Construction is underway on Central Park West apartments, but two office towers that are part of the overall project near Interstate 394 and Highway 100 have been delayed.
Last year, St. Louis Park leaders approved the first tower, called 10 West End, and Golden Valley approved a neighboring 1,214-stall parking garage southwest of the I-394 and Highway 100 interchange.
The Excelsior Group, which is developing the office towers, sought a one-year extension on the towers. The St. Louis Park Economic Development Authority, made up of city council members, approved the request March 20 but not before seeking some answers about the delays.
Construction on the first office tower, an 11-story building that would contain about 315,000 square feet of office space, had been scheduled to begin by April 1 with completion by the end of September 2018.
Construction on the second tower had been scheduled to begin by April 1, 2020, with completion by the end of September 2021.
The newly approved schedule adds a year to the construction schedule for each of the towers.
At about the same time, The Excelsior Group sought municipal approvals for 10 West End and had been in active discussions with a potential anchor tenant that would have leased 35 percent of the building, according to a St. Louis Park city staff report.
“Unfortunately, that tenant elected to renew its lease in its current location and forgo relocating into the new 10 West End building,” the report states.
The development team maintains that it must pre-lease 40-50 percent of the planned office building before construction can begin, according to the report.
“Constructing a $100 million building on a speculative basis without sufficient pre-lease commitments would involve considerable financial risk,” the report adds.
Commissioner Sue Sanger said she understood that The Excelsior Group wanted to postpone construction on the first tower because of the lack of an anchor tenant. However, she questioned why construction on the second tower would also need to be postponed by one year.
Tom Tracy, senior vice president of the group, said his company wanted to give St. Louis Park leaders a realistic picture of how long filling a second 315,000-square-foot building may take.
Sanger replied, “I think I understand that, but I can also tell you that I’ve been around long enough to know that we’ve already given several extensions on this project already, and it’s getting old. I for one would be really thrilled to see the whole West End project finished, developed and up and running soon.”
Tracy replied, “We share that interest.”
Plans for office buildings on the site date to 2008, initially with Duke Realty and since late 2014 with The Excelsior Group.
Tracy said the development team “would love to break ground tomorrow on both phases.”
He added, “We remain very, very bullish on this being the best development site in the Twin Cities for office development.”
Nevertheless, he said, “It just takes some time to absorb space.”
Tracy outlined progress made in 2016 on the project, including a partnership with Ryan Cos., one of the largest construction companies in the Twin Cities, and a deal with the real estate firm Transwestern to assist with marketing. He also noted the St. Louis Park and Golden Valley approvals and progress on designing the first phase.
On the day of the St. Louis Park Economic Development Authority meeting, Tracy said The Excelsior Group issued a proposal “to a large, very reputable company who would be fantastic, and it’s going to be a very competitive process.”
He reiterated that The Excelsior Group has prospects to lease space in 10 West End.
“We’re working very hard on the marketing,” Tracy said.
The St. Louis Park staff report included a copy of a Finance & Commerce article detailing the difficulty The Excelsior Group had in finding investors before deciding to seek tenants before the beginning of construction.
The article also noted a trend toward denser workspaces, with the Minneapolis Downtown East Wells Fargo towers containing only 110 square feet per employee.
Commissioner Tim Brausen said to Tracy, “I certainly encourage the developer as you’re looking for some master tenants to anchor this to use your creative office space to look for tenants that will allow a little bit of room and not just have 10-by-10 cubicles that people are working in all the time.”
Tracy said the trend toward less space per employee in offices has contributed to the difficulty his team has had in finding tenants.
Tracy said, “People are using space more efficiently, trying to reduce their overall cost, which is slowing the absorption of office space.”
Ultimately, all seven commissioners voted to approve the delays.
Contact Seth Rowe at [email protected]