City Of Mpls. Seeks To Consolidate Office Space

City Of Mpls. Seeks To Consolidate Office Space

Could Minneapolis City Hall drive a new downtown office project?

Is the City of Minneapolis the next big tenant in play in the downtown Minneapolis office market?

It’s routine business for private companies to review their real estate needs and portfolios, yet less common for government to do the same. But now the City of Minneapolis has put out the call for “real estate consulting and brokerage services” to work with the city on its goal of consolidating its own downtown office spaces.

The city’s primary goal is “to consolidate city office spaces into modernized facilities that function well for employees and for the general public and that are cost-effective and environmentally-responsible.” The city seeks responses to its request for proposals (RFP) by June 19. A pre-proposal conference for interested brokers will be held at City Hall on June 4.

The RFP that the city issued outlines two primary challenges: City offices are currently located in seven different downtown buildings, and “outside of City Hall (currently under renovation), the city-owned buildings are aging and are functionally obsolete.”

According to the RFP: “Ideally, all city staff needing to work in the ‘downtown campus office core’ will eventually be housed in no more than three buildings, including City Hall. Those buildings will be in close proximity to each other and connected by skyways and/or tunnels.”

The city’s space is scattered in a mix of four buildings owned by the city and three additional properties where the city leases space. Outside of City Hall, the city occupies nearly 250,000 square feet of office and storage space, according to the RFP.

The RFP indicates that the city analysis will include weighing the “potential” sale of three city-owned office buildings and “the potential city purchase of an existing building or city participation in a ‘build to suit’ development partnership with the private sector.”

In addition to City Hall, the city owns three buildings on a block kitty-corner from City Hall: the Public Service Center at 250 Fourth Street South, the Community Service building at 217 Third Street South, and the City of Lakes building at 309 Second Avenue South. Those three buildings combined total approximately 164,000 square feet of rentable space and currently house about 700 city employees. The Community Service building is vacant and currently being used for temporary storage.

The RFP also details that the city leases additional space in three other downtown properties: the Crown Roller Mill, the Flour Exchange building, and the Towle Building. In those properties, the city occupies about 79,000 square feet of space for about 230 employees.

The largest chunk of the leased space is in the Crown Roller Mill at 195 Fifth Avenue South, where the city leases 60,500 square feet. That property is several blocks from City Hall. According to the RFP, about 8,700 square feet of the city’s leased space there is currently unoccupied. The Crown Roller Mill lease expires in August 2016.

Overall office vacancy remains high amid a sluggish economic comeback and a trend for many companies to use space more efficiently and lease less space per employee.

A recent market study from Bloomington-based Cushman & Wakefield/NorthMarq reported the office vacancy rate in downtown Minneapolis at 17.4 percent at the end of 2013 with more than 4.5 million square feet of empty office space available within the central business district.

Not far from City Hall, Minneapolis-based Ryan Companies US Inc. recently broke ground on its large redevelopment project in the Downtown East area, which will be anchored by two new office towers owned by Wells Fargo & Company.