Developers are still proposing to build more housing units in or near downtown Minneapolis, which has been ground zero for the apartment building boom.
Three new projects, which would collectively add more than 450 new units, are up for discussion at Minneapolis City Hall late Thursday afternoon before the Minneapolis City Planning Commission’s Committee of the Whole.
But in a signal about the changing state of the housing market, developers are weighing for-sale condos—instead of rental apartments—for two of the three projects.
The projects up for discussion include:
• Minneapolis-based Alatus LLC is pitching a 40-story tower in the St. Anthony Falls area across the river from downtown Minneapolis at 200 Central Avenue Southeast and 113 Second Street Southeast. City documents indicate the plan calls for 325 units; Alatus is weighing whether to add condos or apartments at the site.
• Minneapolis-based Sherman Associates is proposing The Encore, a 122-unit apartment project at 935 Second Street South near the Guthrie Theater.
• Local developers Curt Gunsbury and Robb Miller are floating a plan for an eight-story, 24-unit project in the North Loop neighborhood at 602-606 First Street North.
At least one other developer, Jim Stanton of Coon Rapids-based Shamrock Development, has recently proven that's there's room in the market for new condos. Stanton has sold of the bulk of the 164 units in his recently completed Stonebridge Lofts near the Guthrie Theater in downtown Minneapolis.
The latest Alatus plan has grown from the original proposal, which called for approximately 275 units in a 25- to 30-story tower. Jon Fletcher, project developer for the tower for Alatus, said that they have not yet determined if the units will be condos or apartments.
“We really think the market can support either. . . . We’re still waiting to get the results of our market study back,” Fletcher told Twin Cities Business. He said that the total unit count hasn’t been finalized, but it calls for about 320 units, which would include 10 to 15 townhomes.
Fletcher says that he’s confident in the depth of the demand for more housing units: “There’s definitely a lot of product coming online. . . . but we feel really, really good about the area.”
Fletcher said that Alatus is looking to start construction in the spring of 2015, with completion in the fall of 2016.
Developer Curt Gunsbury says that his group is also looking at condos for the North Loop site that it has under contract to purchase, but he stressed that a final decision has not been made yet. Gunsbury has been part of the development team on several apartment projects.
“We really think this is a great condo site,” Gunsbury said. “The North Loop is a really desirable place to be.”
Gunsbury said that it’s too early to forecast a construction start for the project and noted that there are issues to sort out, including parking on the smaller site.
The latest market study from Minneapolis-based Marquette Advisors showed a notable uptick in the downtown Minneapolis apartment vacancy rate, which climbed to 5 percent in the first quarter of 2014—up from 2.2 percent in the first quarter of 2013. Vacancy rates above 5 percent are considered more favorable to tenants.
Overall, the housing market has improved solidly since the Great Recession. The Minneapolis Area Association of Realtors (MAAR) reports the median sales price for homes across the metro at $219,500 for June, the best showing for a June reporting period in six years.
Jason Wittenberg, who serves as land use, design, and preservation manager for the city’s Community Planning and Economic Development (CPED) department, says that the pace of large new multifamily projects appears to be tapering off a bit: “We certainly have seen fewer projects. . . . compared to the first half of 2013. However, there still seems to be pretty strong demand.”
No votes are taken at the planning commission’s Committee of the Whole meetings, which are meant as a forum for developers to gain some early project feedback from planning commissioners.
Sherman Associates previously developed the 64-unit Zenith condominium project and the Aloft Hotel adjacent to the site for the proposed Encore apartments. Sherman secured approval for a 103-unit condo building on the site in 2006, but the plan never moved ahead after the condo market eroded and the economy cooled.
Sherman Associates owner George Sherman tested the waters by floating a plan for an office building on the site in recent years before bringing back the revised plan for housing on the site, which is across the street from Gold Medal Park.