MREJ Jan 2017

VOLUME 33, NUMBER 1

©2017 Real Estate Publishing Corporation

January 2017

DNA of CRE survey: Commercial real estate remains male-dominated, doesn’t make instant millionaires

By Dan Rafter

T Attracting and retaining talent— in the suburbs

O

ffice life in the suburbs is rapidly evolving as building owners transform their buildings to cater to the new way of working preferred by today’s workforce. New lounges are offering spaces for employees to collaborate and socialize, while fitness centers and healthy food offerings are helping to meet employees’ health and wellness needs under one roof.

Many building owners have realized that Millennials

and other professionals love their suburban lives (and shorter commutes)—they just want well-designed buildings with amenities on-par with their counterparts in the city. These building owners, whether investors or corporations, know that investing in the suburbs remains a strong long-term proposition.

A 2016 report by PwC and the Urban Land Institute found absorption rates in Chicago’s suburban offices are Suburbs to page 16

he vast majority of commercial real estate professionals — 80 percent — are male, and most don’t rank among the super rich, with 24 percent of commercial real estate agents reporting that they earned less than $100,000 in gross commission income each year and 16 percent from $101,000 to $150,000 each year.

Those are two of the statistical nuggets unearthed in this year’s DNA of CRE survey compiled by online brokerage theBrokerList and Buildout, a company that produces marketing software for CRE brokerages. This is the second year that these two companies have partnered on the survey.

Some things haven’t changed much since the first survey last year. There’s the fact that commercial real estate remains a male-dominated industry. It’s also an industry led by older brokers.

The survey found that 27 percent of Survey to page 17

Johnson acquires Minnesota Real Estate Journal & related companies

I

am very pleased to announce that after 19 years of working for the Minnesota Real Estate Journal I was given the opportunity to acquire the Journal and related businesses from Law Bulleting Publishing Company on January 3, 2017. For the past 33 years, the Minnesota Real Estate Journal has had the privilege of providing the commercial real estate community with the most indepth real estate news and information in Minnesota. In addition, 19 years ago, we began providing continuing education and networking seminars focused

on subjects directly related to the commercial real estate industry and its many distinct sectors. Our readers and sponsors have responded with crowds of up to 750 Johnson professionals.

As I look forward to the future, our team has exciting plans to continue improving the Minnesota Real Estate Journal and providing our

readers with the content and information that will most positively impact their businesses. We will also continue to offer unique and timely seminars to help our attendees learn about the latest trends in their market segment and provide them with the best networking experience in the industry. Furthermore, we look forward to the launch of a new website in the coming months.

I graciously thank you, the readers, subscribers, and advertisers of the Minnesota Real Estate Journal and all the attendees and sponsors of our confer-

ences for your support in the past and in the future. Please reach out to me with any ideas or comments you have. My team and I look forward to continuing to serve you with your real estate news and information needs. Let’s make it a great 2017 for the real estate industry!

Jeff Johnson Minnesota Real Estate Journal 952-405-7780 jeff.johnson@resummits.com

January 2017

Minnesota Real Estate Journal

Contents

1

JANAURY 2017 • VOLUME 33, NUMBER 1

ATTRACTING AND RETAINING TALENT— IN THE SUBURBS DNA OF CRE SURVEY: COMMERCIAL REAL ESTATE REMAINS MALE-DOMINATED, DOESN’T MAKE INSTANT MILLIONAIRES

12

SPACE SHORTAGES MAKE LIFE CHALLENGING IN INDUSTRIAL MARKET

14

INDUSTRIAL LEADERS: EXPECT A BIG YEAR FOR DISTRIBUTION, WAREHOUSE FACILITIES IN 2017

18

USING AGILE DEVELOPMENT PRINCIPLES TO PREPARE FOR THE CITY OF THE FUTURE

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Departments PEOPLE

4

NEWS

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Minnesota Real Estate Journal (ISSN 08932255) Copyright © 2017 by the Minnesota Real Estate Journal is published for $85 a year at 12 times per year by Jeff Johnson, 13700 83rd Way North, Suite 206, Maple Grove, MN 55369. Monthly Business and Editorial Offices: 13700 83rd Way North, Maple Grove, MN 55369 Accounting and Circulation Offices: Jeff Johnson, 13700 83rd Way North, Maple Grove, MN 55369 Call 952-885-0815 to subscribe. For more information call: 952-885-0815.

POSTMASTER: Send address changes to Minnesota Real Estate Journal, 13700 83rd Way North, Suite 206, Maple Grove, MN 55369 ©2017 Real Estate Publishing Corporation. No part of this publication may be reproduced without the written permission of the publisher.

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Minnesota Real Estate Journal

January 2017

People

13700 83rd Way N, STE 206 Maple Grove, MN 55369 For information call 952-885-0815

President | Publisher Jeff Johnson jeff.johnson@resummits.com Associate Publisher Jay Kodytek jay.kodytek@resummits.com Consulting Editor Dr. Tom Musil tamusil@stthomas.edu Conference Manager | Art Director | Graphic Designer | CE Specialist Alan Davis alan@resummits.com

EditoRial advisoRy BoaRd JOHN ALLEN Industrial Equities ROBERT ANGLESON Navigator Real Estate JEFF EATON Cushman & Wakefield/NorthMarq MARK EVENSON Evenson and Young PATRICIA GNETZ US Bank TOM GUMP TAG Consulting DAVID JELLISON Liberty Property Trust CHAD JOHNSON Hellmuth & Johnson BILL WARDWELL Colliers International JEFFREY LAFAVRE IAG Commercial WADE LAU Founders Properties MIKE LE JEUNE Fabcon JIM LOCKHART WIPFLI DUANE LUND Exchange Realty CLINT MILLER Cushman & Wakefield/NorthMarq DR. THOMAS MUSIL WILLIAM M. OSTLUND CBC Griffin Companies WHITNEY PEYTON MIKE SALMEN Transwestern

13700 83rd Way N, STE 206 Maple Grove, MN 55369 For information call 952-885-0815

Bridgewater Bank Names Joe Chybowski Chief Financial Officer Bridgewater Bank, a leading Minnesota bank focused on meeting the unique needs of successful real estate and small business entrepreneurs, is pleased to announce the promotion of Joe Chybowski to Chief Financial Officer and Senior Vice President. Joe joined Bridgewater Bank in 2013 as Controller and most recently served as Vice President of Finance.

