retention Needs`-Labor Force Quarterly Update c.) Strategic Plan Item: research and identify fiber-optics and other emerging technologies; encourage additional office park.development; attract and retain employers that will utilize the'sklls of residents -High Tech Subcommittee Update d.) Strategic Plan item: Review business incentives and recommend strategies..- Incentive Subcommittee Update 5. Request for Amendment to the Comprehensive Plan by the Avalon Group for the TimberCrest at Lakeville proposed project.: 6. Cost/Benefit Analysis of providing financial assistance to Mr. Glenna's proposed airplane hanger facility at Airlake Airport 7. Discussion on Strategic Plan Update. 8. Adjourn. 2001. January 23 1 G:1AFIad\ECONDEV\EDC\2001 mtgs\3A9arch\032701 agenda.doc For Your Information: 1. Update on Dakota County Vanpool Initiative Attachments: 1. 2001 Towle Report 2001, January 23 2 G:\AFlad\ECON DEV\EDC\2001 mtgs\3March\032701 agenda.doc Economic Development Commission Meeting Minutes February 27, 2001 Clt of Lakeville ~ Y Economic Development Commission a Meeting Minutes February 27, 2001 6:00 p.m. Appro Development 21476 Grenada Avenue, Lakeville Members Present: Emond, Miller, Tushie, Pogatchnik, Brantly, Matasosky, Vogel. Members Absent: Schubert, alternate member Erickson, ex-officio member Bornhauser. Others Present: Robert Erickson, City Administrator; Arlyn Grussing, Community & Economic Development Director; Ann Flad, Economic Development Coordinator. Visitors: Paul Steinman and Mikaela Huot of Springsted Public Finance Advisors. 1. Call Meeting to Order. Chair Vogel called the meeting to order at 6:05 p.m. in the conference room of Appro Development, 21476 Grenada Avenue, Lakeville. 2. Approval of February 15, 2001 Special Meeting Minutes. Motion 01.09 Comms. Emond/Pogatchnik moved to approve the February 15, 2001 Special Meeting Minutes. Motion carried unanimously. 3. Incentive Study Mr. Grussing indicated the study will explore financial tools available to the City. As with many tools there is little room for creativity. The creativity in marketing Lakeville will come from the marketing plan and not the financial tools study. Paul Steinman and Mikaela Huot of Springsted Public Finance Advisors presented the first of three parts of a matrix they are developing to identify financial tools that. Lakeville may be able to use to address economic development projects. This first part of the. matrix identifies the economic development issues the EDC wants to address as extrapolated from the Strategic Plan for Economic Development and Springsted's conversation with the Commission at the January, 23, 2001 meeting. The second part of the matrix will outline tools available, while the third part of the matrix will provide detailed information on the tools' uses in Lakeville. Mr. Erickson indicated that creative tools should be included in the matrix, such as The City of Lakeville Wetland Bank. Mr. Steinman indicated that the study would consider financial "tools" the City could consider using to address economic development projects, as opposed to "incentives." He then referred to Springsted's February 23, 2001 document that outlined eight categories of issues in Lakeville: downtown, freeway, retail development, community enhancement, business attraction, business retention and expansion, housing, and public/private infrastructure. The EDC was asked to review and confirm that these are the issues financial tools are being sought for. 1 G:1AFIad1ECONDEV\EDC\2001mtgs\2February27\022701 minutes.doc Economic Development Commission Meeting Minutes February 27, 2001 1. Downtown: Discussion ensued about the identity and ambiance of downtown. Springsted will add a marketing subcategory to this issue. 2. Freeway: Comm. Tushie suggested adding a subcategory relating to redevelopment of highway 46. He also suggested Springsted consider the entire freeway corridor as one issue. Development/redevelopment of highway 70 will also be added. 3. Retail Development: Comm. Brantly suggested adding regional retail center in order to capitalize on Lakeville's position as the southern gateway to the metro area. Mr. Erickson also noted that Cedar would see additional retail development in the future. 4. Community Enhancements: Park dedication fees will be noted as a potential financial tool. Mr. Erickson indicated the need to find. additional sources of funding for the Comprehensive Parks, Trails, and Open Space Plan so that park dedication fees received from commercial and industrial projects can be used to benefit business areas. 5. Business attraction: Comm. Matatsosky suggested adding the promotion of automation to the business attraction category. Mr. Steinman will also change the subcategory of industrial/manufacturing to light manufacturing. 6. Business Retention and Expansion: No changes were suggested 7. Housing: Comm. Tushie suggested adding market rate rental. Chair Vogel suggested adding manufactured housing. 8. Public/Private Infrastructure: Discussion ensued regarding difficulties in expanding Airlake Airport's runway and capacity difficulties of the Empire Treatment Plant brought on by excelerated growth. Mr. Steinman and Ms. Huot will incorporate the above issues into the matrix and will have a preliminary draft of the entire matrix completed in approximately one month. The Incentive Subcommittee will review the matrix draft and work with Springsted to refine it before presenting it to the EDC. 4. High Tech Subcommittee update. Chair Vogel indicated that he and the Chair of the Telecommunications Commission met with staff to confirm the purpose of the subcommittee. Staff was directed to obtain a scope of work and cost estimate from a consultant that could assist the subcommittee in .reviewing the high tech infrastructure and business needs in Lakeville. Staff obtained an estimate from David MacKenzie, who previously consulted with the Telecommunications Commission on technology issues. 5. Review and Update of Strategic Planning Process. Chair Vogel indicated a need to review the Strategic Plan for Economic Development in order to ascertain the direction for 2001 and to begin planning for a new Strategic Planning process in the fall. Ms. Flad distributed an update on the progress made on the .2000-2001 Strategic Plan to date. The plan will be discussed in detail at the March meeting. 6. Park Dedication .Fee Subcommittee update. Mr. Erickson indicated that the City Council reviewed the Park Dedication Subcommittee's February 22, 2001 recommendation "that the current offer by Airlake Development to pre- pay park dedication fees be accepted as it satisfies the joint goals of the committees." The Council has requested acost-benefit analysis from the Finance Department in order Page 2 of 4 r Economic Development Commission Meeting Minutes February 27, 2001 to determine the fiscal impact of accepting payment now as opposed to when the property is platted. The Council will make a decision after the cost-benefit analysis is reviewed. No further action by the EDC was requested. The EDC stated their appreciation to the City Council for their consideration of this matter. 7. Annual Development Project Feedback Report. Ms. Flad presented results of the Project Feedback surveys that were mailed out in 2000. Satisfaction has increased greatly from 1999, with individual measures showing 6% to 23% increases in satisfaction. Fifty-two surveys were mailed to developers and business owners involved in twenty-three completed projects. Discussion ensued about quantifying the satisfaction of persons who never complete the process. Ms. Flad suggested this be incorporated into the Strategic Plan for Economic Development. and its priority determined. Comm. Pogatchnik suggested this information be shared with the staff responsible for customer service. 8. Prospect/lnquiry Report. Ms. Flad provided information on the prospects and inquiries she has received to date. The entire Community & Economic Development Department has been asked to provide information to Ms. Flad on the inquiries they respond to, in order to ascertain trends such as demand and size of retail space, demand and size of property for industrial development, etc. This report will be provided to the EDC on an ongoing basis. 9. Airlake. Airport Facilities update. Mr. trussing reported that staff met on February 16, 2001 with Appro Development and Jack Eberlein of the Metropolitan Airports Commission to review the preliminary proposal by Mr. Glenna for an airplane hanger that could accommodate other corporate users in Lakeville. Mr. Glenna is expected to request financial support from the EDC for this project. Staff is working on a cost benefit analysis of the project, while MAC will be exploring their ability to assist the project. It was further discussed that the current FBO may change ownership and the new owners may consider an upgrade of the FBO facility. 10. Meeting adjourned at 8:21 p.m. Respectfully submitted by: Attested to: Ann Flad, Recording Secretary R.T. Brantly, Secretary Page 3 of 4 Item 1~'v._ TQ. Iwcano~ni~ Uevetopment Cammissian FR1`~~t Arlyn Grossing, Community and Economic Development Director DATE: March 22, 2401. RE s TIF .~xnendments Mr. Dennis Feller, Finance Director, provided the attached memos far the amendments to Lakeville TIF Districts 9 and 10. The amendments are being forwarded to the hearing process to avoid any possible limitations imposed by pending legislation. By rt~aking these arn~ndments the excess increment can be utilized for planned roadway improvements. TTF District 9 includes Argonne Plaza created in May 1988. The captured revenues proposed to be used: for the acquisition of a parcel for future right-of--way at 175f~' Streef and Junelle Fath. This is part of the planned improvements to CSAH 50 and I-35 interchange. TIF District 10 includes Fairfield Business Campus created in April 1989. The captured increrrt~tt will be utilized for the design, acquisition of right of way and reconstruetic~n of CSAH 70 and J-35 Interchange. Staff r~on~~mends approval of bath amendments. a' -f7TfT To: Economic Development Commis 'o From: Dennis Feller, Finance Director C: Robert Erickson, City Administrator Arlyn Grossing, Community & Economic Development Director Ann Flad, Economic Development Coordinator Date:. March 19, 2001 Re: TIF District No. 9 -Amendment No. 1 House File l87 and Senate File 73 states that any amendments for the tax increment plans certified prior to May 1990 can only be amended up to April 30, 2001. All spending and/or issuance of debt must be completed by Apri130, 2002. Tax Increment Financing (TIF) District No. 9 (Argonne Plaza) was created. in May 1988. The increments from the Argonne Plaza (Taco Bell and adjoining parcels) are pledged to financing future public improvements within the Redevelopment Project. area. The proposed Amendment No. 1 to TIF District No. 9 authorizes the appropriation of the tax increment revenues for the acquisition of a parcel (22-11850-220-00) for future right-of--way on 175`" Street and Junelle Path. The~roposed right-of--way acquisition is an integral part of the County Road 50/175 Street/I-35 interchange improvement project. The City Council will conduct a public hearing and adopt the Resolution amending the TIF Plan at its meeting on April 16, 2001. Tax Increment Fi nanci n District No. ~ g \ r. - \ \ , ~ \ . ~ N ~ W E „ ~ 0 ¦ ~ ~ ~ ~ _ ~ ~ ~ , _ ~ S _ 175th Street - ~ ' _ - \ \ ; _ ( 0 / Structures o ~ _ Roads ,0;~~ ~ Buildings c Tif distict no 9 ~ ~ ~ ~ ~ o i ~ ~ - Property J ~ ~ 0 Proposed o ~ ~ rr ~ ~ ~ Property To Be ~ ~ ~ ` - ~ ¦ Acquired V ° ~ \ - \ ~ ~ ~ ~ 176th Street - - - - ~ _ 176th Street " =~T : - - T \ v ~ ~ ~ ~ ~ ~ ~ To: Economic Development Commission From: Dennis Feller, Finance Director C: Robert Erickson, City Administrator Arlyn Grossing, Community & Economic Development Director Ann Flad, Economic Development Coordinator Date: March 19, 2001 Re: TIF District No. 10 -Amendment No. 2 House File 187 and Senate File 73 states that any amendments for tax increment plans certified prior to May 1990 can only be amended up to April 30, 2001. All spending must be completed by April 30, 2002. Tax Increment Financing (TIF) District No. 10 (Fairfield Business Campus) was created in April 1989. The increments from the Fairfield Business Campus TIF are pledged to the payment of the 1995B and 1998D General Obligation Bonds. The proposed Amendment to TIF District No. 10 authorizes the appropriation of the tax increment revenues, to the extent that such revenues are available after the payment of the existing debt and fiscal disparities, for improvements to I-35 and County Road 70 intersection-Dakota County Project 70-06. The proposed improvement project will eliminate unsafe conditions and reduce traffic hazards. The last tenant, D.R. Horton, will complete their facility this year. If the properties appreciate at the rate of 6% per year, the TIF district will generate approximately $6,119,119 of tax increment revenues after payment of existing debt and fiscal disparities. The cash projection also assumes there will be no significant legislative changes affecting property classification rates, taxation or tax increment financing. Springsted Inc. has prepared projected debt service schedules based on the cash flow projection. Springsted is recommending issuance of approximately $2,675,430 of General Obligation Tax Increment Bond Series 2001 (Capital Appreciation Bonds). The bonds will generate approximately. $2.6 million for the County Road 70/I-35 construction project after payment of issuance costs and bond discount. Prior to commencing the project, the City and the County would also approve an agreement for the I-35/County Road 70 project. The Agreement will require the City to issue the $2,675,420 of General Obligation Tax Increment (Capital Appreciation) Bonds. The bond proceeds will be appropriated to the engineering, construction and right of way costs associated with the County Road 70/Interstate 35 improvements. The project is anticipated to be designed in 2001 with construction in 2003. Other City financing may be required based on actual project costs and the extent of federal funding. The Amendment also elects to reduce the amount of captured tax increment by the amount of fiscal disparities contribution. The fiscal disparities will therefore be taken from within the Tax Increment District rather than the City-wide tax base. The City Council will conduct a public hearing and adopt the Resolution amending the TIF Plan at its meeting on April 16, 2001. 2 ax cremen mina ce istriciNo` 'I S Prop o Proj Area T f D slot[ No 10 I F EID ED AO 1 r Memorandum To: Economic Development Commission CC: Robert Erickson, City Administrator Arlyn Grossing, Community & Economic Development Director From: Ann Flad, Economic Development Coordinator Date: 03123/0 1 Re: Strategic Plan Action Item: Develop a Proactive Approach to Expand the Supply of Affordable Housing The 2000-2001 Strategic Plan for Economic Development placed high priority on the development of a proactive approach to expanding the supply of affordable housing. Mark Ulfers, Executive Director of the CDA, will be present to speak to the EDC on various public/private affordable housing projects his agency has participated in and the potential applicability of such strategies for Lakeville. Xi. STRATEGIC ACTION ITEMS .Utilizing the strategies identified, the EDC generated the following action ite .These action items will be utilized to develop the annual work plans which direct a economic development program. Due to limitations in staff time and funding, as w as unanticipated changes in the economic development environment, a f the action items identified at the time of the Strategic Plan adoption may not implemented. The EDC will be reevaluating the action items as needed through th ~ implementation of the 2000-2001 Strategic Plan. DEVELOP AND IMPLEMENT VISION FOR LAKEVILLE'S ETAIL AND SERVICE SECTORS Include questions in future community surv s to identify priority needs for additional retail goods and services and ingness to purchase locally • Identify in fall 2000 issues that-nee dditional information from residents • Review draft survey questions fo .001 survey Support the implementation oft Town Square plan for uses-that capture commercial, services, and en ainment dollars from both the local and sub- regional populations. Healt services, quality grocery and restaurants are high priority uses to attract. • Define priority us and potential sites • Identify lando ers and developers • Support the " corporation of the Heritage Commons architecturalguidelines into other dev opments in the Town Square .area Explore if dhow to integrate with other communities so that Lakeville becomes both a ro community and a regional center. • upport users that would be a regional draw Support and research methods to attract purchasing power from neighboring communities • Develop a database and monitor building. permit informatian for communities south and west • Identify networking opportunities with neighboring communities ENSURE AN ADEQUATE SUPPLY AND DIVERSITY IN HOUSING OPPORTUNITIES Devebp a proactive approach to expand the supply of affordable housing • Review City Council and Metropolitan Council adopted agreement on goals for Livable Communities Act {LCA) • Review Dakota County Cluster LCA action plan • Develop a request for proposal to hire a consultant 2000-2001 Strategic Plan for Economic Development 20 Y • Work with consultant to: - Research and define "affordable housing" and identify successes in similar communities - Identify potenfial locations for additional affordable housing units. - Consider options to encourage affordable housing to be mixed with market rate housing throughout the community, such as incorporation of affordable units in specific projects - Identify sources of additional financial resources for affordable housing, such as CDBG, TIF, MHFA, etc. - Explore opportunities for securing employer participation in assisting current and future employees to live in the City • Encourage the development of medium and high density housing as identified in the 2020 Land Use plan as an effective element in an economic development strategy • Partner with other city and county agencies to provide public information about the linkages between housing and economic development policies Develop a proactive approach to expand the supply of life-cycle housing • Review City Council and Metropolitan Council adopted agreement for Livable. Communities Act (LCA) • Review Dakota County Cluster LCA action plan • Establish City subsidies for life-cycle housing MAINTAIN LONG-TERM VITALITY OF THE HISTORIC DOWNTOWN Explore how the new arts center can become a key community resourc . • Review plans for major areas of the site • Define programming responsibilities • Define target uses. Support the Downtown Lakeville Business Assoc' on (DLBA) in identifying a future market-niche for the historic downtown d methods to link it with Heritage Commons • Review, adopt by reference, and ' ze DLBA Design Guidelines • .Ensure the incorporation oft owntown Lakeville Parking Study recommendations in the. Wing Ordinance update • Work with the Dako ounty Community Development Agency to develop and implement a St rout Improvement Program with Community Development Block Gra unding Imple t feasible options 2000-2001 Strategic Plan for Economic Development 21 i Item Memorandum To: .Economic Development Commission CC: Robert Erickson, City Administrator Arlyn Grussing, Community & Economic Development Director From: Ann Flad, Economic Development Coordinator Date: 03/23/01 Re: Strategic Plan Action Item: Identify Resources to Meet Employers' Recruitment and Retention Needs Labor Force/HR Committee First Quarter Report 2001 The EDC, at their November 28, 2000 meeting, recommended that the Labor Force Subcommittee "create a plan for developing leadership in Airlake Park that will be responsible for marketing Lakeville and Airlake Park to potential employees." Three meetings were held in the first quarter of 2001 to foster leadership among businesses and implement strategies that address labor force issues. On January 18, 2001, a meeting for Airlake Businesses was hosted by the Labor Force Subcommittee of the EDC and the Chamber of Commerce. The purpose of the meeting was to determine interest in pursuing joint strategies to address labor force issues and to determine the leadership that would guide the implementation of these strategies. Airlake businesses expressed support for the Human Resources Committee of the Lakeville Area Chamber of Commerce taking this role. A second meeting was held on February 15 to determine a structure for the HR Committee and to prioritize the next steps. Discussion ensued regarding the focus of the HR Committee, including the education of H.R. Professionals, recruitment of labor to Lakeville, and retention of existing labor. Businesses determined that their initial focus would be labor force recruitment. Subsequently, the HR Committee met on March 22, 2001 at Ryt-Way Industries. The purpose was to determine what jobs and target populations businesses were experiencing difficulty in recruiting.. Businesses reported that while they had other job openings periodically, their primary difficulty was in filling the following positions: • Entry level laborer (loaders, assembly, line workers) • Machine operators • Machine mechanics • Customer service representatives (salaried, non-exempt) • Welder fabricators (skilled position} • Receptionists (hourly non-exempt) • Administrative assistants • Electrical Supervisors (salaried exempt, degree required) The committee members then determined that these positions were primarily classified as: • Entry level/unskilled labor • Skilled technical labor • Office/clerical Discussion then ensued about the Labor Force Subcommittee's strategies that were identified through focus group discussions. Strategies were classified into two catagories: those that provided a central location for job seekers to get information and those that advertised the central location. Participants decided to pursue development of a central location for job information first, with a web site and a job hotline being the most appealing options for businesses. Holding a job fair was also discussed as a central location for job information and maybe pursued in the future. The effectiveness of listing jobs on a web site was discussed, with concern expressed about the target populations' access to the internet. It was suggested. that a job hotline could be developed that would direct those with internet access to a LakevilleJobs web site, and those without internet access could leave their address and a printout of available jobs would be mailed to them. Advertisements could indicate that these same printouts would be available at business establishments throughout the community, such as Enggren's Market and the Lakeville Post Office. Businesses felt that creating a job hotline that would list each individual job opening would be cumbersome for job seekers to use and would be less successful. Target mailings, cable TV advertising, billboards, inserts in papers, indoor advertising and strategic placement of literature were discussed as methods to advertise the central location for job information which will be developed. Businesses indicated strong support for Created on 03/09/01 3:42 PM r advertising to recruit labor. The felt that a billboard would be the most effective way to advertise the central location that would be developed (i.e.: web site or job hotline.) The meeting concluded with participants agreeing to research different web site development alternatives. Specifically, information will be sought on the development of Airlake's own jobs web site, the incorporation of Lakeville openings into an existing web site, and the use of the Chamber of Commerce's "NationJobs.com" web site. Participants will present the. information to the HR Committee at the April 12, 2001 meeting to be held at Ryt-Way Industries at 7:30 a.m. Created on 03/09101 3:42 PM Memorandum To: Economic- Development Commission CC: Robert Erickson, City Administrator Arlyn Grussing, Community & Economic Development Director From: Ann Flad, Economic Development Coordinator Date: 03/23/01 Strategic Plan. Action Item: High Tech Uubeommitee In January, 2001, a High Tech Subcommittee was appointed to address the following components of the Economic Development Strategic Work Plan_ ¦ Research and identify fiber-optics and other emerging technologies," as identified in the 2000-2001 Strategic Plan for Economic Development ¦ "Encourage additional office park/business campus development to achieve desired business mix," as identified in the 2000-2001 Strategic Plan for Economic Development. ¦ "Attract and retain employers that will utilize the skills of residents," as identified in the 2000-2001 Strategic Plan for Economic Development. Mr. David MacKenzie., a consultant who has worked with the Telecommunications Commission in the past, has signed an agreement (see attached) to assist the High Tech Subcommittee gather data and determine a course of action to achieve the above objectives. Mr. MacKenzie will be creating a survey tool to ascertain existing Lakeville companies' technology needs. This information will then be incorporated into a "report summarizing survey findings and recommending strategies for addressing current and future unment needs..." A draft of the survey and will be reviewed by the High Tech Subcommittee the week of March 26-30, 2001. The subcommittee will also identify appropriate targets/recipients of the survey and methodology for delivery at that time. David C. MacKenzie 821 4`h Avenue Madison, MN 56256 V~ice:320.598.3224 Fax: 320.598.3508 Email: dmack@frontiernet.net February 27, 2001 City of Lakeville Jeff Lueders, Cable Coordinator 20195 Holyoke Avenue Lakeville, MN 55044 Re: Communication Needs Survey Dear Jeff: The following is the proposal for my services in assisting the City of Lakeville in its efforts to assess and evaluate the current and future communication needs of companies in Lakeville primarily located in the Airlake and Fairfield Industrial Parks. Scope of Work Phase I -Development of Survey Instrument - Develop a Survey Instrument designed to determine the following: ? Current types of communication services/facilities available ? Current types of communication services/facilities used by companies Current services/facilities needs that are not being met by providers ? Current costs of communication services ? Future communication needs of the companies Work with staff to identify appropriate target/recipient of survey and methodology for delivery of survey and collection of data. Deliverables: Draft of Survey Meeting with Staff to critique/edit Survey Final Survey Instrument Phase II -Assist Staff in the collection and assimilation of survey data as may be required. Assistance may include participation in on-site interviews with survey participants, methodology for analyzing data, and assisting staff in understanding responses. Phase III -Summary Report and Recommendations -Report summarizing Survey findings and recommended strategies for addressing current and future unmet needs identified by the Survey. Estimated Cost of Services The following presents the estimated cost for the services outlined above: Phase I -Development of Survey Instrument $1,000.00 Fixed Price Phase II -Assistance with Survey Delivery/Data $ 0.00 to ? Cost is based on $125/hr. Hours controlled by Staff. Phase III -Summary Report and Recommendations $ 750.00 Fixed Price Fixed prices and hourly rates include travel and other incidental costs which may be incurred during the engagement. Payment Terms Phase I & III shall be paid in the form of a $500.00 retainer upon acceptance of the proposal. Balance of Phase I due upon delivery of Final Survey document. Balance of Phase III upon delivery of Report and Recommendations. Phase II will be invoiced based on hours used on a monthly basis. Hours for Phase II will be reported to Staff on a weekly basis for management purposes. Please contact me if you have any questions. Respectfully submitted, r David C. MacKenzie /"R ~ J Z Please signifj acceptance o~ this proposal by signing beio'w: City o vill ereb c e t the above proposal By ~ Date: It's L~~? %i~' .''~`~J./~3i~'>'~'e S i'w~'~'Yi~`~,.. n ~r1~1~i V.(~l \ JJ V TO: Economic Development Commission FROM: Arlyn Grussing, Community and Economic Development Director :DATE: March 13, 2401 RE: Incentive Study Subcommittee update The subcommittee met on March 14,` 2001 to review the questions to be used during interviews of the 15 local companies. It was determined. attendance by a`staff member and a subcommittee member for each' interview was preferred and assignments made for .each muting. The meeting schedule is attached. The results of the interview meetings will be tabulated and the subcommittee will be reviewing the results on March 27, just prior to the EDC meeting. The preliminary summary will be presented at the EDC meeting. The subcommittee will also review new information from Springsted at the'subcommittee meeting and schedule another subcommittee meeting in early April to discuss this additional information with Spugsted representatives. 