Founders Properties’ Wade Lau: Don’t expect the Twin Cities industrial market to lose its momentum anytime soon
By Dan Rafter, Editor
Still strong. That’s the best way to describe the industrial market in the Minneapolis-St. Paul market.
What’s behind this strength? Ecommerce is still fueling much of the demand for industrial space. Companies still need distribution centers across the country to deliver their products and warehouse space to store it. And they are looking for these spaces across the country, including in the Twin Cities.
At the same time, the push to bring manufacturing back to the United States is inspiring more companies
to open industrial facilities in the country, providing another boost to industrial demand.
While the Twin Cities market isn’t a big distribution market, because of its location, the Minneapolis-St. Paul region is still seeing strong demand for industrial space.
We spoke with Wade Lau, president and chief executive officer of Minnetonka, Minnesota-based real estate investment management company Founders Properties, about the resilience of the local industrial market and what the future might hold for it.
Here is some of what he had to say.
What makes industrial properties, in the Twin Cities area and across the country, such a good asset type for investors?
Wade Lau: The investment characteristics are really solid. Vacancies have held up well over the long term. It’s an investment that cash flows, unlike office, which doesn’t cash-flow particularly well.
But there are also strong tailwinds, strong megatrends, that are benefitting industrial. Ecommerce is still a big driver of industrial demand. The need for last-mile warehouse space is not slowing. That trend Founders to page 18
Twin Cities metro area scores another big industrial lease: Schimberg Co. opens first location in Minnesota
By Dan Rafter, Editor
The suburbs surrounding the Twin Cities continue to attract new tenants looking for industrial space. An example? Just look at a recent lease in suburban Woodbury.
Schimberg Co., a regional pipe, valves and fittings supply company headquartered in Cedar Rapids, Iowa, recently opened its first Minnesota location with a new lease in the Royal Gateway Commerce Center in Woodbury. Schimberg becomes the first occupant in the commerce center’s Building B.
What attracted Schimberg to the building? John Young, vice president- advisory with Forte Real Estate Partners, represented the company in its search for the right site. He said that several factors attracted Schimberg to the Woodbury location.
One of the most important? The quality of the workforce in and around the region.
“Officials with Schimberg believed that they would have a great workforce from eastern Minnesota and western Wisconsin,” Young said. “That was a big factor
for them. And it’s a workforce particular to the industry, people who know how to run heavy equipment and drive a truck. Schimberg knew that it could attract those employees to this Woodbury location.”
Schimberg also found the right building, Young said. Royal Gateway Commerce Center Building B features 28-foot clear heights, something that was critical to Schimberg. The higher clear height allows Schimberg to do their racking properly and efficiently, Young said.
Image by wirestock on Freepik.
CONTENTS May 2025
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Founders Properties’ Wade Lau: Don’t expect the Twin Cities industrial market to lose its momentum anytime soon:
Still strong. That’s the best way to describe the industrial market in the Minneapolis-St. Paul market.
Twin Cities metro area scores another big industrial lease:
The suburbs surrounding the Twin Cities continue to attract new tenants looking for industrial space. An example? Just look at a recent lease in suburban Woodbury.
Low vacancies and steady demand: Twin Cities retail sector still ringing up the business:
Sure, there are plenty of negative headlines about brick-andmortar retail. But if you look beyond the headlines?
Two different office markets: Leasing activity on the rise in Milwaukee, still sluggish in Minneapolis:
Josh Krsnak, chief executive officer of Hempel Real Estate, has an interesting view of the Midwest office market.
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JLL report shows a Twin Cities industrial market that remains a resilient one:
The industrial vacancy rate in the Twin Cities market dropped to 4.3% as of the end of the first quarter.
Opus brings 131,578-square-foot distribution center to Dayton:
Bringing a major development to the region, Opus recently completed development of the Dayton Parkway Business Center.
Colliers report provides a bit of good news about the Minneapolis-St. Paul office market:
Eager for some good news about the Twin Cities office sector?
The Minneapolis-St. Paul office market saw positive net absorption in the first quarter of the year.
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5 top tips for affordable housing developers
Developing and preserving affordable housing is critical to addressing the nationwide housing crisis.
President | Publisher Jeff Johnson jeff.johnson@rejournals.com
Managing Editor Dan Rafter drafter@rejournals.com
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Chief Financial Officer Todd Phillips todd.phillips@rejournals.com
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Low vacancies and steady demand: Twin Cities retail sector still ringing up the business
By Dan Rafter, Editor
Sure, there are plenty of negative headlines about brickand-mortar retail, what with the high-profile closings of such retailers as Joann Fabrics and Rue21. But if you look beyond the headlines? You’ll see that the retail sector has proven resilient since the COVID pandemic.
That includes in the Minneapolis-St. Paul region, where several brands new to the area are entering the market and where retailers focusing both on their brick-and-mortar and online locations are bringing in a steady stream of business. Colliers reported in its first quarter Twin Cities retail report that the vacancy rate for the retail sector here fell to 5.6% during the first three months of the year. That represents a drop of 10.2% from the first quarter of last year.
find something where a lease might be expiring. You might find an owner who wants to enhance a property’s valuation by adding a national credit tenant.
Sometimes you need to cobble together parcels of land and make sure the puzzle pieces fit together properly.
Are you seeing retailers new to the Twin Cities area moving into the market?
Reiling-Holden: One of the interesting things I’ve seen is the sheer volume of franchises entering the market post pandemic. They have been instrumental in bringing our vacancy rate down. There has been so much franchise activity in the last three to four years. They have absorbed some of the smaller shop space.
7767 Elm Creek Boulevard, Suite 210 Maple Grove, MN 55369
What’s behind the retail success story in the Twin Cities region? We spoke with Terese Reiling-Holden, senior vice president with the Minneapolis-St. Paul retail team with Colliers, about the solid retail sector in the area. Here is what she had to say.
Are you still seeing strong demand from tenants for retail space in the MinneapolisSt. Paul market, including its suburban areas?