“Joe’s strategic insights, ability to forecast, budget, identify opportunities and his overall passion for banking makes him an incredible resource to Bridgewater,” explained President and CEO, Jerry Baack. “Not only is his transition to CFO a natural fit, his expertise is a tremendous asset to the Bank.”

During his tenure at Bridgewater Bank, Joe has made significant contributions to the financial health and rapid growth of the Bank. Experienced in overseeing asset/liability and capital management functions, investment strategies, investor relations and more, his new role will expand to managing all financial�related activities of the bank. As a member of the Strategic Leadership team, Joe will help guide the Bank’s strategic initiatives

Siobhan Dvergsten, P.E., Joins Encompass, Inc. Engineering Staff Minneapolis, MN. Siobhan Dvergsten, P.E., has joined the engineering staff of Encompass, Inc., Eden Prairie, as a project engineer. She joins Encompass from Target Corporation, Minneapolis, where she held the position of senior structural engineer, and was involved in the structural design of new and existing stores, analyzed damage of existing stores, led the structural fixture program, and supported the national Code Compliance Team as well as disaster response on the Property Development Crisis Action Team. She has over 23 years of Structural Engineering experience at Target and other consulting engineering firms in Minneapolis, MN. In her new position, Dvergsten will support Encompass’ forensic and investigative work, by utilizing her experi-

ence with structural analysis of steel, wood, concrete and concrete masonry construction, supervising field investigation activities related to a variety of structural and façade failures and providing analysis of field investigations.

Dvergsten received her B.S. degree in civil engineering with structural emphasis from Washington University, St.Louis. She is an active member of the Minnesota Concrete Council.

Knutson Construction Announces Stacey Albers is Promoted to Office Administrator Knutson Construction, a leading builder in the Rochester area, is pleased to announce that Stacey Albers has been promoted to office administrator.

Albers has been with Knutson for six months and is a graduate of Southeast Technical College in Red Wing with a degree in business administration.

Since joining Knutson, Albers has been involved with a number of projects including the Rochester Armory renovation, Mankato East High School renovation, multiple projects at IBM, and closeout for the Rochester Community and Technical College CTECH project.

“Stacey’s attention to detail, past administrative experience, and eagerness to learn will help enhance the efficiencies of Rochester operations and invariably the long-term satisfaction of Knutson’s internal and external partners. We are pleased to be able to leverage Stacey’s full potential and are committed to the growth of our employees,” stated Tom Leimer, vice president and general manager.

Mark Reiling joins Schafer Richardson as Partner and will lead its Real Estate Investment Trust Schafer Richardson, Inc. announced today that Mark W. Reiling, CRE, SIOR has joined the firm as Partner.

His primary role as President will be to oversee and direct SR Realty Trust, Inc., a private equity real estate investment trust, focused on the acquisition of income-producing properties located in Minneapolis and the Upper Midwest.

Mark has more than 35 years of commercial real estate investment, finance, development, sales, leasing, manage-

ment and consulting experience. Most recently, Mr. Reiling held the position of Chief Investment Officer for IRET Properties, and prior to that, was with Colliers Towle Real Estate Company and its successor companies for 29 years, 17 of them as President. He began his career at Citicorp Real Estate, Inc.

Minneapolis’ New Perspective Senior Living hires new COO Minneapolis-based New Perspective Senior Living has hired former Brookdale executive Chris Hyatt as partner, investor and chief operating officer. In this new position, Hyatt will be responsible for the day-to-day operations of the organization. Company founder Todd Novaczyk retains his position as chief executive officer, as does Ryan Novaczyk in his role of president and chief financial officer.

Hyatt has close to 20 years of experience with senior living companies.

Most recently, Hyatt served as executive vice president of operations support for Brookdale. Prior to joining Brookdale, he was executive vice president and chief operations officer at Emeritus Senior Living, which merged with Brookdale in 2014.

Hyatt began his senior housing career with Emeritus in 1998.

Minneapolis’ Westwood Professional Services’ VP to oversee land business Westwood Professional Services Inc. has appointed its vice president of operations, Jason McCarty, to oversee the firm’s Minneapolis-based land business, which includes residential and commercial development.

In this position, McCarty will focus on implementing local and regional growth strategies to support Westwood’s national land division objectives.

McCarty is a civil engineer and 19year veteran of the firm. In addition to previously serving as Minneapolis land leader, he has held a number of leadership roles including residential market leader, national office leader, national land leader, and his current role overseeing national operations, which he will maintain.

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News Doran Construction Repeats as Minnesota Construction Association’s General Contractor of the Year At its Awards of Excellence gala on January 25, the Minnesota Construction Association (MCA), for the second consecutive year, honored Bloomingtonbased Doran Construction as General Contractor of the Year.

In presenting the award, the MCA recognized Doran Construction’s rapid growth in the industry and its stellar reputation for excellence in building large multi-family residential and mixed-use projects in the Twin Cities market.

Kelly Doran, owner and founder of the Bloomington-based company, gave credit to “an outstanding team of leaders and an extremely talented group of project managers, project engineers, construction superintendents and administrative staff. We all know that success doesn’t come easy, so this honor is about people working very hard, with a passion for quality and paying great attention to detail.”

Minnesota Real Estate Journal

January 2017

in Hopkins.

Residential Management Division comes at an interesting time in the industry. According to Paul Olson, Suntide’s Portfolio Manager, managing apartments may become increasingly more challenging with pending changes in the economy; rent increases may stagnate which could push building owners to work harder to keep tenants. “This is the perfect time for us to get in the game,” Olson said. “We’re coming into this market with extensive commercial and residential experience that equips us to offer high-quality service at extremely competitive prices that will allow both residential and commercial investors new opportunities. And with our program, we’ve got four major advantages going for us.”

