Century-old St. Paul gem gets a new polish

The office market throughout the Twin Cities remains sluggish at best, and in downtown St. Paul, where the direct vacancy rate for privately owned, multi-tenant office space is around 25 percent, the situation is even more apparent.

But there are modest signs of strengthening in office demand in the city's central business district, which is being recharged by the emergence of the nearby Lowertown neighborhood. The area has become a destination for young professionals because of new housing options and an expanding nightlife scene.

There's probably no better test of whether this phenomenon is capable of affecting St. Paul's office market than 81 On Seventh, a painstakingly restored, 105-year-old former furniture warehouse and showroom on busy East Seventh Street.

The five-story landmark, which opened for tenants in 2010, has only 20 percent of its 55,000 square feet leased -- the rest, arrayed over large floorplates of 12,000 square feet each, is still for rent.

The building's local ownership group -- which records show includes retired Regis Corp. co-founder Myron Kunin -- spared few expenses when it laid plans in the last decade to buy and rehab the 1907 building, said Pat Wolf of Commercial Real Estate Services, who manages and leases the structure.

"We made our decision to renovate the big infrastructure pieces of the building before the downturn in the market [in 2008], and once you make that decision, you're committed, and making shortcuts won't work," she said.

The Class A structure features of the one-time Northern Furniture Warehouse include its original Douglas fir columns, high ceilings complete with original stamped tin, exposed brick, restored wood floors and wide windows that were originally used as showroom displays.

But are there enough of them to actually move the chronically struggling downtown St. Paul office market?

A recent report from Cushman & Wakefield/Northmarq indicated some glimmers of hope, noting downtown posted 10,207 square feet of positive absorption in the first half of the year. That raises the possibility of a full year of positive movement for the first time since 2006.

One example of the kind of tenant 81 On Seventh is seeking is Spokane, Wash.-based Ecova Inc., which operates in the energy efficiency/sustainability market. It took 15,000 square feet in the 180 East Fifth Building earlier this year.

Wolf said her building's owners so far are looking to keep its large floorplates intact and are seeking tenants who would be able to take up entire floors -- she says she has several leads on companies that like its location.

"The building is on a very busy intersection, it's scalable, we're gong to be physically connected to a 900-car parking ramp this year, and we're about three blocks from a future Central Corridor light-rail transit station," she said. "We're optimistic."

"This is an amazing space. This kind of building shows off a company, and it's going to happen," he predicted.

Kramer noted its future passageway into the Robert Street Parking Ramp will hook it up to St. Paul's extensive downtown skyway system.

"In Lowertown, they're turning old warehouses like these into condominiums, and that's good and important, but we need office space like this, as well," he said. "One of Pat's challenges is you need to find a tenant who doesn't just want a typical space. But she'll find somebody, and it will be a company that has a 'St. Paul vibe' to it."