MINNEAPOLIS-The Ackerberg Group has begun construction on a $45 million new office and retail building called MoZaic. The 10-story building will have 65,000 square feet of office and 13,000 square feet of retail, in the first new development started in the city since 2008.
However, Stuart Ackerberg tells GlobeSt.com that while building in other areas of the cities might be company suicide, this Uptown neighborhood is enjoying less than 5% vacancy. The site is on Lagoon Avenue between Hennepin and Freemont avenues.
“Our belief is that this submarket of Uptown is tight enough to justify new construction,” Ackerberg says. “While other areas of the city are reducing rents, in this area there’s such a finite amount of space that outpaces supply, and there’s not any large floor-plate buildings available, as many of the offices here were built in the early 1900s.”
His firm owns similar buildings in this neighborhood, such as a 56-year-old, 150,000-square-foot office that is almost 100% leased, Ackerberg says. The lease rate at the new building will be around $20 per square foot, he says. “We’re confident we can lease this space,” Ackerberg says.
Average rates for class A space in the city is about $24 per square foot, according to a fourth-quarter Grubb & Ellis market report. Minneapolis’ vacancy rate was at about 15% in the fourth quarter, the company said in its report.
The offices will occupy the top three floors of the building, with commercial on the first floor and parking on the floors in between. Ackerberg says he’s had two meetings with potential tenants to take two separate floors of the new building, which will be finished in January 2012. A future phase of development is anticipated on the east side of the site and could accommodate 100,000 to 150,000 square feet of additional uses, he says.
Some of the financing for the project is being provided by MidCountry Bank and through Recovery Zone Facility Revenue Bonds issued by the city. Hennepin County’s Transit Orientated Development funds will help pay for a pedestrian/bicycle bridge and trail connections to the Midtown Greenway.
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