Just a few months ago, the 400 block of Nicollet Mall in downtown Minneapolis was a gray patch of surface parking, surrounded by abandoned stores and an unsightly parking deck. Minneapolitans of a certain age may also remember the spot as the home of the now-demolished, but still-beloved, Powers Department Store.
But today, steel-and-concrete footings have been bored into the long-fallow concrete turf, providing the underpinnings of a 26-story, 253-unit luxury apartment tower called the Nic on Fifth — the first new residential rental high-rise at the city’s core in nearly 30 years. Once Minnetonka-based Opus Development Corp. completes that $100 million project in 2014, it will train its cranes to the western side of the block and erect a nine-story corporate campus expansion for Xcel Energy Inc. In the meantime, Mortenson Development is busy refining plans for a 30-story, 262-unit apartment tower called 4Marq at the corner of S. 4th Street and Marquette Avenue to complete the block.
“This is the best sign we’ve seen in a long time that people are proactively choosing to live in the city’s central business district,” said Jeremy Hanson Willis, Minneapolis’ director of community planning and economic development.
Within three years, the block could be home to perhaps 800 residents, and 2,000 employees at the Minneapolis-based Xcel. This wholesale redevelopment of an entire city block is “very unusual, a once-in-a-lifetime opportunity,” said Russ Nelson, a veteran real estate broker and principal of Nelson, Tietz & Hoye, who represented Xcel Energy in its quest to consolidate its downtown operations.
The blight-to-boom phenomenon on the 400 block of Nicollet Mall was spurred in large part by a recovering commercial real estate market, but broader demographic shifts are also in play, including the desire of empty-nesters and millennials to live in urban, transit-friendly locales.
A meaningful driver behind the development of the block is its proximity to light-rail transit — a station is at the corner of S. 5th Street and Nicollet Mall. “Demand for transit access and car-free or car-light lifestyles are dramatically strengthening downtowns as desirable places for people to live and for employers to locate,” said Yingling Fan, an assistant professor at the University of Minnesota’s Humphrey School of Public Affairs.
There are more practical reasons for the boomlet — a lack of developable space along the city’s central spine. “Target has pretty much shored up the south end of Nicollet Mall, so this is where the opportunity lies,” Nelson noted.
Not everyone is cheering the advent of more luxury apartments downtown — where rents could be about $2.50 a square foot — particularly affordable housing advocates. And some housing experts predict there will be a glut of apartments downtown in years to come.
But Bob Solfelt, Mortenson’s director of real estate development, said his firm carefully considered the financial feasibility of the 4Marq project before jumping in. “The downtown market is pretty strong in terms of the need for multifamily residential projects,” he said. “Our market studies show that the demand is there.”
Development of the 400 block may have also encouraged recent real estate deals involving the former Neiman Marcus store, which Bloomington-based United Properties has an agreement to buy, and the 510 Marquette building, which was recently sold to developer Ned Abdul of Swervo Development Corp. for $6.7 million. And, kitty-corner from the 400 block at S. 5th Street and Marquette Avenue, the 98-year-old Soo Line Building is being converted from tired offices into 250 luxury apartments by the Michigan-based developer Village Green.
Abdul said he was attracted to the area because of its “prime real estate location,” as well as light rail, bus service and the proximity to the development across the street. He plans to return the nearly vacant building to its “Old World facade” — it was the home of the Federal Reserve Bank from 1925 to 1973. Beyond that, the 510 offices will be reconfigured into collaborative workspace, with street-level retail. “We’re going to bring the Warehouse District to the [Central Business District],” he said.
Nelson said he was hired by Xcel Energy to find office space closer to the company’s headquarters on Nicollet Mall — roughly 800 employees now work in Marquette Plaza about two blocks away, and the lease is set to expire in 2016. The discussion then involved Opus, and a deal was struck for the developer to build and own the 215,000-square-foot office building that Xcel will lease.
“It is a unique piece to the whole project,” said Dave Menke, senior vice president for Opus Development. “It’s a huge commitment by Xcel to stay and grow downtown, and it really completes the transformation of that block.”
Meanwhile, the city and the Downtown Council, a group of local business leaders, are pushing for a new park stretching from Fifth Street to the Mississippi River, as well as a $20 million revamp of Nicollet Mall itself.
“The broader vision is to really connect the lakes to the Mississippi River along Nicollet,” said Minneapolis’ Hanson Willis. “Now, you could be standing on Fifth and Nicollet and have no idea the river is four blocks away.”