Terese Reiling-Holden: During the pandemic, we were worried about an influx of vacant space from tenants who didn’t have capital on hand. We did see vacant space come back on the market. But it got absorbed so fast. Now we have a record-low vacancy rate in the Twin Cities market. It’s probably the lowest I’ve seen since I’ve been in this business.
There hasn’t been a lot of new retail development of any substantial size in the Twin Cities lately. Because of the lack of new construction and the strong consumer demand we are at this unprecedented low vacancy rate.
It can be challenging for retailers to find opportunities because there isn’t a lot of space available. This has forced brokers to be more diligent to uncover opportunities that maybe in the past retailers would not have considered. We must work to uncover what might be more creative options for our retail clients.
How do you get creative when trying to find space for your retail clients?
Reiling-Holden: You have to call around on real estate that doesn’t have an “available” sign on it. You might have to go to the tax records and figure out who owns it. That can be challenging because the tax records don’t always include all the information you need. If you are lucky, you’ll
We are seeing a lot of specialty fitness concepts opening. We have seen med spa concepts entering the market. And, of course, there are always new food concepts. At the same time, we are seeing a lot of national expansion on the part of established retailers. Consumers are spending so much. I did a Dick’s Sporting Goods land deal recently. National retailers like J. Crew and EVEREVE have been active. A lot of the national apparel groups were very active in 2024 for store openings in 2025.
What types of retailers are performing well today in the Twin Cities?
Reiling-Holden: Consumers are out there spending. There is some speculation that people are early purchasing ahead of tariff hikes.
But we are seeing foot traffic increasing for furniture and home furnishings stores and for home improvement stores. Electronics stores are seeing increased traffic. A lot of people are out browsing and comparing pricing amid inflation concerns. Traffic to clothing stores has risen, too.
Since the pandemic, restaurant visits have been on the rise, too. There has been a strong rebound in people dining out. Post pandemic we did see restaurants close. But those spaces have been absorbed so fast. Today, we’ll see 10 inquiries on second-generation restaurant space for every space that is available. Restaurants remain a strong category. That is surprising with all the pressures they are under.
Miniso is expanding here. That’s a Chinese retailer and variety store that is having good success. They sell everything from stationery to makeup to toys. The stores are bright and cheerful. Customers really like these. And the price point draws in a variety of customers.
Image by Rudy and Peter Skitterians from Pixabay
Two different office markets: Leasing activity on the rise in Milwaukee, still sluggish in Minneapolis
By Dan Rafter, Editor
Josh Krsnak, chief executive officer of Hempel Real Estate, has an interesting view of the Midwest office market. Hempel Real Estate operates offices in Eden Prairie, Minnesota – serving the Minneapolis/ St. Paul market – and Milwaukee. Krsnak, then, has an up-close view of one downtown Midwest office market that remains resilient and one that continues to struggle.
The market with a resilient downtown office sector? Milwaukee. The struggling one? Minneapolis/St. Paul. What’s the difference between these two markets? Hempel said that government officials are encourag-
ing business development in the Milwaukee market. It’s easier to run a successful business here.
In the Minneapolis market? Government bodies aren’t quite as pro-business. And that makes a difference, Hempel said.
“Milwaukee is performing better than Minneapolis,” he said. “We are getting more deals done in Milwaukee than in Minneapolis, especially in downtown Milwaukee compared to downtown Minneapolis. Milwaukee is just more friendly toward business development today.”
As an example of this, Krsnak points to Fiserv, which in March of last year moved its global headquarters from suburban Brookfield, Wisconsin, to downtown Milwaukee. Krsnak said that one of the reasons why Fiserv moved into the 170,000-square-foot facility was that the Milwaukee Common Council approved a TIF package to lessen the costs that the company would face.
While this move did cost the city money, it also helped bring a key employer to downtown Milwaukee.
“Milwaukee gave them a TIF, money that Fiserv needed to help build and remodel the space they moved into,” Krsnak said. “In return, Fiserv has required that their employees be in the office three days a week.”
That helps bring more activity to downtown Milwaukee, a benefit for the surrounding retailers and restaurants.
Another big office move in downtown Milwaukee? Northwestern Mutual’s downtown office tower redevelopment hit a key milestone this March, the topping off of the 18-story building.
Northwestern Mutual expects the $500 million redevelopment project to wrap up in 2027. The company is moving about 2,000 employees from an office in Franklin, Wisconsin, to the downtown location.
This development is partly fueled by $30 million in TIF funds. The Common Council approved this TIF in 2023. As with Fiserv, Northwestern Mutual is requesting that its employees work in the downtown office three days a week.
Leasing to page 17
BUILDINGS ARE COOL .
We should know. We design the behind-the-walls systems that bring them to life.
Image by StockSnap from Pixabay.
JLL report shows a Twin Cities industrial market that remain a resilient one
By Dan Rafter, Editor
The industrial vacancy rate in the Twin Cities market dropped to 4.3% as of the end of the first quarter. It’s yet another sign that the Minneapolis-St. Paul industrial market remains strong.
In its first quarter Twin Cities industrial market report, JLL said that the Minneapolis-St. Paul area saw several large industrial leases in the first three months of the year.
Big leases during the quarter included Lumbermen’s lease of 245,949 square feet of new spec industrial space in the Cottage Grove Logistics Park I and Schimberg Company, which leased 102,925 square feet of new spec space at Royal Gateway Commerce Center B.
HM Cragg leased the entire 92,224 square feet of a build-to-suit as part of a two-building redevelopment of the former American Family office campus in Eden Prairie.
While those big leases made headlines, overall industrial leasing activity slowed somewhat during the first quarter, JLL reported. The slowdown, though, was a fairly minor one.
The Northeast submarket led all submarkets in leasing activity during the first quarter, accounting for 37% of leasing activity during this time, JLL reported. The Southeast submarket accounted for 30% of leasing activity in the first quarter, while the Northwest accounted for 23% and the Southwest 10%.
New development activity might soon be rising, too, with JLL reporting that at least five additional industrial projects totaling more than 1 million square feet could break ground in the next one to two quarters.
