Is there room for one more apartment tower in downtown Minneapolis?
According to City of Minneapolis documents, Houston-based real estate firm and developer Hines is floating plans for a new 25-story tower with 291 units.
The tower would be the second phase of the Dock Street Flats project in the North Loop area of Minneapolis. Hines is currently completing work on the 185-unit Dock Street Flats, which is set to open in December, not far from Target Field. (A rendering of that building appears at the top of this page.)
On Monday, representatives of Hines could not immediately be reached for comment on the second phase of Dock Street Flats.
In a recent Twin Cities Business cover story on the metro apartment market, Steve Luthman, a managing director with Hines, said that the company was in the early stages of weighing plans for a rental tower adjacent to the Dock Street Flats site: “The firm views Minneapolis as one of our top markets,” Luthman said.
Details of the plan are referenced in a staff report prepared for the Minneapolis City Council’s Zoning and Planning Committee, which is set to discuss the project on Thursday morning.
Two new luxury apartment towers are currently under construction in downtown Minneapolis. Chicago-based Magellan Development Group is building the 36-story, 354-unit LPM Apartments near Loring Park, and Minnetonka-based Opus Development Company is building the 26-story, 253-unit Nic on Fifth in the heart of downtown.
The first residents can begin moving into the LPM Apartments tower next spring. Even though the project is still under construction, it’s already changing the skyline at the southern edge of downtown Minneapolis.
“We’re excited. The buzz is just incredible. We’re getting calls all the time about the building,” Brian Gordon, senior vice president with the Magellan Development Group, told Twin Cities Business. “I think our timing is perfect. There’s still very little vacancy in town.”
Meanwhile, residents have started moving into units on two floors of the Soo Line Building City Apartments in Minneapolis. Farmington Hills, Michigan-based Village Green is converting the vintage former office building into 254 apartments.
And more downtown projects are on the horizon. Golden Valley-based Mortenson Development has proposed 4Marq, a 262-unit apartment tower, and Minneapolis-based Alatus LLC is pitching a 320-unit project at 301 Washington Avenue South.
Ambitious mixed-use plans from Minneapolis-based Ryan Companies US, Inc., in Minneapolis’ Downtown East neighborhood call for approximately 400 new residential units, including a proposal for a 125-unit apartment project at the western edge of land designated for a new city park.
A recent report from Minneapolis-based Marquette Advisors indicated that the vacancy rate for downtown Minneapolis apartments was 3 percent at the end of the second quarter, compared to a rate of 2.3 percent for the Twin Cities.
While the vacancy rate remains low and completed apartment projects have seen brisk leasing, one market observer expects that will start to change as the volume of new units hitting the market increases.
“My sense is that the early projects are leasing very well,” said Tom Melchior, director of market research for Minneapolis-based CliftonLarsonAllen.
But Melchior thinks that the pace of leasing will start to slow for buildings that are slated to open in 2014 and 2015.
“You’ll see an elevated vacancy rate,” Melchior said. “Is it going to take six months for a new building to fill, or is it going to take two years?”
The issue for the Zoning and Planning Committee to weigh is whether Hines will be required to do additional environmental review because the scale of the Dock Street project has grown.
City staff argues that Hines does not need to do any further review beyond the Environmental Assessment Worksheet that’s already completed. But the ultimate decision rests with the Minneapolis City Council.
In addition to residential use, plans for the apartment tower in Hines’ latest proposal also call for 15,735 square feet of commercial space.
The city staff report notes that Hines scrapped plans for a small 15-unit apartment building as part of the Dock Street project after the final location of the first Dock Street Flats building shifted. Original plans envisioned an additional 200-unit building, which would have totaled 400 apartments for the project.