One of the best attributes of a career in commercial real estate is that no deal is ever the same and the opportunities for creative problem solving are endless. Commercial real estate is most definitely a thinking person’s game. Enter two properties, one an office building and one an industrial building.
Success Story #1 – Office
How do you re-position a high-quality office building in a market surrounded by a good labor force, with great visibility and access, but not known for its office product?
This was the challenge for the office building in Fridley, MN. Initially constructed for Target Corporation’s northern operations in the mid-1980s, this well-designed and constructed building had stood the test of time. Designed for a single tenant, the building benefits from abundant light throughout the space with an open atrium capped by skylights.
The building owner and its broker experienced limited interest for a period of 2 years. Then, in late 2018, KimbleCo was retained as the listing broker for the property. As this property was not located in a traditional office market the first question we asked was, “why has the building been marketed as a single-tenant building”? It was not situated in a strong office corridor and so it seemed the likelihood of attracting a 74,160 square foot single user was low. The answer was that the building’s HVAC system made the property unable to be demised for multi-tenancy. The team decided to probe further making a trek to city hall to look at old plans and the history of subcontractor work over the years. We identified HVAC contractors from the city files that knew the building and had them meet us on site. We learned there was no reason we could not demise the space for multitenancy. The next step was a code study which also proved positive. There was no reason we could not market the building as multitenant. Some critical thinking, hard work and voila! – we had created an opportunity for lease-up.
Even better, the building improvements the landlord had to make were relatively minimal. This is a building with great bones that needed just a bit of updating in addition to creating secure elevator lobbies. The use of 100% glass walls retained all the fabulous light streaming into the building.
The team hit the ground running to re-position the building for more than one tenant. Broker outreach, on-site events, drip marketing campaigns, cold/warm calls and production of a digital bubble tour and soon the building was 60% leased. Well on its way to the goal of 100% lease-up for the building.
We have been delighted to work with this landlord on three buildings and respect their deep knowledge of the industry. Our team values relationships and we are happy to have a trusted rapport with this important client.
Success Story #2 - Industrial
When one has the pleasure of touring a beautifully built-out office space it is easy to imagine the great possibilities for future office users. In some cases, however, the building’s bones and the market tell experienced real estate professionals it may be time to bring the property back to its industrial roots.
KimbleCo was retained to lease or sell an industrial building in Blaine, MN that had been occupied by a single tenant for its 10 years of existence. This well-located, relatively new, 92,000 sf, 24’ clear ceiling height industrial building is immediately off an interstate freeway positioned in a master planned industrial park. Yet, it had been fully built out as office space—and cool office space at that. Herein lies the challenge. Could we leverage the value of the installed tenant improvements by attracting an office user to an industrial location or did we need to reposition the building altogether?
While taking into consideration our deep knowledge of the submarket and further, the city in which the building was located, the team conducted considerable analysis including tenant demand (which had been further complicated by a global pandemic), historical lease and sale comps, then provided multiple financial scenarios for the owner. It was clear that the opportunity for this property would be industrial into the foreseeable future. Working with the owner’s senior asset manager, the decision was made to demolish most of the office improvements and return the building to its industrial shell condition. Always a difficult decision, yet we know from experience it is incredibly challenging for prospective industrial tenants to see office space as a potential industrial space.
The decision to convert was made in November of 2020. The contractor and architect were engaged by December, with the schedule for completion of the building conversion by spring of 2021. A marketing plan focused on industrial brokers and industrial users was developed noting the spring availability. Almost as quickly as the building could be ready, the results of the decision were successful. As soon as January of 2021 negotiations began with a tenant for just over two-thirds of the building and a lease was signed in February 2021. A smart decision based on real data and information led to a successful transformation and outcome.
Working closely with the building owner, the team was able to convert this challenge to a success. KimbleCo was delighted for the opportunity to not only lease the newly positioned properties but to also project management the new improvements for the building owner.
Building leasing and sales are not achieved by putting up a sign and answering the phone. Success happens when you are willing to do the hard work, think outside of the box, fully understand the owner’s goals, and with focus and great persistence execute on a strategic plan as a most trusted advisor. No one said it would be easy – embrace the opportunity to creatively problem solve and plan to enjoy a successful outcome!