The demolition of the former Thomson Reuters office building began in the first quarter. The office property will be replaced by a mixed-use redevelopment that will include space for a future Amazon facility.
Investment sales were led by a $99.5 million acquisition by PGIM Real Estate of an 840,000-square-foot Amazon fulfillment center in the Southwest submarket. The quarter also saw the $75 million acquisition by Taurus Investment Holdings of a 16-building, 636,051-square-foot small-bay portfolio.
And how do the numbers look? JLL reported that the Twin Cities market saw more than 1.46 million square feet of net industrial absorption during the first quarter. JLL reported that more than 2.5 million square feet of industrial space was under construction as of the end of the quarter, while 607,502 square feet of new industrial space delivered during the first three months of 2025.
Image by freepik.
Opus brings 131,578-square-foot distribution center to Dayton
By Dan Rafter, Editor
Bringing a major development to the region, Opus recently completed development of the Dayton Parkway Business Center, including the tenant improvements for TurbinePROs, a North American field services provider for rotating equipment at power generation and process plants.
TurbinePROs is the project’s first tenant.
Dayton Parkway Business Center is a 131,578-squarefoot Class-A speculative distribution and light manufacturing facility located at 17800 Territorial Road in Dayton. The development sits on a 10-acre site easily accessible from the new Dayton Parkway Interchange and Interstate-94.
“We’re excited to announce the early delivery of Dayton Parkway Business Center and to offer the northwest submarket a unique new leasing opportunity with access to and visibility from Interstate 94,” said Joe Mahoney, senior director of real estate development with Opus, in a statement.
“Already the development has received a favorable response, as evidenced by TurbinePROs’ early commitment to the project and additional user interest in the remaining space. Coupled with robust northwest submarket leasing activity, we’re confident the project will continue to be well received by users.”
TurbinePROs is leasing 87,597 square feet of the facility, which includes 12,000 square feet of office. The space replaces the company’s 30,000-squarefoot Rogers, Minnesota, site, which could no longer support the 16-year-old company’s rapid growth over the last five years.
Among the facility’s most notable features is a pair of drive-thru dock doors to accommodate forward-facing indoor loading and unloading of two semi-trucks simultaneously.
“Our new headquarters in Dayton Parkway Business Center delivers an exceptional office and shop with easy access to Highway 94 and maneuverability for trucks carrying our customized tool connexes and boxes. It also provides the ability to conduct all opera-
tions indoors and ample room for future growth,” said John Loubier, president and CEO of TurbinePROs, in a statement. “Opus was tremendous to work with. They were collaborative, accommodating and flexible. And they delivered our space under budget and ahead of schedule.”
According to Loubier, TurbinePROs is currently transitioning into its new location and will be fully operational by the end of April.
Dayton Parkway Business Center’s remaining 43,091 square feet offers prospective tenants six dock doors, expandable to 10; two drive-in doors; a clear height of 32 feet; 115 vehicle parking stalls; and 14 trailer parking stalls. Additional amenities include natural lighting and motion-activated occupancy sensors. A new right-hand turn lane on Dayton Parkway provides trucks easy and direct access onto the property.
Opus was the developer, design-builder and architect of record on the project. Dan Swartz and Austin Lovin of CBRE are marketing the remaining space for lease.
Dayton Parkway Business Center (Photo courtesy of Opus.)
Colliers report provides a bit of good news about the Minneapolis-St. Paul office market
By Dan Rafter, Editor
Eager for some good news about the Twin Cities office sector? The Minneapolis-St. Paul office market saw positive net absorption in the first quarter of the year. That’s the first time this has happened since the fourth quarter of 2023.
That’s the big takeaway from the first quarter 2025 Twin Cities office report released earlier this month by Colliers.
The Minneapolis-St. Paul office market saw 109,000 square feet of positive net absorption in the first quarter, Colliers reported, with smaller tenants largely driving increased demand.
According to the report, tenants seeking under 25,000 square feet of space were most active in the local office market during the first quarter. And in further good news, Colliers said that the availability of sublease space has now dropped in the Twin Cities market for six consecutive quarters. That includes in downtown Minneapolis, a key submarket.
Not all the news is good, though. Larger corporate users are still not as active as in years past. Office sales volume continue to decline, with those transactions that do close occurring at substantial discounts, Colliers reported.
The Twin Cities office vacancy rate still remains high at 22.1%, though that is a slight decrease from the 22.3% overall vacancy rate in the fourth quarter of last year. Construction activity is also sluggish, with just 125,000 square feet of office space under construction as of the first quarter of the year.
The sector’s overall asking lease rate stood at an average of $30.78 a square foot in the first quarter of 2025, up from $26.17 in the first quarter of 2024.
Don’t expect office sales volume to increase anytime soon, though. As Colliers reported, the office capital markets struggled in the first quarter, posting less than half of the sales volume that the market saw
at the same time a year earlier. And major office sales are coming at discounted prices.
An example? Ameriprise Financial Center in the Minneapolis CBD sold to Onward Investors for $6.25 million, a cost of just $6.51 a square foot.
Many of the other office sales in the area consisted of redevelopment and adaptive reuse transactions. The Thomson Reuters campus in Eagan, Minnesota, is an example, selling to Ryan Companies. Plans call for this former office campus to be redeveloped for industrial use.
The takeaway here? The Minneapolis-St. Paul office market isn’t performing too differently from most major office markets across the country. Investment sales remain low and vacancies high. New construction is down. But there is some hope here: Smaller tenants continue to seek higher-quality space and the trickle of adaptive reuse projects are taking some outdated office property off the market.
Photo courtesy of pressfoto/Freepik.
5 top tips for affordable housing developers
By Pat Craig, SVP Commercial Banking Team Lead, Bridgewater Bank
Developing and preserving affordable housing is critical to addressing the nationwide housing crisis. And despite common misconceptions, affordability doesn’t have to come at the expense of quality, functionality or sustainability.
