Big construction projects downtown, at U have peaked; action will move to neighborhoods and suburbs

Chris Grzybowski, a part­ner in the local of­fice of Utah-based Big-D Construction, is kind of a prox­y for the Twin Cities build­ing boom that in Minneapolis alone is heading for a record four years in a row of $1 bil­lion-plus in com­mer­cial-resi­den­tial build­ing per­mits is­sued.

"We've been for­tu­nate," said Grzybowski, 51, a Wis­con­sin na­tive who moved to Minnesota with his fam­i­ly in 2013. "We've got about $180 mil­lion worth of pro­jects done or underway this year.

"It's been most­ly mul­ti­family; also public works pro­jects; a bank build­ing, a res­tau­rant. We're di­verse. We also have put some pro­jects on Big-D's port­folios in Col­o­ra­do, Washington and Utah through re­la­tion­ships here. The own­er of Big-D is pret­ty hap­py with our per­form­ance."

Yet Grzybowski and oth­er vet­er­an con­trac­tors also be­lieve the pace of de­vel­op­ment, at least in down­town Minneapolis and at the University of Minnesota, will slow over the next year or so. Minneapolis topped a re­cord $2 bil­lion in con­struc­tion per­mits pulled in 2014. About a quar­ter of that was a big chunk of Vi­kings sta­di­um con­struc­tion and re­lated pri­vate de­vel­op­ments in Downtown East, the last un­de­vel­oped down­town tract.

Minneapolis crossed $1 ­bil­lion for 2015 in Sep­tem­ber, a­gain thanks to about $120 mil­lion in con­struc­tion per­mits pulled for the Wells Fargo of­fice build­ings that are near­ly com­plete in Downtown East and the near­by Port­land Towers con­do­mini­ums on Sev­enth Street, ac­cord­ing to city re­cords. But this year should fall short of last year in terms of vol­ume in the city, par­tic­u­lar­ly down­town. And things may be cool­ing in the sev­er­al years-hot loop that has wit­nessed its big­gest boom ever since 2010.

"Po­ten­tial­ly there will be some pain for de­vel­op­ers," said Kelly Doran, CEO of Doran Cos. and a de­vel­op­er-build­er in the Twin Cities for 30-plus years.

Doran, who has been en­gaged in at least $100 mil­lion in pro­jects for sev­er­al years, in 2009 broke ground on upscale stu­dent hous­ing on the U's East Bank cam­pus, and apart­ments for pro­fes­sion­als and re­tirees down­town and near St. Anthony Main.

He's late­ly shift­ed his fo­cus to mul­ti­family hous­ing in Ma­ple Grove and oth­er sub­urbs.

Some emp­ty-nest­er baby boom­ers are sell­ing hous­es into a sol­id mar­ket and choos­ing to stay and rent in their home com­mu­ni­ties.

Doran, the first de­vel­op­er in town to get fi­nanced and start build­ing pri­vate pro­jects in late 2009, said: "Wall Street looks at real es­tate as a com­mod­i­ty but it's not. It's a local game. You can have areas where its over­built in one neigh­bor­hood … and the U of M is now over­built.

"And al­most all our cam­pus build­ings are at least 95 percent leased. The de­bate is wheth­er these [neighborhoods] can take any­thing more."

Builders such as Doran and Big-D are swing­ing to the sub­urbs and parts of Minneapolis and St. Paul with mar­ket-rate hous­ing.

CEO Alan Arthur of nonprofit de­vel­op­er Aeon and a vari­ety of part­ners have spent about a dec­ade on a $50 mil­lion over­haul of the once-blight­ed in­ter­sec­tion of Port­land and Franklin ave­nues in south Minneapolis with 250 hous­ing units in four build­ings that bear mar­ket rents for fami­lies of up to $1,600 per month but also af­ford­a­ble ef­fi­cien­cies and one-bed­rooms for folks mak­ing $12 an hour. The de­vel­op­ment in­cludes re­tail, child care and of­fice space.

How­ever, af­ford­a­ble hous­ing of­ten takes years to de­vel­op through a patch­work of finan­ci­ers, in­clud­ing banks, foun­da­tions, gov­ern­ment and tax cred­its for af­flu­ent investors who par­tici­pate. A few of these deals are now com­ing to fru­i­tion but not en­ough to sup­plant the ac­tiv­i­ty cre­at­ed by the tax­pay­er-fi­nanced Vi­kings sta­di­um and the oth­er down­town pro­jects.

Ja­mey Flan­nery, own­er of Flan­nery Construction in St. Paul, which does up to $20 mil­lion a year in pro­jects, said she's bal­an­cing af­ford­a­ble-hous­ing pro­jects with nonprofit part­ners with small com­mer­cial de­vel­op­ments.

"We're pa­tient and we came out of the re­ces­sion very lean and grew slow­ly since 2011," said Flan­nery, one of the few fe­male con­struc­tion-firm own­ers. "This year was very busy. But it takes a long time to de­vel­op af­ford­a­ble hous­ing with the 'al­pha­bet soup' of fund­ing. And we do light com­mer­cial, un­der $2 mil­lion for most jobs, such as the new 'I­tal­ian Eat­er­y' on Cedar Avenue S.

"We're not ex­act­ly Mor­ten­son Construction," (general contractor on the $1 billion-plus Vi­kings sta­di­um).