Minneapolis' plan to speed up office-to-residential conversions
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Minneapolis officials want to make it easier — and cheaper — for developers to convert office towers, schools, and other buildings into apartments and condos.
Why it matters: Replacing office workers with residents has been a post-pandemic dream to revitalize downtowns across the U.S., but Minneapolis has been home to few conversion projects since 2020.
Driving the news: Council members Katie Cashman and Michael Rainville, who each represent parts of downtown, have introduced an ordinance specifically for conversions that would speed up review times by 1-2 months, do away with the need for a public hearing and temporarily exempt converted buildings from an affordable housing policy.
What they're saying: "The nine-to-five commuter population isn't coming back, and we have to be future thinking about downtown instead of trying to claw our way back to a pre-pandemic model," Cashman told Axios.
- Time is money for developers, and speeding up the process will cut costs, she added.
Plus: A five-year exemption from a city requirement that 8% of units be affordable would save a 100-unit project about $1.2 million, Cashman said.
Reality check: It's not clear if these changes will have any impact in the short term, because there's been a massive slowdown in multifamily housing building across the Twin Cities due to rising interest rates and construction costs.
- Adding to the challenge, one developer told Axios recently that converting office space to apartments is much more expensive.
- For a project he's working on in the Warehouse District, he said the per-unit cost is double the cost of new construction.
What we're watching: Cashman and the city supported a proposed bill at the Minnesota Capitol that would have provided a 30% state tax credit for conversions, but it didn't pass.
- Cashman pointed to vacant schools, saying a state tax credit could incentivize conversion of rural, shuttered campuses. And with Minneapolis Public Schools likely to close buildings, she notes a conversion ordinance could help turn them into housing.
One possibility: Minneapolis Grain Exchange
The owner of the Minneapolis Grain Exchange put the historic downtown building on the market last week, and its brokers say it's an ideal candidate for a conversion.
What's inside: The 120+-year-old building has curb appeal, small floors that lend themselves to residential living, and an incredible former trading floor that could be used as a tenant lounge or event space, they say.
By the numbers: Since it's on the state and national historic registry, the building is eligible for matching 20% state and federal tax credits that would apply to construction costs.
- For example, a $100 million project would get a $20 million state tax credit and a $20 million federal tax credit.
Plus: CBRE broker Harrison Wagenseil told Axios that all of the leases in the building are flexible, so a buyer could quickly clear out office tenants to make space for a conversion.
What we're watching: There's no asking price.