The Lay of the Land

Some in the development community believe eminent domain legislation passed by the Minnesota Legislature in May will make large-scale mixed-used projects more difficult in the future. The new law makes it harder for governments to seize private property for the use of another private entity, such as a developer. Local governments typically use eminent domain for civic purposes, such as building roads or public buildings, and less frequently as an economic development tool. It can be difficult to acquire sufficient property for a larger development without the assistance of eminent domain.

“When you begin taking away communities’ redevelopment tools, the likelihood of finding locations where communities will want to create a large mixed-use development becomes less,” says Bob Cunningham, a principal with Told Development Company, a real estate firm in Plymouth.

Migrating to the Outer Rings

The high prices inside the 494/694 loop have more businesses and developers looking ever farther out for land. CSM is in the third phase of its planned 75-acre Lexington Preserve Business Park in Blaine, Target Corporation purchased 198 acres adjacent to its Brooklyn Park campus rather than expand at its downtown location, and suburban office condominiums continue to be a popular choice for small businesses. Retail development has been strong near Lakeville, Blaine, Rogers, and Savage, which have high residential growth.

Schwanke says there are still some good values in places like the southeast metro, along Highway 61 South through Cottage Grove and beyond. “There is land to be found there at prices that are relatively reasonable, and there also is infrastructure with roadways and water and sewer in place,” he says.

But the search for the right deal is increasingly taking office- and industrial-land buyers outside the seven-county metro area. “We are seeing more people looking in Rice, Wright, or Sherburne counties in an effort to find more affordable land as well as more land sellers,” Schwanke says. While the odds of finding cheaper land in outlying areas like Dayton or Carver are better, there is no guarantee that it will be already equipped with utilities and roadways.

Rising costs for residential land also have affected the pricing of some commercial parcels. National home builders often buy up large tracts of residential land for master-planned developments, and then sell off smaller pieces that are zoned for commercial use to local developers. “Those commercial remnants are getting very expensive,” Young says.