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NOTES TO ECONOMIC DEVELOPMENT COMMISSION AGENDA May 18, 2010 IV. Northwest Quadrant Report Development Discussions The City Council has had severe[ work session discussions in April concerning potential development opportunities in the Northwest Quadrant. Office development will continue to be a key component of the Northwest Quadrant, however demand In space will most likely come firm a specific user. There is general consensus among real estate experts that developers can no longer build speculative office space (without a tenant) because it cannot be financed. The retail market is still suffering from high vacancy levels, making the demand for new space challenging. Meat of the developers we have talked to over the years base emphasized Nat remit in the Northwest Quadrant will be secondary to other uses. Freeway access is the biggest handle to the site as a destination for large retail users. Typical read uses MR be neighborhood -based and service-oriented (i.e. coffee shop, drycleamer, convenience, etc.). More importantly, retail in this coutext usually follows the `roof tops" — in other words after housing or office is developed. The residential market is improving, although construction says across the metro area are down from the peak a few years ago. Based on information collected from developer interviews over last few months and other medback from industry experts, there is still demand for multiple -f ily housing, especially market -rate rental opanmens. In large pan, demographics are driving the demand for higher end, amenity -rich apartments. Many younger households (i.e. recent gendarmes, young couples) are choosing no rent first When buying a home; and many have significant expectations about the quality of the housing. In addition, some people are wary of investing in real estate given the down tum in values. On May 3`° the Council went on a tow of recent apartment developments Nat were completed in the cities of St. Anthony (The landings at Silver Lake Village) and St. Louis Park (Hoigaard Village and Excelsior & OreM). These projects were developed by Dommunn, Dunbar Development, and TOLD Development, respectively. Beckgroural information on the tout is provided in the packet. In general, the lour was well-received card each of the developers provided candid assessments of the current market. Financing continues to he a challenge as basks and other traditional lenders are not providing credit on reasonable tames. There are also gaps between market rears and the cost of new constmenon. In spite of demand for apartment housing, financing problems may persist for some time. The Council is also trying to encourage development in the near term by using surplus crib remsmers man existing mar increment Removing(TIF)districts, The Legislature normal ambs bill which essentially allows cities to tap imp TIF resources if construction can be saved by July 1,2011. The City has asked each of the developers whether they would have interest in doing a project along with additional information. Smffwill also provide the EDC with more iM tion as it becomes available.