How do we know? At Bridgewater Bank, we’ve been successfully helping developers navigate the complexities of affordable housing financing since our founding in 2005. With deep expertise in structuring complex deals and a level of adaptability that larger institutions often lack, we’ve built lasting relationships with many developers in Minnesota and across the United States who count on us to help bring their projects to life.
For over a decade, I’ve had the privilege of working closely with many of these developers, witnessing both the challenges and the opportunities in this space. If you’re looking to build or preserve affordable housing that serves communities while remaining financially successful, I encourage you to keep these five strategies in mind:
1. Engage with the Community Early and Often
Affordable housing developments can face resistance due to misconceptions about property values and community integration. That’s why proactively engaging with residents, businesses, and stakeholders
DEVELOPMENT
Pat Craig (Photo courtesy of Bridgewater Bank.)
from the outset can help build support and minimize opposition-related delays.
Hosting community meetings, maintaining transparency, and addressing concerns early can foster trust. Involving local voices in the design process also helps create developments that truly serve the needs of the community, fostering a sense of ownership and pride.
2. Explore Emerging Markets
Post-COVID population shifts have driven significant affordable housing development in states like Florida, Texas, Arizona, and Georgia. However, these markets are becoming increasingly competitive. Firms willing to look beyond traditional development hotspots can find promising opportunities.
For example, Oklahoma City is often overlooked in favor of Texas but offers a business-friendly environment, strong job and wage growth, substantial municipal bonds, and ample (flat!) development sites. Identifying underserved markets can provide a strategic advantage and reduce competition.
3. Maximize Government Incentives and Grants
Government programs play a crucial role in making affordable housing financially viable. The Low-Income Housing Tax Credit (LIHTC) is one of the most wellknown tools, offering significant cost reductions. Additionally, lesser-known programs provide direct loans
and grants for sustainability upgrades in HUD-assisted affordable projects. Many state and local agencies also offer funding for community-driven housing initiatives. Tapping into these resources can dramatically improve a project’s financial feasibility.
4. Prioritize Energy Efficiency and Sustainability
Sustainable design isn’t just good for the environment; it also lowers long-term operating costs for both developers and residents. As property expenses continue to rise, energy-efficient buildings can help mitigate costs. Consider upgrading appliances to energy-efficient models, installing solar panels on unused property space, and replacing outdated lighting with LED alternatives.
Simple improvements, such as preventing excessive toilet water usage and installing water-saving faucets, can yield significant cost savings. While some of these investments require higher upfront costs, they pay off in the long run by enhancing affordability and reducing operational expenses.
5. Partner with a Relationship-Based Bank
Securing financing for affordable housing can be complex, requiring a deep understanding of funding structures and regulatory requirements. Having a banking partner that specializes in affordable housing can streamline the process and provide critical finan-
MID-YEAR FORECASTsummit
cial solutions, from predevelopment land bridges to construction-to-permanent loans, acquisition bridges, and partnership financing.
At Bridgewater, we go a step further. As a true strategic partner, we’re proud to be a one-stop shop for affordable housing developers, offering not only versatile lending options but full-service banking capabilities, including a full suite of treasury management solutions, to help developers optimize cash flow and streamline operations, ensuring projects remain financially sound from start to finish.
Developing affordable housing comes with challenges, but with the right approach, and right banking partner, developers can create high-quality, financially sustainable housing for those who need it most. Implementing these five strategies will help ensure your projects remain viable while delivering much-needed housing to underserved populations, making a lasting impact on communities.
Looking for a relationship-focused bank who values flexibility, understands the nuances of affordable housing financing, and can help navigate the challenges to get projects to the finish line? We’d love to connect with you.
Pat Craig is Senior Vice President and Commercial Banking Team Lead at St. Louis Park, Minnesota-based Bridgewater Bank.
Ross Dress for Less has signed a bunch of leases in the Twin Cities market. I have seen them pop up in a bunch of plans.
What about in the CBDs here? How is the retail sector performing there?
Reiling-Holden: The Minneapolis and St. Paul CBDs are carrying more vacancies. Downtown St. Paul is really struggling with vacancies. Until more people are back working in the office more frequently, retail in the CBD will continue to struggle. It’s a bit better in downtown Minneapolis than it is in downtown St. Paul.
Is leasing activity in the retail sector holding steady?
Reiling-Holden: It is. In the third quarter of 2024, we saw 186 retail leases signed for about 670,000 square feet. A total of 13 of those were for leases over 10,000 square feet. Most of those deals were for 10,000 square feet or less. In the fourth quarter of last year, we saw 118 lease deals for 415,000 square feet, eight of which were for more than 10,000 square feet.
In the first quarter of this year, we saw 157 retail leases for 457,000 square feet. Only five of those lease deals were over 10,000 square feet. And 22 of those leases were for 1,000 square feet or less.
There has been a lot of leasing activity from small businesses. I worked with a lot of small businesses that people took from their homes to open their first brick-and-mortar concept. It’s fun to work with those businesses.
They were predominantly women-owned. They included everything from florists and interior designers to more service-oriented businesses like spas and real estate offices.
A lot of people were concerned about the growth of online sales and how that was going to cause a big problem for traditional brick-and-mortar. But while online sales have grown, they haven’t lessened the desire for people to go out and physically shop for things.
Do you think we’ll see much new retail development this year in the Twin Cities market?
Reiling-Holden: The big challenge with development is the cost. Construction costs have gone up so much. Land costs, too. You have to be in a higher rent range to make new development work. Not a lot of retailers can afford that. The big national corporations can. They have the infrastructure in place to spread costs out. Local businesses, though, can’t afford those higher rents. There is a limited pool of retailers who can afford to rent in those new developments.
Image by Pexels from Pixabay
“I’ve signed 202,000 square feet of leases in downtown Milwaukee in the last couple of years,” Krsnak said. “The reason why? Everyone is committed to doing what it takes to get companies to locate in the city’s downtown.”
That isn’t always the case for downtown Minneapolis, Krsnak said. For one thing, it’s extremely difficult to get exterior signage on an office building in downtown Minneapolis. That seems like a small nuisance, but it does keep some companies from locating in the city of the center, Krsnak said.
