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ARDEN HILLS SPECIAL CITY COUNCIL WORKSESSION - FEBRUARY 12, 2024 2 <br />City Administrator Perrault stated that at a previous work session Council discussed <br />commercial zoning on Rice Creek Commons and requested staff bring back commercial <br />developers to discuss the site. Specific items discussed were building materials, retail building <br />size, and warehouses. <br />Mr. Cattanach noted that United Properties has developed office industrial, multi -family, retail <br />and senior housing. They also own a substantial amount of real estate. <br />Mr. Roberts said he's been in commercial real estate for almost 18 years. His grandfather <br />developed a lot of the industrial buildings in Arden Hills, he and his father have focused on <br />office/warehouse type buildings, retail and senior apartments. <br />Mayor Grant asked if they could talk about office/warehouse space and the trends in the <br />commercial market. <br />Mr. Roberts thought the warehouse component of the industrial office type building was critical. <br />Many manufacturing facilities need warehouse space to store product before it is worked on or <br />made into something, and while waiting to ship the finished product. He wouldn't consider <br />reducing the amount of warehouse. <br />Mr. Cattanach added that a traditional office user wouldn't need the warehouse aspect. <br />Businesses are looking for spaces where they can create or assemble something but also have an <br />office setting. Groups that want to have a location such as Rice Creek Commons want to have <br />access to a work force and having a class A space helps bring in employees. The key thing they <br />are seeing more of is the functional work space has gone higher to be able to put more product <br />inside the same square footage. Most buildings are being built on a speculative basis and having it <br />be as flexible and accommodating as possible to potential users. <br />Councilmember Holden said they are seeing people from outside the state buying the buildings <br />and rent is going up — they aren't asking for Minnesota rent, they're asking for New York rent. <br />Mr. Cattanach replied that industrial continues to be one of the most desirable products versus <br />office buildings. Right now, there is sub 5% vacancy for industrial space in the Twin Cities. <br />There is continued demand and that is showing where rent has to be. He thought rent here was <br />more affordable than in other markets. <br />Councilmember Fabel asked what they see as the office market in the suburban area and how is <br />it affected by the high rates of vacancy happening downtown. <br />Mr. Cattanach said a lot of companies are looking for smaller space than they currently have and <br />they are able to pay more for the smaller space. There has been a shift to more opportunities in <br />the suburbs but in his opinion if they don't have the user in tow, they don't have the ability to get <br />it financed because construction costs would probably be cost prohibitive. High rise office <br />buildings downtown that haven't had investment into amenities or increasing work space <br />environments will suffer because the only compelling thing they have to offer is low rent. <br />Conversely, a brand new office building can bring people back into the office. <br />Councilmember Rousseau wondered if they were still seeing corporate campuses or smaller <br />campuses. <br />