The retooling and repurposing of older buildings has become an increasingly popular trend in urban office markets across the country. Companies are investing in modern office spaces as a tool to attract and retain young talent in the workforce. A shortage of modern Class “A” office space has opened the door for expansive renovations of older, historic buildings to add new amenities and features while retaining the building’s original character and charm. Companies are beginning to see the importance of amenities and attractive, exciting workspaces that appeal to employees. Popular renovation amenities include: on-site parking; locker rooms; bike storage; on-site coffee shops/bars; open floor plans; and bright, collaborative spaces with lots of natural light.
A great example of this new trend toward repurposing older buildings is the Highlight Center project that was recently completed in the Northeast Minneapolis submarket by Hillcrest Development. The Highlight Center was a major redevelopment of aging buildings that originally functioned as a light bulb factory and housed the Minneapolis Public Schools Headquarters until 2014.
The renovation included razing buildings on the site to open up space for surface parking while keeping the core buildings intact. The process of reusing the original structures retained the character and charm of the buildings while renovations inside transformed and modernized the space. The development team added a slew of amenities, including: bike storage and locker rooms for commuters; an on-site coffee shop and brewery; open, bright floor plans; and ample free surface parking.
Many companies that would traditionally look in the North Loop area are drawn to the Northeast Minneapolis market in search of more favorable rents. The Highlight Center created the perfect blend between price and attractive amenities in a newly renovated, modern office building. The new space attracted Sports Engine, a software company for managing sports leagues online, which became an anchor tenant occupying nearly 32,000 square feet of office space. The signing of Sports Engine was a catalyst for other tech and creative companies that followed suit and helped the property reach 99% occupancy after its first year. Sports Engine leased an additional 7,500 square feet of space approximately a year after signing the initial lease at rates nearly 11% higher than their initial signing.
Rent increases have continued as demand increased at the property, with recent signings showing strong growth from less than 12 months earlier. Northeast Minneapolis’ close proximity to the Minneapolis Central Business District and cost-effective space options provide a compelling choice for growing companies.
For the most part, repurposing and renovating of older buildings is happening in urban neighborhoods where younger members of the labor force are choosing to live and work. Developers’ responses to increased demand for modern workplace in urban locations will have a direct impact on asset value in the future. The success of the Highlight Center project and interest in the Northeast Minneapolis market as a cheaper, more flexible alternative to the Central Business District or North Loop neighborhoods of Minneapolis bodes well for the area. It will be interesting to keep an eye on the Northeast Minneapolis market to see if other renovation projects emerge, hoping to build on the success of the Highlight Center.