Each year, developers and property owners from downtown Minneapolis gather to talk shop at an event called the Downtown Development Summit.
This year's gathering, held last week in, ironically, Golden Valley, offered a mix of market updates, forecasts and gossip.
Here's some of what we heard:
• On the topic of why there's so little condo development in Minneapolis, Kristin Rowell, an attorney with Anthony Ostlund Baer & Louwagie, spoke of ongoing concerns about the state's construction defect laws, which put developers on the hook for a decade for certain structural defects. That's stifling condo development in the city. She said that in many cases, the fear of such litigation is greater than the risk. She noted several recent cases that have been dismissed because developers successfully asserted that plaintiffs failed to report the defects in a timely fashion. The takeaway: Changes to the law are warranted, but developers aren't as vulnerable as they think.
• Another record year for Twin Cities apartment sales? "We will hit another record," said Abe Appert, first vice president CB Richard Ellis. Investors from elsewhere continue to snap up Twin Cities apartment buildings and pay record prices. Appert predicts total volume will exceed $1 billion by the end of the year. Even so, that's considerably lower than $3 billion in sales transactions expected this year in Denver, a metro area of comparable size to the Twin Cities. Appert predicts that rising valuations will lead to higher taxes, which building owners will pass on to renters.
• Developers and urban planners have been talking about turning Portland Avenue in downtown Minneapolis into a "residential corridor" of new and existing housing developments. That includes a full-block revamp by Kraus-Anderson, which plans offices, a hotel, brewery and 17-story tower with more than 300 apartments at the corner of 8th Street and Portland. John Campobasso, the company's marketing chief, provided a few updates on the project. To cater to families who want to live downtown, he said the tower will include a higher proportion of three-bedroom apartments than most buildings. And to create a more lively streetscape, the base of the building will be lined with townhouse-style rentals and will have a 6- to 10-foot setback that will create more space along the sidewalk.
• When it comes to the office market, there was plenty of talk about the lack of new supply and repositioning of existing assets. Mark McCary, CBRE senior vice president, rattled off compelling statistics about the drop off in numbers of new office buildings. From 1985-2000, the Twin Cities added 124 structures, or 26 million square feet, to the office market. From 2001-2010, the region added 29 buildings, or 4 million square feet. And from 2010-2015, the market has only seen one new office building constructed, adding just 65,000 square feet of space.
• Hotels are so hot in downtown Minneapolis, the topic was given its own panel. Hampton Inn & Suites, AC by Marriott, Hyatt Centric and Radisson Red are hotels recently built or currently under construction while the Embassy Suites and Hewing Hotel are new lodging options in underutilized, historic structures. "We are in the sixth inning of the hospitality cycle," said Tom Lander, who works in the hotel unit of construction firm Mortenson Co. "There's a $600 million hospitality backlog across all markets."
Jim Buchta and Kristen Leigh Painter