One of the most expensive neighborhoods for renters in the Twin Cities could get a big batch of more affordable apartments.

Minneapolis-based Schafer Richardson has scrapped its plans to convert a nearly century-old warehouse in Minneapolis’ North Loop district into offices and will instead build 104 income-restricted rentals.

“That development is now envisioned as entirely affordable,” said Maureen Michalski, director of development for the company.

If built, the Redwell would be by far the biggest income-restricted apartment project in an area where rents are among the most expensive in the city.

Mary Bujold, president of Maxfield Research, said the average rent in downtown, which includes the North Loop, was $1,727 at the end of the first quarter. “New properties’ rents are going even higher,” she said. “There is a significant need [for affordable units].”

Schafer Richardson had planned to convert the building at 1000 N. 3rd St. and a new addition into about 60,000 square feet of office space. Instead, the company will demolish the building and construct a low-rise apartment building.

The warehouse was most recently known as the Zuccaro’s Produce building, but it was originally built in 1922 for the W.T. Rawleigh Co. to manufacture medicines and other products for at-home remedies, according to a city staff report. In the 1970s, Astad Corp. used the building for light assembly work, and in the 1980s Zuccaro’s Produce bought the building and used it for fruit, vegetable and bulk food distribution and wholesaling.

Schafer Richardson paid $1.9 million for the building in May 2017. That same month the developer submitted land-use plans that called for the renovation and addition. It was approved by the Minneapolis Planning Commission last June, but late last month the company submitted new plans for the site to the Planning Commission’s committee of the whole.

Michalski said the firm made the decision to go to all-affordable rentals as it was working through the city entitlement process. She said the firm initially switched to multifamily after finding that attracting smaller commercial tenants who would lease 9,000 square feet or less would be difficult given the firm’s preleasing requirements.

Most of those users, she said, were looking to occupy space within six months or less whereas construction wouldn’t be done for 12 months or more.

The apartments will be restricted to those who earn 60 percent or less of the area median income, and the developer will partner with the Minneapolis Public Housing Authority on at least 10 project-based Section 8 vouchers in the development.

The developer has the support of the North Loop Neighborhood Association and will present its plans to a city planning and zoning committee in early June. The full City Council is expected to review the project in mid-June.

Several projects are already underway in that end of the North Loop. They include a massive 500,000-square-foot office and retail development at 419 Washington Av. N. and a 10-story, 200,000-square-foot mixed-use building.