BUILDING AN INDUSTRIAL-STRENGTH FOUNDATION

 

Strong Communities Need More Than Retail and Residential

 

 

The Twin Cities industrial market is on the verge of a comeback: Space is tightening, rates are ticking upward, and select submarkets are seeing both speculative and build-to-suit development.

 

This uptick in activity is spurring discussions regarding the benefits of a strong industrial base not only for individual communities, but for the metropolitan area as a whole. More commercial and industrial tax dollars, for example, pay for amenities like parks and trails, which make communities better places to live.

 

The market recovery also is prompting conversations related to rising land costs, limited industrial land in various communities, and restricted uses allowed in some cities. Many industrial businesses, in some cases, are being pushed farther out from the metro's core. This concerns industry experts, who emphasize the importance of a strong foundation of industrial businesses in the community.

 

 

 

A healthy industrial market can create living-wage jobs, train the unemployed or under-employed for positions with good wages and benefits, and help assure a healthy, diverse tax base, says Tony DelDotto, senior associate – Industrial Brokerage at United Properties.

 

The Metropolitan Council reported $238 million in industrial construction activity in the metro in 2006, a 4% jump from 2004 and a significant increase over previous years tracked, dating back to 2002.

 

As for land, Met Council statistics¹ show the Twin Cities has 59,600 acres zoned for industrial use. Of that, 47,190 acres sit within the metropolitan urban services area.

 

However, it's no secret that the metro has lost large reserves of industrial land inside the Interstate 494/694 loop as a result of parcels being rezoned for residential, retail and office uses. DelDotto emphasizes that communities need to protect their areas that support industrial businesses—businesses that add tangible value to the goods that pass through the metro. Cities need to protect these areas because the difference in land value between industrial land and retail and residential land could eventually force out many industrial jobs. Prices will just be too high for industrial users to afford.

 

"Land 'upzoning' for other uses is putting Minnesota's industrial land at risk," agrees Shakopee Mayor John Schmitt. His community of 34,000 people boasts a large industrial base. (See Viewpoints below)

 

Scott Moe, vice president, industrial leasing at Duke Realty Corp., believes cities need to be tougher on zoning. "Cities need to say ‘We're going to have a strong industrial base and not allow rezoning for other uses for some of our land because of the jobs, tax benefits, etc. We see the value.' City planners and council members can't let landowners drive the issue; it's a master plan issue."

 

In some communities, however, there's been a longstanding approach of NIMBY ("not in my back yard") when it comes to industrial. "If a city opens up land-use zoning, industrial is the first to be re-zoned for higher-end uses, but there's a strong point to be made that industrial brings a diversity of uses, good-paying jobs, a healthy tax base, and a place where people can live and work," DelDotto says. "The Twin Cities needs strong distribution, manufacturing, wholesaling and trucking operations, and when companies are pushed out, this ultimately forces prices up for the creation and distribution of consumer goods."

 

Today, cities like Shakopee, Minneapolis, St. Louis Park, Apple Valley and Blaine are recognizing the importance of protecting their industrial base. For example, Maxfield Research reported in 2006 that Minneapolis steadily lost industrial land and could lose another 31% to other uses if no action is taken. The industrial market is recovering, and Minneapolis wants to be positioned to capture demand, so it's working to preserve the remaining industrial land.

 

Which Cities Have ... More Than 1,000 Planned Industrial Acres? The Fewest Acres of Planned Industrial Land?

 

"Cities that embrace the concept of having a mix of development will be in a much better competitive position," says DelDotto. Also, cities must evaluate the long-term economic benefits of industrial versus other uses. While a big-box retailer, for example, might employ 85 part-time people at minimum wage, a warehousing operation could employ a dozen employees with full-time, stable jobs that pay $40,000 annually with good benefits. Cities must weigh these benefits.

 

If a city rezones industrial land because it believes retail or residential is a better use, it should consider replacing it in another part of the city, DelDotto notes. Oftentimes, it's taken for a net loss. "If the Twin Cities continues to chip away at its industrial base," he says, "we'll lose businesses and jobs."

 

DelDotto is also concerned about land prices. "Because cities are being more selective in the uses they allow, that's putting pressure on the available industrial sites and pushing up land prices. It will only make sense for higher-end industrial users, because heavy industrial can't afford higher land prices. And where will they go?"

 

VIEWPOINTS One Mayor's Perspective Shakopee Mayor John Schmitt is a big supporter of a strong industrial base. In Shakopee, most industrial development takes place in the eastern portion of the city. Read more   A Developer's Perspective "From a macro standpoint, industrial has always been the backbone of our country, but we seem to be pushing trucking, logistic companies and other heavy industrial users farther out." Read more

The industrial market is beginning its recovery, and the strength of that recovery in the Twin Cities depends not only on the individual businesses, but also on each city's willingness to work with these users to maintain, if not expand, the community's industrial base. Some cities, however, can and do get by without an industrial component. The accompanying articles seek to provide additional perspectives about industrial-zoned land in the community.

 

 

 

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1) Information compiled from the 2020 Comprehensive Plans submitted by municipalities with population greater than 5,000