4 No EDC action is necessary at his time. a p i Questions for Company Interviews 1. This inventory will assist the City of Lakeville and the Economic Development Commission in determining what are the positive attributes and decisive reasons for locating a business in Lakeville. Concurrently, we are working with a consultant to study financial incentives or tools available to the City for economic development. The survey and study are anticipated to be the basis for a progressive economic development policy. Z. What were the most important reasons you decided to locate or expand in Lakeville? -Location _Transportation -Land price -Labor force reasons -Available land -Proximity of suppliers/customers -Live here or near -Availability of rail services -Financial incentives -Avoid congestion -Leave the urban area -Strong business climate Availability of Airport -Other 3. Have your reasons proved to be true? 4. Please rank the following programs as to their importance to your company. -Affordable Housing -Downtown Lakeville -Retail & Service Dev. -Roadway Improvements I-35 Interchanges -Public & Private Utilities Labor Force 5. In your opinion, what things could Lakeville do to encourage businesses to locate here? 6. Are you aware of programs in other States or Communities that may be beneficial for Lakeville to consider? 7. In your opinion, what businesses should we be trying to attract? 8. Word of mouth is the best advertisement--if the situation arises would you be willing to meet with prospective businesses to help encourage their location to Lakeville? 9. What incentive would have been the most important to your company in locating or expanding in Lakeville? Thank You, we appreciate your input and we will send you a copy of the results of this survey. Incentive Study Meeting Schedule Company Address Phone No. Meeting With Time Date EDC Member Performance Office 21673 Cedar Ave. 952-469-1400 Russ Defauw 9:00 a.m. Friday, 3/16 Barry/Arlyn Parker Hannifin 21337 Hemlock Ave. 952-469-5000 Fran Caulfield 10:00 a.m. Friday,3/16 Barry/Arlyn Applied Power Products 21455 Hamburg Ave. 952-985-5100 Bruce Lundeen 11:00 a.m. Friday, 3/16 Barry/Arlyn Allison Specialty 21655 Cedar Ave. 952-469-5623 Tom Mork 1:00 p.m. Friday,3/16 Jim/Arlyn Heat & Glo 20802 Kensington Blvd. 952-985-6000 Brad Determan 2:00 p.m: Friday,3/16 Jim/Arlyn 3:00 p.m. Friday, 3/16 Jim/Arlyn DHY 2.1467 Holyoke Ave. 952-469-1000 Ken Owen 9:00 a.m. Tuesday, 3/20 Bob/Arlyn Menasha Packaging 8085 220th St. W. 952-469-4451 Rich Swanson 10:00 a.m. Tuesday, 3/20 Bob/Arlyn Delmar 21355 Heywood Ave. 952-469-8600 Kevin Delk 11:00 a.m. Tuesday, 3/20 Bob/Arlyn D. R. Horton 3459 Washington St. Ste. 204 Eagan 651-256-7144 Neil Hanson 1:00 p.m: Tuesday, 3/20 Bob/Arlyn Imperial Plastics 21320 Hamburg Avenue 952-469-4951 Norman Oberto 1:45 p.m. Tuesday, 3/20 Bob/Arlyn J & E Manufacturing 7925 215th St. W. 952-469-3933 Bob LeClair 1:30 p.m. Wed. 3121 Jim/Arlyn DeGidio Services 21033 Heron Way 952-469-6411 Jim DeGidio 3:15 p.m. Wed. 3/21 Jim/Arlyn Merrillat Industries 21755 Cedar Ave. 952-985-7300 Pete Palpant 9:30 a.m. Friday, 3/23 Jim/Arlyn/Ann Wausau 21700 Highview Ave. 952-460-6626 Tom Sheeman 11:15 a.m. Friday, 3/23 Jim/Arlyn Meetings to be set up: J & J Enterprises Meet in Prior Lake? 952-226-3127 Joe Johnson Out of Town Until 3/19 call at end of Week r MEMORANDUM TO: Econonuc Development Commission FROM: Arlyn Grussing, Community and Economic Development Director DATE: March 22, 2001 RE: TimberCrest at Lakeville The attached memo was submitted to the EDC along with the application information and the staff report for the proposed TimberCrest development. The EDC is being requested to provide a recommendation to the City Council on the Comprehensive Plan Amendment requested by Avalon. The change in the Comprehensive Plan designation is from Office Park/Business Campus to General Commercial If the Comprehensive Plan is changed, as per the request, the applicant will need to submit a rezoning application at a later date to change the zoning from Corporate Campus to General Commercial. The Environmental Affairs committee recommended approval of the change on March 13, 2001 (recommendation attached). The Planning Commission recommended approval of the request following their public hearing on March 15, 2001. The Planning Commission will make their final recommendation on March 22, 2001 with approval of their findings of fact (attached). Each of these Commissions considered their respective charges in making the recommendations. The copy of the Lakevilla web-site information regarding the proposed TimberCrest development is attached for your information. The EDC, in making their recommendation, should base their decision on the 2000-2001 Strategic Plan for Economic Development and pages 17-18 of the staff report. MEMORANDUM TO: Economic Development Commission i FROM: Arl}ni Grossing, Community and Economic Development Director DATE: March 8, 2001 RE: TimberCrest at Lakeville The EDC is familiar with the request of Avalon Real Estate Group to construct 550,000 sq. ft. of retail, service, restaurant and office uses on approximately 96 acres at the northeast quadrant of I-35 and CSAH 60 (185`h Street). The EDC was invited and attended an informational presentation made by Avalon to the Plamling Commission on February 15, 2001. The Economic Development Commission Strategic Plan contains the following strategies: • Development and implement a vision for Lakeville's retail and service sectors. • Develop and maintain policies and programs that improve Lakeville's ean~city for economic development. • Explore if and how to integrate with other communities so that Lakeville becomes both a metro community and a r?gional center. • Support users that would be a regional draw. • Support and research methods to attract purchasing power from neighboring communities. • Encourage retention of large tracts of land for future development. • Identify uses and locations. • Develop and monitor policies that promote quality growth. • Develop policies and oversee the incorporation and implementation of the Corridor and Gateway Design Study. • Continue to update the EDC on the Comprehensive Plan process and provide opportunities for monitoring of the plan. The comprehensive plan change is proceeding through the review process and will be on the Environmental Affairs Agenda on March 13, 2001 and the Planning Commission Agenda on March 15, 2001. Recommendations from the commissions will be forwarded to the City Council in April 2001. With the stated policies in place the application for the comprehensive plan change submitted by Avalon is enclosed in the white binder and the staff report is enclosed in the grey binder. This item will appear on the March 27, 2001 EDC agenda. Please review the material and be prepared to make a recommendation to the City Council. LAKEY~LL~: Avalon Group Comprehensive Plciea Ataaendnaent Request Review - 05 March 01 dev meat plan to address downstream water quantity and quality impacts that may be a concernresidents of the City. Any development taking place on the site will be required demonstratef~at all City stormwater management standards will be achieved. In conclusion, however, at this poi=fn the review process, stormwater does not appear to be an issue. 3. Water Supply WSB has evaluated the municipal water supply for the site in question and has found that it is available and would be provided through the~extension of existing systems located along CSAH 60 on the south and 176th Street on the north.. 4. Summary ,e_ The proposed use is located on an "infill" site and is currently surrounded~y existing development. Infrastructure extensions are readily available and the use wife no# impact City systems more than was originally anticipated or can be accommodated by the City. ECONOMIC DEVELOPMENT The Avalon Group's Comprehensive Plan Application submission does not specifically highlight economic development as a separate consideration: Reference to economic development .matters are however cited in the section of "City Wide issues" and "Growth Management." A primary factor in this regard is the citation of the fact that 96% of City residents currently make their household purchases outside of Lakeville. In conjunction with the Lakeville Comprehensive Plan directives, the City's "2000-2001 Strategic Plan for Economic Development" (SPED) provides a basis upon which to evaluate the Avalon Pian Amendment request. Although discussed in more detail in the following section of this report, one of the overriding objectives of the SPED is to maintain a balanced tax base within the community. This is a critical goal which is necessary to provide an affordable and equitable property tax system funding the services provided to residents and business. At the present time, Lakeville has a relatively low amount of commercial/industrial tax base. A year 2000 survey of Dakota County cities over 10,000 population indicates that Lakeville ranks sixth in commercial/industria! property as a percent of tax base at 10.2%. in order to maintain a reasonable tax on residential property there must be a corresponding expansion of the non-residential sector within the City. The City's continuing .rate of residential growth makes it that much more difficult to achieve the balance which is desired. Development of the site in question, either under the present office use designation. or under the proposed commercial use classification would assist in reaching this critical City milestone. Typically, the primary governmental service demands for commercial property involve public safety and infrastructure maintenance. Commercial property normally places relatively insignificant demands on general government, park and recreation or schools systems. Assuming the proposed Avalon Group project has an estimated $90 million market value, their site would generate approximately $3.$ million of taxes per year for the following entities; Schools $2,259,000; County $820,000; City $667,000; Other $76,000. , 17 LAKEY7LLE.• Avalon Grozap Comprehensive Plan Amendment Request Review - 06 March O1 Commercial/industrial tax base also results in lower taxes for residential development. If the $90 million Avalon project is realized, the property taxes on a homestead residential property in ISD 194 valued at $175,000 would be reduced by approximately $101.00 per year. The SPED also identifies that a critical issue for Lakeville is encouraging new business to serve its resident population. Lakeville has surpassed the 40,000 population threshold but continues to lack an appropriate amount and diversity of retail goods and services which are typically available in other similar sized communities. As noted earlier in this section, currently much of the purchasing power of Lakeville residents is being siphoned off into neighboring cities. The SPED supports additional new retail opportunities in the community to counter this present situation. Specifically the Economic Development Commission had indicated that they want to see an increased availability of convenience goods including groceries and family restaurants. The 1999 community survey by Decision Resources also .identified these types of uses as a high priority items. A related benefit of having basic shopping and services facilities geographically located with in the City is the direct link to building community identity and the satisfaction of residents with their quality of life. In comparison of the existing guided land use as contrasted to the use requested on the site in question, the Avalon proposal complies with these elements of the City's economic development objectives. The SPED includes a high priority strategy to develop and implement a vision for Lakeville's retail and service sectors. Under this strategy are several action items, one being to explore the Ci#y becoming a metro community and regional center. To accomplish this. end the SPED supports uses that would be a regional draw: Additionally, to accomplish desired retail diversity there needs to be large named retailers that will attract and be a magnet for smaller businesses. A significant factor in attracting the magnet user/anchor is to have a large site to accommodate their needs while providing opportunity for other business. As documented in Attachment "E," the Avalon site meets this criteria. Expanding upon a point just noted, Lakeville requires "big. box" type business if smaller retaiUservice establishments are to be attracted to the community and to maintain their financial viability. Many of Lakevilie's current small businesses have difficulty surviving due to the fact that there is limited major shopping/convenience retail development. The experience and success recently noted in the communities of Maple Grove and Woodbury substantiate this situation. While there have been comments from Lakeville residents that the City should avoid "big box" type developments and facilitate only smaller business, this position does not reflect the reality of the market place if sustainable development and smart growth is to be realized. V SUMMARY ~ CflNCLUSIfl~f To briefly reiterate, it is recommended that ~ityrG~icia!s take note of the "Request Conideration" section of this report as well as subsection V. t~ 'R~rriew=a!ysis" in organizing their thoughts and decision-making process. In this regard, the proceeding paragra 18 CITY OF LAKEVILLE DAKOTA COUNTY, MINNESOTA IN RE: Application of The Avalon Real: Estate Group, LLC, FINDINGS OF' FACT Robert and Lorraine Adelmann, Lakeville "385", AND RECOIVTMENDATION and Byron Watsehke for an Amendment`to the City's Comprehensive Plan On iVlarch 15, 2001, the Lakeville Planning Commission met to consider the application of The. Avalon Real Estate Group, LLC, Robert and Lorraine Adelmann, Lakeville "385.", and Byron Watschke for a comprehensive plan .amendment- to reguide property. from Office Park/Business Campus to Commercial. The Planning Commission conducted a public hearing on the proposed comprehensive plan amendment preceded by published and mailed notice. The Planning Commission heard testimony from all interested persans wishing to speak and now makes the following: FINDINGS OF FACT 1. The property is currently guided Office Park/Business Campus. 2. The property is located within Planning District No. 1 in the City's Comprehensive Plan. 3. The legal description of the property is described on the attached Exhibit "A". 4. The proposed amendment is consistent with the policies and provisions of the Comprehensive Plan. One of the primary gaals of Planning District No. 1, the district in which the subject property is located, is to promote commercial development. The City needs additional retail shopping opportunities. Most residents must leave the City to make routine .purchases. The addition of this retail area will allow residents to shop close to home. This will reduce demands on the City and Regional Transportation System and is consistent with smart growth policies.. The proposed amendment is consistent with the City's Strategic Plan for Economic Development. The reguiding carries forward the Plan objectives of providing a balanced tax base and retail shopping opportunities. 6. The proposed use is or will be compatible with present and future land uses of the area, To the west of the property is I-35, to the east is a railroad track, to the south is CSAH b0 which is a high density minor arterial. Site design, performance standards, and provided open space will buffer adjacent residential property. 7. Adequate capacity exists for storm water drainage, water supply, and waste disposal systems to support. the proposed land use. 8. Currently planned and existing streets and highways have adequate capacity to serve the property. Commercial guiding will put less peak hour demand on the transportatian .network than the current guiding. 9. Any use of the property will have an impact on the environment. The .impact of the proposed guiding would be similar to the current guiding. The City's wetland, tree, ar~d environmental regulations currently in place will protect the area. The City's storm water management requirements will ensure that run-off does not degrade water quality in the two affected watersheds. 10. The proposed use will not overburden the City's public service capability. 1 L The proposed reguiding is consistent with and will promote the public health, safety, and welfare of the community. RECOMMENDATION The Planning Commission recommends that the City Council approve reguiding the subject property to commercial and that the text of Planning District No. 1 be amended to include substantially the following provision: To maintain open space and to assure the Acorn Heights residents of a reasonable natural buffer, the environmentally sensitive areas along the north and east borders of the subject property and .other sensitive areas, totaling approximately 3o acres, must be protected from development through a conservation easement or dedication to the City: ADOPTED by the Lakeville Planning Commission this 22"d day of March, 2001. LAKEVILLE PLANNING COMMISSION s Its Chairperson ATTEST: Secretary 92623.03 2 RNK:03/19/2001 r EXHIBIT "A" LEGAL DESCRIPTION OF SUBJECT PROPERTY That part of the following described parcels lying southerly of the south line of the REPEAT OF ACORN HEIGHTS ADDITION, according to the recorded plat thereof, Dakota County, Minnesota, and its easterly and westerly extensions. Said easterly extension to terminate at the westerly right of way line of the Minneapolis, Northfield and Southern Railroad and at said westerly right of way to terminate at the easterly right of way line of Interstate Highway 35 W. That part of the Northwest Quarter (NW1/4) of Section Thirteen (13), Township One Hundred Fourteen (114), Range Twenty One (21), Dakota County, Minnesota lying East of the Easterly right of way line of U.S. Interstate Highway No. 35, Southerly of the South line of the North Half (N1/2) of the North Half (N1/2) of said Northwest Quarter (NW1/4) and Northerly of the following described line to-wit: Commencing at a point on the centerline of State Trunk Highway No. 65 (according to the Amended Final Certificate of Condemnation filed in Book 70 of M.R., page 28 in the office to the Register of Deeds, in Dakota County, Minnesota), distant 932.b feet Northerly of the East and West Quarter (1/4) section line of said Section Thirteen (13); thence in an Easterly direction to a point on the East line of said Northwest Quarter (NW 1/4), distant 930.4 feet North of the center of said Section Thirteen (13), according to the U.S. Government Survey thereof. That part of the Northwest Quarter of Section 13, Township 114, Range 21, Dakota County, Minnesota, described as follows: Beginning at the southeast corner of said Northwest Quarter; thence North 88 degrees 16 minutes 54 seconds West (assumed bearing) along the south line of said Northwest Quarter a distance of 621.84 feet to its intersection with the easterly right of way line of Interstate Highway 35W; thence westerly 269.72 feet along said right of way, along a nontangential curve concave to the south, radius of 766.20 feet, central angle of 20 degrees 10 minutes 11 seconds and a chord that bears North 77 degrees 33 minutes 09 seconds West; thence northerly 70.18 feet along said right of way, along a nontangential curve concave to the west, radius of 336.48 feet, central angle of 11 degrees 57 minutes 03 seconds and a chord that bears North i 1 degrees 03 minutes 23 seconds West; thence North 17 degrees O 1 minutes 54 seconds West, along said right of way, tangent to last described curve a distance of 605.25 feet; thence North 04 degrees 49 minutes 06 seconds East, along said right of way a distance of 73.51 feet; thence North 85 degrees 10 minutes 54 seconds West, along said right of way a distance of 12,50 feet; thence North 04 degrees 49 minutes 06 seconds East, along said right of way a distance of 159.90 feet; thence South 88 degrees 33 minutes 24 seconds East a distance of 1091.79 feet to a point on the east line of said Northwest Quarter distant 930.40 feet north from said southeast corner of the Northwest Quarter, as measured along said East line; thence South O1 degrees 29 minutes 45 seconds West along said east line a distance of 930.40 feet to the paint of beginning. That part of the Northeast Quarter (NE1/4) of Section Thirteen (13), Township One Hundred Fourteen (114), Range Twenty-one (21), lying North of a line perpendicular to the West line of said Northeast Quarter (NE1/4) of said Section Thirteen (13) from. a point on the West tine thereof distant 1426.57 feet South of the Northwest corner thereof, and Southwesterly of the Southwesterly right of way line of the Minneapolis, Northfield and Southern Railway. That part of the Northeast Quarter of Section 13, Township 114, Rangz 21, Dakota County, Minnesota, lying southwesterly of the southwesterly right of way line of the Minneapolis, Narthfield and Southern Railway and south of a line perpendicular to the west line of said Nartheast Quarter of said Section 13 from a point on said west line of the Northeast Quarter of Section 13 distant 1426.57 feet south of the northwest corner of the Nartheast Quarter of Section 13: And That part of the Northwest Quarter of Section 13, Township 114, Range 21, as described in Quit Claim Deed No. 832848. (State of Minnesota to City of Lakeville, known as Kenrick Ave.) 92623.03 3 RNK:03/19!2001 i CITY OF LAKEVILLE ENVIRONMENTAL AFFAIRS COMMITTEE MEETING MINUTES March 13, 2001 ITEM 1: Call to order. The meeting was called to order by Chair Rosselit at 6:00 p.m. in the City Council Chambers. ITEM 2: Roll call of members. Roll call of members was taken. Present: Rosselit, Goodwin, Kline, McManus, and Schmitt. Also in attendance were Tim Brown, Environmental Resources Coordinator; Keith Nelson, City Engineer; Roger Knutson, City .Attorney; Ron Mullenbach, Associate Planner and Karla Hartmann, Engineering Secretary. ITEM 3: Approval of February 15, 2001 Environmental Affairs Committee Meeting mutes. Committee members approved the February 15, 2001 Environmental Affairs Committee meeting minutes as submitted. ITEM 4: Recommendation regarding the application of the Avalon Real Estate Group, . or an amen ment tote an se an. Chair Rosselit gave an outline of the agenda format, and stated that following the presentations there would be time for comments and questions from the EAC and .public. He established the parameters for public comment, stating that there would be a maximum of three minutes per person allowed for questions/comments with a maximum 30 minute question period. Chair Rosselit asked Mr. Brown to introduce the agenda item and consultants. Mr. Brown stated that the Avalon. Group has submitted an application for an amendment to the 2020 Land Use Plan for the proposed TimberCrest at Lakeville project. Mr. Brown introduced Mr. David Licht, NAC, and Bret Weiss, WSB and Associates, Inc. Mr. David Licht reviewed the application, referencing-the City of Lakeville Planning Report dated March 2001, which was included in the EAC packet. He indicated the area in question is a 96 acre site located in the northeast quadrant of County Road 60 (185th Street West) and I-35. The City's current 1999 Comprehensive Plan guides this property for Office Park/Business Campus use (Corporate Campus zoning). Mr. Licht indicated that if the application were approved by the City Council, the applicant would return with an application for rezoninglplatting. EAC Minutes ~ March 13, 2001 Page 2 Mr. Licht highlighted the background of the City Comprehensive Plan that was adopted in 1999. He also noted that the land use designations for this property has gone through many changes over the years and is reflective of the ongoing planning process. Chair Rosselit opened the discussion to the EAC for comments and questions. Member Kline referenced page. 5, item 5 of the planning report where it states the proposed use will not negatively impact environmentally sensitive areas. He asked for validation of his assumption that the statement was made in the context of the change in land use, that is, that there would be relatively no additional environmental impact. Mr. Licht responded affirmatively. Member Kline asked for clarification on the 30% open space requirement. Mr. Licht responded that although the site planning issues have not been addressed in detail, the schematic site plan identifies approximately 30% open space. Member Schmitt asked about the funding for the freeway overpass improvements. Mr. Nelson responded that the bridge and County Road 60 improvements were both identified in the Dakota County, Scott County and City of Lakeville Capital Improvement Programs for the year 2005, and are contingent upon receiving federal/state money. An application was made in 1999 for Federal TEA-21 funding, however, due to limited amount of funding available, and the number of requests received, it did not rank high enough for funding. Mr. Licht noted that the project would be phased as road capacity becomes available. He indicated that the proposal for the full interchange at I-35 and County Road 60 dates back to the City's 1968 Comprehensive Plan, and were not prompted by the Avalon request. Member Schmitt asked about the plans for the wetland that will be filled due to the Kenrick Avenue/185th Street alignment south of 185th Street. Mr. Nelson indicated that a permit has been obtained and the entire wetland will be mitigated through the BWSR State Wetland Bank. Member McManus asked what plans the City has for the 17 acres of land that they own to the east of the Avalon site. Mr. Nelson stated the site consists of pristine wetlands and oak stands and will be preserved in its natural state, with the possible exception of some park trails. . Member McManus asked about the drainage patterns for the site. Mr. Weiss reviewed the three patterns for stormwater runoff. Member McManus asked what the 28 acres of open space consists of. Mr. Licht responded that there are trees, wetlands, and slopes. Member McManus asked if the Super Target would be part of the first phase. Mr. Licht indicated that was his understanding.... Member Goodwin asked if the stormwater runoff across I-35 would be pretreated. Mr. Weiss responded affirmatively and identified the location of possible infiltration ponding. f EAC Minutes March 13, 2001 Page 3 Member Goodwin expressed concern about the extreme changes in elevation on the site. Mr. Weiss responded that due to the topography and grading needed, a lot of vegetation on the site would be impacted regardless of the land use. He added that tiered retaining walls are one of the most commonly used landscaping solutions with severe grades. Member McManus sited the example of the unusual amount of snowfall this year and asked if the pretreatment ponds would be designed to handle the combination of impervious surface and snow. Mr. Weiss stated that the amount of snow this year is considered an extreme event, and. ponds are designed to handle 95% of all events. Chair Rosselit opened the discussion to the public for questions or comments. He reiterated the parameters for questions/comments. Mr. Rick Krueger, 11605 177th Street West, noted that the current designation allows for 2 million square feet of office space, and all comparisons have been based on this size. Mr. Krueger did some checking and found that the IDS building is 1.9 million square feet, and the U.S. Bank Building is 1.4 million square feet, and noted that this is probably not a realistic comparison. Mr. Krueger also expressed concern about this site being part of the Minnesota Valley Watershed, and recommended that an AUAR be submitted in light of the sensitive environmental issues (i.e., Orchard Lake and Lake Marion). Ms. Meg Scharmer, 17683 Kingswood Circle, asked if this project would exempt these wetlands from the recently authorized Wetland Management Plan Project. Ms. Jean Baudhuin, 18625 Kanabec Trail, asked if a recommendation would be made as part of tonight's agenda prior to the development of an EAW. She also wondered if this site was in a flood plain area. Ms. Baudhuin indicated that the DNR has expressed concern about stormwater runoff.. She stated that in light of this, she believes the City should review the interchange improvements and Avalon site environmental impacts as a whole. Ms. Baudhuin stated that projects that are developed piece by piece causes more destruction. Mr. Weiss responded to Mr. Krueger's comment regarding an AUAR stating that it is very similar to an EAW. Mr. Weiss indicated that an AUAR is generally used to include very large areas. Since most of the City is already developed around this site, it would not be a useable tool for this project. An EAW would be more appropriate and would address all issues.. Tim Brown responded to Ms. Baudhuin by stating that this site is not in a FEMA floodplain, and that the EAW would be prepared with site details included and would be reviewed later in the process. In response to Ms. Scharmer's question he clarified that the wetlands on the site would be included in the wetland inventory project. Member McManus asked for verification as to whether this site is in the Minnesota Valley Watershed. Mr. Brown responded that part of the site to the north drains to the Minnesota River. EAC Minutes ~ March 13, 2001 Page 4 Member Kline noted that he feels all the comments from the audience are germane. This community spends a considerable amount of time on these issues and are very mindful of issues surrounding the water quality of lakes. He assured the public members that as this site goes through the review process the EAC will thoroughly review the stormwater runoff issues. Member McManus concurred and stated the EAC is very mindful of the issues this site presents. She noted that the EAC has been very outspoken in the past with other environmentally sensitive sites and assured the audience members all of their questions/comments will be addressed during the review process. Member McManus thanked the audience members for their questions and comments. Member Goodwin assured the members from the audience that the EAW is a vehicle that goes through several agencies, including the DNR, and considers it to be very thorough. Chair Rosselit called for a motion. 