Eagan set a record for development in 2017 as Minnesota Vikings, United Properties, others bet big on suburb – Minneapolis / St. Paul Business Journal

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The Minnesota Vikings moved into their new Eagan headquarters this week, but they’re far from the only ones moving to the south metro suburb these days.

Eagan is experiencing a development boom that has brought new shopping centers, apartments, hotels and office buildings to the suburb of 66,000 people. The city set a record in 2017 for the amount of money spent on new commercial and residential construction and remodeling, at $428 million. That figure tops every Twin Cities suburb, including the usual suspects in the west metro, according to Business Journal research.

In fact, there was more investment in Eagan last year than in Edina and Eden Prairie combined — two cities that are no slouches when it comes to development.

Eagan, in the past decade, has solidified itself as the commerce capital of the south metro, with major employers like Thomson Reuters, Blue Cross and Blue Shield of Minnesota and Prime Therapeutics, plus a series of distribution centers. A recent MinnPost project using U.S. Census data found that 42,769 people travel into Eagan for work, more than every other Minnesota city except Minneapolis, St. Paul, Bloomington and St. Cloud.

“What we hear from businesses lately is that they don’t want to be in a sleepy suburb,” said the city’s community development director, Jill Hutmacher. “They want to be in places with vibrancy. They want to be near services and retail and trails and where their employees can enjoy some of the amenities of a community.”

Eagan has set in motion a development boom that could keep going for years. The city predicts that the new investment will lead to a net increase of 5 percent in the city’s tax base by 2022.

What makes the city giddy is that the development is balanced, with a mix of retail, multifamily housing, senior housing, office, industrial and hotels.

Three growth areas

Eagan is located in a key location that should be hard to match for developers. It boasts proximity to both downtowns, it’s just a stone’s throw from the Minneapolis-St. Paul International Airport, and it still has large chunks of undeveloped land.

That’s always been the case in Eagan, so what’s changed?

“Investment follows investment,” Hutmacher explained.

Three major developments in the city, spread across Eagan, have spurred more investment.

Five years ago, at the south end of the city, Paragon Outlet Partners broke ground on the $47 million Twin Cities Premium Outlets shopping center. Since then, the area around Cedar Avenue and Highway 13, called Cedar Grove, has attracted a new hotel and hundreds of new apartments, with several more projects in the pipeline.

Further north, Minneapolis-based CSM Corp. in 2016 finished redeveloping the former Lockheed Martin campus, turning it into Central Park Commons, a 434,000-square-foot shopping center anchored by Hy-Vee Inc., Hobby Lobby and Sierra Trading Post.

Soon after, United Properties, StuartCo and Continental Properties broke ground on separate projects on 24 acres of land. Those projects cost $62.8 million, according to city data.

Minneapolis-based United Properties is building a senior housing co-op and an Aldi store. Bloomington-based StuartCo is building a 183-unit market-rate apartment building, and Menomonee Falls, Wis.-based Continental Properties is building a 127-room Residence Inn by Marriott. Those projects should be complete early next year.

The recent developments have resulted in a flood of retail to Eagan — nearly 1 million square feet in a period of five years.

Eagan was probably under-retailed before the boom, but it might be time to pump the brakes, said Keith Ulstad, United Properties’ senior vice president of retail and mixed-use development.

“Eagan has a lot of retail per capita, and right now it’s the python that swallowed the pig. It’s got to digest what it’s eaten,” Ulstad said.

The third major development area is at the northern edge of the city and could brings hundreds of millions of dollars more in development.

The Vikings land at Delta’s old base

Ten years ago, Atlanta-based Delta Air Lines Inc. bought Northwest Airlines, which had been sitting on 200 acres of land in Eagan that it had once hoped to develop, but never got past a pair of office buildings.

Delta made Atlanta the combined company’s headquarters, which meant that the two 275,000-square-foot office buildings where 1,000 people once worked were vacant by the time St. Louis Park-based The Excelsior Group bought the property in 2015.

Across town, around the same time, the Vikings reached the conclusion that they couldn’t stay in Eden Prairie because their Winter Park headquarters was landlocked and their employees were spread over two buildings there, plus another in downtown Minneapolis.

They happened upon something rare in the Twin Cities: a large swath of land on a major freeway, minutes from the airport and inside the beltway.

“Trying to find a large footprint like that with access to the airport, it’s not something you find every day,” said Vikings Project Executive Don Becker, the man in charge of developing the site. “It checked all the boxes we wanted to fill for what a new Vikings headquarters and surrounding community could be.”

In 2016, the Vikings bought the entire site and broke ground on a state-of-the-art practice facility, a 6,000-seat football stadium, a team headquarters building for 250 employees and a Twin Cities Orthopedics clinic. Another building is going up that will become an incubator for startups.

That’s about $150 million worth of development, but there’s still 160 acres available that could eventually house 1 million square feet of office space, 1,000 apartments, a full-service hotel and 160,000 square feet for retailers and restaurants.

The Vikings plan to break ground this fall on two apartment buildings, with 200 to 300 units, plus a community center for tenants, Becker said. They’re also drawing up plans for a hotel.

Over the 10-plus years of development, Viking Lakes could eventually result in $500 million to $1 billion worth of construction. The lynchpin will be attracting office users. That’s where John McCarthy, Newmark Knight Frank’s senior managing director, comes in.

The real estate broker said the Vikings want to build four 250,000-square-foot office buildings on site, though that could change depending on what users want. Once McCarthy lands an anchor tenant, the first building will go up. The team is being patient and wants to own all of the land, as opposed to sell it off to other developers.

“They are looking at it properly and more long term,” McCarthy said. “Who do they want for neighbors and who can be successful with them? They have been around for 50 years and they are planning for the next 100. So it’s not like a typical developer that has to have a site figured out in six months.”

Market watch

In recent years Eagan has been a hot spot for retail development, with projects like Twin Cities Premium Outlets and Central Park Commons drawing shoppers. There’s plenty of activity in the office and hotel sectors, too.

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