Downtown St. Paul Sees Mini Construction Boom

Downtown St. Paul sees mini construction boom with new Saints ballpark, light rail transit, new housing and a Lunds store


Will new amenities bring renewed energy and boost the downtown market?

By Liz Wolf

Downtown St. Paul brokers are keeping a close eye on the construction cranes around the business district. Massive projects like the $54 million, 7,000-seat St. Paul Saints minor-league ballpark in Lowertown -- set to be completed in spring 2015 -- and the $957 million Central Corridor light-rail transit line -- which will link downtown St. Paul with downtown Minneapolis next year -- could be among the catalysts needed to reform the capitol city’s downtown.

“I’ve been on the St. Paul BOMA marketing committee and we jokingly talked about the quiet renaissance that’s happening in St. Paul,” says Aaron Barnard, director of brokerage services for Bloomington-based Cushman & Wakefield/NorthMarq.

St. Paul landlords, business owners, brokers and city officials predict both light rail and the new ballpark will have a positive impact on downtown. Restaurants and bars should benefit from the new baseball stadium and its 7,000 visitors passing by on game days and could lead to the opening of new restaurants and bars, and light rail could attract some future downtown development.


Tom Stella, senior director of brokerage services for Cushman & Wakefield/NorthMarq, says the future ballpark is already making an impact. For example, he says his business partner Rob Davis is marketing a building next to the old Gillette Building in Lowertown, near the site of the new stadium, and he’s had a lot of inquiries from restaurants wanting to locate there.


“(The ballpark) is a huge win,” Barnard says. “It’s what St. Paul doesn’t have outside of the Ordway and Xcel Center, which do very well. St. Paul doesn’t have a reason for more of an outdoor and community-type situation. Anybody can go to a Saints game. If you’re going to a hockey game, you’re a season ticketholder and it’s a different demographic… If you go to the Ordway, you may go to dinner and you leave... An outdoor venue with baseball is much more of, “Hey, let’s go down and meet and watch some of the game. Let’s hang out downtown. Let’s go up to my loft condo afterwards’… So it’s a link in the chain of ‘work, live, play’ downtown.  St. Paul has been ‘work’ and just recently it’s become ‘live,’ but now you’re adding the ‘play’ element, which is huge.”


New housing going up


More downtown housing options will soon be available, which are expected to attract more young professionals looking to live downtown. Developments include the high-profile, $62 million Penfield Apartments, a 254-unit, upscale complex that will include a first-floor Lunds grocery store. The complex is under construction at 10th and Minnesota streets. In addition to Lunds, the complex’s other fashionable amenities will include a rooftop  dog area and “dog wash” station, a concierge, party deck, fitness center and outdoor swimming pool. It will be near the new Central Corridor light-rail line.


Also the historic Pioneer-Endicott office buildings are being renovated into a $40 million, 234-unit luxury apartment complex with commercial space. The buildings are at Fourth and Robert streets. And Minneapolis-based Sherman Associates is developing the West Side Flats, which will include both market-rate and affordable units across the Mississippi River from downtown St. Paul. Sherman Associates also plans to convert the Rayette Building in Lowertown into lofts and street-level retail space.


In other downtown activity, there are planned improvements to the Ordway Center for the Performing Arts, and the Metropolitan State University and Minnesota Children's Museum are waiting on state funding for future expansions. Also, the Union Depot recently completed a $243 million historic rehab, and the St. Paul Athletic Club reopened in February after extensive renovations.

Creating a buzz

There’s hope among brokers, developers and city boosters that these projects could generate more interest in downtown and draw more businesses and tenants.

“Anything that brings more reasons to stay downtown is good for downtown,” Barnard says. “I’m bullish on the future of downtown St. Paul with the increasing amenities and live-and-play options that are going to give employers the ability to retain and attract talent.”


But will these amenities translate into more office leasing? Barnard says they will create more energy and companies want to locate near energy. He also says that companies today are catering to the younger Generation Y demographic


“There’s a genuine realty that to hire young talent you need to be in an urban environment with a lot of attractions,” he says. “They want energy and life. It’s (like) the LoDo phenomenon in Denver. You put a ballpark in and a bunch of condos, and all of a sudden, everybody who lives there are under 40 with double incomes …. And I think that’s the same metric you’re going to see in rental and owned units in St. Paul.”


Barnard also points out that St. Paul is generally less expensive for office tenants than other local markets, and the downtown for-lease office market is only 8 million square feet of 16 million square feet of space. The rest is government-occupied or owned by companies like Securian Financial Group. “So a 50,000-square-foot or 100,000-square-foot lease is a huge deal to St. Paul… When you truly understand and respect the scale of St. Paul, things like LRT and the stadium are going to have a much bigger impact due to the relative smallness of the market.”


Still some unknowns


Earlier this year, Infor Lawson, the anchor tenant at Lawson Commons, had talked about downsizing or relocating out of St. Paul. Also, what will happen with the vacant downtown Macy’s store remains a question mark. It was the last downtown St. Paul department store and is a five-story, windowless building. St. Paul Mayor Chris Coleman has said he would like to see an office building replace the Macy’s building, but that’s questionable.


“The city had talked about wanting to see an office tower there,” Stella says, “but I think that’s going to be a long time in the making. The rents just aren’t there to support it. Unless there’s a big enough group that comes in for a build-to-suit.”


“I personally think it’s another piece of the live, work, play connectivity,” Barnard adds. “Its redevelopment needs to encompass all three elements. It’s another key location in how it connects the various neighborhoods of downtown.”


Despite unknowns, some positive momentum


“There’s a little bit more optimism,” Stella says of the market. He says the downtown office market’s overall vacancy rate is still north of 20 percent. However, the market reported positive absorption in 2012 -- the first time in five years.


One new deal is Regus Corp. is moving to Bremer Tower. Regus is an executive suites operation based in Atlanta, and this will be a new location for the company, says Eric King, director at Cushman & Wakefield. King represented Bremer Tower on behalf of its owner Sentinel Real Estate Corp. in the lease. Jones Lang LaSalle represented Regus.


They will be occupying the entire 15th floor,” King says. “The floor plates are 11,977 square feet. I would estimate occupancy in approximately four to five months… With this lease and a small expansion that we just got done, we’ll be at 84 percent occupancy in the tower.”


In other activity, Eagan-based West Academic Publishing is looking downtown St. Paul for 18,000 to 20,000 square, which would be another new tenant in the market. Earlier this year, Thomson Reuters sold its law school publishing business to Eureka Growth Capital in Philadelphia. The business now operates as West Academic Publishing and publishes legal textbooks, study guides and related materials.


“We haven’t seen new tenants in St. Paul in quite a while so it’s nice to see,” Stella says.


Also, Green Tree recently expanded downtown. The company is in Landmark Tower and expanded into approximately 33,000 square feet at Lawson Commons.


“We still have our challenges… There’s no doubt about it,” Stella says. “We still have a lot of vacant space in St. Paul, but this is some good news. There’s potential that we could end the year with two years of positive absorption, which coming off of five years of negative absorption is a big deal.” 

Posted at: 2:37 pm on May 28th, 2013

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