01.04 Motion by Kline, Second by McManus to recommend approval to amend the 2020 Land Use Plan in accordance with the Avalon Real Estate Group, L.L.C. application. Mr. Licht suggested that it may be appropriate to add the three stipulations as noted on page 19 of the Planning Report, but indicated that it is not required. Member Kline asked for clarification on the purpose of adding the stipulations. Mr. Roger Knutson, City Attorney, indicated that it is general direction for the. City Council. Member Kline stated he was in favor of including the three stipulations. Chair Rosselit opened the discussion up to the EAC for additional comments. Ms. Baudhuin, approached the podium, and asked the Chair if stipulations to the motion require opening discussion for public comment. Chair Rosselit responded that the public comment period was closed. Member Schmitt stated he was uncomfortable and felt like he needed more information before he could include the stipulations in the motion. Discussion occurred regarding the content of each of the stipulations, and that the second and third stipulations dealt with zoning recommendations, and were beyond the scope of this committee. Member McManus stated she was not comfortable with seconding the motion with the addition of the stipulations. Member Goodwin stated his only concern with stipulation number one is that preservation of these areas may be difficult without grading into them and losing trees, due to the extreme change of elevation. Mr. Licht reminded the committee that grading is a site planning issue. Member Goodwin responded that he just wanted to make the developer aware of his concern up front. ~ EAC Minutes March 13, 2001 Page 5 Mr. Knutson indicated that it would not be necessary to reiterate each stipulation in the motion, but that the recommendation for the City Council includes the following stipulations as listed in the Planning Report: 1. So as to maintain the open space which is required as part of the current office guided use on the property and to assure the Acorn Heights residents of a reasonable natural buffer, the Comprehensive Plan text should state that the environmentally sensitive areas along the north and east borders of the site, totaling approximately 28 acres, should be protected from development through a conservation easement or dedication to the City. (The exact size of this area would be resolved as part of zoning and subdivision reviews.) 2. The 12 acre area to the immediate north of the Avalon Group site, between Acorn Heights and the CP Railroad should retain the present Office Park/Business Campus use (Corporate Campus zoning) designation for the time being. As more information becomes available on this area's natural features and the alignment of Kenrick is resolved, the City should review, what if any, land use plan changes may be appropriate. In this regard, consideration should be given to extending the residential land use which encompasses the Acorn Heights neighborhood, easterly to the new Kenrick Avenue. 3. The area to the north of Acorn Heights and south/southwest of the CP Railroad line should continue to be guided general commercial. The City should, however, maintain flexibility to consider a possible Office Park/Business Campus land use designation (Corporate Campus zoning) for this property should market demand demonstrate a need for such use and area size. Chair Rosselit called for a new motion. 01.05 Motion by Kline, Second by Goodwin to recommend approval to amend the 2020 Land Use Plan in accordance with the Avalon Real Estate Group, L.L.C. application, and to recommend that the City go forth with stipulation items I, 2 and 3 as listed in the Planning Report. Roll call vote was called on the motion. Ayes: Goodwin, Kline, and Rosselit. Nays: McManus, Schmitt. Motion passed. Members McManus and Schmitt indicated that their no votes were due to the inclusions of .stipulations two and three. They further stated that they supported the main motion amending the 2020 Land Use Plan designation for this site from Office Park/Business Campus to General Commercial. ITEM 5: Adjournment. The meeting adjourned at 7:35 p.m. EAC Minutes March 13, 2001 Page 6 Respectfully Submitted, ,dj ~ Kayla Hartmann Recording Secretary , ATTEST: To Goodwin Secretary Calendar Page 1 of 2 ' ~ _ t e. s r r _ 1. t ~ ~ # k" ~ Public Hearing Notice City of Lakeville Planning Commission Meeting Fact Finding regarding the Avalon ..Group's Proposal. Thursday, March 22nd, E-mail Me Tuesday, March 27 Economic Development Meeting City Hall 6:00 PM Voice Your Concerns! http://www.lakevillemn.homestead.com/Calendar~ns4.htm1 03/23/2001 Calendar Page 2 of 2 w YU~1l1UI1 ~JLdLCII1CIll 1rUII1 LI1C UUWIIWWII ~USIIICSJ 1CdUCTJ: "As business people in downtown Lakeville, we are encouraged by the trend toward providing more shopping for our neighbors within our comminity. The downdown Lakeveville business association holds true to providing a unique shopping experience to the growing consumer base which will result from expanded shopping centers in our community." Tuesday, March__l3, 2001 Environmental Affairs Mtg City Hall 6pm In a vote 3 to 2 the amendment has been recommended by this committee with 3 stipulations...without the stipulations, it is on record that a115 members recommend the amendment http://www.lakevillemn.homestead.com/Calendar~ns4.htm1 03/23/2001 T MemO1~d11dU111 To: Economic Development Commission. CC: Robert Erickson, City Administrator Ann Flad, Economic Development Coordinator From: Arlyn Gn~ssing Corrununity & Economic Developmerrt Director - ''.,.,d Date: o3i23~oi Re: Cost/Benefit Analysis of providing financial assistance to Mr. Glenna's proposed airplane hanger facility at Airlake Airport The Economic Development Commission has expressed an interest in addressing concerns related to the facilities available for corporate flights at Airlake Airport. The EDC has considered this item several times in the past several months. It should be noted that one of the items of concern has been addressed by the Fixed Based Operator with the addition of an expanded paved tie-down area last fall. The EDC has been considering providing financial support to Gary Glenna for the construction of a new hanger, tie-down area, restrooms, and lounge, which would be made available to Heat-N-Glo, Merrillat and possibly other Lakeville businesses. The EDC requested that acost/benefit analysis be completed for the project to help in making a recommendation regarding public funding. Acost/benefit analysis does, not include the subjective benefit that other businesses would receive from utilizing such a facility. Preliminary cost estimates submitted along with preliminary plans for the hanger and these estimates are included in the attached memo to Dennis Feller. The total of $116, 560 is the estimated value of improvements necessary to accommodate Heat- N-GIo, Merrilat and other Lakeville businesses at this facility. The preliminary estimates indicate a value for the project of approximately $350,000 and this was further confirmed by Tom K.rier (Dakota County C/I Appraiser.) The building will be used for commercial purposes and receive a C/I property tax classification. MAC would issue an Aircraft Storage Lease to Mr. Glenna but because the property is zoned industrial it would have a commercial value established. Taxes received by the City would be in the $1,500 range annually. Several other factors need to be considered in this proposal. The first is the potential sale of the Fixed Based Operator (FBO) at Airlake Airport. There have been several discussions between potential operators and the Metropolitan Airports Commission (MAC) and to date no final conclusion has been reached. If a new operation includes necessary facilities and services, the need for Mr. Glenna's proposal would be minimized. Jack Eberlein of MAC is aware of the Glenna proposal and also the proposal to upgrade the existing FBO by a new operator. In discussions with Mr. Eberlein, it has been determined that MAC will provide the site to Mr. Glenna, including the necessary fill and land alterations. There has been no indication of any further financial support from MAC. The discussions to date have not specified an amount that the City may consider contributing or a specif c request from Mr. Glenna on the kind of assistance needed. Without knowing a specific amount, the EDC must look at all available options. One option will be to consider utilizing tax abatement for the proposed hanger. A second would be utilizing the City of Lakeville Revolving Loan Fund for either a grant or loan to Mr. Glenna. Created on 03/21/01 4:07 PM Item loo... L To. Economic Development :Commission CC: Robert Erickson, City Administrator Ar1yn Grus~ing, Community & Economic Development Director Fr+arm: Ann Flad, Economic Development Coordinator ~A1t~: 03/22io1 . Re: Discussion on Strategic Plan Update Ached you wriii find an update on the status of the 2000 Strategic Wark Plan that was developed from the 2000-2001 Strategic Plan for Economic [~velopment. Staff proposes that the April 24, 2001 EDC meeting convene at 4.00 p.m. in order to allow adequate time for the, review of the 2000 Work Pian and discussion abotat the process and timeline for creation of a 2002-2003 Strategic Plan for Economic Development. } STRATEGIC PLAN UPDATE February 27, 2001 MISSION STATEMENT The Economic Development Commission is committed to economic development programs and policies which enhance the quality of the business and residential community. GOALS The goals of the Economic Development Commission are to: ? Attract and retain employers and workforce to diversify the economic base ? Manage growth and city processes to enhance quality of life and sense of community ? Position Lakeville for longer-term economic expansion STRATEGIES The 2000-2001 Stratetgic Plan for Economic Development was developed by the Economic Development Commission and adopted by the City Council on February 22, 2001. Taking into consideration Lakeville's assets, disadvantages, changes, and external factors, the plan then identifies and prioritizes activities that the EDC will undertake in order to achieve the Commission's mission. After working on the plan for one year, the EDC is evaluating its progress on the action items and determining the areas of focus for the upcoming year. Below are. the eleven strategies identified in the 2000-2001 Strategic Plan for Economic Development, along with an update on the progress made on each item. i t H/GH PR/OR/ 1. Develop and implement vision for Lakeviile's retail and service sectors Planned actions for 2000 ¦ Include questions in future community surveys to identify priority needs for additional retail goods and services an willingness to purchase locally ¦ Support the implementation of the Town Square plan for uses that capture commercial, service and entertainment dollars from both the local and sub-regional populations. Health services, quality grocery store and restaurants are high priority uses to attract ¦ Explore if and how to integrate with other communities so that Lakeville becomes both a metro community and a regional center. Status for 2000 • Ongoing conversations with developers of upscale grocery stores ¦ Referral of prospects to .Heritage Commons ¦ Successfully encouraged incorporation of Heritage Commons Design Guidelines into the design for U. S. Bank ¦ Successfully encouraged the United States Postal Service to develop a retail facility at Heritage Commons Proposed actions and priority ranking for 2001 2 2. Ensure an adequate supply and diversity in housing opportunities Planned actions for 2000 ¦ Develop a proactive approach to expand the supply of affordable housing ¦ Develop a proactive approach to expand the supply of life-cycle housing Status for 2000 ¦ Broke ground on a 51 unit senior apartment building. ¦ Provided CDBG funds to acquire site for an additiona131 unit affordable townhouse development. ¦ City approved first market-rate apartment development. ¦ Diversity of housing opportunities enhanced by the approval of more attached townhouse developments than single-family developments. ¦ Assisted developer in evaluating methods to construct proposed Dominium affordable housing project. Proposed actions and priority ranking for 2001 3. Maintain long-term vitality of the Historic Downtown Planned actions for 2000 ¦ Explore how the new arts center can become a key community resource ¦ Support the Downtown Lakeville Business Association (DLBA) in identifying a future market niche for the historic downtown and methods to link it with Heritage Commons Status for 2000 ¦ Provided CDBG funds for the upgrade of the Smith Dentistry building and the former A+ Driving School building considstent with the Historic Fairfield District of Downtown Lakeville Design Guidelines. ¦ .Broke ground on a senior housing mixed use facility, bringing more people and more retail space to downtown. Proposed actions and priority ranking for 2001 3 r MED/UM PR/OR/ 4. Develop Strategies to attract and retain employers that will utilize the skills of the residents Planned actions for 2000 ¦ Define mix of commercial/industrial development desired to provide job mix Status for 2000 ¦ Completed Labor Force Focus Group Study which surveyed businesses on retention and recruitment issues. Proposed actions and priority ranking for 2001 5. Encourage additional office park/business campus and home- based business sector development to achieve desired business mix Planned actions for 2000 ¦ Develop strategies for additional office park/business campus development ¦ Identify and implement opportunities to provide assistance to home businesses to ensure long-term growth. Status for 2000 ¦ Developed a High Tech Subcommittee to explore the possibility of a developing a High Tech Business Park Proposed actions and priority ranking for 2001 4 r 6. Identify resources to meet employers' recruitment and retention needs Planned actions for 2000 ¦ Survey employers to assess needs regarding recruitment, retention, training, transportation, housing, and child care ¦ Initiate programs to assist employers with recruitment ¦ Assist in linking businesses to training opportunities and education opportunities ¦ Increase access for workers to Lakeville employment opportunities through transportation initiative ¦ Increase ability of workers to live in Lakeville through transportation initiatives • Increase ability of workers to live in Lakeville by developing a proactive approach to expand the supply of affordable housing ¦ Increase access for workers to Lakeville employment opportunities through child care services Status for 2000 ¦ Completed survey of businesses . ¦ Identified strategies to support employer recruitment. ¦ Held two meetings with manufacturing businesses to present strategies, determine interest. ¦ Fostered leadership among Airlake businesses via the HR Committee of Chamber to implement~strategies. ¦ Provided information via Airlake News regarding training and education opportunities. ¦ Funded City's participation in the Dakota County Vanpool Initiative ¦ Provided CDBG funding to acquire site near Airlake on which to develop affordable housing. ¦ Determined via survey that childcare is not a major barrier to employment in Lakeville. Proposed actions and priority ranking for 2001 5 7. Implement strategies to ensure Lakeville's infrastructure is adequate to meet current and future business needs Planned actions for 2000 ¦ Collaborate with others in an effort to secure additional financial resources from the state legislature and county highway department for timing and sharing costs of major transportation infrastructure investments ¦ Promote airport for corporate office use ¦ Promote a technology center for the Lakeville business community ¦ Research and identify fiber-optics and other emerging technologies Status for 2000 ¦ Encouraged development of new hanger and. service options for corporate flights. ¦ Explored EDC's ability to use Revolving Loan Funds to incentivize the development of new facilities, eg: F80 and corporate hanger. ¦ Met with fixed based operator to encourage enhancement of facilities and service. ¦ Met with Jeff Hamiel, Executive Director of the Metropolitan Airports Commission, Cary Schmidt, Director of Reliever Airports for MAC,. and Bridget Reif, Airside Project Manager for MAC, regarding options for enhancing facilities and service at Airlake Airport. • Met with Reliever Airports Manager Jack Eberlien regarding proposal to construct a new hanger with facilities to accommodate corporate flights. ¦ Formed ahigh-tech subcommittee to explore fiber-optics. Proposed actions and priority ranking for 2001 6 r t LOWER PR/OR/ 8. Develop and maintain policies and programs that improve Lakeville's capacity for Economic Development Planned actions for 2000 ¦ Ensure that zoning district designations can serve different retail and office markets ¦ Encourage retention of large tracts of land for future development ¦ Complete annual review and update of the Community Marketing. Plan ¦ Review tools available for business incentives for economic development and recommend strategies to the City Council Status for 2000 ¦ Formed Incentives Subcommittee to explore tools available. ¦ Retained consultant to identify incentive tools that can be used for identifiable EDC projects. Proposed actions and priority ranking for 2001 9. Develop and monitor policies that promote quality growth Planned actions for 2000 ¦ Develop policies and oversee the incorporation and implementation of the corridor and gateway design study ¦ Review, and enhance if necessary, performance standards for future industrial and commercial development (work with the planning commission) ¦ Continue to update the EDC on the Comprehensive Plan Process and provide opportunities for monitoring of the plan Status for 2000 ¦ Formed Park Dedication Subcommittee to ascertain the City's ability to use park dedication fees to accomplish Corridor and Gateway designs. Proposed actions and priority ranking for 2001 t 10. Enhance and maintain communication efforts with stakeholders. Planned actions for 2000 ¦ Develop effective communication strategies consistent with the City of Lakeville Comprehensive Communication Plan ¦ Design annual economic development report to citizens ¦ Create program to recognize business people as ambassadors in the community through personal and where appropriate, public recognition ¦ Build stronger linkages with other city advisory groups, City Council and staff Status for 2000 ¦ Joint subcommittees were developed with other advisory boards and City departments, including the Park Dedication Subcommittee with the Parks and Recreation Advisory Committee, the High Tech Subcommittee with the Telecommunications Commission, and the South Creek Subcommittee with the Environmental Affairs Committee. ¦ Airlake News newsletters sent to all Chamber of Commerce members and Chamber newsletters sent to Airlake businesses. ¦ Bi-monthly development project information provided for Transactions, the Chamber of Commerce Newsletter. ¦ Quarterly publication of Airlake News for manufacturing businesses. ¦ Non-Residential Development Project list updated quarterly and provided to realtors, brokers, etc. Proposed actions and priority ranking for 2001 11. Implement Strategies to Maintain Quality Customer Service Planned actions for 2000 ¦ Maintain efficient review process of commercial and industrial development projects ¦ Hold annual customer service training for City staff Status for 2000 ¦ Continued surveying developers and business owners who have completed projects in order to determine their satisfaction with the development process in Lakeville. Proposed actions and priority ranking for 2001 s ~ ~ , \ March 13, 2001 Tonya Hanson FTA Project Coordinator Darcy Johnson Transportation Coordinator, Access to Jobs Dakota County Collaborative Innovative Transportation Solutions to Work 1645 Marthaler Lane West St. Paul, MN 55118 Dear Tonya and Darcy: I was saddened to hear the Reverse Commute Vanpool Program was being discontinued. At the time you called I requested a letter and a report as to why the program was being terminated and the reasons for the decision. You may recall, I also requested a response regarding how much of the City contribution will be returned. I also want to be certain the companies you were working with including; Arden Kitchens, Con Agra Store Brands and Ryt-Way Foods, have been properly notified of the programs demise. If you have any questions .regarding this request please call me at 952-985-4421. Sincerely,.. Arlyn G~ing Community and Econ mic Development Director CC: Robert Erickson,. City Administrator Dennis Feller, Finance Director G+ i5;~ z~~?~y't?~£ %~~'~;l~l~ e ~1,~te?'1~1~~ l~i~'~, ~~j~~=ice ~ t~>`''~~ ~Ji`r~? ~~t;f~ k c'~._-+:¢t?i) zoo Towle Report . _ :::v - - - ~ :f=;-. - _ . , . ~~:e~::. Y: - . .,,y ' i.J~ ate:. ~.si _ ai,'~ ~ '.K1 ~::.'e. r ' . ~ Y: - innea ois/St. Paul J .'~~_`:1a.41r'°' .~{.-~i.f"" - '~'ra~~ ia~v~~4....2 i', ~.!TWI ' .:,s.,"~"+,r r':y~. ~,g,,,~'i:'.'. 'A'.~.:i .t ~4~~i~~s..~.~ ~[~Yi~z- ~*i:;- ~'j~ ~ v ~ - 3 'j'Y -'-'~V~x..-~S:y.',,,ts~~:,, r ,4~..~;X ~ :i: t, „~.~~-w~a F ~i~ lrilnn~s®ta ~,ir' 3r •aF, ~ 4fr s yes- ~ • rye, 1+5 ~~i`~C+d`" 'R ~ L ids>`~:"_ A V _ ~A'!'~h AI} { - i f. =p+ "e'. ~CS is A . eye, : _ t .dY:.' a ' Y J ~ ¢ S r; s; kk .N .A - r 4 , - 6 - e i[i~ - TOWLE REPORT CONTENTS Market Overview .........................2 Sector Map Office Report ...............................5 Industrial. Report 14 Retail Report ..............................24 Apartment Report.... 34 Finance Report 3b Definitions 37 Colliers International ...................38 Company Directory ....................40 ACKNOWLEDGEMENTS Towle Report 2001 was possible through the continuing cooperation of property representatives who gave their time to provide and verify the information used in this report. Colliers Towle Real Estate extends its appreciation to these individuals. RESEARC9~1, ANALYSIS & Pi20DUCT10N Cindy M. Baguus, Bryon Nelson, Aiane Hones & Adam Fisher -Research Michelle L. Keil & Jason P. Priee -Graphic Production Research and analysis by Colliers Towle Real Estate. Permission is granted to quote from this publication only when Colliers Towle Real Estate is credited as the source. All information furnished to Colliers Towle Real Estate is from sources believed to be reliable. However, no warranty or representation is made os to its accuracy or completeness. Annual Subscription - $299.00 Copyright ©2001 COLLIERS TCJWLE REAL ESTATE ti:.~i L _ - X t, ~ T St.. v ? , n~°rl~ iris: BROKERAGE • APPRAISAL • RESEARCH • PROPERTY MANAGEMENT Mark W. Reiling, CRE Kathleen Nye-Reding Colliers Towle Real Estate President Principal Towle Building • Suite 800 330 Second Avenue South February 14, 2000 Minneapolis, MN 55401 Tel: 6 12/34 I -4444 Fax: 612/347-9389 Dear Clients and Friends, We are pleased to provide you with Towle Report 2001, a full review of the commercial real estate markets in the Twin Cities of Minneapolis and St. Paul, Minnesota. This year's information shows that our local market is active, growing and healthy with acceptable vacancy rates and ample construction underway for future absorption. We did not have the significant dot-com space absorption of other major metropolitan areas, and will not experience the shake-out occurring in those other markets. The investment market experienced substantial sales in office, industrial and apartment properties. To secure deals, 1031 tax deferred exchange buyers were willing to pay up to 5% more than other buyers. Debt and equity capital are available at attractive interest rates and terms. User-buildings have been selling too, but not at the same pace, in part due to assertive seller pricing. Land sales have been brisk. Information is the key to making good real estate decisions. Count on the Towle Report and our professionals to advise you in the year ahead. We welcome your calls to confidentially discuss any commercial real estate need or situation. Best wishes for a prosperous year. Sincerely, I~/~ Mark W. Reiling, CRE Kathleen Nye-Reiling President Principal • • • r 1 ~ h' 7 fff~ ~ - Twin Cities Metropolitan Area Towle Report 2001 Minneapolis and St. Paul, known as the Twin Cities, are situated in the heart of the Upper M PLS/ST. PAU L Midwest and constitute a vital economic and social hub of that region. This is the 16th largest MSA (Metropolitan Statistical Area) in the nation and includes the Minnesota METRO counties of Anoka, Carver, Dakota, Hennepin, Ramsey, Scott and Washington,. known ~ H 1 G H LI r.7 H TS as the core area, plus Chisago, Isanti, Wright and the Wisconsin county of St. Croix. For Towle Report we survey 1,850+ commercial properties in Anoha, Dakota, Hennepin, Ramsey, Scott and Washington counties. • Minneapolis-St. Paul is the 9th largest Cyber City Many factors contribute to the health and vitality of the Twin Cities economic in the country, with 4,042 and business climate. According to a recent study conducted by the American high-tech establishments in Electronics Association, Minneapolis-St. Paul is the 9th largest "Cyber City" in the metro region. the country, with 4,042 high-tech establishments in the metro region, ranking it eighth best in the nation. The Minneapolis-St. Paul Buying Power Index is • Minnesota's seasonally- the 11th best nation-wide and the Median Household EBI (Effective Buying ~ adjusted unemployment rate Income) is $47,002, indicating a strong consumer base in the region. (Sales for November of 2000 was and Marketing Management Report) Furthermore, a business foundation of 3. I well under the national companies involved in manufacturing supercomputers, electronics, medical rate of 4%. instruments, milling, machine manufacturing, food processing and graphic arts demonstrates the strength and diversity of this metropolitan area. F. , . , • The largest gains in the region's job growth were. ' t"' i r in the construction and Economic conditions in the Twin Cities continue to rank above national averages. According to the Minnesota Department of Economic Security, services industry. More than Minnesota's seasonally adjusted unemployment rate for November of 2000 half of projected new jobs was 3.1%, up from last year's rate of 1.5%, but still well under the national are expected to be in the rate of 4%. (Metropolitan Council) This rate has been consistently lower services industry. than the national rate for the last decade. . international sales in Over the past year, the largest gains in job growth in the region were _ Minnesota account for more made in the construction and services industries. Manufacturing saw = - than $ 11.6 billion in direct a slight decrease from 1999 but has remained steady over the last ten ~ } revenue every year. years and is expected to expand over the next ten years in the areas o of medical supplies, commercial printing, electric components and k rk fC1RTUNE SOO accessories manufacturers. (Minnesota Workforce Center) , (;(~]~PANIES 1 ` z TUUlN CITIES The total number of jobs in Minnesota is expected to increase to _ almost 3.2 million by 2008, a 16% increase from 1998. Although i r PUBLIC NA.Tt®NAL c,_ . . COMPAN~I R1a~J1Ul+l4~ this figure is down from 23% for the previous 10-year period, ~ - this slowdown is expected because of current labor shortages Target 32 experienced both locally and nationally. When the slowin UnitedHeatth Group 86 g SuperValu 99 rate of job creation is considered in light of the increasing Minnesota Mining & Mfg. 110 unemployment rate, it is clear that a greater balance is being Northwest Airlines 165 achieved between employment supply and demand in the area. - Best Buy 169 _ St. Paul Companies 204 US Bancorp 212 The highest gains will be seen in service industries, which , ~ Cenex Harvest States 267 are expected to add more than half of the projected new General Mills 279 Medtronic 381 jobs, and trades which will provide the second highest Nash Finch 383 number of jobs. Although manufacturing is expected to Hormel Foods 458 slow nationally, in Minnesota it will continue to expand. Reliastar Financial 500 (Minnesota Workforce Center) Business services growth so°r~e: FoRTUNe, AP~~~ zooo is also expanding with the fastest growth in computer ~?