The drive to recruit and retain top young talent is of utmost importance for employers operating in competitive, high-growth industries, and that imperative is driving corporate real estate decisions — for instance, whether to build new offices or to lease existing space.
The preferences of these sought-after younger workers skew toward close workplace collaboration and open, flexible spaces, something generally not found in older multi-tenant buildings. This is leading some companies to calculate that it's a better investment to spend millions on new construction than to renew leases in older space that millennials deem outmoded.
Over the last couple of years, the Twin Cities has market has seen a trend of big employers ditching multitenant buildings for "built-to-suit" new construction. In some cases, the companies own the new buildings, in others they are the sole tenants. For instance, Xcel Energy has relocated hundreds of employees from Marquette Plaza to a new built-to-suit building at 401 Nicollet Mall featuring "collaborative work spaces that will assist in recruiting and retaining talented professionals."
Ditto for CenterPoint Energy's move in 2014 to buy and renovate the former Neiman Marcus building at 505 Nicollet Mall. That firm relocated 255 employees from the LaSalle Plaza multitenant building into its new headquarters, which also touted "collaborative meeting spaces" as a key element of the remodeling.
In addition to catering to the workplace habits of young recruits and providing eye-catching "trophy" visuals, new construction has another big advantage: It can be built to be much more cost-efficient than all but the most up-to-date multi-tenant spaces. More collaborative space means less per-employee individual space, and thus lower real estate costs.
Now this trend has hit the northeast metro area, where the biggest commercial real estate news of the year has been a decision by Land O'Lakes to move some 850 employees from leased space at the Shoreview Corporate Center into a new, $80 million office building to be constructed adjacent to its existing headquarters across Lexington Avenue in Arden Hills.
In making the move, the agricultural products cooperative — which has 1,800 local employees and recorded $13 billion in sales last year — also appears to be at least partly motivated by the trend toward collaborative work spaces. As well as integrating its International Development and Animal Milk Products divisions into the main campus to improve workflow efficiencies, a company official says the new, 155,000-square-foot building is about responding to emerging trends.
"This is a great location to attract and retain the best talent," Land O'Lakes Director of Real Estate and Facilities Marcia Droege told the Arden Hills Planning Commission in June. "There's a lot of competition for the best talent. Agribusiness is a high-growth industry and having the right environment for employees is really critical, so being on one campus is important to us."
Land O'Lakes has been in Arden Hills since the building of its existing headquarters in 1981, part of the first wave of corporate users relocating to suburban campuses. Ramsey County Commissioners in April approved a $1.5 million, 15-year tax abatement for the campus expansion, while Arden Hills kicked in a further $650,000 abatement.
The "odd office out" in the scenario is the Shoreview Corporate Center, which began in the early 1980s as the 553,000-square-foot, five-building corporate campus of Deluxe Corp.
The office park, now owned by Minneapolis-based Eagle Ridge Partners, leased two of those buildings to Land O'Lakes. One of the others, at 1005 Gramsie Road, has been vacant for eight years after Medtronic Corp. left it for its own $95 million campus expansion project in Mounds View.
Shoreview Economic Development Manager Tom Simonson said the city is working with Eagle Ridge to institute upgrades and add amenities to the property.
Don Jacobson is a freelance writer based in St. Paul. He is the former editor of the Minneapolis/St. Paul Real Estate Journal.
