Developers that can redevelop suburban corporate campuses or convert buildings to new uses are the likely winners of the post-pandemic world of commercial real estate.
During a panel discussion hosted by MNCAR on Tuesday about the revitalization of commercial real estate after the pandemic, panelists discussed how the industry can tackle the problems presented by the exodus of office workers to the hybrid work-from-home model. Most solutions revolve around redevelopment and use-conversion.
Dan Salzer, the director of development for Scannell’s Twin Cities office and a panelist, talked through how many suburban office campuses no longer have a demand for the space they currently have and have been downsizing. The result, Salzer said, is that these sprawling campuses are rezoned to mixed-use and become sites for industrial development and new housing.
Salzer points to two redevelopments that Scannell is undertaking. The first being the Deluxe headquarters campus in Shoreview that is being demolished for 590 units of housing, office and industrial buildings and a hotel.
The second is the Scannell and Roers mixed-use project at the former Prudential campus in Plymouth. Roers will focus on the multifamily aspect of the property, while Scannell will fulfill the industrial buildings. There will also be a 13-acre park on the former campus, which Salzer admitted was not in the original plans.
Erin Fitzgerald, senior director for capital markets at JLL and moderator of the panel, said that she was previously talking to a researcher at Gensler who said that since the start of the pandemic, the most thriving commercial real estate spaces are the ones that reinvent themselves.
“What will win the day as cities reinvent themselves post-pandemic and as real estate shifts around is mixed-use,” she said. “That’s going to be mixed-use buildings and mixed-use development and mixed-use neighborhoods.”
Trevor Martinez, a senior developer for Sherman Associates also talked about converting buildings, something that Sherman is doing with two office properties in downtown St. Paul and Minneapolis. He said the two cities have different processes for reviewing the viability of a conversion project.
Minneapolis, he said, requires a full site plan approval to get a building permit which takes a long time and has no public financing tools for office conversions. St. Paul, on the other hand, views these conversions as tenant improvement projects, which speeds up the process considerably, Martinez said.
St. Paul’s TIF guidelines, he said are flexible enough that they were able to secure it for their building conversion at Landmark Towers, as well as a deferred loan for “a portion of the larger gap that existed” in the downtown. The city, he said, recognizes that conversion projects will become more common as time goes on, but that more funding is required to get some of the early conversions across the finish line.
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