-J and data processing services (123°%) is projected to increase by 15,240, mining jobs, which are expected to fall 1 and personnel supply services (44%) or 13%, in the transportation, by 20% over the next 10 years due to the industries. Employment in finance, communications and public utilities closing of a large taconite mine in 2001. insurance and real estate is expected division. (Minnesota Department of (Minnesota Workforce Center) to increase by 14% over the projection Economic Security) Decreases are period, adding 19,480 jobs. Employment expected only in farm employment and The Twin Cities' workforce is among the youngest and most highly educated in the country. Median age is 32.3 ,olliers Towle ReaLEstate „ ; years; lower than 19 of the 25 largest metropolitan areas. Of people 25 and CITY 199(3 1998 CHANGE older in the Minneapolis/St. Paul area, 28% have a B.A. or higher degree Minneapolis 278,314 293,355 5.AO,n compared to 21% nationally. 91.6% are St. Paul 172,504 181,375 5.10./° Bloomington 75,742.. 98,479 30:00% high school graduates compared to 77% Edina 44,534 ` 51,846 16.40% nationally. (Greater Mpls. Chamber of Plymouth 38,103 50,548 32.40°f° Commerce) and more Minnesotans are Minnetonka 35,536 46,595 31(10% at work than in the rest of the nation. Eden Prairie 36,095 45;502 26.10% St. Louis Park 36.791 39;421 7,10% According to the Minnesota Workforce Eagan 26:000 36,41'2 40.00% Center, labor force participation Roseville 33,046 35,859 8:50% in 1997 was 75.6% compared to 67.1 % nationally. ' - Minneapolis and St. Paul continue to " ' ° ' - ' ' ' ' ` " ' " ' ~ expand their presence in global and MEDIAN BUYING national markets. International sales in METROPOLITAN TOTAL RETAIL HOUSEHOLD POWER AREA SALES (000'Sl RANK SBI RANK INDEX RANK Mlnne50ta aCCOUnt fOr more [flan $11.6 Chicago $101,595,500 1 X48.273 19 3.2249 1 billion in direct revenue every year and Detroit $62,287,245 4 $41,1.87 68 1.7376 6 fourteen Fortune 500 companies base Atlanta $59,648,098 5 $42,528 47 1.5905 s their headquarters in this area. Sales & Boston $56,257;270 8 $50,241. 13: 1.6719 7 Marketin Mana ement (A r>l 1999) Dallas $50,566,138... 10 $44,610 33 1:4158 10 g g P MplslSt. Paul $49,169,706 11 $47,002 27 1.2632 11 ranked the Twin Cities metropolitan St. Louis $32,772;669 18 $41,602 62 0.9749- 17 area as one of the 20 hottest markets Denver $29,979,256 20 $41,581: 63 0:8361 23 in the United States to do business. Kansas City $24,991,216 32 $40,874 71 0.7003 3o Fortune (May 1996) praises the area .Milwaukee $19,400;554 40 $41,138 69 0.5680 39 Omaha $10,351;166 69 $46,575 29 0.2966 7o for its readily available venture capital Des Moines ; $6,615,501 -..100 $41,663 59 0.1824 100 network. And Sprint Business (Jan. 1999) ranks Minneapolis as 14th most Phoenix $45,230,355 12 $34,283 179 1.1583 13 productive metropolitan area in the San Diego $33,56.1..,474 17 $39,213 91 1.0093 16 U.S. based on business conditions and New York $80,156,394 3 :$39,039 94 3..1634 3 Cleveland $27,741;062 23 $38,115 115_ 0:8214 24 overall economic performance. (Greater Pittsburgh $26,972,342 27 $36,970 131 0.8653 22 Minneapolis Chamber of Commerce) Madison $6,924;598- 96 $43,669 38 0:1805 102 Source: Saes & Marketing Managemerit Report -Survey of$uying Power, August 2000 .MINNEAPOLIS-ST.PAUL ~aETROPOLITANREGI©N (IN THOUSANDS) r.,_ . ~ _ ~ .~rt... . _ a. TYPE ' 1990 1991 1992 1443 1944 1445 I99S 1447 ~ 1498 i 5999 ~QpQ 1940-2000 4~Manufacttaring263.0 257 9 " .257:9 266 1 ; 271 3 -275.9' 273.5 , 277.2I 277.9 285.6 281.0 ; 6.84% Mining 0.5 0.4 0.4 ; 0.4 ` 0.3 ~ 0.5 , 0.6 ~ 0.51 0.5 I D.6 = `0.6 ( 20.00% Construction i 49:71 47.2' 46.6 46.9 ? 48.2 ~ .60.0 ~ 58.5 ~ '61.4 ~ 82.6 76.5 i 81.3 i 63.58% TCPU (1) 77.2. 77.0 77.1 77.9 80.2 ' 84.9 ? .87.5 ' 88.3 = 93.8: 97.2 P :.97.2 ? 25.91 Trade 331.8 326 6 + 331.7 354 3 365 7 ~ 362.9 i 392.6 , 399.31 409 7 413..9 409.2 ~ 23.33% F.LR.E. (2) 97,7 99 2 101.3 110 1 109 5 111.2; 112.6 .114.6] 119.3' 130.0 1'31.4; 34.49% Services 365.9 369.2 ,a 388.8 417 8 430.4 1 443.2 i 457.8 475.3 = ' 497.2 1 510.5 524.2 ( 43.26% Government 185.8 188.8 ^ 191.8 207.9 214.2 202.8; 226.7 225.9 233.8 222.6 ; 241.6 i 30.03% Total (3) 1,371.6. 1 366 3 1,395.6 1,481.5 ; 1,519:7 j 1,541.4; 1,609.8 ! 1',642.5] 1,694.8 1,736.9 1,766.6 28:80% , (1) Transportation, COmmunlCatiDnS, Public Uhldies (2) Finance, Insurance, Real Estate (3) Columns may not total due to rounding Source: "Employment, Hours & Earnings: Minneapolis-St. Paul Area, 1982 to 1992", Minnesota Department of Jobs andTraining; July 1993, Minnesota Department of Economic Security, October 1999: Minnesota Employment Review, December 2000. r~iYil~a ~OWLE REPORT ARK~T ~+CTOR 11~P MINNEAPOLIS - ST. PAUL METROP®LITAN AREA ~ ANOKA s'~2 COUNTY 569 ~ Gs z e 9 ~O~ ~s1 j :.NORTHWEST.. ~ SECTOR (S ~o w-9a NORTHEAST ~.~,~a SECTOR O• ~ ~O WEST MTV sS ~ ~ ~ I-694 - MN 36 SECTOR ~ 1-35`;~ M1135 MN 5 I-394 s 1 z oa, ST. PAU r WASHING~yTON ~ AVENUE - tOUN'11 9 °o ~ y~_ ` ~ I-94 MN ~ z ~ M(N EAPOL C0.62 o~ O ~ A;1N 5 +J ~ o. 1-494. ,o S UTHWEST ~ ~ GS SECTOR - ~i,,ws z 6~ 0 ~szl~ .~a Mw~~1 DAKOTA \,7 . COUNTY ca:a2 SCOTT s MN 55 .COUNTY - C0.42 Minneapolis Northeast Sector Southwest Sector • Arden Hills • Little Canada • Maplewood • Bloomington • Chanhassen • Eden Prairie St. Paul • Mounds View • New Brighton • North Oaks • Edina • Hopkins {part) • Minnetonka (part} • North St. Paul • Roseville • Shoreview • Richfield Anoka County • St. Anthony• Vadnais Heights • White Bear Lake (Boundary for West and Southwest sectors is Excelsior BIvdJ • Anoka • Blaine • Champlin • Columbia Heights • Coon Rapids • Fridley + Spring Lake Park Northwest Sector Washington County • Ramsey • Brooklyn Center • Brooklyn Park • Crystal • Cottage Grove • Lake Elmo • Newport • Maple Grove • New Hope • Osseo • Robbinsdale • Oakdale • Oak Park Heights • Stillwater Dakota County • St. Paul Park • Woodbury • Apple Valley • Burnsville • Eagan • Hastings Scott County • Inver Grove Heights • Lakeville • Chaska • Prior Lake • Savage • Shakopee West Sector • Mendota Heights • Rosemount • South St. Paul • Excelsior • Golden Valley • Hopkins (part) • Medina • Minnetonka (part) • Mound • Plymouth • St. Louis Park • Wayzata (Boundary for West and Southwest sectors is Excelsior B1vdJ ror.w..ew . r, Colliers Towle Real Estate Towle Report 2001 MARKET OVERVIEW • In years past, Towle Report provided a fourth quarter update of 0 ~ C E the Minneapolis CBD and Southwest sector only. We're now expanding our fourth quarter survey to include all 48S multi-tenant office properties totaling 61.8 million sq. ft. in the Twin MARKET Cities metropolitan area. Another new addition is a table of past and current average rental HIGHLIGHTS rates, taxes and total operating expenses for mahing comparisons. The following office report provides data for the six-month period from second .Six-month net absorption quarter 2000 to fourth quarter 2000. Our mid-year office report, published in of I ,079,789 sq. ft. was July, will continue to cover the annual time period from second quarter to second re orted, but it was not quarter as it has for the last 15 years. P enough` to offset the 1.4 New development coming on line dominated the fourth quarter, with 11 million sq. ft. of new space properties adding 1.4 million square feet. Three former single tenant properties that came on line. Thus, the totaling 464,000 square feet were also added to our survey, as they are now metro area vacancy .rate multi-tenant. rose, from 8.9% to I I All of this new, mostly Class A construction contributed to a total six-month .The West sector was absorption of 1,079,789 sq. ft. Despite this impressive tenant growth and expansion, it was not enough to offset the amount of new space added. the absorption leader with Thus, the metro area vacancy rate rose, from 8.9% second quarter 2000 456,2.12 sq. ft. posted; to 11% fourth quarter 2000. 99% of it was in Class A. In an overall review of the market, the West sector was the absorption .Asking rents stabilized in leader, posting tenant growth of 456,212 sq. ft., 99% of which was most sectors (see quarter- claimed by Class A buildings. A similar pattern of activity occurred in the to-quarter comparisons on Southwest sector's Class A segment with absorption of 305,225 sq. ft. In both sectors this was due to leasing in new developments, which is page I I.) detailed in the sector narratives on the following pages. • There is nearly 2 million sq. ft. of sublease space ° i., on the market, which will lead to more aggressive and - - ~ lower rental rates. } ~ ~ Office building sales a ~ ~ were active, with 35 sales ='~~t occurring in 2000. selling for a~ .~,,s~t,~ $3I-$300psf. i k. 1f k .::;y~t4ai , F;r ha. v - Sixteen projects under s construction will add _ another 3.2 million sq. ft. next year. Expect vacancies to climb in several sectors. - ~ t _ MarketPointe, a 242,000 sq. ft. development 6y Ryon Co's and Lutheran Brotherhood was recently: completed in Bloomington. As predicted, average asking rents held steady in almost all sectors with _ the exception of the Northeast Metro _ = i and Minneapolis Out-of-CBD sectors. ~ ~ ~ Meanwhile, there is an important element ~a ~r~ to consider about the future of rental rates, and the health of the market ~ ( - _ overall, and that is the startling amount ~ ~"6 of sublease space available. Our survey t , r results, combined with a search of the ~ " Organization of Commercial Realtors - D system, shows that the amount of sublease space currently on the market is nearly 2 million sq. ft. (see below.) There are a couple of reasons for this staggering amount of space. Business The first phase o f Norman Pointe, a 214,000 sq. ft. once building by Duke Weeks, growth occurred, forcing companies was recently completed in Bloomington. to relocate to meet their space needs. 29% of the vacancy is due to closures and downsizing because of mergers ~ ~d~ Center and the Fisher Paper Box and acquisitions. And in an abrupt Downtown Minneapolis reported Building contributed to the gain. about face, there was the dissolution of minimal tenant losses of 11,321 sq. ft. e-commerce divisions and firms, now for the six-month period between second Class C buildings had similar absorption, dubbed "dot.bombs". quarter and fourth quarter 2000. Thus, of 70,249 sq. ft. Slow but steady the vacancy rate rose slightly, from 6.8% improvement brings this segment's Companies with sublease space are to 7.2%. Asking rents for Class A and vacancy rate from 19.2% to 15.7%. trying to obviate their cash outflows B buildings remained stable. Average This was due to tenant gains in the 511 by subleasing these spaces. They will rents for both Class C and Renovated Building, the Flour Exchange and the discount rents to make it happen, causing categories increased by 7%, as detailed Northwestern Building. Developer some rent disparities in the market. on page 11. Timeshare Properties plans to expand the 511 Building by over 100;000 Currently under construction are 16 The Renovated segment emerged as the sq. ft. this year. developments totaling 3.2 million sq. ft. absorption leader, with 74,514 sq. ft. Trends in these new buildings include reported. This caused the vacancy rate to With several ups and downs in a few bigger floor plates, more parking, fiber improve, from 10.4% to 8.2%. Leasing Class A buildings, the net result in optics, more power and bigger systems. activity in Bassett Creek Business this segment was negative six-month An example of this is FRM Associates' Marquette Plaza in Minneapolis (the former Federal Reserve Bank). The - . - building, which is already home to ~ ~ ~ ' . " ` several telecommunications firms on FOURTH QUARTER 2000/TWIN CITIES METRO AREA the lower levels, will be completely •i% 1.2% wireless .and will provide the highest SECTOR (SQ.FT.) speed telecommunications capabilities ®SOUTHWEST 647,500 and security in the region. It will WEST 3so,9oo ' be skyway connected, will provide 357+ parking spaces, and will have a new 0 MINNEAPOLIS -CBD 354,330 outdoor public plaza with terraced ~ ST. PAUL CBD 313,600 landscaping featuring 6,000 plants ~ NORTHEAST METRO 151,100 and trees. ~ DAKOTA COUNTY 109,700 ® WASHINGTON COUNTY 25,531 Investment sales were brisk in the year - ANOKA COUNTY 2,759 2000, with a total of 35 transactions TOTAL 1,965,224 occurring (see page 9.) Prices ranged from $31 psf to $300 psf. Cap rates 18% ranged from 9-9.5% for Class A properties; 10-11% for Class B properties and 11-13% for ClaSS C bulldingS. ©CoOiersTowleRealEstate Construction continues on two Class A ©c°niers roWie Reap estate buildings: SO South 6th St. (,600,000 ' sq. ft.) by Hines and 900 Nicollet MINNEAPOLIS/ST. PAUL METROPOLITAN AREA 1998-2000 (449,000 sq. ft.) by Ryan Co's. NUMBER TOTAL TOTAL MARKET STUDY OF `RENTABLE AMOUNT VACANCY NET- SECTOR DATE BLDGS AREA VACANT RATE .ABSORPTION Developer FRM Associates is moving forward with construction of 534,000 Anoka County 2nd Qtr. 1998 10 413,917 29;760 7.2%~ 3;496 sq. ft. at Marquette Plaza, the former 2nd Qtr. 1999 12 483,917 49,056 10.1% 50,704 Federal Reserve Bank. 2nd Qtr. 2000 13 489,966 56;594 11.6% -,25,462 4th Qtr. 2000 12 466,966 35,782 7.7% 20,812 Dakota County 2nd Qtr. 1998 20 1,059,203 95,926 9.1% 166,028 New to the survey is Broadway Ridge, 2nd Qtr. 1999 24 1,306,524 215,570 16.5% 127,677 2nd Qtr. 2000 28 1,533,524 258;351 16.8% 144;349. a 180,739 sq. ft. project built by the _"___4th Qtc_20Q0 30_ 1,620;297µm`292;830 Ty_18.1%_ _ 52,029_._.. Chute Company that is 6Z% leased. This Minneapolis CBD - contributed to six-month absorption of Class A 2nd Qtr. 1998 13 ,10,483,773 452,452 4:3% -61,823 128,576 sq. ft. 2nd Qtr. 1999 13 10,523,887. 436,029 4.1% 16,423 2nd Qtr. 2000 14 11,401;676 463;166 4.1% 848,264 There were not enough tenant gains, 4th Qtr. 2000 14 11,472,592. 606,095 5.3% -74,599 however, to improve the vacancy rate, Class B 2nd. Qtr. 1998 32 6,929,549 483,744 7.0% 295,878 thus it .rose, from 9.6% second quarter 2nd Qtr. 1999 31 6,861,073 329,184 4.8% 153;837 to 12.0% fourth quarter 2000. 2nd Qtc 2000 31 6,910,758 428,176 6.2% -56,869 4th Qtr. 2000 31 6,888,756 508;185. 7.4% -81.,485 Rental rates increased by 6.3% to $13.44 psf. Class C 2nd Qtr: 1998 15 2,019,786 349,572 .17.3% 49,410 2nd Qtr. 1999 14 1,944,850 289,185 14.9% 60,387 Nearly completed is the former Bank's 2nd Qtr. 2000 14 1,964,861 259,594 13.2% 29,591 4th Qtr. 2000 14 1,960,119 307;355 15:7% 70,249 building at 615 1st Ave NE, which will add 156,000 sq. ft. to the universe. Renovated 2nd Qtr. 1998 22 2,457,144 270,806 1t.o% $0,229 Developer SchaeferRichardsonpurchased 2nd Qtr. 1999 22 2,745,612 269,843 9:8% 139,563 the project from Hillcrest Development 2nd Qtr. 2000 26 3,215,783 333,345. 10.4% 348;49.8 and plans to complete renovation and 4th Qtr.. 2000 26 3,159,495 258,831 8.2% 74,514 commence occupancy by this spring. Subtotal 2nd Qtr. 1998 82 21,890,252 1,556,574 7.1% 363,694 2nd Qtr. 1999 82 22,075,422 1,324,241 6.0% 370;210 . ~ 2nd Qtr.. 2000 85 23,493,078 1,484,281 6.3% 1,169,484 Overall, Downtown St. Paul reported 4th Qtr 2000 85 23,480,962 1,680,466 7.2% -11,321 tenant gains totaling 131,725 sq. ft. Minneapolis 2nd Qtr. 1998 16 1,370,991 124,783 9.1 % 14,ti1 t for the six-month period ending fourth Out-of-CBD 2nd Qtr. 1999 16 .1,370,991 153,255 11.2% -28,472. Quarter 2000. However, it was not 2hd Qtr. 2000 16 1,385,516 132;825 9.6% 20,428 enough to offset the amount of new 4th Qtr. 2000. 17 1,554,062 185,795. 12.0% 128,576 space added to the universe, so the resulting vacancy rate climbed from Northeast 2nd Qtr. 1998 30 1,491,620 142,214 9.5% -12,915 11.5% to 16%. Metro 2nd Qtr. 1999 33 2,433,620 227,692 9.4% 114,522 2nd Qtr. 2000 30 2,199,500 281,462 12:8% -46,759 The Class A segment was the absorption 4th Qtr 2000 31 2 240 616 314,185. 14.0% -2,391 leader with 285,648 sq. ft. of tenant Northwest 2nd Qtr. 1998 12 929,212 100.,555 10.8% 66;249 gains.. This was mostly due to the 2nd Qtr. 1999 12 929,212 203,453 21.9% -102,898 addition to our survey of the 368,000 2nd Qtr. 2000 13 993,996 259;139 26:1% -5,686 sq. ft. 400 N. Robert building, which 4th Qtr. 2000 13 993,067 132,593 1.3.4% 126,546 Minnesota Mutual is now offering as multi-tenant. As that building leases up, Minnesota Mutual employees will a'sorption totaling 74,599 sq. ft. Despite The Class B segment also suffered move into their new headquarters strong tenant gains in the ATStT Tower negaeive six-month absorption, of 81,485 at 401 N. Robert. Approximately and the new US Bancorp Center, there sq. ft. This raised the vacancy rate from 135, 000 sq. ft. is currently vacant in were substantial vacancies reported in the 6.2°io to 7.4% by fourth quarter 2000. the 400 N. Robert building as some IDS Center and Piper Jaffrey Tower Moderate Losses were reported in the 701 workers have already relocated. to offset them. The still-healthy vacancy Building, the newly named Tri-Tech rate ticked up, from. 4.1% to 5.3%. Office (formerly Midland Square), Several factors affected the Class A IVlidwest Plaza and Northstar East. vacancy rate, which rocketed from 16.8% to 26.6% by fourth quarter 2000. An ©c°ulers Towle Read Estate additiona1138,000 sq. ft. of vacant space at the World Trade Center that was once retail space has been added to our MINNEAPOLIS/ST. PAUL METROPOLITAN AREA 1998-2000 NUMBER TOTAL ..TOTAL survey since it has been converted to MARKET STUDY OF RENTABLE AMOUNT VACANCY NET office use. SECTOR ..DATE.. SLDGS AREA- VACANT RATE A85ORPTlON St. Paul CBD~__w.~.~ Class A average net rental rates dropped Class A 2nd Qtr. 1998 2 681,832 38,265 5.6% 30,143 by 8.7% to $14.10 psf. 2nd Qtr. 1999 2 681,832 23,796: 3.5% 14,469 2nd Qtr. 2000 3 1,084,466 182,273 16.8% 244,157- The Class B segment posted negative 4th Qtr. 2000 4 1,618,488 430,647 26.6% 285,648 absorption totaling 128,882 sq. ft. for Class B 2nd Qtr. 1998 23 4,152,653 338,858 8.2% 17,518 the six-month period ending fourth 2nd Qtr. 1999 23 4,178,816 ' 237,007 5.7% 101,891 quarter 2000. The resulting vacancy Znd Qtr. 2000 24 4,748,914 487,329 10.30% 239,637 rate rose from 10.3% to 13%. Moderate 4th Qtr. 2000 24 4,684,161 616,211 13.2/° -128,882 losses in the First National Bank Class C 2nd Qtr. 1998 12 1,272,799 201,116 15.8% -35,638 building, Firstar Center, the Golden 2nd Qtr. 4999 i2 1,272,799 162,646 12.8% 38,470 2nd Qtr. 2000 12 1,315,705 153,000 11.6% 9,646. Rule building and Park Square Court ° were reported. 4th Qtr. 2000 12 1,310,875 177,031 13.5/° -25,031 Subtotal 2nd Qtr. 1998 37 6,107,284 578,239 9.5% 12,023 Asking rents ticked up slightly, from 2nd Qtr. 1999 37 6,133,447. 423,449 6.9% 154,830 $8.29 sf to $8.39 sf. 2nd Qtr. 2000 39 7,149,085 822,602 11.5% 493,440 P P 4th Qtr. 2000 40 7,613,524 1,223,889- 16.1% 131,735 Class C buildings also suffered six-month St. Paul 2nd Qtr. 1998 21 - 1,830,870 271,194 14.8% 2,292 tenant losses of 25,031 sq. ft, the Out-of-CBD 2nd Qtr. 1999 21 1,841.,870 202,864 11.00% 68,330 ma~orit of which were at Metro 2nd Qtr. 2000 22 1,928,806 190,707 9.9 14,649 J y 4th_(~tr.2QQS2____ 22. _192.6.,662-.___~_2Q4.,4$~_____1Q,Sz°l~__.__,_ -13 90~ Square. This caused the vacancy rate to southwest jump from 11.6% to 13.5% by fourth Class A 2nd Qtr. 1998 17 4,371,073 146,005 3.3% 442,000 uarter 2000. 2nd Qtr. 1999 20 4,937,714 555,337 11.2% 158,688. q 2nd Qtr. 2000 20 4,932,809 296,553 6.0% 255,484 4th Qtr. 2000 24 5,655,121 717,104 12.7% 305,225 Average net asking rents remained stable at $8.39 psf. Glass B 2nd Qtr. 1998 113 8,405,906 397,281 4.7% 13,830 2nd Qtr. 1999 116 8,673,880 589,750 6.8°!° -30,675 2nd Qtr. 2000 119 8,743,074 830,661 9.5% 22,231 Relief is in sight for St. Paul's parking 4th Qtr. 2000 121 8,820,931 1,093,625 12.4% -132,964 shortage. Already in the works is Capitol Subtotal City Plaza, a 700-car ramp by the St. 2nd Qtr. 1998 130 12,776,979 543,286 4.30% 455,830 Paul PortAuthorit .Two more ro owls 2nd Qtr. 1999 136 , 13,611,594 1,145,087 8.4 128,013 y p P 2nd Qtr. 2000 139 ' 13,675,883 1,127,214 8.2% 277,715 include the Cleveland Circle Transit 4th Qtr. 2000 145 14,476,052 1,810,729 12.5% 172,261 Hub and a Metro Transit Hub near the washin ton 10,849 9 2nd Qtr. 1998 4 280,877 4,142 1.5%, new Xcel Center. County 2nd Qtr. 1999 5 323,527 29,447 9.1% 17,345 2nd Qtr. 2000 6 359,077 35,124 9.8% 26,073 ~1 1'9, . ~ e 4th Qtr. 2000 ~ ___417 41.3 75 125 _ 18.0%s______-- 19,232 ~ > ' West". ~ Following several years of steady Class A 2nd Qtr. 1998 8 1,594,256 70,632 4.4% 96,147 - progress, St. Paul Out-of-CBD reported 2nd Qtr. 1999 7 1,512,522. 213,210 14:1% -142,578. tenant losses of 13,902 sq. ft. for 2nd Qtr. 2000 8 1,730,654 90,972 5.3% 341,238 the six-month period ending fourth 4th Qtr. 2000 11 2,367,330 276,935. 11.7% 450,713 quarter 2000. The resulting vacancy rate Class B 2nd Qtr. 1998 63 4,062,452 278,007 6:8% -34,540 , increased, from 9.9% to 10.6%. 2nd Qtr. 1999 70 4,562,418 562,618 12.3% 133,621 2nd Qtr. 2000 72 4,640,381 599,085 12.9% 86,136 Asking rents remained steady at 4th Qtr. 2000 72 4,639,109 593,576 12.8% 5,499 $11.08 psf. Subtotal 2nd Qtr. 1998 71 5,656,708 348,639 6.2% 61,607 2nd Qtr. 1999 77 6,074,940 775,828 12.8% -8,957. Althou h this sector has not seen any 2nd Qtr. 2000 80 6,371,035 690,057 10.8% 427,374 g 4th Qtr. 2000 83 7 006,439 870,511 12.4% 456,212 new development for years, future _ _ _ _ construction plans (both by local Metropolitan 2nd Qtr. 1998 437 53,807,913 3,795,312 7.0% 1,143,764 partnerships) include Gateway West, Total 2nd Qtr. 1999 453 56,585,064 4,749,942 8.3% 891,304 a 200,000 s . ft. ro ect and renovation 2nd Qtr. 2000 471 59,579,466 5,338,356 8.9% 2,546,529 q P ~ 4th Qtr. 2000 485 61,798,080 6,826,390 11.0% 1,079,789 yof the 80,000 sq. ft. Drake Marble Ullllding. (In some sectors, absorption to[ak are adjusted to reflect true absorption in cases where buildings were remeasured of became single-tenant.) building in Bloomington was single tenant and is now multi-tenant. Despite this expansion, tenant losses in several BUILDING I~APA~ _ GTY_ P~tICE PSF _ other buildings resulted in negative 200 E. ^Lake ~ M. Wayzata $300- six-month absorption of 132,964 sq. ft. Crescent Rid a II Minnetonka $175 This increased the vacancy rate from Crescent Ridge I Minnetonka $163 9.5% to 12.4%. Lake Calhoun Executive Center Minneapolis $157 US Bancorp Center Minneapolis CBD $145 Overall, the Southwest sector posted Metropolitan Centre Minneapolis CBD $141.' six-month absorption of 172,261 sq. ft., Gateway/Gateway North Minnetonka $133 but again, because a greater amount Lawson.Common St. Paul CBD $11:6 of unoccupied space was added, the Roseville-Corporate Center Roseville $108 vacancy rate rose from 8.2% to 12.5%. National Car Bldg. Edina $105 Southeast Tech Center Eagan $104 Average asking rents remained steady, Creekridge I & II Bloomington $101 with Class A rates at $15.88 psf and 219 S 4th St. Minneapolis CBD $100 Class B rates at $12.72 psf. Minnetonka Financial Center Minnetonka. $99 Park Place East & West (and TGl Friday's) St. Louis Park $97 Future development plans totaling 4 Shady Oak Office Ctr I Minnetonka $90 million sq. ft. are detailed on page Northgate II Maple Grove $88 13. Three large. projects now under Southgate Office Plaza Bloomington $88 construction are Liberty Property Minnetonka Corporate Center Minnetonka $87 Trust's Flying Cloud Corporate World Trade Genter St. Paul CBD $86* Campus (287,000 sq. ft.) in Eden Foshay Tower Minneapolis CBD $80 Prairie; Opus' Flagship Corporate Shoreview Corporate Center .Shoreview $76 Center (139,000 sq. ft.) also in Eden Eden'West Professional Building Eden. Prairie $70 Prairie; and United Properties/Teachers' One ParamotantPlaza Bloomington $66 Normandale Tower (240,000 sq. ft.) Lexington Commerce Center Eagan_ $61 in Bloomington. 615 1st Ave NE Minneapolis- $$1 Winsor Office Plaza.& Roseridge Office (package) Roseville $60 Significant tenant gains at Brookdaie Brookdale Corp. Ctrs II & III Brooklyn Center $58 Corporate Center I-III improved the Itasca Building (warehouse dist) Minneapolis CBD $50 vacancy rate from 26.1% to 13.4% from International. Design Center(warenouse dirt) Minneapolis CBD $46 second quarter to fourth quarter 2000. Essen Building Minneapolis CBD $41 Six-month absorption totaled 126,546 Galtier Plaza St. Paul CBD $33 sq. ft. Despite high vacancy in Earl Earl Brown Tower Brooklyn Center $31 Brown Tower, due to three tenants 530 N. Third {warehouse dist) Minneapolis CBD n/a relocating, this sector has improved Riverplace Minneapolis n/a immensely from the last ten years when *Includes vacant retail area in rentable area (23%) c 200 coi~iers ToWie Real the vacancy rate percentages hovered in the high teens and low 20's. Over 500,000 sq. ft. of new development Tenant gains in these new buildings is planned. In Maple Grove, Opus Class A development is the biggest contributed to tremendous six-month Northwest L.L.C. plans to build Arbor news in the Southwest sector. Four absorption of 305,225 sq. ft., however, Lakes I-III (300,000 sq. ft.) and TOLD new projects totaling 690,000 sq. ft. were since more space was added than was Development will build Wedgwood added between second and fourth quarter absorbed, the vacancy rate increased 146715 (130,000 sq. ft.). In Brooklyn including: Centennial Lakes V, United by 6.7 percentage points to 12.7% by Park, Kraus Anderson will develop The Properties' 220,000 sq. ft. project in fourth quarter 2000. Village (90,000 sq. ft.), a redevelopment Edina, Interlachen Corporate Center, of a 133-acre site that will also include Haugland Development's 104,000 Two buildings totaling 126,000 sq. ft. retail and housing. sq. ft. building also in Edina, tivere added to the Class B segment. At MarketPointe, a 242,000 sq. ft. joint Richfield Bank ~ Trust's. beautiful new Average asking rents dipped slightly, by project of Ryan Companies and Lutheran mixed-use development, Woodlake 1.5% to $9.28 psf. Brotherhood in Bloomington, and Centre, 60,000 sq. ft of office space Norman Pointe I, a 214,000 sq. ft. is now 90% occupied, and Airport I building by Duke Weeks. Business Center, a 66,000 sq. ft. - Commons (39,000 sq. ft.) And,. this While taxes and operating expenses Class A growth dominated the West sector will see more new development, remained stable, the° average net sector, with the addition of Duke's 1600 as detailed on page 13. rent increased by 2 /o to $11.24 Tower (248,000 sq. ft.) in St. Louis psf for the six-month period ending Park and Opus Northwest L.L.C.'s Bass ~ - ~ fourth quarter 2000. Creek Corporate Center (123;000 Minimal tenant losses of 2,281 sq. ft. sq. ft.) in Plymouth. Also included in were reported for the six-month period ~ ~ m the survey was the absorption in Opus' between second quarter and fourth Dakota County welcomed two new Crescent Ridge Corporate Center I quarter. The resulting vacancy rate buildings between second and fourth (265,000 sq. ft.) in Minnetonka. The climbed from 12.8% to 14%. quarter 2000: Mendota Office Center net result was impressive tenant gains of III, a 52,000 sq. ft. building by United 450,713 sq. ft. However, because more Average net rents rose by 5.4% to Properties in Mendota Heights and Town space was added than was absorbed, the $11.99 psf. Centre Plaza, a 42,000 sq. ft. project in Class A vacancy rate rose, from.5.3% Eagan by a local partnership. Although to 11.7%. In development news, construction their combined occupancy of 50% continues on the 263,000 sq. ft. Veritas contributed to six-month absorption of The Class B segment posted minimal Software regional campus in Roseville. 