The lease renewal through 2023 eases concerns for the owner of City Center, but it leaves other would-be Target suitors hunting for tenants.
The announcement ends a guessing game among local real estate experts over whether the Minneapolis-based retailer would stay put at the office building where it has been a tenant since 1983 or move to another office tower. Target's leases were due to expire in 2013 and 2015.
The new lease term will extend through December 2023, with renewal extensions through 2038. Target now occupies nearly 1 million square feet on 35 of the 50 floors in City Center.
Toronto-based Brookfield Properties, the building's owner, had been discussing a lease renewal with Target for several months.
"We have a long-standing relationship with Target," said David Sternberg, senior vice president for Brookfield's Minneapolis office. "We are thrilled that they will continue to occupy a major portion of our building and are delighted with this contribution to Minneapolis' continued economic vitality."
Roughly a third of the 12,000 or so Target headquarters employees work in City Center. Target occupies an additional 2 million square feet of office space in downtown Minneapolis, including its headquarters at 10th Street and Nicollet Mall.
"This is a hugely positive development for downtown and one that will have an impact for decades to come," said Mayor R.T. Rybak.
Target's large downtown workforce is a major contributor to the retail downtown economy and accounts for a significant portion of the residential population in downtown condos and apartments, Rybak said.
The renewal comes at an opportune time for downtown, where office vacancies have risen in the economic recession. The vacancy rate for downtown office space has been edging up since 2007 and stood at 14 percent at the end of the first quarter this year, according to the Twin Cities office of Colliers Turley Martin Tucker.
Job cuts have taken their toll on the downtown market. The 20 largest employers cut 3,335 people last year, a 7 percent drop in downtown's workforce, according to the Minneapolis Downtown Council. The cutbacks have continued this year at several downtown law firms and at Target, which laid off 600 employees and decided not to fill 400 other vacancies.
Target's decision to remain at City Center basically puts an end to developers' efforts to secure the company as an anchor tenant for a new downtown office building.
It's been about eight years since downtown has sprouted a new office tower, and Target was considered the most obvious prospective tenant because of its large space needs. Real estate experts have said that any new office building downtown would need be at least 600,000 square feet, with an anchor taking about half the space, to be economically viable.
Downtown has about a half-dozen sites where a new office tower could be built, and developers that own or control those sites all were keenly aware of Target's lease period at City Center. The sites seeking a suitor include a parcel on Marquette Avenue between 9th and 10th Streets and another on 10th and Nicollet, where plans for a mixed-use project have stalled.
Others include the old Powers department store site on 5th Street just off Nicollet; the former Sheraton-Ritz Hotel site, at 4th Street and Nicollet; and one at 7th Street and 3rd Avenue, all owned by Minnetonka-based Opus Northwest.
Minneapolis-based Ryan Companies had been frequently mentioned as a developer for a project that would involve Target. Ryan built Target's headquarters and is involved with the retailer's long-term plans to develop a large corporate campus in Brooklyn Park. Target has delayed that expansion, which might have resulted in transferring some employees from downtown if the retailer had not renewed its lease at City Center.
Target's renewal is the second significant downtown lease deal in the last year for Brookfield. Late last year, Neiman Marcus renewed its lease for its department store in Gaviidae Common.
Susan Feyder • 612-673-1723