Minneapolis officials looking for developer for Public Service Center block

The city of Minneapolis is seeking a development partner for the city-owned properties in the heart of downtown known as the Public Service Center Block.

It has issued a request for qualifications, seeking a developer to work with the city on new plans for the site, possibly including housing, hotels, offices, retail or commercial buildings that are at least 10 stories tall, as well as other uses such as parking.

The redevelopment site has long been the subject of discussion among City Council members, economic-development groups and city boosters. It now houses the well-worn Public Service Center, the City of Lakes building and two other city-owned parcels, which combined comprise about two-thirds of the block bounded by S. 3rd and 4th streets and by S. 2nd and 3rd avenues.

Current city workers on the block will be relocated nearby in 2021 to the new city office building being built next to the Hennepin County Government Center on the corner of S. 5th Street and 4th Avenue, officials said.

The city is looking to move forward with the planning for redeveloping the properties as developers and brokers struggle to collect rent and fill office, hotel and retail space amid a pandemic-induced economic downturn. Minneapolis's downtown has largely resembled a ghost town as thousands of workers work remotely and as thousands of traditional convention and business visitors avoid travel.

"Their timing couldn't be worse," said Lupe Development Vice President Steve Minn, whose company has redeveloped parcels of Lake Street and Franklin Avenue and other parts of the city.

City officials anticipate the planning process could take two years before construction begins. By that time, they are hopeful that economic conditions will have improved.

City Council Member Lisa Goodman, who chairs the city's economic-development and regulatory-services committee, said that the "flexibility of downtown zoning allows for a wide variety of uses and the ability for unlimited height makes this a very attractive development site."

But Minn said he questions the timing of the city's inquiries. "There is no reason to pursue more hotels right now. There is no need to pursue more offices right now," he said. "And there is certainly no reason to pursue retail or residential right now. Not one of those four market segments is doing well anywhere, let alone in downtown. So this is not a good idea."

The hunt for a development partner comes at a difficult time for the city, during the midst of a pandemic and just days after more rioting hit the streets of Minneapolis.

"There are some questions about investing in Minneapolis. We need to shore up people's confidence right now over the public-safety issue in particular," said Steve Cramer, CEO of the Minneapolis Downtown Council.

Current challenges aside, some see potential. Drew Johnson, senior vice president of Oppidan Investment, said the offer to redevelop most of the Public Service Center block is unlikely to attract residential builders but could inspire an investment by a partnership struck between a large developer and brokerage firm that has lined up trying to help a large commercial tenant or tenants.

Dee DePass • 612-673-7725