67,613 sq. ft., it was not enough to absorption of 5,499 sq. ft., which Planned for multi-tenant development improve the overall vacancy rate. Thus; nudged the vacancy rate. from 12.9% is the 25,000 sq. ft. Silverview Office the Dakota County fourth quarter 2000 to 12.8%. Center in Mounds. View. vacancy rate stands at 17.9%, up from the 16.8% reported second quarter. Overall, the West sector claimed 456,212 _ - ' ~ ' sq. ft. of six-month absorption, but again, Posting its best occupancy since 1987, Asking rents. decreased by 1.6% to because of the amount of unoccupied Anoka County had .tenant gains 20,812. $11.32 psf, while taxes and operating space added, the vacancy rate went sq. ft. during the last six months, which expenses remained stable. up, from 10.8% to 12.4%. Rental rates improved the vacancy rate from 11.6% to remained stable, with Class A at $16.75 7.7% for the period ending fourth Future development plans include: psf and Class B at $12.35 psf. quarter 2000. Contributing to the Apple Valley Financial Center improvement was absorption in Coon (120,000 sq. ft.) and Grand Oak Construction continues on Carlson Rapid's new Springbrook Executive II, III and VII (133,000 sq. ft.). Real Estate's 401 Carlson Parkway Plaza (added in our second quarter However, given the rising vacancy in (213,000. sq. ft.) in Minnetonka and 2000 report) and The Business Center this sector, we may not see all of the Brookstone Real Estate's Golden Valley in Columbia Heights. projects completed. MINNEAPOLIS/ST. PAUL METRO AREA 2ND QUARTER - 4TH QUARTER 2000 x00,000 MARKET SECTOR A85ORPTiONSQ.FT. 0 ANOKA COUNTY 20,812 400,000 ~ DAKOTA COUNTY 52,029 ~ >7 w MINNEAPOLIS CBD -11,321 m Q ~ 300,000 = MINNEAPOLIS OUT-OF-CBD 128,576 d 3 ~ ..i NORTHEAST -2,391 p vi Q ~ NORTHWEST ..126,546 200,000 ~ ~ Q 0 ~ H ~ ST. PAUL CBD 131,735 = U ~ I ST. PAUL OUT-OF-CBD -13,902 ~ ~ 100,000 ~ d a ~ SOUTHWEST 172,261 WASHINGTON COUNTY 19,232 0 Z E H WEST 456,212 TOTAL 1,079,789 J -100,000 © 2001 Colliers Towle Real Estate Added to the fourth quarter survey was Gateway Corporate Center, a MINNEAPOLIS/ST. PAUL METRO AREA new 60,000 sq. ft. facility by Opus 4TH QUARTER 2000 Northwest L.L.C. in Woodbury. It's occupancy of 45% contributed to 2~ six-month absorption of 19,232 sq. ft. However, as this sector is relatively small, it was not enough to offset a - - rise in the overall vacancy rate, which ~ ~ METRO AVERAGE 11°fo climbed from 9.8% to 18% for fourth 1~ M_____~__~ quarter 2000. - N o\° ~o N ~ Average asking rents ticked up by 1.4% 12 . a . - ~ - a to $12.88 psf. ~ Future development plans, detailed ~ ~ on page 13, include a new proposed ~ • project by Kraus Anderson Realty Co., ~ a - the Seasons Office Building. (24,000 ~ • sq. ft.) in Woodbury. ~ ~ . s ~ ~ ~ r 0 - 2001 Colliers Towle Real Estate ©Coihers Towle Real Estate MINNEAPOLIS/ST.PAUL METROPOLITAN ,4REA - ScCOND & FOURTH QUARTER2000 (PSF) AVERAGE MA~t1Ct=T AVERAGE NAT t'3ENT RANEE A`~ERt~~E -!'O?ALEXPEI+.iSt<5 SENOR NET RENT LOS/-,HIGHw_ „t_OW~HIGH t PROPERTY TAX (Incls~ding taxes) -:~_e ~ _ ~n.. 2nd Q -.4th Q 2nd ~ 4th. 4 _ 2nd Q 4th Q ~~g~ 2nd Qj~~4th Q Anoka County $10.94 $11.24 $6J0-$14.00 $6.60-$14.00 $2:75 $2.75 ~ $6.23 $6.50 Dakota County $11.50 :$1.1.32 ~ $9.00-$15.00 $7.50-$15.50 $3.02 $2.71 ` $6.26 = $6.27 i ~ I Minneapolis CBD ~ ; ~ Class A $16.63 :$16.46. ~ $13.75-$20.00 $12.00-$24.00 $6.60 $6.52 ~ $12.26 $12.27 Class B $12.65 $12.78 $8.00-$.16.00 , $8.50-$15.50 ? $3.73 $3.87 ~ $10.28' $10.72 Class C $10.:12 $T0.92 $5.00-$16.00 $5.00-$14.50 $1.66 $1.57 ~ $5.95 $5.89 Renovated $10.64 $1.1.36. ~ $4:50-$18.00 $4.50-$14.00 $2.44 $2.10 i $6.55 $6.93 Mpls:Out-of-CBD $12.64 $13.44 ~ $8.50-$16.50 $7.00-$18:00 3 $3.35 $2.79 $9.26 $8.41 Northeast $11:37 $11.99. ; $8.00-$15,00 $7.00-$17.50 t $2.54 $2.43 $6.99' $7.23 Northwest $9.42 ` $9.28 -.$6.00-$12.00 $6.00-$12.00 " $2.65 $2.58 1 $7.13 $7.09 ~ ~ St. Paul CBD `Class A $15.33 $14.10: $14.00-$18.00 $12.50-$16.00. $2.81 $4.25 ~ $9.40 $9.92 Class B $10.72 $10.85 $5.00-$15.00 $6.00-$16.00 $2.67 $2.51 ~ $8.98 $9.06 Class C $8.29 $8.39 $5.25-$11.00 $6.00-$1.1.00 ~ $1.25.. $1.25 $5.50 $8.16 St. Paul Out-of-CBD $11.05 $11.08 ~ $7.50-$14.00. $5:75-$14.00 ~ $2.36 $3.43 ~ $6.75 $6.16 Southwest Class A $.15.82 $15.88 ~ $13.75-$19:25 $13.00-$19.00 $5.89 $5.35 ; $11.33 $11.13 Class B $12,79 $12.72 ~ $9.00-$18.00 $8A0-$17.00 $3.37 $3.45 ~ $8.64 $8.56 Washington. $12.70 .$12.88 ; $9.00-$15.50 $9.00-$15..50 $2.47. $2.22 ~ $6.52 $6.38 West ? t Class A $16:71 $16 75 ~ $16.Q0-$17.50 $16.50-$17,50 $6.09 $5.98 ; $11.66 $11.60 .Class B $12:29 $1.2.35 $9.00-$17.50 $9.00-$16.00 ~ $3.44 $3.49 ~ $8.76 $8.74 'r'.; ~ TONVLE MARKET OUTLOOK Economists often say that the market is headed fora "soft landing", as if the economy were coming to an end. Though we don't know exactly what the economy will do in the coming year, no market is coming to an end, certainly not the Twin Cities market. However, some fi indicators suggest that the office market has downshifted...creeping vacancies R with more pending development, an enormous amount of sublease space available, and softening of rents. The 1600 Tower, a 248,000 sq. ft. development in St. Louis Park, was recently There are 39 buildings totaling completed by Duke Weeks. 9.4 million sq. ft. that are either underconstruction, planned, orproposed. of the equilibrium supply range. Being of space they occupy downtown. Most are located in the Southwest, over 10% is not a reason for concessions Downtown Minneapolis, and Minneapolis to enter the market in and of itself. As The Minneapolis CBD has 1.7 million Out-of-CBD. Most are Class A, A-, B+ important is the length of time of market sq. ft. under construction, plus the and range in size from 32,000 to 1 oversupply and the trend. While the second Target headquarters building and million sq. ft. Development in previous West sector for instance is over 10%, it third AMEX building. The relocations years was mostly speculative space. just got there with new buildings. The are going to raise the vacancy rate. Plus, Now, developers want and lenders are pipeline of new product is low with only Pillsbury has begun subleasing a portion demanding some pre-leasing before 250,000 sq. ft. under construction and of their 540,000 sq. ft: space. The overall construction begins. Construction costs absorption continues to be robust. vacancy rate will climb to the low teens for new suburban office buildings of by the end of 2002.. There will be large six stories or less are $120 to $130 Additionally, this corridor will get more blocks of space in the Pillsbury Center, per sq. ft. Downtown costs range from attention from space seekers who will U.S. Bank Building, Piper Jaffray $140 to $200 sq. ft. depending on want to be away from the Crosstown Tower, North Star and Baker blocks, many variables. Highway 62 closure and its adverse and the Multifoods Tower. affects on Southwest traffic. Watch for these new design trends and Depending upon the economy, it is going features in future office buildings: The Southwest sector, on the other hand, to take awhile to lease up the vacancies. • Bigger floor plates 30-35,000 sq. ft., has been experiencing a lower rate of We have gone through a boom phase and 41'-45' depths from core to glass space absorption, has 728,000 sq. ft. many of the engines of absorption are • Fiber optics under construction, and is facing greater satisfied. It is too early to tell what will • More power, HVAC, larger restrooms traffic gridlock. The ingredients are there happen with rents. The last overbuilding • 8" raised floors for data and voice for rent softening, but it depends on if cycle - 10 years ago -was more severe cabling owners are willing to reduce rents, or than this will be and the makeup of the • New parabolic light fixture directing provide other concessions or not. owners is a bit different. Most of the light straight down, reducing glare owners of big blocks of to-be-vacant on computer screens At 16% vacant, Downtown St. Paul faces space know what's coming. They also • Floor-to-ceiling glass real challenges, although good values have deep pockets and are not likely to be • Higher suburban parking ratios from will be found in its space opportunities. aggressive rent cutters to move space. 4:1 [0 4.5:1 to 5:1 A good example is PDI's commitment to lease over 110,000 sq. ft. in the 400 Despite the future oversupply of office Rents in new suburban buildings Robert Building and leave downtown space, Downtown Minneapolis is hot. are $17.50 to $19.00 psf net, plus Minneapolis. It is difficult to predict Businesses are expanding. New housing $10-$11.50 psf in cam and tax. just where the vacancy rate will go is bringing people downtown. New Downtown Class A rents are $18 to $24 until a couple of pending .factors shake restaurants and an ice skating rink have psf net with expenses of $11-$14 psf. out. First, the State of Ntinnesota is opened. Light rail and the North Star We predict some softening of rents in completing a study that could lead to the commuter line are coming. New hotels, the Southwest with 12.5% vacancy and relocation of 1 million sq. ft. of mostly Block E, and the Convention Center the St. Paul CBD at 16.1%. Downtown downtown St. Paul tenancy. Second, a expansion are underway. People and Minneapolis remains healthy at 7.2%. planned development across the river for businesses want to be there. Historically, 10% has been the top end US Bank will reduce the 275,000 sq. ft. s ~~FlCE PROJ~CT~ PROPOSED, P~iANN~D AND UNDER COHSTRUCTIOH MINNEAPOLIS/ST: PAUL METRO AREA -FOURTH QUARTER 2000 MULTI-TENANT PROJECT NAME StZE1SF CITY DEVELOPER STATUS Centre Pointe VII 110,000 Mendota Heights Roseville Properties P Grand Oak II 55,000 Eagan Wispark Corp. P Grand Oak III 68,000 Eagan Wispark Corp. U/C Grand Oak Vll 60,000 Eagan Wispark Corp. P The Waters III 66,000 Eagan CSM Corp. U/C Dakota County 359,000 _._~.._____w. _...__~__~._T___ .____---,__T_______~~_~ - 50 South. 6th St. 600,000 Minneapolis Hines U/C 900 fVicollet 449,000 Minneapolis Ryan Companies _ U/C Marquette Plaza 530,000 Minneapolis FRM Associates U/C Stone Arch Plaza 62,000 Minneapolis Brighton Development P Minneapolis CBD. 1,641,000 615 1st Ave NE (former Bank's) 156,000 Minneapolis Out-of-CBD SchaferRichardson U!C Grain Belt Brewhouse 75,000 Minneapolis Out-of-CBD Ryan Companies U/C Great Lake Commercial Center 1 million Minneapolis Out-of-CBD STA Associates P Stinson Tech 400/500 Bldg. 265,000 Minneapolis Out-of-CBD Hillcrest Development U/C Stinson Tech 749 B{dg. 55,000 Minneapolis Out-of-CBD Hillcrest Development U/C Minneapolis Out-of-CBD 1,551,000 Silverview Office Center 25,000 Mounds View Local Partnership P Northeast Metro 25,000 ____._r_____.4__:_.~_.__~i Arbor Lakes I-III 300,000 Maple Grove Opus Northwest L.L.C. P The Village 90,000 Brooklyn Park Kraus-Anderson P Wedgwood 14 & 15 130,000 -Maple Grove TOLD Development P Northwest 520,0®® _._._.____..__T_. Drake Marble Building 80,000 St. Paul Out-of-CBD Drake Building L.L.C. P Gateway West 200,000 St. Paul Out-of-CBD Gateway L.L.C. & P Christenson Building Corp. St. Pout Out-of-CAD 280,000 Hwjr. 169 & 1-494 180,000 Edina Frauenshuh P 6875 Shady Oak 32,000 Eden Prairie Mount Properties U/G Capital Pointe I & II 300,000 Eden Prairie Northco & GE Capital P Flagship Corporate Center 139,000 Eden Prairie Opus Northwest L.L.C. U/C Flying Cloud Corp. Campus 287,000 Eden Prairie Liberty Property Trust U/C Grandview Square 95,000 Edina Opus Northwest L.L.C. P Lake Smetana Business Park 250,000 Eden Prairie Liberty Property Trust P Lyndale Gateway 30,000 Richfield Twin Cities Christian Homes U/C Minnesota Center II 250,000 Bloomington TrizecHahn P Normandale Tower 240,000 Bloomington United Properties/TIAA U/C Norman Pointe N 250,000 Bloomington Duke-Weeks P Millennia Forum 2 million Bloomington Olnick Corp. P ~tDLittlweSt $,Q53,0®0 _ - - - 213,000 Minnetonka Carlson Real Estate L ~~~~~U _ 401 Carlson Parkway ~ /C 3501 Plymouth Blvd 47,000 Plymouth Carlson Real Estate P Golden Valley Commons,.. 39,000 Goldert Valley Brookstone Real Estate U/C Golden Valley Executive Plaza 72,000 Golden Valley Amberg LL.C. P Park Commons East 60,000 St. Louis Park TOLD Development P Plymouth Woods. II 86,000 Plymouth United Properties P Revere Lane Site 100,000 Plymouth Industrial Equities P Wayzata Office Park 114,000 Wayzata. Hammer Residences Inc. & P Wes# Wayham L.L.C. 731,000 Oakdale Tech Center 75 000 Oakdale Haugland Company - P Seasons Office Building 24,000 Woodbury Kraus-Anderson Realty Co. P Woodlane Office Center 100,000 Woodbury Robert Muir Co. R 11Vashington County 199,+Q00 Metro Total Under Construction (U/C) = 3.2 million • Metro Planned/Proposed (P) = 6.2 million • Metro Total = 9.4 million Key: P =Proposed or Planned UIC =Ground broken or under construction D =Demolition planned • R =Renovated ©Coiliers Towle Reai Estate i • \ \ Colliers Towle. Real Estate Towle Repart 2001 MARKET OVERVIEW • Colliers Towle Real Estate continues to survey 1,034 multi-tenant ~ N D V STRIA L industrial properties in the seven-county area surrounding Iv4inneapolis/St. Paul. For the year ending third quarter 2000, total net absorption in that universe was 1.8 million MARKET square feet, down from the 2.9 million square feet of absorption that was reported in HIGHLIGHTS 1999. Demand for Twin Cities' multi-tenant industrial space has peaked and vacancies will likely rise. .The overall vacancy rate The survey showed the vacancy rate for industrial space ticked up, from 8.6% of all types of multi-tenant to 9.4% for the year ending third quarter 2000. The rise in vacancy is due industrial space rose slightly, primarily to the addition of 2.2 million square feet in 30 buildings; more than the from 8.6%to 9.4% for the year amount that was absorbed this year. Of particular interest is that in the face of ending third quarter 2000. becoming overbuilt, development continues. There are 39 projects either under Vacancy rates by product type construction or planned totaling more than 4.6 million square feet (as outlined were O/W at 8.3%; OS/BC at on page 23J 9.7%; and BULK at 11.4%. In an overall review of the industrial market, the Office Warehouse (O/W) .Demand for multi-tenant category was the strongest performer for the eighth consecutive year and s ace has Baked and makes up 50% of the multi-tenant industrial market. O/W facilities reported P P annual net absorption of 1.1 million square feet. With 20 new buildings vacancies will likely rise. Net totaling 1.3 million square feet added to the O/W universe and surpassing absorption totaled 1.8 million the amount of tenant gains, the vacancy rate remained steady at 8.3%. sq. ft., down from last year's 2.9 million sq. ft. Fast-growing Scott County led the O/W absorption of 310,371 square feet, which is notable considering that there are only eight buildings in .Investment sales were brisk; the Scott County O/W universe. The Northwest sector followed, with there was over 7 million sq. tenant gains of 270,726 square feet. Future development plans for this ft. of industrial investment category include 29 buildings totaling 2.7 million square feet (see page 23J real estate put on the market in 2000. The Office Showroom/Business Center (OSBC) category registered annual net absorption of 657,967 square feet and a steady _ The development pace continues: 30 new buildings ' totaling 2.2 million sq. ft. were added this year, and 39 projects totaling 4.6 million sq. ft. are planned or under construction. ~ = ~ ~ ~ • Overall, average net rental " rates rose from 4%-8%, with increases as high as 13% in ~ some sectors of the OS/BC market. CSM Development is repositioning the 537,000 sq. ft. Alliant Tech building in Hopkins, now called Excelsior Tech Center, for multi-tenant use. ` ~ a ~ ~ ~ ~ ~ f u ~ ~3. 'tom t -'~~~-~~~t ~ ~ ~ ~ awr ~ I r 6 ~ ~ ~ ;~Y ~ u ev~.. Y. _ , . , - Liberty Property Trust has Hudson Road Tech Center under construction. A 140,000 sq. ft 0!W building in Woodbury. vacancy rate of 9.7%. New development or under construction. added 538,948 square feet to the OSBC CITIES: universe. Recent trends have shown that • Anoka • Blaine • Champlin OSBC buildings saw vacancy rates many tenants prefer to move toward • Columbia Heights • Coon Rapids increase from 2.3% in 3rd quarter 1999 OSBC properties as office rents continue • Fridley • Spring Lake Park • Ramsey to 9.7% for 3rd quarter 2000 in Anoka to escalate in some Class A and Class B County. This was due to negative annual office buildings in the metro area. The UNIVERSE INCLUDES: absorptlon Of 47,492 sq. ft. OS/BC facility becomes a favorable and • 40 buildings more economical alternative. • 3.4 million rentable sq. ft. • 4.9% vacancy rate CITIES: The West Sector topped the list with • 122,693 sq. ft. annual absorption • Apple Valley • Burnsville • Eagan 442,481 square feet of absorption, • Hastings • Inver Grove Heights followed by Dakota County with The overall industrial vacancy rate for • Lakeville • Mendota Heights absorption of 249,297 square feet and Anoka County rose 1.7 percentage points • Rosemount • South St. Paul the Northeast Metro Sectorwith 120,305 to 4.9% from 3rd quarter 1999 to 3rd square feet. quarter 2000. Although it is one of UNIVERSE INCLUDES: the smaller sectors of the metropolitan 125 buildings Eleven new projects totaling over, area, Anoka County is proving to be • 9.9 million rentable sq. ft. 1 million square feet are planned or a strong .performer, posting the lowest 15.0 % vacancy rate are currently under construction for overall industrial vacancy rate in the • 278,889 sq. ft. annual absorption future OSBC facilities, as outlined on metropolitan area for the period. page 23. Combined annual net absorption for all Dakota County, while being one of the three product types totaled 122,693 sq. ft. larger sectors in the metropolitan area The BULK warehouse category had total has the highest vacancy rate for .the net annual absorption of 49,181 square The BULK building type .reported the period ending 3rd quarter 2000. Leasing feet. Tenant growth and expansion in greatest improvement during the period activity has not quite caught up with. some sectors was offset by losses in for Anoka County. Vacancy dropped the large amount of space added aver other sectors. For instance, the leader in from 10.7% to 5.3%, with tenant gains the past five years of nearly 4 million the BULK category, Scott County, posted of 93,773 sq. ft. This is mainly due to the rentable sq. ft. absorption of 289,480 square feet, while completion of the 65,000 sq. ft. Blaine St. Paul suffered negative absorption Industrial Center II, which came on The OS1BC building type was the best of 207,970 square feet. With minimal line 100% leased, performer with annual absorption of absorption and the addition of 345,400 249,297 sq. ft., up nearly 100,000 sq. ft. square feet in new development, the Vacancy rose from 1.3% to 3.3%, for the from the prior year. The vacancy rate vacancy rose 2.6 percentage points from O/W building type. Annual absorption dropped nearly 3 percentage points third quarter 1999 to third quarter 2000 was 76,412 sq. ft. and Radium Business to 10.3%. to 11.4% Center (62,000 sq. ft.) was built in Ramsey and is 100% occupied. Blaine BULK buildings suffered negative Note: Several buildings in our survey Crossings I was completed during this absorption of 55,987 sq. ft. These tenant were reclassified or deleted when they period and is 1/3 leased. losses raised the vacancy rate from became single tenant; absorption 23.8% to 24.8%, which is well above formulas were adjusted to accurately reflect Four new O/W buildings totaling the 11.6% BULK vacancy rate for the these changes. 208,000 sq. ft. are planned, proposed metropolitan area. ....~.v i= Q Colliers Towls Real .Estate ' The O/W building type had a slight increase in vacancy, from 10.8% for 3rd _ quarter 1999 zo 11.2% for 3rd quarter MINNEAPOLIS/ST. PAUL METROPOLITANAREA- 1998-2000 2000. Net annual absorption totaled NUMBER TOTAL TOTAL 85,579 sq. ft. This is attributable to MARKET ' ' STUDY OF RENTABLE-'AMOUNT VACANCY NET the recent completion of Burnsville .SECTOR DATE - BLDG_5 AREA VACANT RATE ABSORPTION c ~.w~. . _ .rt.~ Highpoint Business Center (58,188 BULK WAREHOUSEMARKET sq. ft.), which at .the time of this study _ _ _ _ - _ was 100% vacant, and the Waters Anoka County 3rd Qtr."1998 5 599,800 90,293 15.1 °rb 7,707. Business Center II (73,083 sq. ft.), 3rd Qtr. 1999 5 599,800. 64,307 10.7% 25,986 which was 72% vacant. _ _ 3rd Qtr 2000 6 6_65,280 35,534 5.3% 93,77_3 Dakota County-3rd Qtr:'1998 11 ~ ~2,141,318~ 236,019 11.0% 82,781 Despite highvacanciesinDakotaCounty, 3rd Qtr. 1999 15 2,883,580` 685',894 23.8% 54,775 construction continues. Planned O/W 3rd Qtr 2000 14 2,996,690 741;881 24.8% -55,987 Minneapolis 3rd Qtr. 1998 13 2,248,253 91,912 4.1% 134,088 development includes: Spectrum 3rd Qtc 1999 13 2,248,253 70,000 3.1% 21,912 Commerce Center I-III (289,150 3rd Qtr, 2000 13 2,625,249. 313,154 11.9% -124,754 sq. ft.) and the Waters III (135,600 Northeast 3rd Qtr. T998 8 1,803.224 49,986 2.8% -43,186 sq. ft.) in Eagan; and River Ridge 3rd Qtr. 1999 8 1,803,724 55,986 3.1% -6,000 Business Center (52,000 sq. ft.) in _ 3rd Qtr 200_0 9 2,039,000 82,540 4.0% 53,446 _ Burnsville. Also planned are Phases II Northwest ~ 3rd Qtr.1998 16~~ ~ 2,324,617 ~ 157,967 6.8% 276,766 and III of Northwoods Business Park, 3rd Qtr. 1999 18 2,539,281 301,426 11.9% 71,205 3rd Qtr. 2000 18 2,522 844. 222,323 8.8°i° 71559 and Grand Oak III, all OSfBC buildin s - - g Scott County 3rd Qtr. 1998 3 456,004 405,004 59.9% n/a in Eagan. A major project under 3rd Qtr. 1999 3 546,720 105,600 19.3% 329,524 consideration is Duke-Weeks' Eagan r 3rd Qtr 2000__ 4 ~ 708 720 _ _ 140,:000 _ _ 19.8% _ 289,480 Preserve, a proposed development of St. Paul 3rd Qtr: 1998 22 2;914,037 11,000 0.4% 283,300 700,000 to 1,000,000 sq. ft. of office, 3rd Qtc 1999 22 2,914,037 73,400 2.5% -62,400 industrial, retail and technical space. 3rd Qtr,_2000 22 _ 2 901 791 281,370 9.7% -207,970 Southwest 3rd Qtr. 1998 13 1.,719,499. 155,038 9.0% -100,038) _ 3rd Qtr. 1999 13 1,719,499. 96,740 5.6% 58,298 - ' ~ 3rd Qtr. 2000 13 1,703,105 95,531 5.6% 71,836 UNrv>;xsE INCLUDES: Washington Co3rd Qtr. 1999 3 460 488 190,000 23.7% n/a • 66 buildings _ 3rd Qtr. _2000 3 464 444 165,128 35.6% -56 128 _ - West - ~ 3rd Qtr. 1998w 22~~ -2,969,941 130,895 4.4% 203,735 • 6.4 million rentable sq. fL 3rd Qtr. 1999 23 2,984,205 73,958 2.5°% 167,11.7 • 8.2 % vacancy rate _T _ 3rd Qtr. 2000, _ ,_.._2,853 720_ _ _ 161.032,. 5,6°!0 _ _ -86A074 • -33,405 sq. ft. annual absorption Metropolitan 3rd Qtr. 1998 113 17;177,193 1,328,114 7.7% 845,153 Totals 3rd Qtr. 1999 123 18,699,589 1,636,311 8:8% 589,01,3 Overall vacancy for Minneapolis' 3rd Qtr. 2000 124 19,480,843 .2,238,493- 11.4%° ' 49,181 multi-tenant industrial buildings rose two percentage points to 8.2% during the period from 3rd quarter 1999 to , 3rd quarter 2000, with overall negative ~ g ' absorption totaling 33,405 Sq. fC. ALL SECTORS -THIRD QUARTER 2000 ©Co9iers Towle Real Estate 30.00% _ _ _ _ _ _ , The BULK building type saw the addition of the Minneapolis Rail Distribution Center, a 118,400 sq. ft. building. At ..25.00% _ _ BULK = 11.4% the time of this study, the facility was j ~lF~~ 0.~`~ 100% vacant, which contributed to the !20.00% ` OSBC = 9.7% _ vacancy rate increase of 8.5 percentage points to 11.6%. Net tenant losses of 124,754 sq. ft. were reported. X15.00°l° - . m O/W buildings posted one of the metro 10 00% _ ' , area's lowest vacancy rates. At 5.1 it is .u down almost 21/z percentage points from 5oa°i° _ _ _ the previous year due to absorption of 109,693 sq. ft. !00.00% _ 1990 1991 1942 1993 1994 1995 1996 1997 1998 1999 2°00 ~rl s I The OS/BC building type makes up ~ The Northeast Sector's 7.8% overall only 7.1 % of the overall Minneapolis CITIES; vacancy rate for industrial buildings industrial universe. The vacancy rate for • Arden Hills • Little Canada out performs the overall metropolitan this building type is 10.1% with annual • Maplewood • Mounds View average of 9.4%. This sector continues net absorption of 59,409 sq. ft. However, • New Brighton • North Oaks to grow, specifically in New Brighton, with only 7 buildings representing this • North St. Paul • Roseville Arden Hills, and Roseville. building type in Minneapolis; these • Shoreview • St. Anthonv figures did not have a huge impact on • Vadnais Heights • White Bear Lake At 4%, the BULK building type in the the overall performance for the city. Northeast Sector had one of the lowest UNIVERSE INCLUDES; vacancy rates in the metropolitan area for Future development plans include • 149 buildings the year ending 3rd quarter 2000. Annual Kasota Business Center II, a 110,000 • 9.7 million rentable sq. ft. absorption totaled 53,446 sq. ft. sq. ft. O/W facility. • 7.8% vacancy rate • 294,025 sq. ft. annual absorption O/W buildings maintained a 9.8% vacancy rate with absorption of 120,274 M ~ ~ ~ ~ ~ r ~ a ; , + ~ Colliers Towle Real Estate ~ ~ ~ x°L.t s.' a~a ~ s~ ~,a MINNEAPOLIS/ST. PAUL METROPOLITAN AREA -THIRD QUARTER 2000 VS. THIRD QUARTER 1999 (PSF) MARKET NET RENTAL RANGE ~ AVO. NET RENT ~ REA<_ ~ TOTAL SECTOR OFFICE WAREHOUSE I OFFICE WAREHOUSE TAXES ~ EXPENSES OSIBC 1999 2000 1999 2000 ~ 1999 2000 1999 2000 1999 2000 1999 2000 Anoka County $6.00-8.50 $6.00-8.25 $4.00-4.50 $4.00-4.25 $7.89 $7.64 $4.14 $4.14 ~ $1.89 $1.62 $2.95 $2.72 Dakota County $5.00-12.00 $5.00-10.50 $3.00-5.50 $3.50-10.00 i $8.76 $8.83 $4.37 $4.67 ' $1.96 $1.81 $2.92 $3.00 Minneapolis $7.00-8.50 $7.00-8.50 ~ $2.25-4.50 $2.25-4.50 $8.20 $8.10 $3.95 $3.85 $1.18 $1.41 I $2.61 $2.77 Northeast $4.50-10.00 $8.00-13.00 ' $4.00-5.00 $4.00-8.50 $8.17 $9.27 $4.34 $4.62 $2.12 $2.29 ~ $3.08 $3.86 Northwest $6.25-10.00 $7.75-12.00 $3.50-5.00 $3.75-12.00 ; $8.31 $9.12 $4.19 $4.83 ' $1.69 $2.03 i $3.48 $3.66 Southwest $6.50-12.00 $6.00-14.00 $3.50-6.00 $3.50-13.00 ~ $8.82 $9.29 $4:41 $4.80 $2.23 $2.25 $3.40 $3.55 St. Paul $8.00-9.75 $8.25-10.00 $4.00-4.75 $4.50-4.75 $8.80 $9.32 $4.38 $4.54 $2.40 $2.13 , $4.48 $4.61 West $8.00-12.00 $8.00-12.50 $4.00-6.00 $4.00-6.50 $9.34 $9.64 $4.72 $4.78 $2.10 $2.15 ' $3.10 $3.32 Metro Averages $4.50-12.00 $5.00-14_00 I $2.25-6.00 $2.25-13.50 i $8.79 $9.18 $4.45 $4.72 ~ $2.10 $2.09 ~ $3.23 $3.38 1 OIW ~ ~ Anoka County $3.85-8.75 $4.67-9.75 ! $3.00-4.25 $3.00-4.67 j $7.31 $7.81 $3.87 $4.12 j $0.85 $1.29 $1.68 $1.99 Dakota County $7.00-8.00 $3.00-10.50 ~ $3.50-4.50 $3.00-6.00 ~ $7.83 $7.75 $3.96 $4.11 ~ $1.22 $1.21 $2.12 $1.98 Minneapolis $3.50-9.00 $2.50-14.00 ~ $2.00-4.50 $1.75-5.00 I, $7.22 $7.49 $3.43 $3.80 ~ $1.23 $1.30 $1.94 $2.16 Northeast $6.25-9.50 $6.25-13.00 ' $2.75-4.75 $2.75-12.00 ~ $7.90 $8.28 $3.98 $4.35 ~ $1.29 $1.41 $1.86 $2.Q6 Northwest $3.50-9.00 $3.50-12.00 ~ $3.00-4.75 $3.25-6.00 ' $7.44 $8.21 $3.90 $4.23 $1.54 $1.53 $2.23 $2.27 Scott County $7.50-8.50 $7.50-8.95 ~ $3.50-4.50 $3.50-4.50 $8.17 $8.29 $4.17 $4.13 j $2.25 $0.79 ~ $2.63 $1.56 Southwest $3.00-11.00 $6.00-12.00 ~ $2.90-5.50 $2.90-9.00 $7.91 $8.34 $3.95 $4.31 $1.55 $1.77 $2.38 $2.55 St. Paul $3.50-9.00 $5.00-9.50 ~ $2.50-4.75 $2.00-4.75 j $6.60 $7.72 $3.37 $3.77 $1.41 $1.50 $2.15 $2.48 Washington Co $7.00-9.50 $8.00-9.50 $3.25-4.75 $4.00-E.00 ~ $8.50 $8.84 $4.20 $4.48 ~ $1.04 $1.86 $2.12 $2.59 West $2.75-10.50 $3.25-12.00 ; $2.75-5.00 $3.00-7.50 $7.92 $8.54 $4.00 $4.43 $1.74 $1.88 $2.42 $2.77 Metro Averages $2.75-12.00 $2.50-14.00 ~ $2.00-6.00 $1.75-12.00 ~ $7.76 $8.20 $3.91 $4.24 $1.41 $1.56 $2.18 $2.36. BiJLK ~ ~ ~ i Anoka County $6.50-8.50 $7.50-9.00 i $3.75-4.00 $3.75-4.00 ~ $7.35 $8.00 $3.80 $3.85 j $0.98 $1.06 ' $2.09 $2.09 Dakota County $3.00-8.50 $4.60-9.00 ~ $2.75-4.50 $3.25-4.60 ~ $6.83 $7.48 $3.68 $3.87 $0.95 $0.94 $1.47 $1.52 Minneapolis $5.50-7.00 $5.25-11.00 I $1.75-4.00 $1.90-5.50 ~ $6.30 $7.28 $2.98 $3.48 $1.01 $0.90 $1.66 $1.71 Northeast $6.00-8.00 $6.00-12.00 ~ $3.00-4.35 $3.00-4.36 i $7.33 $8.09 $3.83 $3.74 j $1.16 $1.18 I $1.79 $1.68 Northwest $6.25-9.00 $6.25-9.00 $3.10-4.35 $3.10-4.50 I $7.80 $8.06 $3.79 $3.89 i $1.24 $1.37 ~ $1.96 $2.15 Scott County $6.75-8.25 $4.25-8.25 ~ $3.50-4.25 $4.00-4.25 ~ $7.50 $7.13 $4.03 $4.13 ~ n/a $0.58 $1.55 $1.06 Southwest $7.00-8.00 $7.50-8.00 $3.5U-4.10 $4.OG-4.25 $7.71 $8.00 $3.91 $4.12 j $1.14 $1.15 $1.89 $1.75 St. Paul $7.C0-8.25 $6.00-12.00 j $2.00-3.60 $2.80-6.00 I $7.63 $8.25 $3.16 $3.65 ; $0.91 $1.01 ~ $1.38 $1.60 Washington Co $3.50-9.00 $8.50-9.C0 i $4.00-4.75 $3.75-4.00 ~ $8.75 $8.75 $4.42 $3.88 $0.74 n/a I n/a $1.90 West $5.7_5-8.75 $4.00-12.00 j $2.75-5.50 $237-5..86 ~ $7.30 $7.49 $3.90 $3.98 ~ $1.33 $1.20 ~ $2.02 $2.00 Metro Averages $3.00-9.00 $4.00-12.00 ($1.75-5.50 $1.90-6.00 $7.37 $7.77 $3.70 $3.84 ~ $1.10 $1.07 ! $1.77 $1.81 • ....ter ' sq. ft This is attributable to the addition however, it was not enough to offset Development wiIl continue in the of New Brighton Industrial Center the new space added to the universe. Northwest Sector, with 670,400 sq. ft. (98,855 sq. ft.), which at the time of this Thus, the vacancy rate crept up, from currently under construction, proposed study had a vacancy of 35%. 