Tis’ the season for commercial leasing, according to figures from a new report from Colliers International. The report shows office space vacancy falling over the last few years and predicts that there will be growth in commercial leasing in the Minneapolis and St. Paul areas for the rest of 2013 and into the short-term future. Most of the increase in commercial leasing has been prompted by increasing demand for office space.
Since the recent recessionary years, businesses have not been expanding and have continued to participate in a process of densification, which is the concentrating of office space per workers. This has occurred much more in recent years as businesses have started to hire more employees, but have not expanded space usage. Trends are beginning to develop which suggest that this may change. However, unlike in periods of expedient growth in which businesses sometimes create their own new spaces, companies are currently turning to existing properties for redevelopment, and this has spurred the market for commercial property leasing and redevelopment.
The Colliers report makes mention of several buildings being renovated for this purpose including 510 Marquette, the William E. McGee Building, the Northwestern Building, and Block E. The Star Tribune reported that the Miller Bag Building in North Minneapolis is also being renovated into new office spaces. In addition, many entrepreneurs are eyeing the commercial property sector in the Warehouse District such as Nicolas Thomley, the 33-year-old founder of Pinnacle Services. He recently purchased a 111-year-old warehouse building that he plans to renovate and also partly turn into his own private residence, from which he can survey the development of the Warehouse District. According to him, the Warehouse District is one of the hottest neighborhoods for redevelopment since there is “literally nowhere else to do so.” Other major signs of redevelopment are also accompanying this trend such as the demolition and erecting of the new Vikings Stadium as well as the recently-approved Target Center renovation.
With the expected influx of new commercial property leases and redevelopment, property owners will face the need to draft complex agreements which not only protect their interests, but also shield them from liability. This will be a boon to the legal industry in the Twin Cities since property owners usually defer to legal counsel when drafting complex agreements. They should, too; there are subtleties in commercial real estate law concerning topics like gross vs. double net lease terms as well as indemnification, improvements, dispute resolution, etc. In the arena of commercial leasing, there are fewer laws protecting the parties, no standard forms, long-term and binding provisions, and more negotiable terms.