Minneapolis isn’t as generous with TIF programs, Krsnak said.
“The big difference between Minneapolis and Milwaukee is that people are not as likely to move to downtown Minneapolis because they are not getting the same opportunities as they are in other cities,” Krsnak said.
Krsnak said that in the past as he traveled the country, people frequently told him how much they loved Minneapolis. The city’s reputation, though, has taken a hit since COVID, the murder of George Floyd and the riots that followed that crime.
City officials need to recognize this and make it easier and more attractive for businesses to locate in downtown Minneapolis, Krsnak said.
“Minneapolis has lost some of its cache,” he said. “We have to start acting like we are an underdog, not like we are the city that everyone is trying to replicate.”
While downtown Minneapolis’ office sector is sluggish, Krsnak said, leasing activity is stronger in the city’s surrounding suburbs. Part of the reason? Hempel points to signage. Tenants can place their names on the exteriors of suburban office buildings more easily.
“There is no question about it, we are seeing more office transactions in the suburbs,” Krsnak said. “All
my buildings in the suburbs have exterior signage. Downtown, that is a more contentious issue. It might change. I’m hoping it does.”
Krsnak points to a 15,000-square-foot office lease his company recently closed in suburban Eden Prairie, Minnesota. Krsnak said that the firm moved in partly because it can have its name on the building. That was a key factor in addition to the property’s easy access to the interstate.
“Everyone likes to see their name in lights,” Krsnak said. “It’s free advertising to put your name on the building.”
This doesn’t mean that downtown Minneapolis hasn’t improved since the tough days of 2020. Krsnak said that the city’s downtown is far busier today than it was back then. Activity levels downtown aren’t quite as high as they were before the pandemic, but they are stronger than they were in 2020 or 2021.
The biggest challenge for downtown Minneapolis? Major employers Target and Hennepin County have not required their employees to come back to their downtown offices on a frequent basis yet.
And without the workers from those two major employers, downtown Minneapolis still looks quieter than it did before the pandemic.
“The county, especially, needs to step up,” Krsnak said. “They are only hurting themselves. When you don’t have enough workers downtown, that downtown ecosystem gets off balance. I would argue that if county employees don’t want to come back downtown, you should find employees who do. If you must pay them more, so be it.”
In Milwaukee, Milwaukee County recently signed a lease for 25,000 square feet in the city’s ASQ Center.
“They are eating their own cooking in Milwaukee,” Krsnak said. “In Milwaukee County, they are putting
their employees downtown. In Minneapolis, that is not happening.”
And what about those office spaces that aren’t modern enough to attract tenants today? Or those that lack the amenities that workers and tenants both want?
Krsnak said that conversions will play a role in taking older, outdated office spaces off the market. The challenge remains that not enough older office buildings are candidates for conversion. To convert an office building to multifamily, for instance, developers need both the right building and the right location.
Conversions are expensive, too, further limiting how many older office buildings can be transformed into other uses.
Still, even with these hurdles, Krsnak said, it makes sense for developers to convert as many undesirable office buildings as they can.
“We need less office inventory. It’s a supply-and-demand issue,” Krsnak said.
Hempel isn’t adverse to removing older office stock from the market. Krsnak said that the company earlier this month purchased a 40,000-square-foot office building in St. Louis Park, Minnesota, that the company will tear down. Hempel will build an apartment building on that site.
Hempel is also building a new office building on land across the street.
“Why are we tearing down the building we just purchased?” Krsnak asked. “The way these older buildings are designed and functioning today don’t match what employers want. The more of these outdated office properties that get repurposed, torn down and utilized in new ways, the better. But you need TIF districts and tax credits or the economics don’t work. If you don’t get that help, the math doesn’t pencil out.”
Founders from page 1
line will continue. A product needs three times the amount of warehouse space if it goes through the ecommerce channel as it needs if it is sold in a store. Companies will continue to need that warehouse and distribution space.
Then there is the push for onshoring and reshoring. The reinvestment in this country in manufacturing is real, and that, too, is increasing the demand for industrial.
Those are two important megatrends that help make industrial such a strong asset class. We do think this is a good time to invest in industrial real estate.
Ecommerce certainly got a push during COVID. But the growth of ecommerce was taking place long before the pandemic, right?
Lau: Definitely. The rise of ecommerce has almost been a straight line. It started in the early 2000s that ecommerce sales were steadily accounting for a greater percentage of all retail sales. COVID accelerated the growth of ecommerce, but the rise of ecommerce sales has been a very steady trend line up for a long time.
How strong is the reshoring trend?
Lau: The reshoring and onshoring activity have been steady. There has been significant investment from governments through the CHIPS Act. That has spurred significant investment in manufacturing around the country. Manufacturing has become a bigger piece of the industrial market. Manufacturing still accounts for a smaller percentage of industrial space than distribution facilities and warehouses. But it accounts for a bigger percentage of the demand for industrial space today than it did several years ago.
Here in Minneapolis, our friends at Opus are building the big build-to-suit in Maple Grove for a manufacturing entity. That’s an example of the sort of investment in manufacturing that is happening.
How strong is the industrial market in the Twin Cities?
Lau: The industrial sector is performing well here. Relative to other cities, we have a low vacancy rate. It is sub-5%. That is positive. Development has tailed off, as it has in most markets, and most of the new development that is taking place is build-to-suit. We are seeing more build-to-suit than speculative development.
The amount of institutional ownership has grown in Minneapolis significantly. Link Logistics, for example, owns a significant amount of industrial space here. These larger institutional owners have helped boost industrial rents in the market.
We are not a large distribution market. We have some regional distribution, but Minneapolis doesn’t have that two-day travel to most of the country that markets like Chicago, Indianapolis or Columbus can claim. Overall, though, the numbers are good in our industrial sector. Rents are still growing and vacancy rates are low. Demand for industrial space in the Twin Cities market remains strong.
Another thing to consider: Not all Midwest cities are seeing population growth. Minneapolis still has good population growth. We like Minneapolis as a good place to invest. We have meaningful investments here.