13.9% to 14.1 Seven new buildings or planned. Included are the Rogers totaling 539,348 sq. ft. were added to Distribution Center, a BULK building OSBC buildings were also strong. our study during the period from 3rd consisting of 243,000 sq. ft. Eagle Lake performers. At 5.7%, the Northeast quarter 1999 to 3rd quarter 2000 with a Business Center IV and Five Star Sector had the lowest vacancy rate for combined vacancy rate of 41%. Commerce Center V, O/W buildings this building type and reported annual in Maple Grove; Bell Tower Commerce absorption of 120,305 sq. ft. One new BULK buildings are the sector's best Center, a 100,000 sq. ft. OSBC facility building, Centre Pointe Business Park performer with a vacancy rate of 8.8°1o in Osseo along with the 190,400 sq. ft. III (150,000 sq. ft.) in Roseville, was that improved by 3.1 percentage points France Avenue Business Center, in added to our survey, and is currently from 1999. Annual net absorption Brooklyn Center. 100% leased. totaled 71,559 sq. ft. TT Current development plans include the The O/W category saw the addition CrrlES: 1st phase of Wispark's Rice Creek of Crystal Business Commons II • Chaska • PriorLake • Savage • Shakopee Corporate Park in Shoreview, which (92,300 sq. ft.), Crosstown North V will consist of 114,000 sq. ft. of O/~V St VI (217,400 sq. ftJ, Eagle Lake UNIVERSE INCLUDES: and OSBC buildings. Business Center III. (95,500 sq. ft.), • 12 buildings and Five Star Commerce Center III • 1.5 million rentable square feet ~~~T &Y IV (94,200 sq. ft.) This contributed • 12.4% vacancy rate CITIES: to annual absorption of 270,726 sq. ft., • 599,851 sq. ft. annual absorption • Brooklyn Center • Brooklyn Park however since more space was added • Crystal • Maple Grove • New Hope than was absorbed, the vacancy rate Scott County is the growth leader of the • Osseo • Robbinsdale rose, from 12.3% to 14.4%. metropolitan area in terms of industrial multi-tenant space. This is demonstrated UNIVERSE INCLUDES: OS/BC buildings have a current vacancy through the addition of 4 new buildings • 124 buildings rate of 23.8%, down 2.8 percentage totaling 430,000 sq. ft. and annual • 9.8 million rentable sq. ft. points from 3rd quarter 1999. This absorption of 599,851 sq. ft., the highest • 14.1% vacancy rate improvement was due to absorption of absorption for the metropolitan area, • 384,968 sq. ft. annual absorption 42,683 sq. ft. Added to the survey was while having the smallest amount of the new Northgate III. (39,948 sq. ft.} total rentable square footage.. Its tenant Overall, the Northwest Sector posted in Maple Grove. gains greatly improved the vacancy rate, annual absorption of 384,968 sq. ft., from 18.5% to 12.4%. ~ ©ColliersTowleReal£state 2000 MINNEAPOLIS/ST. PAUL METRO AREA 700,000 COMBINED OSlBC, O/W, BUIK MARKETS - ~ ANNUAL NET 600,000 _ I SECTOR ABSORPTION (SF) t j~ 500,000 ANOKA COUNTY 122,693 t DAKOTA COUNTY 278,889 400,000 I MINNEAPOLIS -33,405 C~v------ - ' " NORTHEAST 294,025 30Q000 ~ NORTHWEST 384,968 t 1- 0 ^F ~ " ~ ~ j' a ~ ' ~ w ~ .SCOTT COUNTY 599,$51 200,000 ` ~ ----~-_--Z ~ - . , q ~ . ; 3' I ' ~1 ST. PAUL -173.,469 ~ - 4 ~ ~ 1 • ~ , ~ F- ; . ~ ' 373 100,000 --~.--~-_Z,.__,~Q'°_°`_~' Z Q Q ~ . p ~ ~ ~ ~ 0 SOUTHWEST 15, WASHINGTON COUNTY -34,752 ~---~~--~--~j~- vii Q r7 Z " Z ~ ~ Ian WEST 392,089 0 ~ _ _ _ _ i TOTAL 1,846,258 -100,000 - __-__---_--------a _ v -200,000 _ ~ ~ ~ ~ ' ~ 0 Colliers Towle Real Estate UNIVERSE INCLUDES: 'MINNEAPOLIS/ST. PAUL METROPOLITAN AREA - 1998-2000 • 75 buildings • 6.6 million rentable sq. ft. NUMBER TOTAL TOTAL _ • 7.8% vacancy rate MARKET STUDY OF RENTABLE AMOUNT VACANCY NET • (173,469) sq. ft. annual absorption SECTOR DATE BLDGS AREA !/ACANT RATE ABSORPTION OEFICE~ SHOWROOM/BUSINESS CENTER MARKET ~ _ ~ ~ Overall, St. Paul had tenant losses of - - - - - - 173,469 sq. ft. for the year ending 3rd Anoka County 3rd Qtr. 1998 8 698,170 73,185 10.5% -13,985 quarter 2000. While the 7.8% vacancy 3rd Qtr. 1999 8 698,170 16,070 2.3% 57,115 rate is below the overall metropolitan _3rd Qtr. 2000._ 7_ ____651,947 63,562 9,7%__ ___-47,492 average of 9.4%, it is up 2.7 percentage Dakota County 3rd Qtr. 1998 57 2,888,497 329,529 11.4% 176,532 points from its position in 3rd quarter 3rd Qtr. 1999 62 3,159,411 410,188 13.0% 15p;278 1999. _ _ _ _ _ 3rd_Qtr. 2000_ 63 3,175,122 325,591 10 3% 249,297 Minneapolis 3rd Qtr: 1998 6 388,982 33,664 8 7% 2,836 3rd Qtr.'1999 6 388,982 36,742 9.4% -3,075 BULK buildings had negative absorption _ 3rd Qtr. 2000______6 __468 544 47,333 __1.O.%_____ _59,409_ totaling 207,970 sq. ft., which resulted Northeast 3rd Qtr: 1998 32 1,721,999 73,051 4.2% 150,419 in a vacancy rate. of <9.7%, an increase 3rd Qtr. 1999 33 1,819,999 73;129- 4.0% 97,922 of 7.2 percentage points. Contributing 3rd Qtr. 2000 34 _ _ 1 885,188 ____107,959 5.7%__ 120,305 factors include large new vacancies in Northwest 3rd Qtr. 1998 19 1 131 „320 104,978 9.3% 3,333 the Lafayette Park and North Prior 3rd Qtr.-1999 20 1,199;620 318,539 26.6% -145,261 3rd Qtr. 2000 21 1,237,406 294,739 23.8% 42,683 distribution centers.- St. Paul 3rd Qtr,1998 15 1,056,210 98,202 9.3% -24,249 3rd Qtr. 1999 15 1,056,210 94,323 8.9% 3,879 Favorable leasing activity in St. Paul's 3rd Qtr. 2000. 15 1,01.2,853 83,649 8.3% 10,944 O/W facilities Cotaled 23,557 sq. ft. The Southwest 3rd Qtr. .1998 123 6,1T5,414 356,635 5.8% 193,985 vacancy is 5.7%, down from 6.4%. 3rd Qtr. 1999 126 6,307,128 245,132 3.9% 303,217 3rd Qtr: 2000 1.26 6,232,827 598,055 9.6°rb -219,660 The OS/BC category reported minimal West 3rd Qtr: 1998 59 3,378,000 176,242 5.2% 276,045 3rd Qtc 1999 63 3,874,582 544,099 14.0% 128,725 absorption of 10,944 sq. ft., which 3rd QtG2000 62 3,849,095 290,080 7.5% 442,481 improved the vacancy rate slightly, from Metropolitan 3rd Qtr. 1998 319 17,378,592 1,245,486 7.2% 764,916 8.9% to 8.3%. .Totals 3rd Qtr: 1999 332 18,446,102 1,238,222 9.4% 534;797 3rd Qtr. 2000 334 18,512,982 1,810,968 9J% 657,967 St. Paul did not add any new facilities in 2000, however CSM's .Westgate Business Campus V, an 80,000 sq. ft. OS1BC building, is currently planned. There are a total of 4 buildings in Business Park (120,000 sq. ft.); and the BULK building universe for Scott Shakopee Industrial Center (33,000 County, only one of which has a vacancy. sq. ft.) • Bloomington • Chanhassen - The vacancy is due to the fact that • Eden Prairie • Edina the new 162,000 sq, ft. warehouse, While many areas in the metropolitan • Hopkins (part) • Minnetonka (part) Wispark Distribution Center, was just area are leveling off in terms of • Richfield recently completed and should be fully development, Scott County will continue leased by year-end given the current to grow in the upcoming years because UNIVERSE INCLUDES: demand for high-ceiling distribution it has available land and it is located • ZSO buildings space. Despite a vacancy rate of 19.8%, on the Highway 169 Distribution • 15 million rentable square feet BULK buildings had net absorption of Corridor. Opus has begun construction • 7.5% vacancy rate 289,480 sq. ft. for the period ending on Eagle Creek Commerce Center • 15,373 sq. ft. annual absorption 3rd quarter 2000. This was due to West (134,000 sq. ft. O/W) and the lease-up of Opus' 162,000 sq. ft. Minnesota Valley III (162,000. sq. ft. With over 15 million rentable sq. Minnesota Valley II in Shakopee. BULK). Phase II of Park 2000, a ft., this sector is the largest in the 128,500 sq. ft. O/W building will be metro area. Although many BULK and O/W facilities claimed 310,371 sq. ft. completed in November by First Indus- O/W buildings reported tenant gains, in tenant growth, which improved the trial. Also under construction are two they were offset by tenant losses in vacancy rate from 17.3% to an impressive other O/W facilities, River South Busi- OSBC facilities, for overall net annual 5.9%. Three buildings were added ness Center, 232,000 sq. ft. by United absorption of just 15,373 sq. ft. Arid, to the survey this year: Opus' fully Properties and Valley Green Business because more space was added than was leased Eagle Creek Commerce Center Center, 110,000 sq. ft. project by absorbed, the vacancy rate rose, from East (107,000 sq. ft.); Valley Green Capp Industries. 5.2% to 7.5%. - The BULK category retained a stable vacancy rate of 5.6°1o and had annual : , ~ ~ ~ c°u~e~5 T°wie Real Estate net absorption of 71,836 sq. ft. Added ~ ~ ' to the survey .was the 360,000 sq. ft. tii1NNEAPOLIS;S ~ PAUL AiETROPOLITAN AREA - 1998-2000 World Wide Distribution Center NUMBER TOTAL TOTAL MARKET STUDY OF RENTABLE AMOUNT VACANCY NET in Bloomington, formerly a single SECTOR DATE BLDGS AREA VACANT RATE ASSORPTlON w a~~ tenant facility. OFFICE WAREHOUSE MARKET _ _ - _ The 7.1 million rentable sq. ft. of Anoka'County 3rd Qtc 1998 21 1,943,179 98,996 5.1% 144,825' - O/W space is the largest in the 3rd Qtr. 1999 23 2,043,137 25,910 1.3% 110,311 metropolitan area and also maintained 3rd Qtr. 2000 27 2,064,769 69 098 3.3°!d .:76,412 - - - _ _ - 746,683 ' - - its last year's vacancy rate of 6.2%. Dakota County 3rd Qtr. 1998 41 3;132,548 283 651 9.1% 286,083 3rd Qtr: 1999 44 3,514,932 379,952 10.8% Substantial absorption of 163,197 sq. ft. 3rd Q#r. 2000 48 3,731,9}2_~_ 419,660 11 2% 85,579 - _ 47 3,685,732 347,774 9 4% 316,689 was reported, however the vacancy rate Minneapolis 3rd Qtr. 1998 remained steady because of the loss 3rd Qtr. 1999 48 3,749,732 28Q,296 7.5% 1.31,478 of space due to the shifting of a .3rd Qtr.;2000 _47 , 3,364,542T 172329 - 5.1%4______31,940 few properties to the OSBC category Northeast ..3rd Qtr. 1998 101 6,045,029 772,782 12.8% 215,962 and the adjustments of rentable square 3rd Qtr. 1999 103 6;133;154 :609,705 9.9% 251,202 footages in several others. Added to 3rd Qtr..2000 _106 5,855,189 523,339 _ 9.8%° 120,274 Northwest ,3rd Qtr. 1998 77 5,380;104 531,350 9.9% 314,441 the survey were Chanhassen East 3~d Qtr.. 1999 85 5,967;510 733,673 12.3% -282,777 Business Center III (27,732 sq. ft.) and 3rd Qtr. 20_00 85 _6,119,094 882,612 _ 14.4% _ _270,726 Aboretum Business Park III (60,000 Scott County 3rd Qtr. 1998 6 418,107 131,000 31.3% :76,000 sq. ft.) also in Chanhassen. 3rd Qtr. 1999 5 347,107 60,000 17.3% 0 3rd Qtr. 2000 8 796,925 47,147 5.9%. _ 310,371 OSBC tenant losses of 219,660 sq. ft. St. Paul 3rd Qtr: 1998 40 2,818,876 168,295 6 0°r~ 139,742 for the year was a dramatic change 3rd Qtr. 1999 41 2,968,876 190,889 6.4% 127,406 from the positive absorption of over _ _ 3rd Qtr. 2000 38 2,742,824 156,102 5.7% 23,557 300,000 5 ft. for the revious ear. Southwest 3rd Qtr. 1998 1 ~0 7,310,324 463 527} 6.3°l0 516,755 q• p y 3rd Qtr. 1999 113 7,605,844 480,820 6.3% 278,227: Negative absorption was reported by a .3rd Qtr. 2000 11.1 7,152.,356 442,709 6.2% 163,197_ quarter of the OSBC buildings in the Washington 3rd Qtr. 4998 ~4 1,034,759 178,793 17.3% 173,950 sector. Vacancy rose a tremendous 5.1 County 3rd Qtr. 1999 24 1,034,759 41,752 4.0% 137,041 percentage points to 9.6%. Two new 3rd Qtr.2000 24 1,092,463_ ',20,688_ 1.9% _ _ 21,376 ' West -3rd Qtr. 1998 _ 82 6,343,590 ~ 556,005 ~ ~ 8.8% .109,554 projects were built this year and are ° full leased, includin Chanhassen 3rd Qtr. 1999 83 6 366,190 437,017 6 9 /0 141,588 Y g 3rd Qtr. 2000 82 6 438,572 .472,737 7 3%0 35,682- . . Lakes Business Park (40,000 sq. Metropolitan 3rd Qtr.-.1998 549 38 112,248 .3,532,173 9.5% 2,754,601. ft.) and City West Business Center Totals ; 3rd Qtr. 1999 569 39,731;241 3,240,014 8.2% 1;746,113. II (90,837 sq. ft.) Also added was ..3rd Qtr. 2000 576 .39,358,646 3,256,421 8.3%° 1,139,114 the former single-tenant building at 4900 W. 78th St. in Bloomington. Washington County, while a major The good news for Washington County growth community, is the 2nd smallest lies in its O/W facilities with a 1.9% Chanhassen and Eden Prairie are still industrial sector in the metropolitan vacancy rate, the lowest in the metro experiencing major development, area. Thus, its relative size must be area. This improvement from last year's especially in the OS/BC .area. Total .considered when evaluating the overall 4.0% vacancy was due to absorption of rentable square footage currently under vacancy rate of 11.9% for all industrial 21,376 sq. ft. construction, planned or proposed buildings in Washington County. The equals 735,000 sq. ft. (see page 23). .County's negative industrial absorption While the previous years saw major of 34,752 sq. ft. is mainly due to large development occurring in Oakdale, the - - ~ ~ ° n~ ~ 9 vacancies in the BULK category. activity has moved to Woodbury. Four new 01W buildings are currently CITIES: • Cottage Grove • Lake Elmo The BULK distribution category is the planned for Woodbury, including the • Newport • Oakdale smallest of all the sectors and posted 50,000 sq. ft. East Metro Business • Oak Park Heights • Stillwater the metro area's highest vacancy rate Center, the 140,800 sq. ft. Hudson • St. Paul Park. • Woodbury of 35.6 /o, up from 23.7% last year. Road Tech Center, and Wooddale Oakdale Interstate II, completed in Business Center and Woodbury UNIVERSE INCLL`DES: time for the 1999 report, is still nearly Commerce Center, each 100,000 • 27 buildings 100% vacant. However, with only three sq. ft. facilities. • 1.5 million rentable sq. ft. buildings in the survey, individual • 11.9 vacancy rate vacancies highly affect the overall rate, • (-34,752) sq. fr. annual absorption due to the modest overall square footage involved. The OS/BC building type was the best 5 ~ i _ , ©emfiers r°w~e Real estate performer of the metro area, with tenant - 1.~ ~ ~ ' - - ' ' gains totaling 442,48.1 sq. ft. This was MINNEAPOLISST. PAUL METROPC)E_ITAN AREA- 1.998-2000 mainly due to the lease up of 167,000 NUMBER TOTAL TOTAL sq. ft. in Golden Hills Business Park MARKET STUDY OF RENTABLE AMOUNT yACANCY NET and the new 53,509 sq. ft. Plymouth SECTOR DATE BLDGS AREA- VACANT RATE ABSORPTION Tech Park IV. COMBINED OS/BC, O/W, BULK MARKETS Future development plans include: Anoka County: 3rd Qtr. 1998 34 3,241,149 262,474 8:1% ` 138,547. Plymouth Ponds V-VIII, comprising 3rd Qtr: 1999 36 3,341,107 106,287 3,1% 193,412 392,000 sq. ft. of O/W space in Plym- _ 3rd Qtr. 2000 _ 40 _ 3 401,996 _ _168,19_4 _ _ 4:9°ro _ _ 122,693 outh, and Long Lake Business Center, Dakota County 3rd Qtr: 1998 109 8,162,363 ~849,199 10.4% 1,005,996 a 24,000 sq. ft. O/W facility. 3rd Qtr: 1999 120 9,499,923 1;476,034 15.4%° 433,136 _ 3rd Qtr. 2000 125 9 903,724 1,487,132 15.0% 278,889 Minneapolis 3rd Qtr. 1998 66 6,322,967 473,350 7.5°!° 453,613' , ~ 3rd Qtr: 1999 67 6,386,967 387,028 6.0% 150,312 'r~~~~~ TOWLE MARKET _ _ 3rd Qtr. 2000.. 66 _ _ 6 458 335 :---532 81.6.-__ _ 8.2%~.,_ _ j33 405 OUTLOOK .Northeast 3rd Qtr. 1998 141 9,570,752 .895,819- 9.4%0 323,195. 3rd Qtr. 1999 144 9,756,877 738,820 7.5%° 343,124 • The Twin Cities lndustrial Market will 3rd Qtr, 2000 149 9,779,377 763,748 y7,&% 294,025_ add another 4.6 million sq. ft. or more Northwest 3rd Qtr. 1998 112 8,836,041 794,295 9.0% 594,540 3rd Qtr. 1999 123 9,706,411 1,353,638 13.9% 208,721- of new multi-tenant leased space in the _~;~3rd_Qt~2000 -124. 9,879,344___1z399,674~, _14_1%°__.___.___384,968. next 18 months. Given that absorption Scott County 3rd Qtr: 1998 9 874,111 536,004 61:3% 76,000 has slowed and there are concerns 3rd Qtr; 1.999 8 893,827 165,600 18:5%° 329,52a about available workers for growth and 3rd Qtr. 200 __12 1,505,645 ,;_.187 147 12;4°!° 599,851_ expansion, we are likely to see a rise in -St. Paul 3rd Qtr: 1998 77 6,789,123 277,497 4.1% 398,793 the overall vacancy. 3rd Qtr: 1999 78 6,934,123 358,612 ,5,1% 68,885 _ 3rd Qtr: 2000. - _75 6 657,468 :521,121 _ _,7.8°f° (173,469 Lease rates will also increase b Southwest 3rd Qtr: 1998 246 15,145,237 975,200 6.4% 610,702 y 3rd Qtr. 1999 252 15,632,471 822,692 5.2% 639,742 10-20~ psf on average, mostly due to _ 3rd Qtr. 2000: 250_ _ _ _ 15 088,288 ,1,1.36 295 _ _ 7 5%,`15,373: ` higher costs of development and tenant Washington 3rd Qtr: 1998 ' 24 1,034,759 178,793 17.3% 173,950- . improvements. Also, many leases have County 3rd Qtr: 1999 27 1,495,247 150,752. 10.0% 137,041 escalation clauses. ~.ve__~._._~__w 3rd Qtr_ 2000 ~ _27^_ 1 556,907,._.__ 185A816~_ 11.9% _~~~34 752, West 3rd Qtr: 1998 163 12,691,531 863,142 6.8% 589,334 .Development costs will continue to 3rd Qtr. 1999 -.169 13,244,977 1,055,074 7.9% 437,430 3rd Qtr: 2000 166 "13;141,387 923;849 7.0% 392,089 increase faster than the rate of inflation. Metropolitan.. 3rd Qtr. 1998 :.981 _72,668,033 .6,105,773:. 8:4% 4,364,670 Normally, developers expect a 3 to Totals 3rd Qtr: 1999'4,024 76;891,930 6,614,547 8.6% 2,869,923 3 1/z% annual increase in the cost of 3rd Qtr: 2000 1,034 77,372,471 7,305;792. 9.4°fo 1,846;258 development. This year that number has risen to over 5% and there is no _ _ The sector posted a healthy 5.6% vacancy sign of slowing. This, together with CITIES: rate for BULK buildings, even though the scarcity of land, will lead to higher • Excelsior • Golden Valley it had negative annual absorption of asking rents. • Hopkins (part) • Medina 86,074 sq. ft. This is due to the vacating • Minnetonka (part) • Mound of the former Ameriserve Building, .The southeast metro area will realize • Plymouth • St. Louis Park • Wayzata which is over 135,000 sq. ft. Without increased demand for space due to the cB°„naary r~<<ve5~ °na s°U~hWeS~ se«°~5 ~s EX~e~~°r siV~t ~ this large tenant loss, the vacancy rate physical expansion of the airport. Up for BULK buildings would be closer to to 16 new .passenger gates, as well as UNIVERSE INCLUDES: what was shown in 1999 when 167,000 new north-south runways and larger. • 166 buildings sq. ft. of absorption lowered the vacancy cargo facilities are slated for completion • 13.1 million rentable sq. ft. rate to 2.5%. by 2002. Land values in that area will • 7.0% vacancy rate ~ continue to rise as many space users will • 392,089 sq. ft. annual absorption The O/W building type has a current need greater airport access. vacancy rate of 7.3%, 2 percentage The West Sector is one of the strongest points below the metropolitan average. • a industrial performers in the Twin Cities Net annual absorption of 35,682 sq. ft. metropolitan area. With over 13 million was posted. Added to the survey was the -There is a dilemma on the horizon. rentable sq. ft., the overall vacancy new Plymouth Ponds VI, a 102,000 The amount of industrial development rate of 7.0% is the second best in the sq. ft. facility that is 63% occupied. during the last four years has caused area. Tenant gains of 392,089 sq. ft. a tremendous shortage of available were reported. G.. land within the 494/694 .Loop. In fact, _ _ developers and space users are shocked - - when faced with the rapidly escalating • ~ , land values. They now must consider ~ ` development in cities considered to s 3.; be farming communities just 3-4 years In mid-2000, an estimated 7 million iii ago. Today, industrial activity is very active in Rogers, Elk River, Maple Grove, square feet of industrial investment JLT Midway, a 700,000 sq. ft. Shakopee, Savage, Ramsey and Hudson, property was listed for sale and warehouse at 2210 Territorial Road Wisconsin. It won't be long now for us to though some investors perceived in St. Paul sold for $2 7.6 million or hear names like Otsego, Dayton, Jordan, it as a glut of spate, it represents $40 psf. Belle Plaine, Rosemount, Lakeville, only 9% of the multi-tenant market. Lino Lakes, and Forest Lake becoming Many investors who have "waited more familiar sounding communities associated with industrial development. on the sidelines" for discounted - pricing are now buying, as they • Many growing mid-size companies believe prices are not going to fall. ~ 4 are in a "wait and see" mode and. As a result, of the 7 million square s~~. are not expanding or proceeding .feet listed for sale, most is under Energy Park, OS/BC buildings in St. with build-to-suits as they watch contract, was sold or was taken off Paul sold for $11.9 million ($62 psf; the economy. the market. at a cap rate of 11.5%. • The trend continues where industrial and office product types converge with Motivated sellers include REIT's North Prior, a 617,637sd. ft. B[ILI< single story buildings with high office paring off the bottom 10% of their warehouse in St. Paul sold for $27.7 finish. These "flex" properties combine portfolios, and profit taking by the million or $39 psf. the best features of office and industrial remaining sellers (life companies, _ buildings and developers are responding pension funds, developers and - to demand for more of this property local partnerships.) Buyers are type. An example of this is CSM's mostly local partnerships and proposed new building at Edenvale "-ti` - Business Center that will have 90-100% some pension funds. Properties ~ office finish. are selling in normal time frames, and most properties are selling in Lexington Commerce Center, an • Significant demand for BULK the 10-ll% cap rate range. With 89,840 sa. ft. O/W building in Eagan distribution space is predicted to interest rates at 8-8 I/z%, and loan .sold for $5.5 million or $61 psf. come from 3PL's (Third-party logistics constants of 9-10%, this translates companies that handle the distribution into 13-14% returns on equity. of goods from manufacturers.) When looking at the available Twin Cities .The highest cap rates are on those ~r true BULK distribution market of properties with near term lease - 100,000 sq. ft. or better, the number maturities, inferior locations and l - can be counted on one hand. That deferred maintenance. spells opportunity for developers Following are representative OakdaleInterstate/N.H draulics, and landlords. industrial investment sales. y two 0/W buildings in Savage and There is one constraint in considering Oahdale totaling 344,498 sc(. ft. sold sites further out however, and that is for $11.9 million ($35 psf) at a cap labor. Employers with skilled work _ rate of 10.58%. forces and key employees are very concerned about losing these talented Westwood II, an OSIBC facility in people by forcing them to commute - .Eden Prairie sold for $3.1 million or longer distances. In fact, some employers Edenvale I Sz II, OS/BC buildings $63 psf. are making real estate decisions that cost more to be in the metro area, even totaling 98,791 sq. ft. in Eden Prairie splitting operations in some cases. This sold for $4.8 million ($49 psf) at a cap o All information about the sale of these properties employee concern becomes an even Yate of 10~ to a 1031 buyer. is believed to be correct. However, We make no larger issue when we examine the 3.1 % warranties on the accuracy of the above details. unemployment rate and the stable job growth rate. INDUSTRIAL PROJECTS UNDER tQNSTRUCTION, PROPOSED & PLANNED THIRD QUARTER2000 MULTI-TENANT'.. PROPERTY PROJECT NAME TYPE. SIZEfSF CITY DEVELOPER Blaine Industrial tl O/W 65.000: Blaine Industrial Equities Blaine Offtce Center O/W 35,000 Blaine Roseville Properties Blaine Crossings 11 OIW 43,200 Blaine Ludel Development North Central Business Center. OJW 65,000. Fridley CSM Development Anoka: County Subtotal _ 208,200 .Eagan Preserve ~__~._r_ _.____._O~T____~_.__200,000. _----Eagan ~w - `Duke-Weeks Grand Oak III OSBC 68,000 Eagan Wispark Northwood Business ParkJl & 111 OSBC 135,000 Eagan Paramount RE Corp. River Ridge Business Center OJW 52,000 Burnsville Lynner Properties L.L.C. Spectrum Commerce Ctr I-111 OJW 289,150 Eagan Spectrum_Development The Waters111 OIW 135,600 Eagan. CSM Corporation Dakota County 879,75!? Kasota Business Center II OJW 110,000... Minneapolis CSM Development Minneapolis l 10,000 Rice Creek-Corp. Parke. O/W 114,000 Shoreview ~ ~ Wispark ~ ~ d Northeast Metro Subtotal 1 14,000 BeII Tower Commerce Center O58C 100,000 ~ Osseo ~ °'~Landcor Eagle Lake Business Ctr IV OJW 6Q000 Maple Grove Caliber Development France Ave Business Park OW/OSBC 1.90,400 Brooklyn Center Real Estate Recycling Five Star Commerce Ctr V OJW 77,000. Maple Grove LandCor, Inc. Rogers Distribution .Center.- BULK 243,000 Rogers Marfield, Belgarde&Yaffe Northvvest5ector Subtotal 470,400 Westgate Business Campus V ~ OSBC 4 80,000V St. Paula e ~ CSM Development St. Paul Subtotal $0,000 _.p___ . _ Eagle Creek Commerce Ctr.West -___s O~ 134,000 Savage Opus Northwest, L.L.C. Minnesota Valley III O/W 232,000 Shakopee Opus Northwest L.L.C. Park 2000 Phase IF OJW 128,500 Shakopee First Industrial River South Business Center O/W 232,000 Shakopee. United Properties Valley Green Business Center O/W i 10,000 Shakopee Capp Industries Scott County Subtotal 835;500 Ctianfia"ssen-"--- ____.___Steiner~----_-_ ,~rborreum ~Busine§s"~arTc'1~~__._ ~ -~3/C~1-__--- - - 6t1;00fY~---- - Arborteum Business Park IV OSBC 97,000 Chanhassen Steiner 81uff Creek Corporate Center OJW ; 140,000. Chanhassen CSM Corporation Chanhassen Corporate Centre OSBC 43,000 Chanhassen Andreas Dev. Co. Chanhassen East Bus. Ctr IV OJW 35,000 Chanhassen CSM Corporation Chanhassen Lakes Bus. Pk VI & VII OSBC 81,500 Chanhassen BMB R.E. Advisors Edenvale Business Center OSBC 81.000 Eden Prairie CSM Development Prairie Oaks Corporate Ctr O/W 83,000 Eden Prairie CSM Corporation Shady Oak Tech Building OSBC 83,500 Eden Prairie Hoyt ,Properties Valley View Corp. Center OSBC 112,004 Eden Prairie CSM Corporation Southwest Sector Subtotal 816,000 Golden ValleyTech Center OVVJOSBC 164,000 Golden Valley Industrial Equities Plymouth Ponds V-VIII O/W 392,000 Plymouth Moen Leuer Long Lake Business Center O/W 24,000 Long Lake. CSM Corporation. West Sett®r Subtotal 580,000 - _ . . _ _ . . _ e__-_ _ - East Metro Business Center O/W 50,000. Woodbury JLT Group Hudson Road Tech Center OJW 140,800 Woodbury Liberty Property Trust Wooddale Business Center OIW f 00,000 Woodbury Opus Northwest L.L.C. Woodbury Commerce Center O/4V, 100,000 Woodbury. Woodbury Centre Washing~or~ County 390,800. METRO TOTAL: 40 projects under eonstruetion, planned and proposed totaling 4.5 million square feet Key: ONV =Office Warehouse • OSBC = Office. Sht3wroom/Business Center • BULK.=Bulk Warehouse ©coulers Towle Real estate. i w.~- 1i' f Colliers Towle Real Estate t';: Towle Report 2001 . y The Towle Report retail universe now contains 46 million sq. ft in multi-tenant shopping RETAIL centers over 30,000 sq. ft. of GLA plus downtown retail centers of over 20,000 MARKET sq. ft. With just over 2.6 million sq. ft: unoccupied, the vacancy rate is now 5.8%, a decrease from last year's 7.7% vacancy. What is interesting is that the total universe I"'I I G H LI G I~-ITS ~ ti of multi-tenant retail centers has stayed the same due to the balance of centers deleted (Apache Mall, University Center III, Vernon Shops, Galtier Plaza, World Trade Center} with new centers and expansions added to the universe The overall vacancy (US Bancorp Plaza, Shakopee Valley Marketplace, Fischer Marketplace, rate continues to be Riverdale Village). 1ow...5.8% vs. 7.7% one year ago. Nlost of the growth continues in three sectors: Washington County (Woodbury), Northwest (Maple Grove), and the Southwest. Approximately 1.5 million sq. ft. Most of the new metro of new retail is under construction and 700,000 sq. ft. of retail space is being added to existing retail centers. The pace of shopping center development construction is that of the has slowed down and a fewer number of proposed projects are making it discount mega-retailers to construction. More and more developers are selling land sites to major who have grown 300% in retailers for self-development. the past ten years. Store changes include the closing of the last local Montgomery Ward store and the renaming of Dayton's Department Store to Marshall Field's. In .Retail development has downtown Minneapolis, Block E, now called Minneapolis Lifestyle slowed down in a number Center, broke ground and new retail space including atwo-story Target of projects. Most projects store is being built on Nicollet Mall. now have two or three , The Explosion of Discount Retailers mega-tenants and the land There has been an outstanding growth in the Discount retail category js owned b the retailers, such as Target, Wal-Mart, Costco, Sam's Clubs and Kmart. This subset y of retailing has not been separately tracked until this year when Towle Report looked at the growth of these mega-retailers over the . powntown Minneapolis past ten years. has new vitality and retail development underway. Montgomery Ward closes its last store. ~ ®Target Corp. announced that Dayton's department store will be renarnerl Marshall Field's. ~ r.