The four things Olson refers to include Suntide’s commitment to highquality, energy-efficient service, management programs that owners can tailor as they see fit and full transparency with building owners; all done with extremely competitive pricing.

“Our approach is simple,” Olson said.

“We treat each property as if we own it, and we believe in full transparency with

Doran CEO of Construction and Architecture, Scott Stenman, who recently joined Doran after managing the design and construction of U.S. Bank Stadium for the Minnesota Sports Facilities Authority and the Minnesota Vikings, observed that “to be honored by your industry competitors and colleagues two years running is an incredible accomplishment. This is a focused and talented group that has put together a very impressive string of projects and I am honored to be with them.”

Among Doran’s notable construction projects over the past two years are Alatus Development’s Latitude 45 and Sherman Associates’ The Encore— inspiring luxury apartment buildings located in the Downtown East and Mill Districts of Minneapolis. Others include the renovation and expansion of the historic Renaissance Depot Hotel in Minneapolis; the construction of Summit Management’s Bluestone Commons in Duluth that consisted of two luxury multi-family projects and the Shoppes of Bluestone; and two of Doran’s own multi-family development projects 610 West in Brooklyn Park and The Moline

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Suntide Commercial Realty, Inc. Launches Multi-Family Residential Management Division Suntide Commercial Realty, Inc., a top 20 management company in the Twin Cities, is pleased to officially announce the launch of its new MultiFamily Residential Management Division. The new division will utilize Suntide’s extensive real estate experience to offer Twin Cities area multi-family building owners high-quality service with trickle-down benefits to owners, landlords and tenants.

“Suntide has long been a leader in commercial real estate management, and the transition for us into multi-family residential is an easy and smart one for us to make,” Mike Cylkowski, Suntide’s head of business development said. “Paul Olson, who leads our new division, has helped create a management program that will result in short and long-term benefits for both our client, as well as, us.”

The launch of Suntide’s Multi-Family

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owners. When you have poor management it’s not just the owner and tenants that pay for it, but the surrounding community as well. Our management style considers efficiency and quality of service as our foundation, focusing on financial, procedural and environmental elements to benefit both owners and tenants. And when it comes to transparency, we go beyond providing routine email updates.”

Suntide offers an online data system that allows owners to see their entire financial picture up to the given minute.

Olson added, “We really have a full-service management division with the flexibility for individual comfort,” Olson said. “A lot of owners have managed their own sites for decades, and would like to retain some of the every-day duties. We can handle all management aspects internally or customize a program for the owners. It’s really about making them comfortable while providing the best service possible.”

Minnesota Real Estate Journal

WOODBURY’S CITYPLACE UNVIELS NEW MEDICAL OFFICE DEVELOPMENT PLANS Elion Partners and The Davis Group have entered a joint venture to develop a Class A medical office building at CityPlace in Woodbury, Minn. The new medical office building is the second to be developed, and is part of the 100-acre master planned development off Radio Dr. and I-94.

The two-story, 50,000+-square-foot medical office building will be located between the retail and Residence Inn by Marriott, on approximately four acres.

“The momentum at CityPlace began with the development of the retail shops, hotel, and TRIA Orthopaedics, which have been phenomenally successful,” said Woodbury Mayor Mary Giuliani Stephens. “Today’s announcement of a new medical office building will only add to that success, and will solidify Woodbury’s reputation as a healthcare destination and an economic hub of the

Twin Cities east metro.”

The approved development plan for CityPlace identified the goal of 400,000 square feet of Places to Work land uses.

Following the construction of the 50,000+-square-foot medical office, there will be 290,000 square feet of Places to Work uses.

“Creating a high-quality Places to Work environment is the main goal of the CityPlace development. The addition of the new multi-tenant medical office building will bring us another step closer to that goal,” said Eric Searles, Woodbury’s City Planner.

The Davis Group, in conjunction with Elion Partners, has designed the multiunit medical office building to meet the demands of today’s medical office user.

“Our focus at CityPlace has always been to bring the highest quality development to the site,” said Juan DeAngulo, Managing Principal, Elion Partners.

“That’s why we are excited to partner with The Davis Group who consistently delivers the highest level of product

January 2017

quality with all of its medical office buildings.”

“We are extremely pleased to be part of the CityPlace development,” said Jill Rasmussen, The Davis Group, Principal. “We look forward to our partnership with Elion Partners and bringing another high-quality Class A medical building to the Woodbury Community.”

The new medical office building will be joining the 75,000-square-foot Tria Orthopaedic Center on site, which is currently under construction and expected to open this summer.

CBRE CAPITAL MARKETS ARRANGES SOUTHEAST CORPORATE CENTER SALE IN EAGAN, MN CBRE Capital Markets arranged the sale of Southeast Corporate Center, a 58,645-square-foot single-story corporate office building in Eagan, Minnesota, to Spectrum Development Group, LLC. Ryan Watts, Judd Welliver, Sonja

Page 10

Dusil and Tom Holtz of CBRE’s Minneapolis office arranged the sale on behalf of the seller, a private equity firm. The sale closed January 20, 2017.

Southeast Corporate Center at 3020 Denmark Avenue in Eagan is 100% leased to CHS, Inc., a Fortune 100 agricultural company. The building is a single story corporate office building that was constructed in 1998 with a brick façade, ribbon glass, and 4.79 parking spaces per 1,000 square feet.

The Minneapolis-based team of Ryan Watts, Judd Welliver, Sonja Dusil and Tom Holtz focuses on the disposition of single-tenant and multi-tenant industrial and office properties. The team also advises real estate operating companies on the sourcing and structuring of joint venture equity. Mr. Watts and Mr. Holtz are part of the 90member CBRE Institutional Properties group. In 2015, the Capital Markets enterprise of CBRE, including the Institutional Properties group, completed more than $121.96 billion in combined total U.S. capital activity.

