By Reed Christianson
Much like Oklahoma in the Land Rush of 1889, the Minneapolis Central Business District (CBD) has become a favorite destination for suburban companies seeking to relocate.
With headcounts ranging from 10 to 1,000 people, many of these firms have grown frustrated in their attempts to attract and retain top talent. Drawn not by acres of raw prairie but by millions of square feet of office space, companies large and small are staking claims in amenity-rich downtown locations that may well boost recruiting.
A mere six years ago, only one company had made the move from the suburbs to downtown Minneapolis. Since that time, however, firms relocating from outlying submarkets have absorbed a consistent 500,000 square feet annually in the CBD. In addition to trendy tech companies, employers making the move include advertising agencies, engineering firms, all-terrain vehicle manufacturers, law firms and even a 250,000-square-foot headquarters for a bed manufacturer.
A few savvy owners of commercial real estate recognized the trend early on. With the assistance of their real estate advisors, these landlords took bold steps to renovate and reimagine the office product they would offer. New amenities and building additions include high-end tenant lounges, rooftop terraces, luxury conference facilities, cutting-edge fitness studios, bike lockers, golf simulators and, yes, even nap pods!
Many building owners spent millions of dollars to achieve the look and provide the experience companies were after. Those collective investments have convinced more suburban companies to join the migration to downtown Minneapolis, and many have agreed to pay 20% to 40% more in net rent than they had been paying before relocating.
The variety and quality of space available to occupiers willing to pay premium CBD rent offers several competitive advantages, particularly for recruiting. Minneapolis’ high-end properties enable tenants to reflect their unique brand and culture through their space. Those firms are also able to give employees access to a vast array of cutting-edge amenities onsite and in the larger CBD, enhancing each employer’s ability to attract and secure the skilled talent they struggled to draw before moving downtown.
The increasing activity in the business district is accelerating population growth and the introduction of new experiences. In the last 24 months, 37 new restaurants and two professional sports venues have opened in the Minneapolis CBD. Downtown population has grown from 5,000 five years ago to 40,000 today and is projected to reach 70,000 by 2026. Thanks to the expanded labor pool, some companies report that the job openings they post for downtown positions get four times as many applicants as those in suburban locations.
Where does this leave the suburban landlords? Some are struggling to retain existing tenants and keep them from trading trees and grass for concrete and glass. Many suburban building owners are taking cues from the CBD, however, and are adding glitzy amenities and lounges to their properties. Some have elevated the convenience factor by providing free parking. But as more workers show their willingness to take the bus, ride the train or bicycle to work downtown, the Minneapolis CBD continues to capture the attention of companies in search of long-term real estate solutions.
As Principal in Transwestern’s Minneapolis office, Reed Christianson provides insight and leadership to the company’s brokerage staff and downtown office portfolio.