~ s yet • s. .Movie theaters have reached a "survival ~f th;~~ fittest mode." In Coon Rapids is Riverdale Village, 0 950,000 ' sq. ft. regional center under construction by ~ x 'A- Developers Daversi fled { ' J The penetration of our market by Also in Blaine, Northtown Mall loses - Target, Kmart, Wal-Mart and now the ! WHO ARE THE an anchor, Montgomery Ward, when the membership club warehouse stores like ~ DISCOUNT ~ store is closed this year. Sam's Club and Costco has eclipsed the i MEGA-STORE PLAYERS? ~ growth of our traditional multi-tenant ~ I In Coon Rapids, a concept plan for the retail universe. These giant retailers i redevelopment of Village 10 shopping offer everything: apparel, shoes, gifts, ! ~Va1-Mart, Kman and Target account for center was discussed and rejected house wares, furniture, automotive ~ $170 billion of the entire $478 billion following a traffic study. Oppidan products, linens, electronics, and now j discount industry sales or 36%. Investments had proposed a Cub Foods sizeable grocery concepts. A decade anchored renovation. ago, consumers were resistant to the ~'-'~L-MART concept of an all-in-one store. Today's • 10 stores in metro area Also in Coon Rapids, Riverdale Village consumer .enjoys the convenience of • -f planned, Eagan, Blaine,.... Shopping Center, developed by Shakopee, Woodbury stopping (and parking!) only once. The Developers' Diversified Realty Corp. is • Typical Size 140,000 sq: ft. only obstacle in the discounters' path of ~ .The Pantry grocery concept adds being built on 120 acres of land south forward momentum is the lack of retail- ~ 30,000 sq. ft. to store and east of Hwy 10. Anchors include zoned land and the burgeoning grass f . Wal-Mart Supercenter concept is JoAnn Etc, Kohl's, and Linen's n' roots resistance in some communities to 190,000 sq. ft. ~i~ith grocery Things. When fully built, the regional the mega-box format and huge, lighted ~ • 3,000 stores in USA center will have 950,000 sq. ft. Other parking lots. i retailers have expressed interest in the K~iART project including Costco Wholesale, AN INTERESTING COMPARISON... • 20 stores in metro area which has proposed a 150,038 sq. ft. In 1990, the multi-tenant shopping Typical Size 80,000 sq. ft. wholesale store. center universe in the Twin Cities was ~ • Big-K stores are 110,000 sq. ft. approximately 38 million sq. ft. At that ~ • Super K stores are 175,000 sy. Et. In Lino Lakes, Ryan Cos. is planning a time, the discount store universe was 2.6 ~ with grocery, 24 hour 300,000 sq. ft. retail project on 40 acres. million sq. ft. or 6.4% of the combined ~ • 1,862 stores, all but 185 renovated. Lino Lakes Town Center will be ready total universe of 40.6 million sq. ft. i for anchors in 2001. TARGET STORES Today in 2001, the multi-tenant j • 41 stores in metro area AO°A -1°'Y shopping center universe is 46 million j • 27 Targets (90,000 sq. ft.}, Vacancy rates for the county's retail space sq. ft. and the discount universe is ~ 7 Greatlands (140,00t~ sq. ft.) dropped to 5.2% vs. last year's 7.2%. 7.8 million. That is 14.5°l0 of the total i 7 SuperTargets(180,000 sq. ft.) ~ This large sector has 15% of the total combined universe of 53.8 million sq. ft. ~ underway or proposed ~ retail universe, or 6:9 million sq. ft. ~Shore~~iew~, Chaska, Eagan While growth in the multi-tenant retail ( Minnetonka. Lakeville, Rogers, In Eagan and Apple Valley, new sector has been 21%, the growth in the C Inner C,rove Heights, construction will begin for two new discount sector has been 300%. ~ • SuperT~.3rget includes-Archer Farm_ s j .grocery, floral, pharmacy, bank, Sam's Clubs including one at Fischer portrait studio, juice bar, Marketplace, which has added Office d E R,~ . ~ ~ Max and Old Na Overall vacancy rates again went down to I restaurant, bakery and automotive. vY~ I ~ r !stores in USA an eleven y ear low of 6.5%. This county (30 are SuperTargets) ~ In Rosemount, Cub Foods plans a 68,000 continues to absorb retail development as sq. ft. store to anchor a retail center on housing growth pushes to the northwest SAA1'S CLUB ~ Co. Rd. 42. There will be 20,000 sq. ft. of metro area. Land sales prices have risen I • 6 stores in metro area ~ additional retail space available. Oppidan in response to desire for high visibility 1 (Burnsville, Fridley, Investment Co. is developing the project locations in a thriving trade area. ~ Inver Gro~~e Hts., St. Louis Park, called Rosemount Village. White Bear Lake, Woodbury) In Blaine, the Robert Muir Co is building • Typical size 130,000 sq. Ft_ ~ Cobblestone Court in Burnsville a 500,000 sq. ft. project on 76 acres. • Membership warehouse club owned underwent a $5 million renovation Called The Village (formerly called by Wal-'dart in 2000 after its sale to a local Pheasant Ridge East), it is located on i + ~ stores in LS development group. a parcel bounded by Lexington Ave., 109th Street N.E. and Hwy 35W. Tenants (COSTCO In Laketi~ille, developer Avalon Group has include Home Depot and Cub Foods. ~ • 1 store in metro area proposed a retail project on 100-acres Wal-Mart purchased a site for $4 million ~ • 1 store under consideration north of 185th Street. TimberCrest at (or $6.80 psf) from Blaine's EDA fora j Coon Rapids Lakeville will be anchored by a 182,000 163,000 sq. ft. store. • Ty pical size 140,000 - 150,000 sq. ft. sq. ft. SuperTarget along with up to • Membership warehouse club 370,000 sq. ft. of retail and restaurants. • ?50 locations in US i Ryan Co. purchased a 12-acre parcel ©c°rre~5 r°wie Reap Escace in Inver Grove Heights from Rottlund Homes and is building a 57,000 sq. ft. grocery store for Rainbow Foods. The MINNEAPOLIS/ST. PAUL METROPOLITAN AREA-FIRST QUARTER 1999-2001 ~ project named Arbor Pointe Commons wu~nl3ea Goss ~oTA< a~~va~ n~aamcglr sTtaar of ~.~asas~.~ nn~~uHZ ~~RC~~'r yea will have 81,000 sq. ft. sic:o~ o~?~€ c~~~'~ti~s area vacar~T vaaea~sr assa~€~~°~~~~ ~ ~.a_.~w ~._y... e"m. I _....m. r.~ w,~_~n~ In West St. Paul, Home Depot plans `°`Y " ° ° " to open a store in 2001 on the former Neighborhood 1999 20 1,652,509 129,418 7.8% 36,209 Kmart site on Wentworth Avenue. 2000 22 1,594,560 146,129 9.2% -74,660 _ _ 2_001_. __.,_22 , 1,682,820 _ 107,263 _6 4% ^_,..127,126 _ , _ Community 1999 9 2,008,940 106,616 5.3% 522,118 The rebirth of Signal Hills continues as 2000 9 1,934,413 70,947 3 7% 35,669 [he new 103,000 sa. ft. Kmart relocated 2001 _ g _1,.743 977 _ 88,431. _.____5 1%___ -17,484 _ _ from its existing location. The 45-year Regional 1999 1 816 000 104,000 12 7% -15,280 old center was de-mailed and re-tenanted 2000 1 816,000 73,440 9.0% 30,560 in the last two years. _ _ _ _ 2001. _ __.1 822,000 82,000 _ ._.._10% 2,560 _ _ Total ~ ~ 1999 30 4,477,449 340,034 7.6°/a 543,047 2000 32 4,344,973 290,516 6.7% -8,431 2001 32 4 248,797; 277,694 6 5°!0 107,0 An overall vacancy rate in Minneapolis' ; , i _ _ _-~,,.m,_.m retail properties is 7°h compared to Nei hborhood ~ 1999 38~~~2,221,482 238,497 10.7% -1,618 8.3% vacancy rate last year. The 9 2000 39 2,245,975 285,347 12.7% -16,695 submarket absorbed over 62,000 sq. ft. 2001 38 2;265,652_ .166,847 7 4% _ .120,424 ~ - of retail space. Community v - --1999 ._____14 ~-2 946,477 195,639 6.6% 26,720 2000 14 3,1.12,861 187,533 6.0% 8,106 A new 2-story Target store of 150,000 2001 __14 .___3,001.,507 154,402_____ 5.1%°__._ .33,131 sq. ft. will command attention on Regional 1.999 1 1,314,343 8,000 0.6% 42,000 Nicollet Mall when it opens in 2001. 2000 1 1,314,343. 6,935 0.5% 1,065 The US Bancorp Plaza at Eighth and _ _ _2001 1 1,070,000___i10,000__:_.09%__ _=3,065 Nicollet now has 48,000 sq. ft. of retail Total.. 1999 53 6,504,302 442,136 6.8% 67,102 2000 54 6,673,179 479,815 7.2% -7,524 I and restaurants including McCormick ~ 2001 53 6,337,159... 331,249 5.2% 150,490 Schmick, an upscale West Coast seafood - _ ~.~u. ~ - g Neighborhood yN~=~1999 8_ ~~~~-439,554J~~~ 4,041 0.9% 5,983 chain. Tar et Plaza South will have " 15,000 sq. ft. of small-shop space. 2000 9 507,554 19,204 3.8% 52,837 2001 9 528,611 32,521 6.2% 13,3.17 _ In downtown Minneapolis, after 12 Commuhity 1999 3 ..730,459. - 61,542 8.4 25,580 years, the long awaited groundbreaking 2000 4 985,076 95,720 9 7% -5,061 for Block E occurred in Oct. 2000. The _ _ _ _.2001 __.__.__:4 _.,,_µ_924,52l._.. 21,590 ____2.3%__" 74,,130 $157 million retail center, renamed Regional 1999 3 712,054 123,145 17.3% -66,460 Minneapolis Lifestyle Center, will 2000 3 712,054 .92,220 13 0% 30,925 be supported by over $39 million - 2001___ 3 712 054 .90,558 12 7% _1,662 _ Downtown Retail 2000 15 833 661 46,039 5 5% n/a I in city financing. The lead tenant .Mixed-U__se__ 2001 16 832_821 _ 64_,476 ___7 7% _ _6,044 is GameWorks, owned by Stephen Total _ ~~~1999-- _._-19 2,432,236 234,728 97% -25,997 Spielberg: The project, developed by 2000 31 3,038,345 253,183 8:3% 78,701* McCaffery Interests, Inc. will include a 2001 32 ' 2,998,006 209,145 7.0% 62,475 255-room Renaissance Marriott Hotel and a 17-screen movie theater. In the Nicollet-Lake area in south Minneapolis, the City of Minneapolis This sector has 43 properties and 6.9 Apache Plaza, in St. Anthony, ha~i is considering a plan that may relocate million sq. ft. of space. Overall vacancy brief chance to be redeveloped as Teel; Kmart from its Lake Street location. rate is 5.5%. space by Hillcrest Development. 1h Sherman Associates, a local developer, City, however, denied the plan. lG~- has proposed a mix of rental and for In Shoreview, plans were approved for have deleted Apache Plaza from o~~z sale housing, up to 200,000 sq. ft. Target to expand its Greatland store to retailsurvey. of retail including a new Kmart, and Minnesota's first SuperTarget store. The approximately 20,000 sq. ft. of office 185,000 sq. ft. mega-store includes a Brighton Village Shopping Center space. While the plan is in review stages, 32,000 sq. ft. grocery as well as five on I-694 and Silver Lake Road lost i the opening up of the key NicolleVLake other concepts (floral, pharmacy, coffee, anchor, LLmds Foods. intersection would benefit the area. juice, banking). 1 s in Savage. Preliminary plans call for , _ } ~ r-, a 200,000 sq. ft. retail center with a big-box grocer. .~::r _a „ s This is the largest sector in our survey fir; with 9.3 million sq. ft. or 20°l0 of the ~ ~N i`,, , universe. Overall vacancy is now 4.2 ~~~~r ~ ~ which is only 14% of the universe' 5 .1 r ~ vacancy. The strong demographic area " ~ " ~ ~ , ~ is filling in and owners are maximizing Y their GLA to accommodate tenants s,~- . ~ y _ needs and consumers demands for E ' ~'k~ ' ~ ' new attractions. ~ In Edina, Southdale regional mall ' has announced its plans to expand by 120,000 sq. ft. toward the south * ~r , side of their property.. A 16-20 screen cinema is planned as well as two national restaurants. The Cheesecake Factory, Proof of Scott County's rapid growth is at the intersection of Highway 13 and p,F.Chang's, both highly successful County Road 42 where all four quadrants may soon have retail development. restaurant concepts, may open their first _ _ _ - Minnesota stores here. . p'~ , corner of I-94 and Hwy 610. General Development continues in this Growth has options on the land. across Richfield is the center of activity on fast-growing segment. Over 200,000 the highway to the west. office, retail and housing agendas. A sq. ft. were absorbed in the past year. proposed City Bella retail project on Current vacancy rate is 9% vs. 12.8% Opus' Arbor Lakes continues its 66th and Lyndale calls for 40,000 sq. ft. last year. This sector has 12% of the retail successful tenant roster with a 57,500 sq. of shops and restaurants as part of universe but 18% of the universe vacancy. ft. Dave `n Busters, and a 160,000 sq. ft. $30 million commercial and housing This reflects the new construction being multi-plex cinema, and a Von Maur redevelopment. At another quadrant completed for waiting tenants. department store. There is potential for of the same intersection, a proposed up to 750,000 sq. ft. in Phase II, ready development to include a new Lyndale At Brookdale regional mall, the $90 in 2002. Garden Center, retail and apartments is million renovation continues. Plans to being considered. .add 200,000 sq. ft. are underway for the The City of Rogers will have the seventh 38-year old mall now owned by Talisman local SuperTarget store as part of a Richfield is the city chosen by Best Co. Dayton's remodeled its 200,000 300,000 sq. ft. retail center proposed Buy for its new corporate headquarters sq. ft. store as have JCPenney and Sears.. by Ryan Cos. Rogers Retail Centre is campus. If the plans are approved, a ne~v The Gap stores opened 12,500 sq. ft. in located at Hwy 101 and I-94. $150 million complex will accommodate three concepts. 5,000 - 8,000 employees. Additional workers will create demand for housing, The Brooklyn Center Kmart was the only Current vacancy~is 18.6%, a change from restaurants and retail. Kmart store in the metro area to close in the 8.7% last year. This is due to the the recent 72-store closing plan. development schedule of Shakopee Eden Prairie Center continues its Va1leyMarketplace,Oppidan's278,000 transition as VonNlaur completes its In Brooklyn Park, the Village North sq. ft. development on Rd 42 and Hwy 160,000 sq. ft. two-story department center, owned by Kraus-Anderson faces 13. Kohl's department store is awaiting store on the south side of the regional redevelopment. The 188,000 sq. ft. approval to open an 86,000 sq. ft: store, mall. East of the mall and across Prairie center is 60% vacant. A proposal by If approved, the center, anchored by Center Drive, Costco proposed a 148,000 HuntGregory includes both housing and Target, will be 93% occupied. sq. ft. warehouse store on land otivned retail development. by Ryan Cos. but the plan was denied A new Big-K store, a 108,000 sq. ft. in early November by City officials. In Maple Grove, Rouse Co. is discussing Kmart concept, replaced the old Ryan Co. may proceed with a different plans for a regional mall with anchor Kmart store. retail project as originally planned stores Dayton's and Nordstrom. Both in 1994. retailers have signed on for the mail North American Properties is considering Also in Eden Prairie, Target increased .that may open in 2003 at the southeast a mixed-use development on 60-acres its store to a Target Greatland format ©c0nfersrOwfeRea•esca~e by adding 42,000 sq. ft. to its 104,000 sq. ft. store. MINNEAPOLISiST. PAUL METROPOLITAN AREA -FIRST QUARTER 1999-2001 A transit village concept including NU~nBea ol~os~ TorAL ANNUAL retail, housin and offices ace is bein MARx~r ~ sau®r LEASABLE A~noUNr PI=aC~Nr NIET g P g ~~craR oAr~ c~NSel~s AREA VACANT vAOANV AasoR_IPr~®N planned by North American Properties } ~ ; ~ ~ _ in Eden Prairie on land currently owned Neighborhood ~ 1999 32m 2,152,895 167,950 7.8% ~ 88,658 by the Metro Transit Commission. 2000 32 2,163,383 142,034 6.6% 25,916 Approximately 60,000 - 75,000 sq. ft _ 2001_ _,___32_ ___?,158,221 .176,787 8 2%a____ -34;827_ of space for restaurants, grocery, and Community. 1999 6 1,315,803 70;480 5.4% ~ 1,025 convenience retail is being considered. 2000 7 1,568,225 108,480 6.9% 201;518 2001 _7_.__,.___1,579,665 _ 111;220 __7.0% -2,740_ On Hwy 41 and Pioneer Trail in Regional 1999 J ' ~ 4 3,293,477 383,524 11.6% -18.,700 _ Chaska, a 182,000 sq. ft. SuperTarget 2000 4 3,293,477 368,319 11.2°/0 15,205 2001__ _ . _3 _ 2,774,_882__._ 69.62 _.__.._2,5 /o__,_ -101 301 _ is under construction. Just across the ___._r,_ . street, Home Depot purchased land for Total 1999- 42 6,762,175 621,954 9.2% 70,983 2000 43 7,025,085 618,833 8.8°1° 242,639 future development. 2001 42 6,512,768 357,627 5.5% -138,868 In Neighborhood 1999~~! 22 Y~1,747,330 ~ 226,265 ~ 12.9% ~ 156,262 In St. Paul, [he overall vacancy rate is 2000 21 1,633,925 226,058 13.8% -79,593 _ 2001 _ 21 1,612,700,_ 288,423 _ 1.7 9% _ -62,665 4.2% after the removal of two centers from the survey (World Trade Center Community 1999 ~ 10 2,278,042 98909 4 3% 219,361 and Galtier Plaza). 2000 11 2,777,282 425,256 15.3% 182.;630 _ 20Q1 11 2,885,294 170,907 5.9% 263,731T All of downtown retail is benefitin from Regional _ J 1999 ~ 1 986 000 130,000. 13.2% -5,000 g 2000 1 986,000 39,000 4.0°fo 91;000 the 1,000 employees of Lawson Software _ _ _ 2001 _ 1 _ _ 986,000 _39,000 4 0%0__ _ and the visitors at the Xcel Energy Center Total ~ 1999 ___.:33 5,012.247 455,174 9.1% 37.1,498 and the new riverfront Science Museum. 2000 33 5,397,207 690,314 12.8% .194,037 Downtown boosters are pleased with the 2001 33 5,483,994 498,330 9.1 % 201,066 new vitality throughout downtown on ~ ' ~ i`~° event days and nights. Neighborhood 2000 4 526 074 40,006 7.6010 2001 3 258,069 31,723 ,_,12.3/0 72,273 _ _ NIA"` _ o In downtown SL Paul, Dayton's (now Community 2000 2 319 125 33,415 10 50/0 named Marshall Field's) will remodel and 200.1 3_ __._.._670,481 _ _ 14.1,128,___„ 21 A /o _ _ T 170,287 Total 2000 6 845,199 73,421 8.7% N/A" make its store somewhat smaller. 2001 6 928,550 172,851 18.6% -16,079 At World Trade Center, We11s Fargo bank Neighborhood 1999 _ 27 1,934,083 .177,035 ~ ~ ~ 9.2%~ tir,w~ .36,548 will capture most of the retail space for 2000 26 1,824,864 129,251. 7.1 % 47,784 its office needs. The building will be 2001 26 2,017 176 124,136 6 2%4_ _99 2?7 _ _ _ renamed Wells Fargo Tower. We have Community -1999 9 1,198,885 56,800 4.7% deleted World Trade Center retail from 2000 10 1,730,683 29,853. 1.7% 37,610 our study. Also deleted this year is Galtier _ _ _ 2001, _ __,_,10 ____1,,803.,172 29128 „ _ 1.6%__ __~r. 729 - Plaza that had been converting to office Regional 1999 4 5,418,522 265,114 4 90% -46,8886 space over the past few years. It was 2000 4 5,489 592 277,000 5 0 /0 2001,.__ , __.___4 ____5,532.01.8 235,000 4 2%___ ,.._42,000 _ sold in March to Wasmer, Schroeder _ - Total 1999 41 8,969,274 500,916 5 6% 3,112 bT Co. 2000 40 9,045,139 436,104 4.8% 73,508 2001 40 9,352,366 388,263 4.2% -56,498. The current vacancy rate in Washington County is 3.8% down from last year's Shoppes at Woodbury Village. Located developed by Genstar Land Co. at Valley 6.2%. Absorption was approximately on a 2.7 acre site next to Old Country Creek Road and Woodbury Drive. A 158,000 sq. ft. The county has 8% of Buffet, the 24,000 sq. ft. building would 47,000 sq. ft. Kowalski's upscale grocery the total retail universe but only 5% of consist of a 360 degree shopping space. store opened at Valley Creek Road and the overall vacancy. North American Properties has proposed Radio Drive. Woodbury Marketplace is a 228,000 In Woodbury, retail development sq. ft. retail center anchored by Sam's The St. Croix Mall in Oak Park Heights, continues with RoberTt1M sir celled a the Clommonsln(68 000 sq_ Eajles being lend0 000 ie~r last yearefor $9 6 million proposed develop 1 - or $46 psf. The 27-year old partially - ©coufers Towle Rearestate enclosed mall is anchored by Herberger's department store. In late 2000, Andersen MINNEAPOLISlST. PAUL METROPOLITAN AREA-FIRST QUARTER 1999-2001 Windows purchased the mall primarily MARKET NUMBER CROSS TOTAL ANNUAL for its information technology group. The SECTOR STUDY OF LEASABLE AMOUNT PERCENT NET plan is to gradually use the entire space. DATE CENTERS AREA VACANT VACANT ABSORPTION Neighborhood 1999J~ 14~~~~ ~ ~ 699,853~~~~ 89,490 12.8% ~ 43,528, ~ 2000 12 720,231 64,468 9.0% ' 25,022 The overall vacancy rate has risen to _ 2001 _ 12 _ 732,130 _ 46,918 6.4% 9,088 6.1% from 3.7% last year. Community 1999 4 723 929 47,000 6.5% -72,251 2000 5 1,138,030 94,380 8.3% -47,380 At Park place plaza in St. Louis Park, 2001 5 1,138,030 67,835 6.0% 26,545 anew Costco wholesale membership _ _ o.__,_._. club has o ened. The facilit is 139,000 Regional 1999 3 619,101 80,600 13.0% -54-,700 P Y 2000 -Recategorized to Community Center or Downtown Retail Mixed-Use - SCE. ft. and OCCUples Che OUtlOt neXt t0 _ ~ _ _ _ . _ . . r_ Downtown Retail 2000 5 462,497 252,884 54.7% n!a Home Depot. Mixed Use 2001 3 236 093 41,445 _ 17.5% -18,980 Total - ----------1999 26 _ _ _ -2,305,533 235,358} 10.2% - -69;377 Also in St. Louis Park, Knollwood Mall 2000 22 2,320,758 411,732 17.7% -22,25$ has added Panora Bread to its tenant 2001 20 2,107,.153 156,198 7.4% 16,653 roster but has abandoned plans to build _ _ _ a 14-screen theater complex. M.~~_._ . ~_-,_~.-w . ,mwa._.R.. ..~,_.-p-4 _a _ Neighborhood 1999 9 692 065 50,352 7.3% 17,248 2000 9 673,471 40,277 6.0°l0 10,075 Anew computer store concept is being _ _ 2001.,_ 11 _682 019 _ ,,_33,652 4 _9% _ ,__r__iv76,625 presented in St. Louis Park. Micro Center Community 1999 11 2,803,087 55,625 2.0% 39,826 is a 40,000 sq. ft. computer department 2000 11 2,850,879 179,991 6.3% -1.24,366 store aimed at computer hobbyists. The 2001 11 2,855,657 99,388 3.5°10 80,966 store has 17 outlets in 12 states. Regional _ _ NONE_ _ _ _ _ _ _ _ _ Total ~ _1999 20 3,495,152 105,977 3.0% 57,074 park Commons East is a new mixed 2000 20 3,524,350 220,268 6.2% -114;291 use redevelopment in St. Louis Park, 2001 22 3,537,676 133,040 3.8% 157,591 west of Hwy 100 on Excelsior Ave. TOLD .~-_..~.a...~_..__.~..., _..m ..nw _ _ __,.N_.,..__f ,..u__ u~-~ Developmen's plans include 140,000 Neighborhood 1999 32 1,783,276 .95,069 5.3°l0 50,176` sq. ft. of retail space, 60,000 sq. ft. of 2000 32 1,816,278 143,106 7.9% -48,037 office and up to 600 residential units. 2001 32 _ 1,826,461 108,243 5.9% 40,643- Community 1999 10 1,636,310 47,257 2.9% 154,241 North American Properties is building 2000 10 1,670,032 32,116 1.9% 15,141 plymouth Marketplace, a 125,000 2001 11 2,158 556 192,442 8 9% -119;089 sq. ft. center anchored by Lund's foods Regional 1999 2 1,670,000 64,538 3.9% -1,400 on Hwy 55 and Vicksburg Lane in 2000 2 1,670,000. 17,000 1.0% 47;538. plymouth. 2001 1 1,039,000 3,500 0.8% 8,500 _ Total 1999 44 5,089,586 206,864 4.1% 203,017 In Golden Valley, Brookstone-Vanman 2000 44 5,156,310 192,222 3.7% 14;642 is building Golden Valley Commons, 2001 43 5,024,017 304,185 6.1% -69,946 38,000 sq: ft. of retail and office. It will _ _ . _ .~.n~ ,rt.~.~....w~_.~__yw_;._ be part of a mixed use project including Neighborhood 1999 202 13,323,922 1,178,117 8.8% 433,869 high-density housing. 2000 206 13,1$0,241 1,195,874 9.1 % ' -57,351 2001 206 13 505 790 1 084,789 8.0% 163,870 ` In Minnetonka, a 179,000 sq. ft. Community 1999 76 15,663,932 739,868 4.7% 923,859 SuperTarget is under construction at 2000 83 17,767,481 1,224,276 6.9% 303,867 2001 85 18,090 379 935 343 5.2% 339,919.. Hwy 101 and 7 on the former 7-Hi site. _ _ . _ w.. _ . _ _ _ _ _ _ _ Regional 1999 19 14,829,497 1,158,921 7.8% -166,248 2000 16 14,281,466 873,914 6.1% 204,407 ._._..__,._..2001__ _14__ _ 12,935953 _ 529,678 _ 4.1% d_______-54,764 Downtown Retail 2000 20 1,296,158 298,923 23.1 /o nia Mixed-Use 2001 19 1,069,814 105,921 9.9%° -18,980 Total 1999 297 45,047,954 3,143,141 7.0% 1,220,459 2000 325 46,525,346 3,592,987 7.7% 450,923 2001 324 45,601,936 2,655,731 5.8% 430;t)A5 4 mss';<';~. - J Colliers Towle Real Estate IS/ST. PAUL METROPOLITAN AREA -FIRST QUARTER 2000 VS. FIRST'QUARTER 2001 tP~A~I I AVERAGE MINNEAPOL , t'.VEBAGE NE7' RENT RANGE MEDIAN METHICH I TAXES M,1~'R4CET LOW SE~TBJIt 2001 2000 2001 2000 20011 2000 2001 2000 2001 ANOKA 2000 - 20.00 $5:00 - $22.00 $11.67.. $11.61.. $14.56 $16.33 $1.89 $1.76 I, $2.90 $2.96 Community $6:00 $ $5.00 - $20.00 $5..00 - $16.00 $8.07 $8.14 $11..43 $11.00 I $5 75 $5.75 Ij $4.94 $4.94 Neighborhood Regiona! $15.00- $40:00 $15.00 - $40.00 I $15.00 $15.00 $40.00. $40 II QAKOTA CO 22.00 $5.00 - $25.00 $10.77 $10.82 $15.31 $16.55 f $1.55 $1.98 I; $1.99 $1.75 $1 Community $5.00 $ ' Neighborhood $3.50 - $18.00 $8.00 = $85 00 $~0 00 $10 00 $50.00 $85.00 ~ ..$5.70 $5.70 $10.79 $10.79 Super Regional $10.00 - $50.00 $10.00 $ i MINNEAPOLIS 0 - 40.00 $7.00 - $25.00 $10.50 $12.33 $18.75 $17:67 6:95 $7.46 I~ $4.90 $4.38 Community $6.0 $ ~ 14.67.$1.2.56 $20.83 $23.56 $ Downtown Retail Mpls $3.00 - $38:00 $10.00 - $75.00 i $ $2.80 - $22.00 $10.00 -.$25.00 i $11.03 $11.37 $13.75 $19.280 V $$5.21 $$0.98 I~ $$4..60 $1.60 Neighborhood I Regional $10.00 - $60:00 $10.00 - $65.00 $10A0 $12.50. $55.00 $57. I II NORTHEAST 0 - $20.00 $7.00 - $22A0 $11.83 $11.67 $17.33 $18.67 I $1.79 $1.74 j $2.18 $1.88 Community $8.0 Neighborhood $4.00 - $20.00 $6.00 - $20.00 $6.25 $$10.00 $16.40 $21.44 'I!, $2.67 $2.56 $1.90 $1.90 $7.21 $7.21 i $10.51 $10.51 Regional $2.50 - $17.88 $10.00 - $25 I Super Regional $10.00 - $50.00 $10.00 - $50.00 $14.00 $14.00 $42:50 $42 50 II NORTHWEST 2.00 .$6.00 -_$24.00 ~ $11.70 $11.44 $15.70.. $16.33 II $1.80 $2.85 II $2.59 $2.55 Community $8:00 $2 .Neighborhood $3.00 - $23.00 $5.00 °$18.00 $5:00 $5:00 $35 00 $35.00 $8.00 $8.00 it $8.25 $8:25 Super Regional $1.5.00 - $35.00 $15.00 - $35. ' i SCOTT $2.44 ~ $2.41 $13.33 $16.00 f 6 Community $8.00 $18.00 boyhood $6:00 - $18.00.. $7.00 - $14.00 ' $10:25 $9.00 $12:63 $11.50 ~ $2.43 $2.18 iii $1.49 $1.6 Neigh ST. PAUL nit $2:15 - $18.00 $8.00 -'$17.00 ~ $9:03 $9.00 $13.53 $24 67 ~i $7.703 $8.87 I'i $4.66 $3,73 Commu y DawntownRetailSt.Pauf $5.00 - $25.00 $6.00 - $30.00 1 $9.33 $17.33 $23 4.00 - $25.00 $4.00 -.$27.00 ~ $11:50 $1 T:80 $1~i.18 $16.50 ~ $3.33 $2.88 ~,I $3.57 $271 Neighborhood $ SOUTHWEST 8.00 - $40.00 $8.00 - $40.00 $14:75 $13.89 $1.8.60 $19.39 ~ $2.57 $2.60 'i $3.45 $3.35 Community $ Neighborhood $5.50 -.$24.00 $7.00 - $20.00 I $15.00 $18 00 $20.00 $20.00 ~ $4.20 $5.06 i $2.41 $2.33 .Regional $15.00 - $20.00 .$18 15.00 -.$90.00 $15.00 - $90.00 ~ $20.33 $14.01 $53.33 $20.19 $10.fl6 $3.17 $10.53 $10.53 Super Regional $ ~ ~ i, _WASHINGTON I - 21.00 $8.00 - $25.00 ~ $11.27 $2.64 $15:64 $17.60 ~ $1 15 ' $2.46 II, $5.62 $5:5c Community $3.00 :Neighborhood $5.00 - $18.00_' $5.00 - $20.00 i $8.00 $8.00 $11.94 $12.85 $2 I 2.17 ` $2.89 I;, $3.80 $4.4'. WEST Community $8A0 - $30.00. $6.00 - $30.00 ~ $13.35 $13.20 $17.80 X19.30 ~ ~ $2,71 $2:2 Neighborhood $7.00 - $25.00. $7.00 - $24.00 I $1.1.83 $12.85 $14.3. $14.87 $2.31 $2.11 I~ 1.5.00 $85.005100.00.. ~ $4;25 ' $5 35 I!, $14.00 $13.8 Super Regional $15.00 $85.00 $15.00- $1.00.00 iii $15.00 $ 4 I i ~ COLLIERS TOWLE'S r .y.:`, RETAIL MARKET ~ OUTLOOK y.;. t k' d. tat • .The consumer is becoming cautious x, ~ N ` - . due to the stock market declines in the w past 10 months. ^y. • Retailers are consolidating, merging and ~ 3 facing bankruptcy in some cases due to r' ~ ° _ over expansion in premature markets. ~ ~R; ~ w~ • Wise landlords have plans for ~ ~ ~ ~ I ~ r: ~ - ~ h r fv n n e s o t term use o aca t o chor s ac p - while it is being re-marketed. - ~ ; • The Twin Cities continues a healthy ~ housing boom. Almost 18,000 units of single and multi-family housing were approved. • Downtown Minneapolis is busy with Now under construction, the Minneapolis Lifestyle Center on Block E will feature construction including retail,. restaurants GameWorks, a 17-screen movie theater, and a hotel and theaters. • Some local stores have announced Department stores continue to • The most dominant growth category closings including: struggle; we will probably see of retail is the discount superstore. • Wards at Northtown Mall further downsizing. Using 12-18 acres of land, these expert • Home Place at Southtown merchandisers are snatching market • Sears in Duluth To remain competitive, enclosed share away from traditional retailers and • Kmart in Brooklyn Center regional malls must continue to controlling lease costs by owning their • OfficeMax reinvent themselves. own sites. ©Colliers Towle Real Estate ~ ~ MINNEAPOLIS/ST. PAUL METROPOLITAN AREA , CENTER NAME DEVELOPER CITYISECTOR TYPE Sf~E ASP) The Village Robert Muir Blaine/Anoka C 500,000 Riverdale Village. Developers Diversified Coon Rapids/Anoka C 800,000 Lino Lakes Town Center Ryan Co's. Lino Lakes/Anoka C 300,000 Fischer Marketplace Fischer Marketplace Apple Valley/Dakota C 260,000 Arbor Point Commons Ryan Co's Inver Grove HeightslDakota N/S 81,000 Rosemount Village Oppidan Rosemount/Dakota N/S 88,000 Block E -Lifestyle Center McCaffery Interests Minneapolis CBD C Golden Valley Commons Brookstone Golden Valley/West N 97,000 Plymouth Marketplace North American Plymouth,'West N/S 125,000 Total under construction = 2.2 million sq. ft. R =Regional Center C= Community Center N= Neighborhood Center NlS= Neighborhood Center with Supermarket , • ~ Stio~~i~+c ~~NTER S~?LES 2000 , - ~.r ~ , ~ N ~ _ z `Fl ~ ~ ~ ~ ~ ~ ~ ~ ~ i. . ft. center sold to an investor placing funds i t '.'r' ~ { 1 r ~ ~ ~ ~ ~ Holly Center in Fridley, a 72,000 sq ~ ~ ~ ~ ~ from an earlier sale. The sale price was $3.5 million or $49 psf. ~11i1f ~ ~ ~ ~ ~ j ~~i^~st N7K~ON~~aY ~ ~ ~i.. McAndrews Center in Burnsville, a Cobblestone Court in Burnsville, a alle 32,000 sq. ft. center was sold to an 907 $ ~1 millionc($53d psf)1to aslocal In downtown Minneapolis, LaS Investor as part of a 1031 exchange for Court was sold to Minneapolis-based $3 million or $95 psf. investment group which plans a $5 Wall Co's. The property includes million renovation and expansion. 