The Lay of the Land

Inside the Beltway

The lack of supply is the main driver behind escalating land prices inside the 494/694 loop. Businesses or developers seeking vacant industrial land in that area now find it virtually nonexistent, leaving them to redevelop parcels with obsolete or non-functional buildings. That scenario has pushed prices “out of sight” inside the area bordered by first-tier suburbs, says Jon Rausch, head of the land brokerage group at Bloomington-based United Properties, a commercial real estate company. Rausch says industrial land prices have been rapidly increasing over the past 12 months.

“Land within the urban services area [in which sewer and water services are already available] has become incredibly expensive,” says Steve Schwanke, head of the land development sector at RLK, Inc., a Minnetonka real estate design and engineering firm. “Paying $150,000 and up an acre isn’t uncommon anymore for industrial land, depending on the density and redevelopment opportunities there.”

Those seeking land toward the outer edges of the metro area also shouldn’t expect any price breaks. Bob Fields, CEO of LandCor Companies, a real estate firm in Maple Grove, says he paid almost $2 million for a three-and-a-half-acre site close to downtown Maple Grove to construct the three-story, 53,000-square-foot Bell Tower West office complex. LandCor tore down two existing single-story office buildings on the site to make way for the complex.

“There was a time in the outer suburbs if you were paying north of $3 per square foot for industrial land, you were entering unknown territory,” Fields says. “Now you see industrial selling for as high as $8 per square foot.”

Land for retail development is getting more expensive, too. Retail typically follows the “rooftops,” or construction of new housing units, and residential land is being snapped up even as prices rise. A 2006 market report by CB Richard Ellis, a real estate firm with offices in Minneapolis, says land prices for retail development are increasing “at levels not before seen in the Twin Cities metro area.” Larger parcels of land zoned for big-box retail development ranged between $4.50 and $7 per square foot in 2005, according to the report.