Minnesota Real Estate Journal

MARCUS & MILLICHAP ARRANGES THE SALE OF A 52-UNIT APARTMENT BUILDING Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Columbia Park Apartments, a 52-unit apartment property located in Minneapolis, Minnesota, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The asset sold for $3,800,000.

Mox Gunderson, Dan Linnell and Josh Talberg, investment specialists in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a private investor. The buyer, a private investor, was also secured and represented by Gunderson, Linnell and Talberg.

Speaking with Mr. Linnell, “Columbia Park represented a well-kept, stabilized apartment community in the exciting Northeast area of Minneapo-

lis. Having been in the same ownership for over 45 years, and considering the properties great urban location, Columbia Park generated multiple offers from both local and regional investors.

Columbia Park Apartments was constructed in 1959 and is located at 3414 Tyler Street NE in Minneapolis, Minnesota.

Dougherty Mortgage LLC closes $20 million Fannie Mae loan for La Jolla Terrace Apartment Homes Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed a $20 million Fannie Mae loan for the acquisition of La Jolla Terrace Apartment Homes, a 340-unit market rate multifamily apartment property located in Fort Worth, Texas. The Fannie Mae 12-year term, 1-year interest only, 30-year amortization loan was arranged through a partnership with Old Capital Lending and Dougherty’s Vienna, Virginia office for borrower Katz La Jolla Terrace, LLC

January 2017

Dougherty Mortgage LLC closes $13 million Fannie Mae loan for Las Lomas Apartments Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed a $13 million Fannie Mae loan for the acquisition of Las Lomas Apartments, a 224-unit market rate multifamily apartment property located in Arlington, Texas.

The Fannie Mae 10-year term, 2-year interest only, 30-year amortization loan was arranged through a partnership with Old Capital Lending and Dougherty’s Vienna, Virginia office for borrower DCP 834 Timberlake Drive, LLC.

Dominium Recognized for Excellence in Multifamily Development, Design, Marketing and Management Dominium collects five awards at National Association of Home Builders’ Multifamily Pillars of the News to page 20

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Minnesota Real Estate Journal

January 2017

Space shortages make life challenging in industrial market

By Mike Antonelli, Brown Commercial Group

A

s the industrial market in Chicago and across the Midwest continues its strong run into 2017, several trends continue to impact the small to mid-sized owners and tenants in the market. While there has been much talk about large tenants, such as Amazon and other big-box users driving new construction and leasing, market conditions are bringing other changes to those companies that need only a fraction of the space required by larger users.

With overall industrial vacancies low – they are at or below 7 percent throughout the Chicago area, for instance — a shortage of space is creating challenges across most submarkets.

This is particularly true with properties in the 60,000-square-foot and under category, where tenants—whether they intend to buy or lease—are often hardpressed to find ideal facilities.

This is a result of quarter-over-quarter positive absorption and a continued supply of active buyers and tenants

Mike Antonelli looking for spaces in the 10,000- to 60,000-square-foot range. Also, new construction is limited in this size category. While it’s cost-effective for developers or large-end users to build new, state-of-the-art facilities of 100,000 to 1 million square feet, small to medium-sized users often find new construction costs to be prohibitive.

This scenario is particularly true for

those users seeking Class-A building space with modern amenities. Buildings with 24-foot ceiling heights or higher, ample truck and employee parking, and multiple dock spaces, for example, are in high demand.

Those who wish to buy are often forced into plan B, leasing a smaller space within a larger building. Many properties that have been on the market for a long period of time — and might not have all the amenities tenants desire — are now seeing increased activity because of this lack of inventory.

This supply-demand equation is also driving up pricing in many markets.

During the past few years, rents have increased by 5 percent to 10 percent or more in many areas. Sellers and landlords no longer need to offer aggressive concessions, especially on the most desirable spaces. This increase in average lease rates combined with steady interest rates, has caused many buyers to now consider those new-construction opportunities that were once considered cost-prohibitive.

In the Chicago area’s DuPage County and bordering collar counties, for

example, sales of industrial buildings of 50,000 square feet and under remain strong, as sellers are taking advantage of the favorable market conditions compared to that of 2011. However, lack of infill sites available for development continue pushing newer, larger developments beyond the core submarkets into areas such as the south suburbs of Chicago and Southeastern Wisconsin.

The outlook for small to mid-sized industrial tenants and owners remains positive, as growth in light manufacturing, e-commerce and related supplychain businesses should continue at a steady pace. Many business owners are more confident about their long-term growth plans today than in recent years. All this bodes well for the industrial market heading into 2017.

Mike Antonelli is vice president of sales with Brown Commercial Group in Elk Grove Village, Illinois.

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Minnesota Real Estate Journal

January 2017

Industrial leaders: Expect a big year for distribution, warehouse facilities in 2017

by Declan Harty

T

he growth of the industrial market – in Chicago and across the country — isn’t expected to slow at all in 2017.

Thanks largely to a continued surge in e-commerce activity, the boom in industrial property has cued industrial professionals to gear up for what could be a year filled with new problems, trends and a constant need for more supply. From e-commerce’s boom to a new presidential administration, the industrial real estate market is gearing up for changes that could make ripples for years to come.

The Chicago industrial market alone saw record net absorption of 26.6 million square feet in 2016, according to a fourth quarter market report from Colliers International. The report detailed that the Second City saw its industrial vacancy rate drop 62 basis points in 2016, falling to 6.7 percent, the lowest vacancy rate since the third quarter of 2001.

With 85 construction projects completed in 2016 and another 58 currently under construction, the Chicago industrial market is primed for ample growth amid a flurry of interest in the area.

The rise of e-commerce Some of the biggest leasing deals

done in 2016 had one thing in common: e-commerce.

As Americans continue to demand speedy deliveries, e-retailers – notably Amazon – are snatching up more warehouse space and distribution facilities, all in a push to keep up.

