In a chronically flat office market where "tenant poaching" has become one of the few surefire ways to fill vacant space, building owners are feeling the competitive pressure to upgrade their properties.
In the case of the green-tiled Spruce Tree Centre at the corner of University and Snelling avenues in St. Paul, owner and manager MetroPlains has kicked off a $1.4 million renovation effort that includes a pair of big tenant build-outs and a major rehabbing of the 28-year-old building's common areas.
Mike Koch and Jason Sklar of North Dakota-based MetroPlains say they're also using Spruce Tree's strategic location at the Snelling Avenue stop along the Green Line to pitch it to existing tenants and lure new ones.
"Like most commercial buildings, we've had to fight hard to keep our tenants, and with the disruptions during the light rail construction phase, that was a real challenge," Koch said. "But now we're a year past that, and the benefits of being on the Green Line are starting to show. Now we've made a joint commitment with two of our anchor tenants to create an atmosphere that will be attractive to their customers and employees, and transit is an important amenity for them."
Spruce Tree Centre is immediately recognizable for its abstract architecture and distinctive green tile exterior, which has inspired both admiration and criticism over the years. And like other stabs at mixed-use retail-office projects from the 1980s, its original vision crumbled as retailers shunned inner-city locations in favor of expansion in the suburbs.
When MetroPlains purchased it the mid-1990s, it was half-vacant. The firm instituted a rescue plan that largely repositioned it away from retail and concentrated on office uses. Since then it has been largely successful, reaching 100 percent occupancy at times.
Spruce Tree Centre now has an occupancy level in the "low 80s," Koch said. He added it has several lease agreements with new tenants "out for signature" that will put it "in a good spot" in the coming years. Two anchor tenants, Image Sensing Systems and Impact Physical Medicine & Aquatic Center, have recently signed long-term deals that include extensive new work on their spaces.
Koch and Sklar wouldn't reveal the costs of the upgrades. Building permits filed with the city indicate MetroPlains is spending $900,000 to give Spruce Tree its first ground-level common area upgrade in 20 years.
"We've carved out some space that was previously leased space and are converting it to amenities," Sklar said. "For instance, we're putting in a fitness center with showers, a conference room with up-to-date technology, a mother's room for breast-feeding and a new self-service convenience food store just for tenants."
New tile floors and redesigned elevator areas will give the lobby areas an updated look.
The building permits also indicated MetroPlains is spending $300,000 to upgrade and expand space leased by the high-tech traffic control firm Image Sensing Systems on the building's fourth and fifth floors. Some $180,000 is being spent to move Impact Physical Medicine & Aquatic Center into new digs across the hall from former space fronting University Avenue on the ground floor.
When Spruce Tree was built with the aid of tax increment financing in the 1980s, the city also constructed a connected four-level, 353-space parking ramp. This year, the ramp's bonds were paid off. The ramp can be expanded if demand in the Snelling-University area calls for it, city officials said.
Don Jacobson is a freelance writer in St. Paul and former editor of the Minnesota Real Estate Journal.