Shovels are turning for Twin Cities industrial projects

For Katie Clark Sieben, it's been a summer of groundbreakings. In one week alone, she went to five.

And many of the places that Minnesota's top economic official went to toss dirt and celebrate were industrial buildings.

Driving around the Twin Cities suburbs, the phenomenon is hard to miss. Gigantic warehouses and manufacturing spaces, many with offices attached, are springing up on empty tracts throughout the metro area.

Some of the companies expanding their footprint are stalwart Minnesota brands, such as medical device maker St. Jude Medical Inc. Others are growing midsize firms like SterilMed Inc. and Pro-Con. And there are some attention-getting newcomers like Shutterfly Inc., which was personally wooed by Gov. Mark Dayton.

"We are seeing hundreds of business expansions happening in the metro and in greater Minnesota," said Sieben, commissioner for the Minnesota Department of Employment and Economic Development.

The northwest metro, in particular, is bustling. In August, Bloomington-based United Properties broke ground on the Northcross Business Park, a 36-acre site at the busy intersection of Hwys. 610 and 169 in Brooklyn Park.

The largest patch of land in the park was set aside for a 168,000-square-foot speculative industrial building and a $27.5 million new headquarters for Wurth Adams Nut & Bolt Co., a distributor of fasteners and assembly components now in Maple Grove. A smaller plot was set aside for a 70,000-square-foot building for machine manufacturer Perbix Inc. United Properties also plans to carve out some space on the property for a hotel.

"Businesses are ramping up their [construction] to support their anticipated growth," said Bill Katter, United Properties' executive vice president.

The overall vacancy space for industrial space in the metro is just 10.8 percent, according to a recent Compass report released by the Bloomington-based real estate firm Cushman & Wakefield/NorthMarq.

Nationally, the commercial real estate market grew at the strongest pace in the past year since the economic recovery began in 2011, according to NAIOP, an industry group. And the overall outlook for the industry through 2015 is expected to grow between 8 and 15 percent.

The strongest year-over-year performer has been industrial development, which surged 48.5 percent due largely to energy-related development across the country, NAIOP said.

"Commercial real estate development has an immense ripple effect in the economy, providing wages and jobs that quickly roll over into increased consumer spending," the NAIOP report notes.

The demand for space is partly due to industrial production that surged to a record level by the end of 2013 and is up another 5 percent through July this year.

The 12-month rolling average of net new jobs nationally in the manufacturing, transportation and warehouse sectors has ranged from 2,000 a month in late 2010, just as commercial real estate began to recover, to 34,000 a month as of June. This is a pace of industrial job creation not seen since the 1990s, the real estate firm Cassidy Turley said in a recent report.

Developers are so confident that some are building speculative industrial projects without a tenant, considered the most risky gamble in commercial real estate. Eight spec projects totaling 1.2 million square feet are underway in the Twin Cities.

United Properties' Katter says he's already heard from "a number of interested parties" interested in leasing the spec building at the Northcross Business Park. "It's a great location with great visibility and access," he added.

Many of these expansions are also benefiting from oft-controversial public subsidies.

The Northcross project, for example, involved $400,000 in tax increment financing to offset the cost of relocating a petroleum pipeline on the property. Wurth Adams received $590,000 from the Minnesota Job Creation Fund on the promise that the company will create an additional 20 jobs and meet other performance measures. Perbix received $139,000 from the same $24 million fund, which was created by the Minnesota Legislature in 2013.

The state's Sieben says such incentives are necessary because Minnesota is competing with other states for the projects.

"The companies expanding lately could expand and relocate anywhere in the U.S.," she said. The programs "shows that Minnesota is aggressive."

Janet Moore • 612-673-7752