Massive warehouse facilities have

started to, or will soon, pop up in Cook County and Chicago’s edges in towns like Aurora, Joliet, Waukegan and Carol Stream. The push, primarily to the city’s southern and western cusps, has brought thousands of jobs to the area, as facilities require a skilled job Warehouses to next page

January 2017 Warehouses from previous page

force looking for employment.

But in the city, two-day shipping – the standard for services like Amazon Prime — is no longer satisfactory for many Chicagoans. Instead, they’re demanding same-day delivery, wanting their packages to arrive just hours after clicking “buy.”

“We’re all very spoiled and very impatient,” said Bob Smietana, chief executive officer of HSA Commercial, a Chicago-based real estate firm that focuses on various property types, including industrial.

The push for same-day deliveries means that developers are being called increasingly to build smaller, urbanbased properties with ample available access for delivery vans, Smietana said.

The move toward what’s been dubbed “last-mile deliveries” causes a need for spaces of about 50,000 to 60,000 square feet with available docking areas, van access, parking garages and high ceilings.

The biggest benefit for doing business in Chicago and much of the Midwest’s biggest markets, of course, is the central location in the middle of the country. While some Internet giants and delivery companies have created storage lockers where customers can pick up their own packages, most people who order online still prefer their delivery come straight to their home.

“The e-commerce last mile has just been booming,” said Justin Lerner, a principal with Transwestern.

Developers are attempting to compensate by expanding their efforts both in the city and its outskirts. Amazon, which signed half of the 10 largest new leases in 2016 (totaling 4 million square feet), leased properties in Romeoville, Waukegan and Aurora, among others.

But the year prior, Amazon had already started to plant its “last-mile delivery” roots, leasing a property on Goose Island and in the Heart of Chicago neighborhood.

“They’re gobbling up the smaller spaces as well,” said Michael Marconi, a managing broker with Transwestern’s Rosemont industrial practice. “From your big e-commerce to your small ecommerce, every one of them wants to

Minnesota Real Estate Journal

have these smaller distribution centers on the last mile.”

The push for industrial properties hasn’t only been caused by e-commerce. Industry experts have seen manufacturing companies and jobs make a push back to the Chicago area.

Over the last eight or so years, Elk Grove Village, led by Mayor Craig Johnson, has made a continued push for growth in its business park – even amid the Great Recession – resulting in what is the largest industrial park in the United States with more than 3,600 businesses across 62 million square feet.

Johnson attributes the business park’s successes to the village’s investment in the park, which has totaled more than $60 million in recent years.

“We became very aggressive,” he said. “We’ve been very proactive with working with the businesses to make sure we’re ahead of the curve.”

Located just west of O’Hare International Airport – a sea of industrial properties – Elk Grove Village and its business park were erected around the same time in the late ‘50s, early ‘60s. The village and park were always intended to work off one another, with the village as a home for the park’s employees.

Now, with a population of 33,127, Elk Grove has grown into a home for companies of all sorts. Johnson said the companies at the business park range from warehousing and distribution, but he’s hoping for continued development in the park’s manufacturing fronts.

“We hope we can bring manufacturing back,” said Johnson, who noted that Elk Grove is only No. 2 in manufacturing to Chicago across the state of Illinois. “We’re seeing a resurgence again that we haven’t seen in 30 years.”

But the spike in renewed interests in industrial properties like manufacturing, coupled with the booming demand from e-commerce, has caused many questions for those in the Chicago industrial market about what lies ahead.

“As developers, it’s almost tough to keep up with keep up with demand because of the amount of space these companies need,” said Smietana, who called the e-commerce trend “a different animal.” “We’re seeing a lot of growth.”

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Minnesota Real Estate Journal

Suburbs From page 1

improving, while vacancies have slowly but measurably declined. Moreover, the report pointed to ULI data finding that a larger number of millennials would prefer to live in the suburbs than currently do. This supports general logic that as members of the cohort move into their child-rearing years, they are likely to seek bigger homes and better schools in the suburbs.

How to attract and retain talent—in a suburban workplace As office deals in the suburbs pick up, building owners will find that new amenities and impactful design elements can help bring more energy and buzz to their buildings, which pays off in the long term. For owners and investors, repositioning projects increases returns on a building when the new features help attract and retain tenants.

And for businesses, employee recruitment, engagement and retention increases when the design of the workplace effectively meets their needs.

Modern amenities add value to headquarters and multi-tenant buildings alike Over the last decade, the tech industry upped the ante when it comes to office perks, with lavish amenities like gour-

Steve Wright

Roger Heerema

met cafeterias and massage rooms.

Many downtown office buildings followed suit, adding high-tech conference facilities, fitness centers and lounges to help boost employee engagement. For example, the new tenant lounge at 222 South Riverside Plaza, located above Union Station, features a game room and golf simulator. And now we see this trend picking up in the suburbs.

One of the biggest suburban office deals of 2016 came in June, when Retail Properties of America, Inc. announced that Paylocity would take over 309,000 square feet of space at its Zurich Towers office building. To help lock in the 15-

year agreement, RPA engaged Wright Heerema early in the process to design multiple building improvements, including a fully renovated atrium and lobby, state-of-the-art fitness center, new recreational amenities and modern conference and dining facilities.

When our teams design a suburban headquarters renovation, the plans almost always include new social spaces that bring people together organically.

In-office lounges and bars build buzz and encourage employees to network outside of their everyday working relationships. These are features that originated in urban areas, and now are

January 2017

becoming more common in suburban office environments.

More subtle renovations can also make a big impact. Building owners and tenants alike are beginning to cater to the new style of working preferred by Millennials, who enjoy the opportunity to get out of the cocoon of their cubicle and work in a variety of spaces depending on the type of project they are focused on that day.

For instance, when Alliant Credit Union sought to redesign their offices in Rolling Meadows, they decided to knock down walls and transform their pantry area into a bright and airy lounge that brings employees together organically. A variety of seating areas provide spaces for employees to socialize and collaborate, and get a change of scenery from their desks.

