A real estate investment trust and local developer are planning to build a 14-story office tower on Interstate 394 next to the Carlson Center in Minnetonka.
This is welcome news for the Twin Cities office market, which has largely stood on the sidelines of the recent recovery while scores of residential and mixed-use projects have gone up.
But the project will only happen if the owner, Artis REIT, can find an anchor tenant. That will dictate whether the building can open in 2017 or if its timeline is delayed.
"We are hopeful that we can kick it off within the next 12 months, if we can find that right lead tenant," said Brian Wasserman, CBRE's senior vice president.
The new project is one of only a few office project announcements in recent years to be made without a signed user for the space. This is referred to as speculative construction, a type of office development that has lacked strong market support in the Twin Cities. Monday's announcement signals the start of a marketing and leasing campaign led by CBRE for the project.
But the Winnipeg-based REIT and its construction partner, Minneapolis-based Ryan Cos., are confident about the I-394 corridor, which has been a particularly robust geographic region for office growth. Artis bought 601 Carlson Parkway, which is one of the two adjacent towers to this proposed site, last year for $75 million.
The western suburban submarket had the lowest vacancy rate in the Twin Cities, 12.2 percent in the third quarter of 2015, according to research from real estate firm Jones Lang LaSalle. Asking rents for Class A buildings, the top tier in office space, were nearly as high in the western submarket as downtown Minneapolis — $30.50 a square foot compared with $30.76 a square foot.
"The 394 market is as tight as it's ever been, especially for Class A," said Wasserman. He added that many corporate users are having a difficult time finding enough empty floors next to one another where they could relocate their companies.
