Office, Multifamily Developers Capitalize on Growth in Twin Cities’ West End


Brian Woolsey, DTZ

You can hardly open the local paper lately without reading that “Downtown is hot right now; urban living is great.” Yes, downtown is booming. The suburbs are also riding the wave of new mixed-use development and could see more success. It may surprise some, but office vacancy rates and rental rates along I-394 and I-494 rival, and sometimes trump, downtown Minneapolis.

The message is clear: convenience has value. The idea of a mixed-use neighborhood where people are living, working, shopping and having fun in one place is a relatively new concept to the Twin Cities. Minneapolis no longer turns into a ghost town after 6 p.m., but many people don’t want to live downtown.

They find it too congested and far from work, with little green space and few parking options. If only there was a way to have the vitality of a mixed-use neighborhood without the drawbacks of the concrete jungle, right? Today that question is answered all around the metro area.

West End’s Advantages
In particular, the West End region of the Twin Cities shares that same long-term vision. With a strong office market long in place, Duke Realty’s addition in 2009 of The Shops at West End, a 350,000-square-foot lifestyle retail center, sparked growth that has escalated into $202 million of planned development over the last six years. Located at I-394 and Highway 100, the West End is just 10 minutes from downtown and features office, retail, restaurants, bars, apartments and homes within easy walking distance.

Already a shopping destination, the West End’s green space has appeal too. Cedar Lake Trail and Midtown Greenway Trail are popular metro-area bike paths that follow former railway lines and will soon connect at the West End. A new park — Central Park West — is being built in the center of the development. Although the West End’s transformation over the last six years has been significant, future plans for the area are truly remarkable.

Development Surge to Come
It’s clear that investors and developers recognize the appeal of the West End with $285 million of development set to begin in 2016 — 1.5 times the previous six years combined. Some of the growth will be in the office market where rents are increasing 40 percent faster than the metro average. Plans call for Excelsior Group to construct two 11-story office buildings with up to 700,000 square feet of Class A space.

Another area of growth is the multifamily market, driven in part by a nationally hot housing trend. Many people, particularly Millennials, choose to live and work in urban areas. But residential developers strategically look ahead to when this generation’s needs change for children and pets. With an eye on the West End’s rental rates of $2.20 per square foot, which match new downtown apartment projects, developers are moving forward.

DLC Residential is building the 158-unit Millennium at West End apartments, while Trammel Crow builds the 173-unit Arcata apartments. Both will be completed this year. Future developments will eventually double the West End’s housing inventory. Dolce Living plans to construct two six-story apartment buildings with a total of 400 units, and TPI Hospitality has announced that it will build a 150-unit hotel.

Convenience Is Catalyst
Suburban areas are adopting density in urban-like cores to create city centers — offering the best of both suburban and urban living. Convenience is crucial to growth as people look for ways to simplify their lives. Strong retail centers seem to be leading the charge as exemplified by retail expansion plans in Bloomington and Edina. The Mall of America in Bloomington is adding another hotel and office tower. Edina, home to the first fully enclosed indoor shopping mall in the country, is expanding its multifamily offerings near the mall and offices.

This trend will continue in other areas of the Twin Cities that already have two of three types of development: retail, multifamily housing or office. Developing the missing component will be necessary to achieve the live-work-play environment so popular today.

— By Brian Woolsey, managing principal, DTZ. This article originally appeared in the June 2015 issue of Heartland Real Estate Business.

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