When TCF Financial Corp. said last week that it plans to move 1,150 employees from downtown Minneapolis to a campus in suburban Plymouth, the news gave city boosters pause.
“We’re disappointed,” said Steve Cramer, CEO of the Minneapolis Downtown Council, a business group. “But devastated? Certainly not.”
But the Massachusetts-based owner of TCF Tower and Bank Building may opt to redevelop the smaller of the two buildings, a four-story bank structure that dates to the early 20th century, into a new office tower, said Will Friend, vice president and regional director for owner Franklin Street Properties Corp.
Should that occur, the new tower would be the first erected in the downtown core since 2001, when 50 S. 6th St. opened, according to Russ Nelson, veteran office broker.
“No one ever wants to lose a prominent tenant,” Friend said. “But this could be a real opportunity for redevelopment.”
It’s too early to say whether that will occur, but the possibility took some of the sting out of TCF’s announcement, which came last Monday. The Wayzata-based lender said it was consolidating its Minnesota employee base, currently about 3,000, to a new campus called the Plymouth Corporate Center. Minneapolis employees will move sometime in 2015.
During the Great Recession, many businesses opted to downsize their office needs — either as a cost-saving measure, or due to employee cuts or the more-efficient use of space. In TCF’s case, the move is considered a consolidation rather than a downsizing.
“Even if firms have not cut jobs, they are working differently and don’t require as much space when their leases expire or they relocate,” said the January Compass report prepared by Cushman & Wakefield/NorthMarq, a Bloomington real estate firm. The report predicts “more shakeout” in the office sector this year.
That’s not to say new office construction on the periphery of the downtown core has been stagnant in the past year or so.
Work has begun on two 17-story office towers for Wells Fargo & Co. that are part of a $400 million mixed-use development on the east side of downtown, near the new Minnesota Vikings stadium. The National Bone Marrow Donor Program/Be the Match nonprofit organization said it was relocating to new space in the North Loop near Target Field. And Xcel Energy Inc. is expanding its downtown footprint along Nicollet Mall with a new office building across from its headquarters, right next to a 26-story luxury apartment tower being built by Opus Development Inc.
Meanwhile, Friend, of Franklin Street Properties, said ongoing upgrades to the 17-story TCF tower at 121 S. 8th St. will step up leasing activity after the bank’s impending departure.
“I’m very optimistic over the way the market is trending in downtown Minneapolis,” he said.
“It’s a big hit anytime 1,000 people leave downtown; you definitely feel that,” said Brian Woolsey, managing director and principal at Cassidy Turley, a real estate firm. “But this isn’t the first time we’ve seen it. Our city has the capacity to take on additional vacancy.”