Similarly, landlords are taking an active role in building out common spaces for tenants that go beyond lobbies and restrooms, helping to make their buildings more competitive and attract tenants. In multi-tenant buildings, Wi-Fi lounges offer a perk for building tenants and extend the available workspace, providing opportunities for employees to work in different venues and network with other people in the building. Many owners are also adding more robust conference centers and videoconference facilities, which tenSuburbs to next page

January 2017 Suburbs from previous page

ants can use for a fraction of the cost that they would incur to add such amenities to their own individual space.

Fresh design wakes up sleepy office parks While new lounges and other amenities can go a long way in attracting tenants and increasing employee engagement, they may be overlooked if the building itself looks like it hasn’t changed since 1987. In the suburbs, the design of the building exterior and common spaces is more critical than in downtown buildings, where the general buzz of city life lends energy to offices.

In Oakbrook, Wright Heerema partnered with Golub & Company to reinvigorate a 289,000-square-foot complex now branded Oakbrook 22. On top of new amenities, the renovation helped to refresh the building with a re-imagined lobby, landscaping upgrades and a new entry arrival experience. The investment

Survey From page 1

CRE pros were from the ages of 50 to 59, while 20 percent were 60 to 69.

Only 6 percent of CRE pros were from the ages of 21 to 29, while 20 percent were 30 to 39.

What roles do CRE pros assume today? The survey found that 34 percent of them spend the most time representing sellers in investment sales, while 22 percent spend the majority of their time representing landlords in leasing deals. An additional 21 percent said they spend the most time representing tenants in lease transactions, while 12 percent spent the greatest chunk of their time representing buyers in investment sales.

The south, as it did last year, remains the top source of business for commercial agents. A total of 32 percent of respondents said that most of their business came from the south, while 29 percent said that the west provided most of their business. Just 21 percent of respondents said that the Midwest provided most of their business.

When it comes to income, the greatest percentage of agents said that their gross commission income was under $100,000, with 24 percent of agents reporting this level of income. A total of 16 percent of agents said that their gross commission income came in at $150,001 to $200,000, while 15 percent said it was $200,001 to $300,000.

A total of 10 percent said that their gross commission income was $500,000 to $1 million, while just 5 percent reported earning commission income of $1 million to $2 million.

And the big earners? The survey found that only 1 percent of respondents claimed to have earned gross commission income of $2 million or more.

Minnesota Real Estate Journal

has paid off—new leases and renewals have helped to push up occupancy, and Michael Jordan’s restaurant has signed on to take over the new dining area.

Suburban locations also offer an advantage most downtown buildings cannot—the opportunity to extend the office outdoors. Oakbrook 22 took advantage of its land to add a new amenity space with seating in a green area. Bright canopies and thoughtful

landscaping bring energy to the patio, giving office workers a place to take a break from the daily grind.

The project proved it is possible to be cool in the burbs. While some corporations will find a downtown building better suits the needs of their workforce, other companies will find they can still effectively recruit employees and keep them happy in the suburbs.

Modern design and amenities can add

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energy and cater to the working style of today’s employees. In the suburbs, where the onus is on the building to build energy and buzz, these improvements can be even more impactful.

Steve Wright and Roger Heerema are principals with Chicago architecture firm Wright Heerema Architects

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Minnesota Real Estate Journal

January 2017

Using agile development principles to prepare for the city of the future Navigating Technology Technology disruption is showing real estate how it needs to be more flexible to stay relevant. Real estate is showing that technology needs a longer view and ROI in order to survive. In both worlds, tactics and trends will change but success should be measured by the value of the outcomes and the engagement of the users.

By Dan Peterson | Technology Solutions | Colliers International MSP

T

o make real estate future ready, real estate professionals need to adopt an agile development mindset toward delivering CRE strategies. The result will be better user experiences and returns on their investment.

In the technology world, agile development is a methodology used to develop projects with an emphasis placed on empowering people to collaborate and use a continuum of planning, testing and integration. In most cases, the projects evolve and the result is continuous improvement.

Adapting to Change In order to respond to the needs of the changing built environment, real estate needs should be delivered with the same premise - change is continuous and strategies need to be continually responsive. For developers of workspace, design should be guided by the quality of the user experience. Soon, commercial real estate environments will be

Both will be successful if they are invested in wise uses of resources and the priority for our wellbeing.

Five Key Themes Dan Peterson judged in comparison to something as frictionless as downloading and using an app. The world of ubiquitous workspace-as-a-service is close at hand. In the future, companies will still define private spaces to drive their business and support their culture, but as technology and real estate continue to intersect, users will continue to push CRE to support them in a fluid landscape of tools and connection points.

Deloitte recently published a report, “Innovations in Commercial Real Estate, Preparing for the City of the Future.� The report discusses five key technology and consumer behavior themes CRE professionals should be incorporating with their business strategies going forward.

These themes include future trends in mobility, the focus on occupant health, utilizing the Internet of Things, 3D printing and data analytics.

How does real estate use an agile development mindset?

Let’s look at the themes in the Deloitte report on the following page:

January 2017

Minnesota Real Estate Journal

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Future of Mobility Shared access, autonomous and ‘pay-per-use’ vehicles will ultimately cut down on parking requirements and change logistics geographies.

Agile application: Landlords can offer pre-paid (Uber cards) transit credits as leasing incentives and survey existing tenants to create new uses for portions of their parking lots.

Occupant Health and Wellness As health consciousness grows, so does the demand for healthy environments. Well-being in the workplace translates to productivity, recruiting advantages and energy efficiencies.

Agile application: Properties can stay agile to health and wellness needs by expanding access to natural light, maintaining their shell as a sustainable environment and measuring the ongoing physical and mental comfort of the occupants.

Internet of Things Machines everywhere are talking to each other, collecting data and working ‘smarter’ on our behalf. The realities of better measurements and efficiencies are present for owners that put into place an IT backbone fed layer of IoT devices into their buildings and businesses.

Agile application: Owners can take the ongoing IoT device feedback and make it transparent to the tenants. Both parties will have an up to the minute view and voice to improving ROI and property experience.

3D Printing Additive manufacturing is providing many industries more customization and faster delivery.

