MINNEAPOLIS, Minn. -- Despite the nationwide economic slowdown, Minnesota remains in the middle of a corporate real estate growth boom that is unprecedented.
"Our real estate market in Minneapolis-St. Paul has experienced historical growth greater than at any time in the past two years, particularly in terms of new construction," says Todd Braufman, a director with Cushman & Wakefield of Minnesota Inc. "Now that the economy has slowed, we are seeing less demand for space. But over the last two years, we have seen more than US$2 billion in capital investment take place in downtown Minneapolis alone."
Rich Reynolds, also a director with Cushman, agrees. "While the high-tech data centers and carrier hotels were very busy 18 months ago, we are now back to focusing on our core business -- corporate users of space," he says. "The Twin Cities benefits from having a very diverse economic base. We are experiencing nice, steady growth in jobs, income and housing. Housing starts and home sales here continue to outpace other cities. We have also seen considerable multi-family development in the Twin Cities."
What's driving this growth? Braufman and Reynolds give a lot of the credit to Minnesota Gov. Jesse Ventura and his pro-business approach to government. "I don't think that Gov. Ventura falls into the role of the traditional governors of our past," says Reynolds. "I think he has taken a pretty progressive position in recruiting companies to the Twin Cities. He even went to California to recruit more film-based companies."
The governor also convinced Minnesota lawmakers this year to approve the largest tax cut in state history. On June 28, lawmakers voted overwhelmingly to pass a bill that reduces state taxes by $757 million and returns $700 million in surplus revenues to state taxpayers.
As a result, Minnesota is catching a windfall of corporate facility growth. On July 30, Wells Fargo & Co. announced plans to build a 400,000-sq.-ft. (37,200-sq.-m.) operations center and create 500 new jobs in Shoreview, Minn. The construction project is expected to cost up to $60 million and could be completed by mid-2003.
The Wells Fargo expansion reflects a trend in the Twin Cities. As growing Minnesota businesses fill up space in downtown Minneapolis and St. Paul, many companies are turning to the suburbs. The suburban locations offer cheap land, less traffic congestion and better parking.
Another bank heading to the suburbs is U.S. Bancorp, which plans to invest $65 million to expand and consolidate some Twin Cities operations in a proposed campus on the West Side Flats across the Mississippi River from the St. Paul central business district.
Also fueling Minnesota's growth is a major new power plant. On Aug. 23, Minnesota Power and the Blandin Paper Co. announced a proposal to build a $200 million energy facility next to Blandin's paper mill in Grand Rapids, Minn. The combined heat and power plant would use wood waste for fuel and would meet all steam requirements of the UPM-Kymmene-owned Blandin.
The facility would provide about 225 megawatts of electric generation capacity to help meet the region's increasing demand for power. The proposal calls for low-sulfur, Powder River Basin coal and natural gas to be used as fuel for the plant.
"I look at the Twin Cities in a very positive light," says Reynolds. "It is a very diverse economy, a very hard-working city. We have a very highly educated population base that is very active in the political system. And we have a very good education system that is always striving to be better. While we are experiencing a temporary slowdown right now, as is the rest of the country, our outlook for the next 24 months is positive."
-- by Ron Starner
