Outmoded, and sometimes long-vacant, suburban office buildings are more frequently being torn down to make way for new, amenity-rich apartment buildings.
The trend of putting multifamily buildings within older suburban business parks seems to be picking up this fall.
Sometimes these projects have spawned new apartments on vacant land originally intended for office towers that weren't ever built.
In other cases, they are going in where office buildings — usually at least 30 years old — can't be easily or profitably upgraded for open floor plans that are favored today.
The willingness of suburban cities to allow new residential uses in areas that have been zoned commercial/industrial for decades indicates they are bowing before a pair of commercial real estate market forces: the seemingly insatiable demand for new apartments and the persistent lack of it for old types of offices.
After a few notable examples of the phenomenon during the last three years, this month has seen an escalation. Two large-scale proposals to raze older, vacant suburban office properties and replace them with hundreds of upscale, market-rate apartment units came before city officials in both west and east metro suburbs.
• In Minnetonka, Florida-based LeCesse Development moved ahead with its plans for the redevelopment of a vacant office/warehouse building in the Opus 2 business park into the 332-unit Rize at Opus Apartments. The 1970s building has been empty since the departure of Scicom Data Services following its 2013 bankruptcy and subsequent purchase by Taylor Corp.
• In Shoreview, a concept plan submitted by developer Greco and Eagle Ridge Partners, owner of the Shoreview Corporate Center business park, calls for the demolition of a 1980s office building and its redevelopment into 400 new apartment units. The building, part of the original Deluxe Corp. office campus, has been empty since 2007.
Other recent examples of placing new apartments in underutilized commercial zones include StuartCo's One Southdale Place apartments in a corner of the Edina shopping center's parking lot; the 250-unit Covington Apartments, built on a vacant parcel in Bloomington's Norman Pointe office park; and the second phase of the CityVue Apartments in Eagan, to be constructed on land next to a former Blue Cross Blue Shield office tower.
One part of the equation is that older, "Class B" suburban office properties continue to falter. Tastes have changed to favor open floor plans, natural light and a full menu of amenities. Those unable to deliver are seeing persistently high vacancies. The direct vacancy rate for Class B offices in the southwest metro stood at 17.3 percent in the third quarter, according to Colliers International.
At the same time, interest from developers and their investors in well-located suburban multifamily proposals has never been higher, according to Gina Dingman, a principal with Golden Valley-based apartment building broker NAI Everest.
"There's a lot of projects flowing in the downtown areas now, so developers are looking more closely at the suburbs," she said. "There's an unmet demand out there, and much of it is coming from retiring suburban baby boomers who, when they sell their homes, want to stay closer to home rather than move downtown."
Historically, there has been very little new suburban multifamily product delivered in decades, with much of the existing Twin Cities inventory built in the 1980s.
"What little new construction there has been has leased up quickly, which shows there's a healthy demand for it," she noted.
Apartments plunked down in the middle of a suburban business park can make up for a lack of walking-distance amenities by being close to major transportation access points, Dingman said, such as the Interstate 694/Lexington Avenue interchange in the case of the Shoreview project, or a planned light rail transit station in the case of Rize at Opus.
Don Jacobson is a freelance writer in St. Paul. He is the former editor of the Minneapolis-St. Paul Real Estate Journal.