Downtown St. Paul’s commercial real estate market holding steady

  • Article by: JANET MOORE , Star Tribune
  • Updated: October 8, 2012 - 8:49 PM

Downtown St. Paul's commercial real estate market kept its equilibrium amid ups and downs.

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Despite an uncertain commercial real estate market, St. Paul’s historic downtown property at 180 E. 5th St. has increased occupancy by 31,000 square feet.

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A report released Monday found that the office occupancy rate in downtown St. Paul held its own in 2012 -- but in a still-uncertain economy, the status quo is considered a positive.

The Greater St. Paul Building Owners & Managers Association (BOMA) found that overall occupancy for competitive, government and owner-occupied office space in St. Paul's central business district was 90 percent as of July 31, unchanged from the same period of 2011.

"We've had enough regular activity downtown, and we seem to be replacing what we lose throughout the course of the year," said BOMA President Matt Anfang. "Over the years, there's been lots of contraction of existing businesses, but we still maintained the ability to fill behind them."

The BOMA report meticulously details the ebb and flow of office space tenancy, including occupancy increases of 31,000 square feet at 180 E. 5th St., with the addition of Ecova, an energy management firm, as well as HealthPartners Specialty Coders and Three Deep Marketing leasing office space.

At the same time, decreases were noted at several buildings, including 375 Jackson St., which occurred when AgriBank vacated 80,000 square feet when it moved to Wells Fargo Place at 30 E. 7th St.

In some cases, tenants moved into better office space when the opportunity presented itself.

"You could say that was somewhat of a common thing -- in the industry we call it a 'flight-to-quality,' " said Eric Rapp, a broker with Colliers International, and co-chairman of BOMA's marketing committee. "You'll see some strong tenants who will take advantage of the market and move up to Class A space. That might be part of the reason why Class A space is tightening in St. Paul." (Class A is defined as the most-prestigious and competitive space for premier office users, with rents above average for the area.)

Occupancy of Class A space increased in St. Paul from 85.7 percent to 86.8 percent, according to the report.

Overall, there were about 17 million square feet of total office space in the Capitol City's downtown, a decline of 128,000 square feet, or less than 1 percent. However, the overall amount of space increased 2 percent, or about 373,000 square feet, since 2003.

The decrease in 2012 can be attributed in part to the removal from the survey of the Public Safety Building -- about 72,000 square feet of government space at 100 E. 11th St. -- because it was demolished for the impending Penfield/Lunds apartment and grocery store project. In addition, the University Club Downtown, at 340 Cedar St., was removed because its office space was turned into hotel and fitness center facilities.

Patrick Skinner, BOMA's chairman, said in a statement that interest in commercial office space in St. Paul is strong, "but there is intense competition for tenants. Our biggest task is to ensure that our offerings are consistently competitive."

One trend noted in the report involved building owners and managers investing in green space -- and that's occurring in a city already known for its green space

St. Paul already has 14 parks in its central business district, including Mears Park and Rice Park. Another park is planned for the site of the former Pedro's Luggage store at Robert and E. 10th streets. Construction is expected to begin at "Pedro Park" in 2014.

Meanwhile, several building owners have invested in existing green space, including green roofs at the St. Paul Fire Department's headquarters, and at St. Joseph's and Regions hospitals. Plans for an 8,000-square-foot green roof at Children's Hospital include a greenhouse, sculpture, arbors, plant towers and benches.

In addition, Cray Plaza has rooftop green space that features an enclosed glass area that helps light the building. Buildings such as 500 Jackson, Securian's 400 Building and Ecolab's Corporate Center incorporate private exterior open space for employees and visitors, according to the report.

Janet Moore • 612-673-7752

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