42,000 sq. ft. of retail on two levels, The 21-year old center will eventually and underground parking. It sold for house a 48,000 sq. ft. T.J.Maxx $950,000 or $22 psf. N'More store. St. Croix Mall, 210,000 sq. ft. sold by Oak Ridge Partners, an affiliate of , Watson Co's. It sold twice last year and ` ~ ~ a ~ , , , P is now owned by Anderson Windows , ~ who plans to use the space for office. Park Square Shopping Coldeo a loc 1 invvestor for $6.57molio aort$47 psf. anchored by Rainbow, was s The price reflected the uncertainty of the grocery anchor. Carlson Real. Estate recently sold a trio of retail properties to Iowa-based Principal Capital Real Estate Investors. Loehman's Plaza in Bloomington (138,378 sq. ft.) sold for $8.85 million or $62 psf; Southdale Square in Richfield (96,199 sq. (All information about the sale of these properties is ft.) Sold for $13.37 million or $139 psf; and Plymouth Town Center (26,207 believed to be correct. However, we make no warranties SCI. ft.) SOId fOr $4 mllllOn OT $153 psf. on the accuracy of the above details.) i~TiISSR~ ar > LOCAL M EGAPLEX Were either under construction or The market expansion had the symptoms projected to be constructed and of a classic over-building cycle. MANIA WANES completed locally during the year.. 1) Overly abundant capital 2) New theater technology and design In just three short years, the Twin Cities 3) Shifting population growth trends A quick backdrop: As 1998 drew to a movie screen inventory had ballooned In the summer of 2000, we started to close, the Twin Cities had absorbed 108 by nearly 60%. see a slowly developing train wreck in new screens, or a 42% increase in the the theater development game. First, supply of theater screens in one year. Tennessee-based Regal Cinemas, put several projects on hold and announced In 1999, "megaplex mania" continued anew construction slowdown. unabated as an additional 144 screens Next, Loew's Cineplex, one of the nation's : ~ ~ a ~ ®ColliersTowleReatEstate largest and oldest theater operators, ~ , l , :e~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ ~ . announced that the were losin mone ~ ~ Y g Y MINNEAPOLIS/ST. PAUL METROPOLITAN AREA and in financial trouble. PROPOSEID OPERATOR LOCATi00V # OF SCREENS Confronted by burgeoning debt, weak box office receipts, flat profits, and a Crown Theater. Block E/Downtown Mpls 17 slowing national economy, in Minnesota AMC Theaters Eden Prairie Center/Eden Prairie 18 and across the nation, the mega-theater Mega-Star Cinemas .Arbor Lakes/Maple Grove 16 building bubble burst. Some of the Mega-Star Cinemas Southdale Mall/Edina 16 industry's biggest. chains filed for bankruptcy in rapid succession. ~ ~,~',5~~ Coinciding with the bankruptcy i 997 PERSONSI 200Q PERSONSf filing announcements, came the C1TY SCREEN. CITY SCREEN inevitable closings of older, obsolete, poorly located, marginal, and 1.Dallas 8,511 1.Dallas 6,676 unperforming theaters. 2.Atlanta 8,717 2.PhOenix 6,773 So, at the end of the day, are we overbuilt 3.Denver 9,209 3.Mpls/St. Paul 7,221 in theaters or not? Officials at the 4.Mpls/St. Paul 10,780 4.Atlanta 7,365 National Association of Theater Owners S.Cleveland 11,135 5.Denver 7,578 in Hollywood believe that nationally we 6.San Diego 12,270 6.Seattle 8,726 have to see a 30% reduction in screens 7.Pittsburgh 12,965 7.San Diego 9,313 before the theater owners will see a profit 8.Seattle 13,776 8.Cleveland 9,442 again. On the local scene, we are seeing 9.Phoenix 15,069 9.St. Louis 9,537 a marked slowdown in new construction 10.Baltimore 21,475 10.Boston 10,239 and we will see more older, smaller sou~°e: care ToWie Real Estate and Pieces Rated Almanac. theaters go dark in the coming year. ` a'f ' 9 ~ ` s = e ®Colliers Towle Real Estate sa 's - -~'s'~ MINNEAPOLIS/ST. PAUL METROPOLITAN AREA • 1.998-2000 OPERI~T®R LOCATION SCREENS DATE CLOSE® Mann Theaters Signal Hills Mall/West St. Paul 5 November 1998 Mann Theaters Galtier Plaza/St. Paul 4 'April 1999 Lowe's Cineplex Skyway Theater/Downtown Minneapolis 6 March 1999 United Artists Eden Prairie Center/Eden Prairie 4 October 1999 United Artists Burnsville Center I/Burnsville 4 September 1999 United Artists Brookdale Square/Brooklyn Center 8 October 2000 United Artists Maplewood Mall/Maplewood 4 Actober 2000 General Cinema Interchange Office Park/St. Louis Park 5 October 2000 Carmike Cinemas Springbrook 4/Coon Rapids 4 September 2000..' Carmike Cinemas.. Forest Lake 5 September 2000 ~:~.r.~ ;c;`\ Colliers Towle Real Estate Towle Report 2001 MARKET OVERVIE`V • The Twin Cities' apartment market remains as tight as APARTMENT ever. We have seen little change. The vacancy rate continued at 1.5%, remaining well MARKET below the market's 5% equilibrium vacancy rate. There were approximately 1,900 units added in 2000, very close to the projected 2,200 new units. Approximately H ~ G H LI G HTS 2,100 new units are expected to be added in 2001. Vacancy rates are not expected to rise above 2.0%, while rents will likely escalate at a rapid rate. . gverage rents rose nearly Rents in the metropolitan area increased 7% over the same period last year. 7%. Washington County Although the rise is down from the 14% reported fourth quarter 1999, rents experienced the greatest continue to rise at a brisk pace and remain well above the gains the metro area rent increase of over I 0%, , experienced in the previous five years. The largest gain was in Washington while the Southwest Sector County with rents rising 10.7%, followed by the City of St. Paul at 8.32% and had the lowest average rent the City of Minneapolis at 7.9%. With the extremely low vacancy, there is huge increase of 4.90%. demand and the market is reflecting that demand. Senior housing, luxury downtown and suburban developments, along The overall metro area with the growing "village community" concept dominates apartment development in the Twin Cities metropolitan area. As we mentioned vacancy rate remained in last year's report, the urban village concept is growing. Intended to constant at 1.5%. reduce sprawl, these village communities and town centers combine town homes, apartment buildings and senior housing with commercial (both retail and office) buildings in one setting. Brooklyn Park, Eden Prairie, . qn estimated 2, 100 new neighborhoods in South and North Minneapolis, Golden Valley, Eagan, and Mendota Heights have concepts planned, while construction. units will be in added in continues on village communities in Burnsville, St. Louis Park, Maple 2001, keeping the same Grove and Plymouth. development pace as 2000. The new wave in terms of development comes in the form of affordability: The need for affordable housing in the Twin Cities . St» Paul reported the lowest metropolitan area is enormous. The Metropolitan Council has vacaney rate at I . I The estimated that the metropolitan area has a shortage of 150,000 to Southwest Sector's vacancy rate of 2.3% is the highest in the metropolitan area. _ .Over 5,500 units of - apartments were sold in - ~'~r 2000 for an average price of A ~ - '.F*~ ~ x $50,000 per unit. F.~ ~ r Source for fourth quarter vacancy and rental rate data was Apartment Search Pro files. a ~~1~ Regency Woods, a 282-unit apartment complex in Minnetonka sold for $83,245 per unit. 200,000 units of affordable housing Minnetonka Heights Apartments while For the second continuous year, 2000 and, as long as employment remains keeping the units affordable. Almost saw a decrease in apartment sales, a direct • as high as it has been, that number all new development planned has result of the low supply of appropriate may grow due to the influx of lower designated approximately 20% of their product. Over 5,000 apartment units wage earning laborers needed to meet units to "affordable" housing. However, sold for $245 million, representing employment demands. As a result, there with only 2,000 new units coming online about $50,000 per unit. Minneapolis are numerous state and federal programs in the next year, this amount will hardly continued to see the most activity as over in the works to maintain affordability make a dent in the need. 1,600 units sold for over $87 million, in current projects, as well as incentives or an average per unit price of $53,177. in the new developments, in .the form In terms of amenities, the big word these St. Paul followed with the sale of 990 of grants, partnerships .with non-profit days is "broadband". Leading property units for over $50 million, an average entities, and the easing of zoning owners are partnering with Broadband of $50,520 per unit. The Southwest regulations on certain developable Residential, Inc. to provide high-speed sector exchanged over 660 units for parcels. The Met Council, for example, Internet capabilities and entertainment a combined sales price of over $35 has plans to develop and operate 300 services. This will become a major million, or an average of $53,880 per units of affordable housing throughout inducement for renters and should unit. Unit prices ranged from $13,000 to the metropolitan area for the first time become more prevalent as availability $125,000 per unit. Cap rates continued and expects to have those completed widens. Other amenities being falling during 2000, posting below 8.0% by April 2002. There has also been the introduced in the market include on-site in most cases. Viewpoints 2000, released emergence of firms such as Rainbow childcare, alarm systems, fully equipped by Integra Realty Resources, named Development, which is rehabilitating business centers, and gas fireplaces. Minneapolis the third top market for -apartment investment, up from fifth a ~ ~ ~ ~ ~ source Flppreisat place in 1999, due to low vacancy, r ~ M ~ ? ~ r' r^ rapidly increasing rents, and scarce ~ ~ ~ ~ ~ 91~, Data Network Inc. 2000 multifamily sites. NAME CITY UNITS PRICE/UNIT __-~__~w:____~______ _ _ In terms of the future of the apartment market, watch for a artment sales to Marquette Place Minneapolis 240 $125,000 p Pebblebrook West Bloomington 90 ' $1D5,133 ' continue to decrease since most of the Oakwood Minneapolis 97 $82,784 Class A and B properties have recently Regency Woods Minnetonka 282 $83,245 been sold. Redevelopment sites, senior Emerald Point St. Paul 59 $77,285 housing, and the newly conceived village Skyline Apartments St. Paul 506. $61,265 community will dominate development. Pebblebrook Bloomington 170 $52,424 The question of how to provide Millpond Burnsville 3os $38,552 affordable workforce housing will reach sterling square Brooklyn Center 54 > '$37,963 fever pitch. And finally, the vacancy rate Fountains in the Park Brooklyn Park 96 $37,500 will remain below equilibrium. The Beach South Apartments Robbinsdale 136" '$35,507 ' The Pines rBrooklyn Center 102 $31,179 a= a ~ ' Source: ApartmentBearch Profiles 9100 w ~ Source: Apartment x R ~ 7 ~ . . , . ~s, '@ ~ Search Proriles MINNEAPOLIS/ST. PAUL METROPOLITAN AREA 1997-1999: AVERAGE STUDY NUMBER AVERAGE RENT UNlTTYPE DATE OF UNITS RENT RANGE `.,.iTi.ji~i0 1998 7,953 $383.71 $401 - $578 MINNEAP©LIS/ST.: PAUL METROPOUTANAREA. 1999 7,273 $478.42 $421 - $554 NuMSEa 9ico 9ioo OF PERCENT AVERASBE _ 2000 7,390_ $5_17.16 $375 - $6_38 s€cTait UNITS vacarlT RENT. S_I~ ~ i .T 1998 -~~62,917 $577.89~T `$523-$671 Anoka. 7,506 1.2% $714.74 1:999 62,466 ' $640.65 $584 - $706 Dakota Co: 18,547 1.2% $793.29 2000 63,010 $686.83, _'$521 -$885 Minneapolis 21,668 1.4% $732.02 1+ ~ S~' ~:~:C4 ~d~ 1998 56,753 $717.80 ~ _$632 - $821 a Naif 14,126: 1.2% $71;8.21 ` Northwest ' 13,305 1.5% $700.18. 1999 57,267 $790.77 $670 - $906 St:patal 15,539 1.1 % $705.22 2000 58;016 $838.78 $643 - $1-,376 Scott Co: 841 1.9% $712:07 I~=-~'}~ v~.. 1998 6,134 $929.58 $700 - $1,175 Southwest 19;775 2.3% $823.83 1999 6,437 $1,072.69 $817 - $1,238 Washington Co. 5;217 2.1 % $836.22' West _ 18,900 1.8% $846.22 2000 7,008 $1,119.76 $800 - $1,926 - - * Avera a Rent - 9/00. _ $765 Metro. Total 135,424- 1.5% $765.07 „g 4.~- Towle Financial Services Midwest, lnc, Towle Report 2001 Hard or Soft Landing-The Impact on Commercial Real Estate in 2001 • What is on the horizon in 2001 for commercial real estate? Will the uncertainty created by last year's stock market retrenchment slow the absorption of space? What is the impact of a hard landing verses a soft? Will owners and developers in this capital-intensive industry have enough cash to keep the good times rolling? Most people in commercial real estate understand that with uncertainty comes opportunity. The flight from tech stocks proved beneficial to the REIT stocks. Dramatic drops in the interest rates sparked a mini-boom in non-recourse financing for borrowers seeking to pay off bank loans or fortunate enough to have a loan open to refinancing. Industrial and office space continued to be absorbed at substantial levels, keeping the marketplace in balance and allowing the commercial real estate industry to do what it does best, create value. These are freaky times, but as said before, with problems come opportunity. From a financing perspective, we think 2001 is going to be a very good year for owners and developers of commercial real estate. Treasury interest rates have fallen more then 100 basis points and are expected to stay at current levels for the near term. The Fed's unexpected cutting of short-term interest rates was the first of many. The new President's proposal to cut taxes resonates with the real estate community, as we tell our elected representatives (of both parties) to do something. 2001 is going to be a good year for users of capital. Life companies, banks and Wall Street will have a huge appetite for commercial mortgages and plenty of money to feed that hunger. Interest rate spreads of 200 to 250 will be the norm. Couple these spreads with aten-year treasury under 5% and we will see rates in the 7 % to 7.5% range for much of the year. Loan terms of 10 to 20 years and loans for 70% to 80% of value will continue to be the norm. Technology will drive an increase in efficiencies in the underwriting and closing process, saving time and money. .2001 will be a year of challenge and opportunity. Race car driver Mario Andretti may have said it best: "If things seem under control, you're not going fast enough." .Commercial real estate has ' never been for the weak of heart and we're sure that will be true in 2001. Good luck! ®YEAR US TREASURY NOTE. NASDAOCOMPOSITE2000 . ~ s.~s ` 1 ~t 4800 }F4t ~ 1 6.50 j ~ . , _ as r~ t t+ ' - ~ f F „ _ > , 4300 ° t 6.25 ! ,y:?. ~ d~~. (j t F 6.00 ~ ` ~ 1I 3800 ~ ~ t j;r n ur * , ~ r s 1 5.T5 ~ ~ ~ ~ ~ a ~ ~ 3300 ~A„ 74 ffastla4 G L 4 ~ ' 5.50 F- - _ ~ t,' ~ _ ' ~ ~ - .y~ ~ zaoo 5.zs p _ ~ - ~ t asoo 5A0 ~--f-Y _ . _ -r-~ _ T ~ _ o o e o 0 0 o e o 0 0 0 0 0 0 0 0 0 0 o e o a o g m$ p e e o e e e e 0 0 0 0 0 0. ~ og o° o w$° 4 m 0 a"i ~ ~ @ m _ a`t ~ S`o,~ ~`F, a~ a e ~ e~_f w e- ~ ~ e. - ~ ei eN7 M ~ a ~ ~ ~ e 3 n n o'8 `e5 a ~ o - e`J e7 i INDUSTRIALCLASSiFICATIONS ~..~1~s~ TC~~XILE REPORT Older buildings of any size in average This report covers multi-tenant to poor condition. They may or may industrial buildings. Not included are not have skyway linkage. EFIN ITION S owner-user manufacturing/industrial R~~~y~~~r facilities or single tenant buildings. Buildings which have had a complete renovation, including all mechanical RENTABLE AREA . - ~ ~,-;cra systems and exterior treatment. Many The portion of the gross floor area on The office showroom business center of these buildings have been readapted which rent can be obtained (BOMA (OS/BC) is defined in this study as to office usage from multi-story Standard). one-story multi-tenant projects over industrial designs. 25,000 rentable sq. ft. with more than GROSS LEASABLE AREA (GLA) 3O% finished office space, typical Sa,~=~`'`' " The total square feet (including anchor clear ceiling heights of 12' to 16', Newer buildings, in first-class condition stores) of a shopping center on which along with nearby freeway access and decor. Large and/or tall in size rent is paid, including the storage and and high visibility. Usage flexibility, with excellent visibility and highway common areas. smaller bay sizes and better than access. Prominence and identity are average landscaping are key criteria key criteria for this group. VACANT AREA of an OS/BC: The total square feet of unoccupied 9 £ B space including sublease space and ; + Seasoned buildings, generally over ten unimproved areas of completed The office warehouse (O!W) buildings With lesds than pr me lvisib lity and buildings. included in this survey are defined highway access. as multi-tenant facilities of 25,000 NET ABSORPTION rentable sq. ft. or larger built after RETAILCLASSIFICATIONS The difference in the occupied area World War II. These facilities typically between study periods, including offer 10% to 20% office finish and have Shopping centers in this study have tenant expansions or moves within the 16' to 20' clear ceiling heights. a minimum of 30,000 sq. ft. of market and new tenant additions to gross leasable area (GLA), including the market. 1~~ .t.~~~:s~: anchor stores. Also, included in the The bulk warehouse (BULK) buildings, downtown markets is retail space in NET RENT per this report, are described as multi- excess of 20,000 sq. ft. within amixed- The quoted asking rent, less total tenant projects with 50,000 rentable use development such as office. Not expenses. sq. ft. or larger, constructed during the included are single tenant, free-standing postwar era. The BULK buildings offer retail stores. TOTAL EXPENSES 5% to 10% office finish and have 20' The annual cost per square feet of or 10% office finish and have 20' or - all operating expenses, including real greater clear ceiling heights. Range in size from 30,000 to 180,000 estate taxes. sq. ft. of GLA and may have a OFFICE CLASSIFICATIONS supermarket as a major anchor. APARTMENT DATA SOURCE This report includes multi-tenant office _ , , This report uses data from The buildings 30,000 sq. ft. or greater. Typically range between 180,000 to Apartment Profiles in Minneapolis. Not included are owner-user, single 500,000 sq. ft. of GLA, although some The study includes 80 percent of all tenant, medical or government office centers are larger (up to 800,000 metropolitan apartment complexes buildings. sq. ft.). They are usually anchored with more than 30 units. For reasons by a .discount, small department or of continuity, data was recalculated a ' ~ variety store and quite often include a to fit geographic boundaries in the drug store, supermarket or warehouse Towle Report. Newer buildings in first class condition, grocer. Power. centers from 100,000 design and decor. Large and/or tall to 750,000 sq. ft. are included in in size with mostly multiple skyway community centers. linkage. 11 Include what are typically considered Seasoned buildings in good condition regional or super-regional shopping and generally over ten years old. malls. These centers have at least Mid-rise in size and may include 300,000 sq. ft. of GLA and must skyway linkage. include a minimum of one major department store. ,a.~~. • ~ ~ ~ ~ ~ ~ • • Office Market Overview Major office real, estate markets. across North .Downtown markets stole the show in .the first America finish 2000 looking robust.- Despite the half of 2000, but suburban markets posted steady much-publicized slowdown in the economy, demand growth throughout -Caused largely by a complete for office space stayed strong through the end of 2000. absence of available space, many downtown market< This was represented by low vacancy rates and rising registered .markedly lower levels of absorption it rents. While the suddenness of the economic slowdown the second half of 2000 relative to their suburban caused concern, the depth of demand and consider- counterparts. Many downtown markets recordec able momentum in the market continued to leave 75%, and. insome-cases 90%, of their annual absorption office-leasing conditions little changed. in the first half of 2000, while suburban market were nearer a 50-50 split during the first and seconc Will unsuccessful "dot,coms" .return significant halves of the year. amounts of space to the market? - As recently as [he third quarter of 2000, dot.com tenants were turbo The prospects for 2001 -Much of 1999 and the firs charging the demand for .office space; however, as half of 2000 was clearly a period of hyper demand; no .funding for these Internet start-ups all but disappeared, sustainable for the long term. With the sudden coolint casualties began to mount and space began to free of the economy, particularly in the high-tech sector up. For a limited number of markets the effect of the office market in 2001 will be subject to a more the dot.com meltdown will undoubtedly create a benign and hopefully more sustainable perio< softer leasing market, however, this is expected to be a of growth. The charts below show markets when short-term phenomenon. A similar scenario is likely to considerable new construction will occur in 2001 surface with the telecommunications industry, which these are the ones to watch. The expectation, however also began to show signs of reducing their office space is for most of these cities to easily absorb what's bein; needs in the face of profitability concerns. brought to the market. Overall, North America major office markets are expected to remain relativei Office rents spike in many North American office tight. and finish 2001 much as they ended 2000. markets -The cost of leasing office space across many parts of the continent soared in 2000 responding to a dearth of available space at a time when many More information on 252 international businesses were anxious to expand..For much of the markets is available from your year high tech tenants in particular displayed little Colliers Towle professional. sensitivity to higher real estate. costs pushing rents www.collierstowle.com up across the entire market. Rents in many markets finished the year at record levels with only a hint of softening in select markets. Downtown Markets Su1,1La;rban Markus x.18,- - 18~- ~ 16Ih 14 1~$. o - 14` 15.1% ri,_ ° 12~ 1~.5% ~ 11 14.I~/o13.9%13.6%IF,.~/° o ~ + 13.3% T 10 i ~ 10.6%Y0.2;~/0 a lg 1 l~.~o a 8- r~ I~ 9.0°l0 8 b% ~.5°Jo F ~ .hS~o 1.2% 6.b% ~4 z 4I~ ~ ` z 4 i 1 T S.5% 3 , r 2 E~ P~ 6[ 3 N 2 1 t ~3 _ ~ Bellevue, WA ~ _ Palm Beach County, FL Ottawa, ON~ Raleigh, NC Austin, TX ~j I fort Lauderdale, FL San Franasco, CA ~ St. Louis, MO Charlotte, NCI Seattle, WA Bellevue, WA ` Portland, OR Miami, FL Minneapolis, MN Philadelphia, PA I Salt Lake Cry, UT Las Vegas, NV San Jose/Sifimn Vallev, CA Las Vegas, HV Boston, MA Colliers International. 2001 • ' • ~ ~ ~ • ~ . ~ Industrial Market Overview Spurred by high-tech industries, demand for Lowest lndustrial Vacancy Rates warehouse space races ahead - A rapidly growing global economy led by expanding high-tech companies, continues to help fuel the demand for industrial. A warehouse space. Rising levels of global trade also ~ ~ ~ ~ , continues to keep demand for industrial space 'A~ ~ ~ f ~ ~ ~ high as manufacturers and distribution companies ~R ~ ~ ~ ~ lf' i search for additional and larger premises. r ~ 1. ~ & ~ ' L.S ~ < ' 1 t f ~ s Industrial Market Indicators Strong demand a ~ ~ a ~ ~ ~ a ' For next 12 month period for warehouse ~ ~ ~ ~ t, : ' ~ ~ ~ ; a 100 space evidenced ~ ~ so vanraa..r, ec ~ ~ kc~..a~ke., vn y, San bw Lm Aa°~b,, G > ao ~ ~ . , in vacancy rates, ~saKan YaM.yL u f ~ s wa.i..uti, rH w.w ~.r,ay - Northern ,0 ~ ~ ~ which continue m ; f 4 > to move lower Last u 50 ~ ~ ~ ~ ~ f ~ - In the 73 s.. wm., Mo rwanro, oN o ~a ~ 3 ~ 3 ~ ~ ' ~ s markets included ~ ~a ,0 ~ _ ~ ~ ~ in the .most m ,0 = ~ recentindustrial o ~ n - Hew Vacanry A6aorption aent~ survey, vacancy rates moved lower in 45, indicating Major High Growth lndustrial Markets significantly less options for users. This, despite healthy levels of new construction in most markets. .~,a,P„an R~ (Annualized Percent) Rental rates continue their upward climb o ,.o s.o a.o a.o s.o a.o ~.o e.o particularly for high-tech/RSrD space -Industrial ~ warehouse rental rates continue to climb higher ~°"'O5e "°"•y~, cA ~ _ for all cate ories, however, hi h-techlR~Z'D s ace MemPhfs, rN g g P M~n„eaPar,, ~ has shown considerable increases particularly in SeatHe, wA f Northern California. Ange,es, CA Des rte stron underl m market conditions, Oa1`'°^d - E°,t eay, ca ~ - - P ~ g Y ~ g sari o~sa, cA developers remain cautious on speculative Vancouver, ec G _ development -Even though market conditions' Sacramenta,cA _ - could barely be better, just half of all new Mantrea~, PQ development is done on a speculative basis "ew~r~y-"artne.n highlighting the still conservative nature of most real "ew,er,ey-sa°~~^ 1 estate development. For 1999 speculative development "eN'''"°y - G accounted for 48.3%, while for the first half of 2000 ~"d'°°°~`''~" f s eculative construction increased sli htl to 53.6%. Atla",°" GA P g y ch,ca~°, .L Market conditions for industrial real estate to remain P'1OB"~~ AZ I Dalla:, Tx ~ largely the same.- Feedback from Colliers' offices Kansas fly, MO 1 indicate many of the trends witnessed over the past 12 months are expected to continue. Despite below average:.. sa,, Lake rty, ur vacancy levels and rising rents, new construction in not P~,~bde~h~a, PA expected to spike or lead to an oversupply situation. At Denver, co _ best, new supply will rise to only just match demand '"~~°kee-'"^ f leaving market conditions little changed. On the demand side, growth industries such as manufacturing, _ warehousing and distribution and high-tech companies Cothers IniernationaT zo0o are expected to support current absorption levels. Colliers International research by: Ross Moore Vice President & National Director of Research OLLIERS T'OWLE REAL ESTATE DIRECTORY Executive Office Property & Fatuity Management Ofi•;ces Office Sales & Leasing The Towle Building Arden Hills Technology Center Hugh Byrne, CCIM 612/347-9354 330 Second Avenue South 612/341-4444 4211 North Lexington Avenue, Suite 2290 Larry Chevalier, SIOR 612/347-9357 Suite 800 Fax 6121347-9389 Arden Hills, MN 55126 Tina Feisthamel 612/347-9371 Minneapolis, MN 55401 651!490-0620 Gary Glockner 6121347-9351 infoC~towle.com Jeff Hart 612/347-9341 Colonial Warehouse Brent Jacobsen 612/347-9312 Mark W. Reiling, CRE 612/347-9303 212 Third Ave. N., Suite 478 Jim Kenney 612/347-9361 President Minneapolis, MN 55401 Don Letsch 612/347-9379 612/333-7996 Julie Lux, CCIM 612/347-9318 Kathleen Nye-Reiling 6121347-9364 Todd Mongrain 651/224-7700 Principal Edina Office Center Marty Wolfe 612/347-9335 7600 France Ave. S., Suite 541 St. Paul Office 651/224-7700 Edina, MN 55435 Retail Sales & Leasing Gallery Professional Bldg. Fax 651/224-4464 952/832-0723 Greg Hayes 6121347-9376 17 West Exchange Street Todd Johnson 612/347-9312 Suite 807 Gallery Professional Center Skip Melin 612/347-.9352 St. Paul, MN 55102 17 West Exchange St., Suite 807 Kathleen Nye-Reiling 612/347-9364 St_ Paul, MN 55102 Brad Pfaff 612/347-9370 Controller 651/224-7700 Carol lilstad 612/347-9394 Carol Parent 612/347-9383 Vice President International Market Square 275 Market Street Corporate Real Estate Services Human Resources Minneapolis, MN 55405 Jefferson Patterson 612/347-9324 Vicky Clement 612/347-9343 612/338-6250 Director of Corporate Real Estate Services Appraisal/Consultation Brokerage/Consultation Larry Chevalier, SIOR 612/347-9357 Michael Bownik, MAI 612!347-9391 Dennis McClinton, CCIM, SIOR 612/347-9368 Dennis McClinton, CCIM, SIOR 612/347-9368 William Cam bell 612/347-9334 ames Miller, SIOR 612/347-9365 P Senior Vice President J Scott Neu 612/347-9330 Sales Manager Raymond J. Reese, SIOR, CCIM 612/347-9329 Rodger L. Skare, MAI 612/347-9336 Investment Services Researeh & Marketing Neal Driscoll 612/347-9349 Towle Fit'lat'dC1af ~t'.rvlteS, ~nC. Cindy Bagaus, Vice President 612/347-9332 Mark Hotzler, CCIM, CPM, SIOR 612/347-9321 Michael R. Meents 612!347-9310 Bryon Nelson 612/347-9378 Mark Kolsrud, CPM 612/347-9340 President Jason Price 612/347-9392 James McCaffrey, CCIM 612/347-9355 James Miller, SIOR 612/347-9365 Tom Boegeman 612/347-9360 Asset Management Ted Holmes 612/347-9381 Dawn Grant, CCIM, CPM; RPA 612/347-9301 Industrial Sales & Leasing Ned Foster 612/347-9366 Vice President Helen Brooks, SIOR 612/347-9359 Marion Freed 612/347-9362 Edward Engler 612/347-9347 Gregory Hulstrand 612/347-9317 Steve Fisher, CCIM 612/347-9325 Erik Moe 612/347-9306 Property & Facility Management Joel Groethe 612/347-9358 Daniel Mott 612/347-9339 Mark Reiling, CRE 612/347-9303 Tony Kamp 612/347-9328 Mark Schoening 612/335-773 President Scott Kummel 612/347-9340 Mary Sullivan 612/335-773 612/333-7996 Steve Larson, CCIM 612/347-9369 Mark W. Vannelli 612!347-9315 Darin Crawford Greg McDonald 612/347-9348 Patrick McCann 651/224-7700 Chris Pendroy 612/347-9315 Barb Perron 952/832-0723 Jon Peterson, CCIM 612/347-9367 Dan Riehle, RPA 651/766-4660 Richard Ragatz 612/347-9323 ~ David Schwebel 952/832-0723 Raymond Reese, SIOR, CCIM 612/347-9329 Patrick Skinner 612/333-7996 Joe Turner 612/347-9356 J. Michael Thomson, RPA 612/330-9474 WWW.tOW~e~l~l.toi111 • • ~^a,~~--~i;F ~axa.'• ~a..aw..an E~~ AMRAISAL WWW.collierstoWleicolE¦ ~NSTI~UTE ® ~ ' ~r COLLIERS TOWLE CAPABILITIES As the dynamic local leader in commercial real estate, Colliers Towle Real Estate continues to grow and expand its services to satisfy clients' needs. Founded in 1909 as a mortgage banking firm, Colliers Towle is the oldest locally owned commercial real estate company in Minnesota. Colliers Towle's corporate offices are located in the Towle building in Downtown Minneapolis: Additionally, our numerous property management offices provide services throughout the Twin Cities. Colliers Towle is an owner/paxtner of Colliers International Property consultants, one of the largest real estate organizations in the world. Our clients are serviced by over 4,900 professionals, in 252 offices covering 51 countries. In every case, valuable local knowledge is combined with unique telecommunications linkages. The result is timely and professional commercial real estate services worldwide. 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