The city of Minneapolis confirmed what many commercial real estate developers already know: The City of Lakes is in the midst of a building boom and much of that activity is downtown.
Fueled by urban-loving millennials and baby boomers downsizing their households, more than $1 billion of construction projects have been approved in Minneapolis, according to permit numbers released Monday. This year, Minneapolis has issued building permits for more housing units than at any time since the condo boom in the early 2000s.
"We definitely are pulling out of the recession faster than most," said Jeremy Hanson Willis, director of the city's Community Planning and Economic Development department.
To date, 12,161 building permits have been issued in Minneapolis, many of them downtown. While the numbers document all kinds of building projects, housing and, especially apartment construction, are fueling the boom,
"Apartments are an interesting phenomenon," said Mark Stenglein, CEO of the Downtown Council, a group of Minneapolis businesses. "There's a reason why there's such interest in rentals -- nobody ever thought they'd ever lose money on their house, but we've seen that's not always true."
Part of the development equation also includes an improving economy and the ability for developers to access capital to fuel projects, Stenglein said. "It's a great renaissance."
Another factor in the boom, Stenglein said, is the growing popularity of mass transit, including light-rail service to the Mall of America, Minneapolis-St. Paul International Airport and other points in south Minneapolis. Soon, the Central Corridor light-rail line will link downtown Minneapolis with St. Paul, and plans are in the works for transit to link downtown with the southwest suburbs. The Northstar commuter-rail line connects downtown with the northwest suburbs.
City data indicate building permits for 3,530 new single- and multi-family housing units were issued through November -- compared with a previous high of 2,732 in 2004, before the housing bubble burst. In 2010, permits were issued for 1,048 units, while permits for 972 units were issued in 2011.
Luxury apartments, with tony amenities like rooftop decks, pools, fitness centers, yoga studios and dog runs, appear to be a popular choice among developers and renters alike.
Since the beginning of the downturn, the rate of homeownership has fallen from record highs as more people became renters by choice. Yet strict mortgage lending requirements and economic hardship forced many would-be buyers into becoming renters, often sharing units with friends and family.
Hanson Willis said Minneapolis' overall economy weathered the recession better than other areas of the state, due largely to its business diversity. "We definitely are pulling out of the recession faster than most," he said. Another factor is the city's low rental vacancy rate, which is under 2 percent.
"Developers are responding to a demand in the marketplace," Hanson Willis said. Several other large projects in the pipeline, including Opus Development's 26-story, 253-unit luxury apartment tower at Fifth Street and Nicollet Mall, were not included in the permit data released Monday. That $100 million Opus project will officially break ground on Wednesday.
The new housing units granted permits so far include 2,888 apartment units in 22 new buildings, plus 562 units added through existing building conversions and additions, the city said. Building permits were also issued for 74 new single-family homes, four townhouses and one new duplex.
The biggest project so far this year in terms of valuation is a new luxury apartment tower proposed for Loring Park, which was valued at $73.1 million. The sleek 36-story, 354-unit structure is on a site where the Chicago-based developer Magellan Development Group had previously planned to build condos. Ground was broken on the reconfigured apartment project at 1369 Spruce Place last month.
Janet Moore • 612-673-7752
TOP FIVE PROJECTS IN MINNEAPOLIS
Measured by building permit valuation
1. Magellan Development's Loring Park apartment tower, 1369 Spruce Place, $73.1 million.
2. Whole Foods and 222 Hennepin apartments, developed by Ryan Cos. U.S. Inc., $45.2 million.
3. Orchestra Hall addition, 1100 Marquette Ave., $39.5 million.
4. Soo Line Building City Apartments, Michigan-based Village Green, 101 5th St. S., $30.1 million.
5. Children's Hospital/Abbott Northwestern Hospital, 902 E. 26th St., Mother-Baby Center, $29.1 million.