It wasn’t long ago that buyers searching for commercial or industrial land in the metro area’s second- or third-tier suburbs could count on an ample supply of parcels selling at reasonable prices. But Alex Young will tell you those golden days now feel like another era. When MSP Commercial, the St. Paul–based real estate firm where Young is vice president of development, purchased land in Woodbury to build a 44,000-square-foot office building in 1999, the company paid $2.60 per square foot. When it bought a comparable piece of property not far away from that site in early 2006, the price had escalated to $9.50 a square foot.
The shrinking availability of land in much of the seven-county metro area, the fallout from soaring prices for residential land, and other factors have combined to push the cost of office, retail, and industrial land in some areas to historic levels. Coupled with rising construction costs, it’s a double whammy that’s changing the face of office and industrial development in the metro area.
“Prices for commercial and industrial land continue to go up every month, and we haven’t seen any signs of leveling off,” Young says. “Every time we look at a site we looked at a year ago, it’s become more expensive.”
Rents have been rising steadily in recent years, and experts think that now the market won’t bear higher rates.