When do you think we might see more spec industrial construction in the Twin Cities market?
Lau: The relationship between rents and new construction costs must be in the right balance. The capital needs to be available. The banks with the runup in interest rates three years ago really slowed their lending to almost a trickle. That’s meaningful because banks account for 40% to 50% of the debt capital in real estate. They got out of the business and that slowed development. For us to see more spec, the banks will need to come back stronger than they have so far.
We also need to see a little bit more industrial space get absorbed. The banks coming back will create more transaction activity. That will solidify values and will help developers underwrite the value of their properties.
Do you think we’ll see more investment sales in the industrial market this year?
Lau: Investment sales activity has been slow. But it has been getting better. The banks coming back will help with this, too. The liquidity question is a big deal. When you take that much debt capital out of the system, you will see fewer transactions. The financial environment is unpredictable now, too. There is a little pause out there in investment sales as investors wait to see how everything settles out.
But I’m very optimistic that over the course of the next 12 to 24 months we will see investment sales pick back up. Of course, every time it looks like we’re going to get there, something crops up and it doesn’t happen. But I am hopeful that transaction activity will go up as the year unfolds.
What attracts investors to the Twin Cities?
Lau: Our metro area has a lot of strengths. Growth is one thing. We are seeing population growth. That means more employees and shoppers. Growth matters. We also have an educated workforce. That makes a difference, too. There is transportation and manufacturing infrastructure already in place here. You are not starting from a dead stop when you are developing something here. You are not trailblazing here.
Are there any new or planned industrial developments in the Twin Cities area that you are excited about?
Lau: There are a number. The interesting one that everyone is watching is the redevelopment of the Thomson Reuters campus in Eagan. That will be a fascinating project to watch. It is going to be big. It’s also in a great location. Eagan is a great location. We are seeing this phenomenon elsewhere, where owners are converting large, older office campuses into industrial uses. That is interesting. It’s a way for developers to get at infill sites. There are some real advantages if you can develop an infill site, to get your buildings closer to population centers.
The strongest submarkets in the Twin Cities are the infill markets. There is investment going on in existing buildings, too, with developers boosting the functionality of these older properties. That is happening in a lot of the infill areas, particularly when it comes to light manufacturing. Infill space is attractive to those kinds of companies.
Wade Lau (Photo courtesy of Founders Properties.)
Industrial facilities located closer to the urban core of the Twin Cities typically only offer clear heights of 20 to 24 feet. With the 28-foot clear height, Schimberg gained access to another rack position in the warehouse.
“That was important, too,” Young said. “We did look at some buildings with 20- and 24-foot clear heights, but Schimberg didn’t think that would provide the efficiencies that would come with taller clear heights.”
The newer Woodbury building also offered wider column spacing and more dock doors. The depth of the truck court allows for heavier loading activity.
Another big selling point? The building features a concrete drive-in ramp. Many other nearby industrial facilities only offered asphalt drive-in ramps. Because Schimberg is bringing in heavier piping material, a thicker concrete ramp was important, Young said.
“They could have worked with an asphalt ramp, but that would have added repair costs down the road,” Young said.
The final key factor? Schimberg said that the city of Woodbury was “fantastic” to work with, welcoming Schimberg to the area.
It’s not surprising that Woodbury officials would be happy to see Schimberg arrive. The company will bring new jobs to the area. The employees working at the site will spend in area restaurants and retailers.
“It will increase the overall level of commerce in the city,” Young said. “The vacant farmlands didn’t create a lot of sales tax or property tax revenue or job growth.”
Royal Gateway Building B at 11650 Hudson Road was developed in 2023 by Greystar, one of the country’s largest owners of multifamily properties. With this lease, the building is 100% occupied.
Schimberg is completing renovations to build 6,000 square feet of office space, an employee break room, a new drive-in door and a will-call area for contractors.
Young said that he expects to see more industrial leasing activity as the year progresses. That’s because demand for industrial space remains high, even if the market isn’t quite as busy as it was in the boom years of 2020 and 2021.
Back then, developers took land positions in areas like Woodbury, Cottage Grove and Dayton, Young said. Then, demand gradually tailed off for industrial spaces here. As Young said, some of the new industrial buildings in these communities sat vacant, including some in Woodbury that had vacancies for almost two years.
That is starting to change again. Industrial demand is gaining momentum. It’s not overheated but is strong
enough to steadily fill much of the empty industrial space in the communities surrounding the Twin Cities.
“We are seeing the demand for new industrial space coming back and filling up these vacancies in areas that were previously overbuilt,” Young said. “Demand for industrial space has gotten back to pre-COVID levels. We are seeing steady growth, steady absorption. But it’s not overheated like in the heyday of the 2021 and 2022 periods. Absorption has leveled off to a more sustainable level.”
And as leasing activity slowly increases, the Twin Cities area might see at least a small increase in new industrial construction, Young said.
“We could see some new construction this year,” he said. “I am aware of several developers looking for land positions again because these areas are starting to see absorption. There is some uncertainty around tariffs. I don’t know what to predict there. A lot of business owners are concerned about the lack of predictability. But many are looking for land positions.”
The industrial facility in Woodbury that will house Schimberg. (Photo courtesy of Forte Real Estate Partners.)
LIFETIME ACHIEVEMENT
GEORGE SHERMAN
George Sherman has planned and delivered multi- and single-family housing for more than 46 years. As principal in developing more than 11,900 rental units and more than 1,400 for-sale housing units, the total value of his development portfolio exceeds $4 billion.
George is recognized as an industry veteran favored by cities and development partners for his ability to commit to a vision for development and deliver the expected results.
George is involved with all aspects of Sherman’s development efforts of both the Market-Rate and Tax Credit Multifamily divisions, as well as the Commercial, Hospitality, and Retail developments.
George is a sought-after speaker at real estate development and urban planning seminars because of the wealth of insight and foresight his development experience provides. George is former board chairman of the Central Community Housing Trust and previously served on the board for the Minnesota Housing Partnership.
