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Thursday, September 10, 2015 11:01:07 AM
Repurposing office parks for residential use puts employees near job sites
By Robyn A. Friedman
Corporate office parks, suburban campuses created by companies decades ago to escape cities, are being reimagined as small versions of the urban-style communities they once avoided.
The latest example is in Minnetonka, Minn., a suburb of Minneapolis. There, Roers Investments LLC and CPM Cos. want to demolish two vacant warehouses to build a 274-unit luxury-apartment project in the middle of the 600-acre Opus II Business Park.
The $62 million development, which will include a fitness center, rooftop patio, fire pit and underground, heated parking, will feature apartments with monthly rents that range from $1,155 for a studio to $2,520 for a two-bedroom unit.
Adding apartments to corporate parks has numerous advantages for developers, according to Maureen McAvey, a senior resident fellow at the Urban Land Institute in Washington. First, most corporate parks are owned by a single entity, making it easier for developers to aggregate the parcels needed to build. With land increasingly scarce in urban and suburban locations, business parks have an abundance of underused space. Corporate parks also usually have easy access to major highways and mass transit, as well as infrastructure such as roads and utilities, which make redevelopment easier and less expensive.
“Virtually every major city in the country is getting strangled by congestion, so the opportunity to live near where you work is attractive to virtually everyone of all age groups,” Ms. McAvey said.
Ms. McAvey said that, in general, government officials have been supportive of redevelopment, because it increases the tax base. Their concern, she says, is infrastructure—whether substantial new traffic can be accommodated in the immediate neighborhood of the redevelopment. But in many cases, she said, “because these corporate parks were originally situated near freeways and major arterials, often infrastructure is not a major problem.”
Brian Roers, owner of Roers Investments, a real-estate firm based in Long Lake, Minn., said the development site, about a 15-minute drive from downtown Minneapolis, also is attractive because it is heavily wooded, with walking and bike paths and ponds. “It is one of the most peaceful sites in Minneapolis, and you would have no idea that you’re a quarter mile from two of the busiest roads in the area,” he said.
The park is also a major employment center—home to such companies as UnitedHealth Group Inc., Digi International Inc. and Communications Systems Inc. —and is close to a light rail system, allowing future tenants to either walk or bike to work nearby or commute downtown with ease.
Jim DePietro, senior vice president of industrial services at commercial brokerage CBRE Group Inc. in Minneapolis, said he expects retail businesses to come next to Opus II. “We’ve found higher and better uses for the properties, and I think some will be reallocated toward retail to service the people who will be living here,” he said.
Another developer adding apartments to a business park is Jamie Danburg, president of Boca Raton, Fla.-based Danburg Management Corp. Mr. Danburg is developing a 282-unit luxury apartment project within the Park at Broken Sound, a 700-acre corporate park in Boca Raton—where raw land is hard to find. Three residential projects are already approved for the park, which has 5.2 million square feet of office space.
Mr. Danburg’s project, where rents will range from $1,775 to $3,100, will have numerous amenities, including a gym, yoga studio, theater, a pool with cabanas, and bicycle-repair stations. The apartments will be within walking or biking distance of major employers and a commuter railroad. “We’re improving on what already exists rather than pushing farther west,” Mr. Danburg said.
Richard P. Robinson, executive director of the Institutional Property Advisors division at brokerage Marcus & Millichap in Boston, said he knows of several apartment projects under development in commercial parks or industrial areas in the Greater Boston area. He said rents are 5% to 8% higher at these properties than at comparable apartments in suburban locations. “You get a rent boost, not only because the residents are living within walking distance of work, but also because they are new properties and the developers increase the amenity level in them,” he said.
Walkability adds value, even to commercial properties. According to data firm Real Capital Analytics, prices for properties in central business districts have risen 125% over the past decade, but suburban properties that are also considered highly walkable are up 43%. Comparatively, prices are up just 21% to 22% for properties in suburban locations that are somewhat walkable or car-dependent.
But while living close to work may be a boon for many tenants, it isn’t for everybody. “Anything that can increase traffic is always a problem with existing residents of a site,” said Ms. McAvey of the Urban Land Institute. “And if it’s a truly industrial site, there may be some concerns by the industrial users that, once residents are introduced, they can object to truck traffic and delivery schedules.”
http://www.wsj.com/articles/property-deal-of-the-week-where-everyone-walks-to-work-1441755235
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