Twin Cities suburbs confront post-COVID office vacancies

In a few years, an Eden Prairie office building that once housed IT consultants could become an assisted living facility. A developer wants to build affordable apartments where a small office park now stands in Edina. And in Plymouth, a 450,000-square-foot office building was razed last year to make way for apartments.

Just like Minneapolis and St. Paul, Twin Cities suburbs are finding that, post-pandemic, residents need fewer offices and more homes, labs, warehouses — anything besides cubicle farms. Big companies are trying to figure out if they still need the hundred-acre campuses they built or bought before the work-from-home era, while smaller companies are pondering offices with less square footage but more glitz and amenities to lure workers.

Emptying offices could spell trouble for first- and second-ring suburbs, which drew companies with abundant space in the 1960s and 1970s, building their tax bases on corporate headquarters that now sit empty.

"We do have a lot of office space, a lot of it vacant," said David Lindahl, Eden Prairie's economic development director.

Every city is dealing with the same issue, he said: "If you have offices in your communities, there are vacancies."

New uses

Not all office buildings will be easy to convert to homes, like the office-to-assisted-living development proposed in Eden Prairie, which could eventually house 112 people.

Recently, Lindahl said, he was interested to see a proposal to use a Chicago building to grow produce indoors. Maybe there are Eden Prairie buildings that could be suited for indoor agriculture, he said — or even commercial cannabis cultivation in a few years.

In nearby Bloomington, officials have focused on developing a semiconductor manufacturing hub. And Eagan has built some of the Twin Cities' largest post-office projects in recent years — even before the pandemic. A Blue Cross Blue Shield office became apartments. The former Boeing office was torn down to make way for a shopping center and restaurants. The old Northwest Airlines campus has become Viking Lakes.

The churn continues around the metro area as companies announce they are abandoning suburban offices, such as Wells Fargo leaving its leased space in St. Louis Park, UnitedHealth listing its Minnetonka headquarters for sale and UNFI deciding not to renew its lease on its 107-acre Eden Prairie campus.

A new balance of commercial and residential property could have huge implications for cities' tax bases — especially if commercial buildings become residential buildings taxed at lower rates. But Jeremy Barnhart, Eden Prairie's city planner, said so far leaders in the west metro city haven't approved many commercial-to-residential projects.

Barnhart gets a lot of inquiries about converting commercial properties to a residential use, he said, but the assisted living facility is the only one approved so far. Sewer infrastructure is a major complication, he said, and worries about traffic can make apartments and condos a hard sell for neighbors.

Wait and see

Lindahl said he likes to stay optimistic about the future of office space. Office workers might come back to Eden Prairie, though maybe with new companies.

"I do see the suburbs as still being a desirable location for a lot of businesses and workers," he said.

Free parking can be a draw, he said, and some office areas will be close to the Green Line light rail when the extension opens.

It might take two or three years for a large building to attract a tenant, he said, but something often happens.