George has received the Lifetime Achievement Award in Real Estate from the Minneapolis/St. Paul Business Journal and the 2016 Presidents Award from the Preservation Alliance of Minnesota. He has been named an Industry Titan by Twin Cities Business Magazine on its list of 100 People to Know and was named a Business Icon by Minnesota Business in 2020. George was inducted into the Minnesota Business Hall of Fame in 2020 and the Minnesota Real Estate Hall of Fame in 2022.
Project Awards
Affordable Housing - Greater Minnesota
Apartments Austin
WINNER! ALEXANDER BAKER APARTMENTS
Brewery Creek Duluth
1st & 3rd Apartments Austin
Affordable Housing - Minneapolis
WINNER! CANVAS APARTMENTS MINNEAPOLIS
Ernestine Apartments
Plymouth Avenue Apartments in Minneapolis
Affordable Housing - St. Paul
Harbourline St. Paul
WINNER! RESTORING WATERS AND NELLIE FRANCIS COURT
Soul Apartments St. Paul
The Balsam on Broadway St. Paul
Affordable Housing - Suburban
Arbor Court
Callisto Commons Fridley
LICA - Affordable New Construction Nicols Pointe
WINNER! WANGSTAD COMMONS
BROOKLYN CENTER
Education & Daycare
New Creations Waconia
WINNER! PACT CHARTER SCHOOL
Government / Community FacilityGreater Minnesota
Charles S. Crandall Center
WINNER! OWATONNA HIGH SCHOOL
Government / Community FacilityTwin Cities
Antlers Park Redevelopment
MN Vehicle Inspection Facility
Panoway on Wayzata Bay
Rosemount Public Works and Police Building
St. Francis City Hall and Fire Station
WINNER! V3 SPORTS CENTER
Greater Minnesota - Commercial
Lake Leaf Cultivation
WINNER! MASSMAN COMPANIES
ALEXANDRIA
Premier Bank Rochester
Sky Harbor Airport Terminal Reconstruct
Duluth
Two Harbors Municipal Liquor Store
Greater Minnesota - Multifamily
WINNER! ALEXANDER BAKER
APARTMENTS INTERNATIONAL FALLS
Pillars of Hermantown
Sunset Trail Community Building Rochester
The Force on 5th Avenue Project Duluth
Green / LEED Development of the Year
WINNER! NORTH LOOP GREEN
The Balsam on Broadway
The Nine at Lexington Station
Hotel / Hospitality
WINNER! HOTEL ALEXANDER
Industrial - Greater Minnesota
Aquatix® by Landscape Structures Inc.’s Expansion
WINNER! CLIMATE BY DESIGN
INTERNATIONAL
Interstate 35 Industrial Park/Niagara Bottling
KAMP Automation
Lake Leaf Cultivation
Industrial - North & East
Neogen Oakdale
nVent Manufacturing
WINNER! UNIVERSITY OF MINNESOTA
MICROBIAL CELL PRODUCTION FACILITY
Industrial - North & West
Golden Valley Business Center
Minneapolis Glass 610 Junction West
Pella Northland
Tesla 610 Junction West
WINNER! THE CUBES AT FRENCH LAKE
Industrial - South
Columbia Business Center
WINNER! FORCE AMERICA
Hohenstein’s
Lakeville Industrial, Sweet Harvest Foods
SOMIC Packaging, Inc.
Infrastructure
WINNER! THE PANOWAY ON WAYZATA
BAY
Interior Design - East
Broadway Street Development Headquarters
WINNER! FLATS ON 94
Prevolv Showroom
The Balsam on Broadway
The Bosk
Interior Design - Greater Minnesota
Arris Duluth
WINNER! PILLARS OF HERMANTOWN
Sunset Trail Community Building
Interior Design - Minneapolis
4th & Park Apartments
WINNER! LASALLE PLAZA REPOSITION
Schafer Richardson
Surdyk’s Liquor Store
Interior Design - Northeast
Lochner
Mounds View Family Dental
WINNER! THE ANSEL
Interior Design - South
51 France
Canvas at Inver Grove Heights
WINNER! CHIP’S PICKLEBALL CLUB
Memorial Blood Centers - Apple Valley
Noble
The Carver
Interior Design - West
Arbor Court
WINNER! BOKETTO
Lennar Homes
Shine Wealth Financial Advisors
The Hallon II
Medical Property
Eagan Specialty Center
HealthPartners Apple Valley
Herself Health
Lakeville Specialty Center
WINNER! MAYO CLINIC ANNA MARIA AND STEPHEN KELLEN BUILDING
Southdale Specialty Surgery Center
Mixed-Use Property - Suburban
Baldwin Supply
WINNER! CANVAS APARTMENTS
Ovation
The Force on 5th Avenue Project
Mixed-Use Property - Urban
African Economic Development Solutions (AEDS) Little Africa Plaza
WINNER! NORTH LOOP GREEN
The Watkins Building
Office - Suburban
Colonnade Building Renovation
WINNER! DONALDSON OFFICE
MAS HVAC
Nepsis
Premier Bank
Shine Wealth Financial Advisors
Office - Urban
WINNER! BURLAP LOFTS
INFRA Headquarters
KPMG
Schafer Richardson
SPS Tower
Wayzata Gateway
Winthrop & Weinstine
Redevelopment - Greater Minnesota
WINNER! ALEXANDER BAKER APARTMENTS
Ascend
Granite Innovations
Jordan Retail & Apartments
Red Skye Lofts Revelopment
The Force on 5th Avenue Project
Redevelopment - Minneapolis East
Burlap Lofts
Factory Lofts
WINNER! NORTHSTAR
Prince Street Building
Redevelopment - Minneapolis West
”Duffey 2.0” - The Hall Lofts
Belfry Apartments
Construction & General Laborers Local Union # 563
WINNER! MINNEAPOLIS AMERICAN INDIAN CENTER
The Historic Coliseum Building
The Watkins Building
Redevelopment - St. Paul
2441 Arts
WINNER! 825 ARTS (FORMERLY VICTORIA THEATER)
INFRA Headquarters