Agile application: Landlords can be agile to the needs of companies with on-demand production and smaller inventories by providing time share storage and infrastructure for on-site manufacturing options.

Demographic Data and Predictive Analytics Primarily because of technology, we gather more data and have more insight to people’s preferences than ever before. As a result, smarter algorithms and greater customization is possible to present timely solutions.

Agile application: Continue to measure and gather information but keep instinct in equal balance for decision making. Human nature and a historical respect for choice will keep our intelligence from going completely artificial.

The Result?

Regardless of what aspect of real estate is affected by technology, incorporating integrated solutions for new ways for people to live and work will result in more collaboration and quicker decisions for users and owners alike.

This will become increasingly important as the fight to attract and retain talented workers continues to gain momentum throughout the United States.

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Minnesota Real Estate Journal News from page 10

Industry Awards, including Multifamily Community of the Year Dominium, a Minneapolis-based leading apartment development and management company, was honored with five awards including Multifamily Community of the Year for their refurbished property, A-Mill Artist Lofts, at the 2016 National Association of Home Builders’ Multifamily Pillars of the Industry Awards.

The NAHB’S Multifamily Pillars of the Industry Awards program recognizes a variety of characteristics within both the apartment and condo marketplace. Included are developmental concepts that yield creativity, state-of-theart financing strategies, innovative designs, and superior management and marketing approaches.

Dougherty Mortgage LLC closes $3.5 million Fannie Mae loan for Pheasant Ridge Village Apartments Dougherty Mortgage LLC, a full

service national mortgage banking firm, recently closed a $3.5 million Fannie Mae loan for the refinance of Pheasant Ridge Village Apartments, a 64-unit market rate multifamily apartment property located in Mitchell, South Dakota. The Fannie Mae 15year term, 30-year amortization loan was arranged through Dougherty’s Minneapolis office for borrower Pheasant Ridge Village Apartments, LLC.

Dominium Announces Construction of Apple Valley Senior Housing Development Legends of Apple Valley to provide Minnesota community affordable senior housing option Dominium, a Minneapolis-based leading apartment development and management company, announced today plans for constructing a new 163unit affordable senior housing development in Apple Valley, Minn.

Legends of Apple Valley will be con-

structed on the southwest corner of 140th Street and Cedar Avenue in Apple Valley. Dominium closed on the property in late December 2016 and construction is scheduled for completion in Spring 2018.

“Dominium is committed to providing quality housing that meets the needs of seniors who want to stay in the community,” said Mike Hudson, development staff associate at Dominium. “This is a great area and the proposed project will be mutually beneficial to the city, neighborhood and community.”

The building will consist of four stories and be constructed using attractive materials that are aesthetically pleasing and fit well into the neighborhood.

Legends of Apple Valley will offer multiple floor plans and include amenities such as a community room, kitchen with separate dining room, craft and card rooms, beauty salon, fitness room, theater area and large outdoor elevated deck with grills and lounge area. It will include both underground and surface parking.

January 2017

Dougherty Mortgage LLC closes $3.8 million Fannie Mae loan for Woodwind Apartment Homes Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed a $3.8 million Fannie Mae loan for the refinance of Woodwind Apartment Homes, a 64unit market rate multifamily apartment property located in Irving, Texas. The Fannie Mae 10-year term, 30-year amortization loan was arranged through a partnership with Old Capital Lending and Dougherty’s Vienna, Virginia office for borrower DCP 3947 Pleasant Run Road, LLC.

Dougherty Mortgage LLC closes $5 million Fannie Mae loan for Willowbrook Apartments Dougherty Mortgage LLC, a full service national mortgage banking firm, recently closed a $5 million Fannie Mae loan for the acquisition financ-

January 2017

ing of Willowbrook Apartments, a 120unit market rate multifamily apartment property located in Louisville, Kentucky. The property offers a variety of floorplans, including one-, two- and three-bedroom units. The Fannie Mae 7-year term, 30-year amortization loan was arranged through Dougherty’s Nashville, Tennessee office for borrower 29SC Willowbrook, LP.

Cushman & Wakefield NorthMarq Hired to Market I-94 Distribution Center The Cushman & Wakefield NorthMarq team of Senior Associate Nate Erickson and Senior Director Sydney Johnson has been hired to market the I94 Distribution Center, a prominent industrial property in Rogers, for lease effective immediately. Dalfen America Corp. purchased the property from The Excelsior Group earlier this year.

“Our purchase of the I-94 Distribution Center demonstrates our focus on acquiring core-plus multi-tenant industrial properties in strong markets,” said A. Scott Henry, CCIM, Vice President

Minnesota Real Estate Journal

of Acquisitions for Dalfen. “This acquisition represents Dalfen’s return to the Minneapolis-St. Paul market after owning assets previously in the Brooklyn Park area.”

At 22000 Industrial Boulevard in Rogers, the property is located adjacent to Interstate 94 in one of the area’s more active industrial markets. The building features unmatched visibility and signage on I-94, as well as 24-footclear ceilings, low tax rates and an ESFR sprinkler system. The 297,756 sq. ft. building has 21,858 sq. ft. available.

“We’re excited to work with Dalfen America Corp. on this assignment,” Erickson said. “They’re deal-makers and will aggressively pursue opportunities to fill the remaining vacancy.”

Retail Space Filling at Miller Textile Building ACKERBERG announced that they have executed leases with Nash Frame Design and Mission Manor in the Miller Textile building located at 861 East Hennepin Avenue in Northeast

Minneapolis. Joining tenants Stahl Construction, Head Flyer Brewing and Grass Roots bringing the project to 77% leased.

• Nash Frame Design is opening their third location providing full service framing and production in 1,978 square feet on the first floor of the Miller Textile building. Amber Lange of KW Commercial represented Nash Frame Design.

• Mission Manor, an escape room entertainment concept where guests team up to race against the clock to solve puzzles, is opening their first location in 2,518 square feet. Mike Doyle of Colliers represented them in the transaction. Mission Manor is a unique entertainment concept where groups of people are given 45 minutes to “escape” from rooms in the basement, after bring provided with clues and hints. They will be a destination for people looking for a fun activity out, as well as for corporate events.

