“Spec” Industrial Real Estate Projects Make A Comeback
New apartment buildings aren’t the only new construction projects underway throughout the Twin Cities.
The Minnetonka-based Opus Group is kicking off construction this week of a new industrial warehouse and distribution facility in Shakopee. The first phase of the Valley Park Business Center, slated for completion in the spring of 2014, calls for approximately 200,000 square feet of space.
Opus is charging ahead on a speculative, or “spec,” basis—meaning it has no signed leases for the space. During the economic downturn, no one was willing to roll the dice on spec projects.
Dave Menke, executive vice president with Opus Development Company, said that prospective tenants are now seeing a shortage of larger blocks of modern, functional space.
“In particular in the southwest you can count just a few blocks of large available space,” Menke told Twin Cities Business. “We’re compelled to pull the trigger.”
Opus ultimately has plans for more than 700,000 square feet of new industrial space on the 50-acre site, which it acquired in July. The land is next to the never-finished facility for ADC Telecommunications at 6021 Broadband Boulevard in Shakopee, which sat vacant for a decade.
Opus acquired the entire ADC site but sold off 60 acres to St. Louis, Missouri-based Emerson Electric Company, which plans to overhaul the never-completed facility into a research and development facility with up to 500 jobs.
Shakopee has been drawing other projects as well. Just last week, Savvis, an arm of CenturyLink, Inc., announced plans for a new 100,000-square-foot data center in Shakopee.
At mid-year, Bloomington-based commercial real estate services firm Cushman & Wakefield/NorthMarq reported the local vacancy rate for industrial space at 11.7 percent, the lowest rate in a decade for the Twin Cities.
In its mid-year market report, Cushman & Wakefield/NorthMarq noted that the dwindling supply of large blocks of space is driving new development: “More speculative projects are in the planning stages market-wide as developers across all submarkets are more aggressively looking to take advantage of the recovering market conditions.”
Opus is not the only player pursuing new industrial space on a spec basis. Dallas, Texas-based Trammell Crow Company is under construction on an 185,000-square-foot spec industrial project in Roseville. Last year, the Malvern, Pennsylvania-based Liberty Property Trust developed a $14 million, 227,000-square-foot spec industrial project in Rogers.
The market in the Twin Cities mirrors national trends. Menke said that Opus currently has spec industrial projects under construction in both Indianapolis and Chicago.
He added that Opus continues to scout other sites in the Minneapolis/St. Paul area for additional, future industrial development.