Demand for Industrial Space at Northern Stacks Remains Strong with 93% Occupancy Rate
The developers of Northern Stacks business park in Fridley, MN, have paid $6.9 million – nearly $4 million under the asking price – for a 177,264-square-foot building nearby.
Minneapolis’ Hyde Development and Golden Valley-based M.A. Mortenson Co. plan to spend $1.2 million to remediate the site and another $2 million to bring the building up to current industrial standards.
The seller of the 36-year-old warehouse at 5101 Industrial Blvd. NE was Alltemp Distribution Co. The purchase allows Hyde and Mortenson to move to Phase VIII of the $125 million Northern Stacks development, which currently includes six buildings on 122 acres, with a seventh under construction.
The Alltemp building was not part of the master plan in May 2014, when Hyde and Mortenson broke ground on Northern Stacks, a former Superfund site that sits on the east bank of the Mississippi River just south of a junction between two interstate highways.
The developers tried to make a play for the property when it hit the market a year ago, said Paul Hyde, founder and partner of Hyde Development. Leasing at Northern Stacks had been brisk, and demand showed no sign of abating.
The occupancy rate at Northern Stacks is currently 93 percent, and only two spaces are available – one in Stacks V totaling 62,591 square feet, and another in Stacks VI at 50,091 square feet.
Even so, the deal was very attractive, Hyde said. The price is above the property’s official assessment by Anoka County, which stood at $6.66 million for taxes payable in 2019, but well below the initial asking price of $10.6 million, or $59 per square foot.
The seller was willing to go lower for the right buyer, in this case a local with a good reputation and a “wildly successful” business park across the street, said Chris Weirens, a broker with Cushman & Wakefield who represented Alltemp in the sale.
“When we set the asking price, we were seeing if we could find that ideal buyer out there who would come in and pay us that big number for it,” Weirens said. “Industrial buildings have been selling for crazy figures.”
In the end, it sold for about $38 per square foot. Prices for buildings of similar size, location and vintage sold during the last year ranged from $34 to $92 per square foot, according to recent CoStar data, with an average price per square foot of about $62.
Hyde said he and the seller were able to negotiate down to a very reasonable final price, given current market dynamics.
“At this stage of the cycle, most of the properties out there are beyond a price point that you can make work, especially for a third-party investor,” Hyde said. “There’s a lot of competition, and we have seen some very high sales comps for buildings that need a lot of work.”
The Alltemp property is currently tenanted by Murphy Warehouse Co., which bought Alltemp’s business about five years ago, but not its real estate holdings. Murphy will move out of 5101 Industrial by the end of November, Hyde said. Work on the building will likely be done by early 2019.
As yet, no new tenant has signed on, but four or five parties have toured it.