Aaron Meyers of ACKERBERG represented the landlord in all of the transactions.

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Renovation is nearly complete as the property is being transformed from the historic Miller Bag Building into creative, dynamic office and retail space.

The newly branded Miller Textile Building includes approximately 10,000 square feet of retail space and 38,000 square feet of office space, with 84 free off-street parking stalls in a renovated, 4-story building. ACKERBERG has transformed the building to develop office and retail space with a new infrastructure to serve today’s and tomorrow’s businesses. 20’ ceilings are creating a loft-like environment with a bright, airy feel. Over 60 new glass windows feature unobstructed views of Downtown Minneapolis

New leasing assignment at one of the most recognizable office buildings in the Southwest metro Mike Gelfman, Vice President with Colliers International MSP and Steve Shepherd, also Vice President with Colliers International MSP have been

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named as exclusive leasing agents for Norman Pointe II, one of the most recognizable Class A Office buildings in the Southwest Metro. Located at 5600 American Blvd. W. in Bloomington, the 322,000-square-foot office building was recently purchased by Boyd Watterson Asset Management.

Boyd Watterson Asset Management, an Ohio-based investment advisory firm, acquired Norman Pointe II in August 2016 from New York-based Gramercy Property Trust. Boyd Watterson felt the building needed to be repositioned and reintroduced to the market and brought in Colliers International’s office brokerage services group to help. This is Boyd Watterson’s first commercial real estate investment in Minnesota.

“Shepherd and Gelfman have extensive knowledge of the Twin Cities southwest office sub-market. Their solid property marketing platform and market expertise will bring a renewed energy to the leasing efforts at Norman Pointe II,” says Amanda Jacobson, Boyd Watterson Asset Management

Minnesota Real Estate Journal

Vice President.

The 10-story Norman Pointe II office building features a five-story glass atrium lobby with an interior courtyard, an eight-story parking ramp with enclosed entrance, on-site café and daycare, building conference and training room, fitness center with locker rooms and showers, decorative ponds and walking paths and is LEED Certified and ENERGY STAR® rated.

The multi-tenant office building has a variety of vacancies available ranging from 1,000 – 22,000-square-feet and is positioned at the prime intersection of I-494 and Highway 100.

“Norman Pointe II is located in the heart of the southwest metro. It’s the perfect location for a company looking to attract talent from all over the Twin Cities metro area. The central location and building amenities are what office employees are looking for today,” says Mike Gelfman, Colliers International Vice President.

MARCUS & MILLICHAP ARRANGES THE SALE OF EDINA VINTAGE APARTMENT PORTFOLIO Marcus & Millichap (NYSE: MMI), a leading commercial real estate investment services firm with offices throughout the United States and Canada, today announced the sale of Interlachen Manor and Oaklawn Estates, a 31-unit apartment portfolio located in Edina, MN, according to Craig Patterson, regional manager of the firm’s Minneapolis office. The assets sold for a combined price of $4,404,000. Interlachen Manor, 17-units, is located 5220 Interlachen Boulevard, Edina, MN 55436. Oaklawn Estates, 14-units, is located at 4401 Valley View Road, Edina, MN 55424.

Josh Talberg, Mox Gunderson, Dan Linnell and investment specialists in Marcus & Millichap’s Minneapolis office, had the exclusive listing to market the property on behalf of the seller, a private investor. The buyer, a private investor, was secured and represented

by Josh Talberg, Mox Gunderson and Dan Linnell , investment specialists in Marcus & Millichap’s Minneapolis office.

Speaking with Mr. Talberg, “This portfolio represented two legacy assets never before marketed for sale. These properties are a few of the best built, maintained, located, and designed apartment buildings in all of Edina.

The portfolio attracted both local and national interest.”

Suntide Commercial Realty, Inc. Partners with KW Commercial Midwest Suntide Commercial Realty, Inc., a top 20 management company in the Twin Cities, is pleased to announce a formal partnership with KW Commercial Midwest. The partnership will combine the award-winning commercial real estate services of Suntide with the diverse, visionary team of KW Commercial Midwest to bring about impactful business development.

Specifically, partnership with KW Commercial Midwest and their brokers will bring unparalleled management and construction opportunities to Suntide.

Barb Schuba, Suntide’s Director of Operations and Max Currie, Suntide’s Head of Construction partnered with Mike Cylkowski, KW Commercial

January 2017

Midwest’s Director of Sales to help Suntide expand their award-winning property management and construction divisions.

“Suntide has a great team of passionate people who share the common goal of providing an outstanding experience for our clients,” Cylkowski said. “We expect this arrangement to benefit everyone involved-Suntide will see explosive growth in management and construction while KW Commercial Midwest will walk into a high-profile portfolio of office buildings. Everyone here is excited about the incredible opportunity this partnership presents and to be part of something that benefits the community.

Other key players in the formation of this partnership include: KW Commercial Director of Investment Sales, Matt Klein; KW Commercial Director of Commercial Service, Jeff Hart; KW Commercial Director of Office and Special Use, Kevin Peck; and KW Commercial Director of Office Andy Manthei.

PROffutt Limited Partnership is selected to develop NDSU Student Housing Project PROffutt Limited Partnership, the real estate division of R.D. Offutt Company, was selected by the NDSU Foundation to develop a new student housing and retail complex just east of the North Dakota State University campus.

The new four-story student housing complex is made up of 344 beds, mixed between two- and four-bedroom units. The project will also include 6,230 square feet of retail space, 258 parking spaces, and a 3,847 squarefoot student living area that is planned for a student lounge and social space.

“We have created a design and program that will transform the north end of University Drive, the Washington Neighborhood, and the student living experience,” Scott Neal, President/CEO of PLP, said. “Bringing these ideas together creates a building that compliments the dynamic and transformative learning environment created at NDSU.” Construction is slated to begin in spring of 2017