The Stella
Redevelopment - Suburban
Boisclair Corporation Headquarters
Brunton Minneapolis Office
Canterbury Park Barn Redevelopment & Backside Improvements
Excelsior Shores
Maple Grove Executive Plaza
Morada Apartments
WINNER! THE EMERY
TRIA GameFace
Restaurant /Entertainment
Burnett Dairy - Duluth
Chip’s Pickleball Club
Life Time Rosemount
WINNER! STARLING NEIGHBORHOOD EATERY
The National Sports Village
Retail
Genesis of Minneapolis
Holiday Stationstore
HomeTown Bank Carver
Memorial Blood Centers - Apple Valley
Starting Gate Multi-Tenant Retail Building
WINNER! WALSER AUTOMOTIVE HQ (TOYOTA DEALERSHIP)
Senior Housing
Applewood Pointe of Apple Valley Cooperative Community
WINNER! ARTESSA MOUND HARBOR
Pillars of Hermantown
Risor of Blaine
Suburban Multifamily - Minneapolis
South
51 France
WINNER! HALLON II
Noble
The Eddi Apartments
Suburban Multifamily - North
WINNER! ALOMA
Article No. 7
Lochner Apartments
Norheim Townhomes
Northwood Apartments by BLVD
The Ansel
The Bosk
Suburban Multifamily - Southeast
Ardor on the Bluffs
Canvas at St. Croix
Lilia
WINNER! THE EMERY
The Preserve At West Circle
Suburban Multifamily - Southwest
Artessa Mound Harbor
Juniper Apartments
Marsh Hollow
WINNER! ONE WEST DRIVE
Plaza at Hazeltine
The Blakeley
The Carver
Urban Multifamily
WINNER! 4TH & PARK APARTMENTS
Arris Duluth
Esox House
Flats on 94
Fuller Park Flats
Company Awards
Association Management Company of the Year
Aurora Management
Ebenezer Management Services
HOALiving Minnesota
WINNER! SHARPER MANAGEMENT
City / County of the Year
City of Eagan
City of Owatonna
WINNER! CITY OF ROSEMOUNT
Developer of the Year - Commercial
Doran Companies
WINNER! ENCLAVE
Endeavor Development
Roers Companies
Developer of the Year - Residential
Centra Homes
JLS Development
Lennar
WINNER! PULTE HOMES
Tradition Companies
General Contractor of the YearCommercial
Doran Companies
WINNER! FLANNERY CONSTRUCTION
Insight Restoration
JE Dunn
Mohs Contracting
Roers Companies
Shaw-Lundquist Associates
General Contractor of the YearResidential
Connell’s Custom Exteriors
WINNER! JLS DESIGN BUILD
RT Residential Inc.
Owner / Landlord
Capital Partners
Frauenshuh
WINNER! HEMPEL REAL ESTATE
Roers Companies
Professional Service Company of the Year
BluSky Restoration
Civil Site Group
Connell’s Custom Exteriors
WINNER! VALBRIDGE PROPERTY
ADVISORS
Professional Service Company of the Year - Real Estate
Carlson Partners
CBRE Project Management / Turner & Townsend
Forte Real Estate Partners
WINNER! RETHOS
Property Management Company of the Year - Commercial
Capital Partners
Davis
WINNER! FRAUENSHUH, INC.
MSP Commercial
Transwestern Real Estate Services
Property Management Company of the Year - Residential
Associa Minnesota
Fuze Real Estate
WINNER! ROERS COMPANIES
Solhem Management Company
Whitecap Management
Sub-Contractor of the Year
WINNER! COMMERCIAL DRYWALL
Qt Commercial
Schwieters Companies
Wells
People Awards
Architect / Engineer of the Year
Matthew O’Keefe, Synergy Architecture Studio
Matthew Pavek, Civil Site Group
Pete Keely, Collage Architects
WINNER! STEPHEN M. OLIVER, MOHAGEN HANSEN ARCHITECTURE | INTERIORS
Association Manager of the Year
Jennifer VanDeVeire, Aurora Management
Kari Ross, HOALiving Minnesota
Matthew Vitek, Aurora Management
Nancie Thom, HOALiving Minnesota
WINNER! NIKKI YOUNGQUIST, SHARPER MANAGEMENT
Tracy Shaver, Sharper Management
Broker of the Year - Individual Investment
Abe Roberts, Roberts Group at Marcus & Millichap
WINNER! CHRIS WEIRENS, TRANSWESTERN
Heidi Addo, Michel Commercial Real Estate
Ted Gonsior, JLL
Broker of the Year - Individual Leasing
Jon Yanta, Cushman and Wakefield
Rob Youngquist, Avison Young
WINNER! STEVE BROWN, CCIM, FORTE REAL ESTATE PARTNERS
Tom Stella, Cushman & Wakefield
Trinette Wacker, Transwestern Real Estate Services
Economic Developer of the Year
WINNER! ERIC VAN OSS, CITY OF ROSEMOUNT
Greg Kruschke, City of Owatonna
Robert Harris III, City of Faribault
Emerging Leader of the YearDeveloper
Erik Anderson, Scannell Properties
Joshua Segal, JLS Development
Matthew Zellmer, Doran Companies
WINNER! MIKE POKORNEY, BADER
Emerging Leader of the Year - Real Estate
Bailey Nichols, Cushman & Wakefield
Dylan Steman, Northmarq
Jake Kelly, Cushman & Wakefield
Jesse Thurston, Michel Commercial Real Estate
Lerew Kaas, Clarity Commercial
WINNER! PETER WINZIG, FRAUENSHUH
Executive of the Year
David Ruhland, Centra Homes
WINNER! EMILY NICOLL, TRANSWESTERN
Jamey Flannery, Flannery Construction
John Callahan, Ebenezer Management Services
Josh Reams, Sharper Management
Joshua Segal, JLS Development
Steve Michel, Michel Commercial Real Estate
Tim Olsen, SIOR, Carlson Partners
Interior Designer of the Year
WINNER! BETSY VOHS, STUDIO BV
Lindsey Feesl, BDH
Madi Goodrich, DJR
