Twin Cities Industrial Developers Fleeing to Outer Ring Suburbs

MINNEAPOLIS-Scarcity of land, rising land prices and tighterzoning restrictions are forcing developers to movefarther and farther away from the core Twin Citiesmarkets in search for warehouse and bulk distributionspace.

Developers such as Marfield Belgarde and Yaffe Cos.,Moen Leuer and Wispark have bought large tracts insuch remote suburbs as Rogers and Lino Lakes for theirbuilt-to-suit and speculation projects, says JonathanYanta, vice president of industrial brokerage atUnited Properties in Bloomington, MN. In Rogers, forinstance, Marfield Belgarde and Yaffe is building a242,000-sf speculative building. “This move seemed unthinkable just a few years ago,”Yanta notes.Over the past five years, land prices have doubled inmany cases, from $1.75 per sf on average to $3.50 per sf andconstruction costs have gone up from 35% to 50%, he says. But rents, meanwhile, have gone upjust 20% to 30% over that same period,which means lower yields for owners and developers.

Yet another factor that has forced developers fartheraway from the core of the cities is a trend amongcloser-in suburbs to revise zoning regulations tofavor high-tech campuses over large distributioncenters. As a result, developers are taking theirprojects to the outer ring suburbs such as Shakopee,Mahtomedi and Farmington, in addition to Lino Lakesand Rogers.The land crunch has also spurred the reuse of a siteor building to accommodate a better use with higherrents, Yanta says.

For instance, United Propertiesrecently moved Seagate Technologies from fivelocations into one new 340,000-sf location inShakopee.One of the buildings, a 120,000-sf structure at8001 E. Bloomington Freeway, was essentially obsoletein that it had inadequate parking, low ceilings, frontentry at the rear and a configuration thatmade it hard to divide, Yanta says. But the buildinghad a good location, a solid infrastructure and goodpower and fiber connections, as was repositioned in anestimated $4.8-million renovation into a building that now houses G.N. Resound, a major hearing aidemanufacturer