Retail projects help Eagan bounce back after job losses

  • Article by: SUSAN FEYDER , Star Tribune
  • Updated: August 18, 2012 - 7:13 PM

The departure of Lockheed Martin and Delta hurt the south metro area's economic powerhouse, but now it's on the rebound.

Two years after a spate of bad news, including the loss of Lockheed Martin's corporate campus and cutbacks by Delta Air Lines, the city of Eagan appears to have regained its economic swagger.

Tech-support company Stream Global Services has announced plans to relocate its headquarters from suburban Boston. MISO, which runs the Midwest's regional electrical grid, plans to move its operations from St. Paul. A North Carolina company hopes to begin construction of a data center this fall.

And while big retail development in other parts of the Twin Cities is yet to rebound after the recession, Eagan can boast of two major projects. One, a high-end outlet mall, is seen as a regional destination occupying a long-vacant parcel along Cedar Avenue.

The other, on the former Lockheed Martin site, already has drawn interest from potential tenants including Whole Foods and Trader Joe's, according to local real estate experts. At 500,000 square feet, it will have big boxes and smaller stores, and it would be larger than specialty centers such as the Galleria in Edina and Woodbury Lakes in Woodbury and about the same size as Knollwood Mall in St. Louis Park.

Richard Grones, whose Edina-based Cambridge Commercial Realty specializes in the retail market, said the two projects are the Twin Cities' first significant retail developments since the recession, other than the expansion at the Mall of America.

"There is so little that is new. They are the only game in town," Grones said.

Eagan still faces challenges, including filling a 190-acre office campus that was the original home of Northwest Airlines. Delta, which bought Northwest in 2008, emptied the buildings as part of a larger move of hundreds of jobs out of the city. One deal to sell the property fell through in 2010, and there have been no other takers despite a price cut by Delta earlier this year.

"This is a very patient community," said City Administrator Tom Hedges. He said he's confident the property will get taken up by one or more businesses.

Hedges said Eagan doesn't rely on financial incentives to chase businesses, but assertively markets the city's advantages, including its carefully developed commercial base and prime location close to Minneapolis-St. Paul Airport, both downtowns and interstates 35E and 494.

It's a formula that has made Eagan the economic powerhouse of south-suburban Dakota County. As of 2011, the city accounted for almost one-third of the county's private sector workforce, according to the Minnesota Department of Employment and Economic Development. It outpaced the county in overall job growth in the past decade, and its rebound from the depths of the recession has been stronger, even after the loss of more than 1,000 jobs from Lockheed and Delta alone.

"It's always been an attractive place for companies to locate," said Steve Buss, a senior vice president in the Twin Cities office of commercial real estate firm CB Richard Ellis. Buss said he wasn't surprised Stream Global chose Eagan, even though the firm engaged in a well-publicized courtship with Apple Valley as it considered south-metro sites. Eagan also draws businesses with its large skilled and educated workforce, Buss said.

Stream Global and its commercial broker declined to comment on the move. The new facilities will include a corporate headquarters for 40 to 50 employees and a call center for at least 300 workers.

Hedges said Stream Global contacted city officials about its interest in Eagan a year ago, long before the talks with Apple Valley surfaced. He said the company considered leasing a former Blue Cross and Blue Shield of Minnesota building but backed off, returning several months later with the deal for a different Eagan property.

The former Blue Cross building remains vacant. Meanwhile, another large office property, the former headquarters of Buffets Inc., has been taken over by Prime Therapeutics, which is expanding with plans to add 300 jobs in the coming years.

City officials say the two retail projects are not envisioned as job creators but address the need for more shopping, dining and entertainment options. "It's an under-served market, given the sheer size of Eagan and what it draws because of the arterials," said Mike Sims, a principal at the Minnesota office of Mid-America Real Estate Group.

Grones said he already has several restaurants expressing interest in the Lockheed site project proposed by CSM Corp. of Minneapolis. Others taking a look include Whole Foods, Trader Joe's, Cabela's, Sports Authority, Dick's Sporting Goods and some midsize apparel merchants, he said.

CSM Vice President Thomas Palmquist declined to name specific prospective tenants but said the developer is aiming for a mix that would include sporting goods, soft lines and home urnishings.

Eagan has smaller community shopping centers, but nothing on the scale of the proposed development. Grones said the stores in Eagan's community centers lack the dimensions sought by national retail chains.

CSM owns the 50-acre Lockheed site at the busy intersection of Pilot Knob and Yankee Doodle roads and has submitted preliminary plans to the city. It expects to start construction early next year with completion in late 2014.

Construction of the outlet mall by Baltimore-based Paragon Outlets is proceeding on a similar timetable. The $14.7 million sale of the city-owned 29-acre site near Hwy. 13 and Cedar Avenue, along the soon-to-open Cedar Avenue bus rapid transit line, was approved last month. The city will use tax-increment financing to fund the $14.8 million cost of building a parking ramp.

Kelvin Antill, a Paragon development partner, said it is not unusual for the company to get public financing for off-site improvements. "The city wants the ramp to facilitate additional development," he said. The outlet mall will be the first in Minnesota for Paragon, whose other malls are in Texas, California and Florida.

"We focused on Eagan fairly early," said Antill of Paragon's search for Twin Cities area sites. The developer prefers sites that are centrally located, have a solid base of upper-middle income residents and also draw tourist traffic. "The Mall of America, the airport, the zoo -- those all made Eagan attractive," he said.

Susan Feyder • 952-746-3282

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