Yes, the office market is struggling today. That doesn’t mean, though, that buyers aren’t interested in any office spaces today. Modern buildings filled with amenities? Those office properties can still attract buyers.
As an example, consider 13305 12th Ave. N. in Plymouth, Minnesota, a suburb of Minneapolis.
Colliers late last year brokered the sale of this 31,780-square-foot office building, a deal that closed on Dec. 18. The sale was a good example of the type of office property that remains in demand today: 13305 12th Ave. N. was named Building of the Year by the NAIOP in 2016 and boasts an extensive glass line, LED lighting and a high-tech audio/visual system. The property also features an inviting outdoor space with a patio and a deck on its second floor.
Nick Leviton, a senior vice president with Colliers, and one of the brokers who represented the building’s seller, said that this property is an example of the type of office space designed to flourish today: modern, bright, new and amenitized.
The property was also the right size. Leviton said that it’s easier today to sell office buildings that are under 40,000 square feet. These properties attract more buyers. Leviton said that three potential buyers bid on the Plymouth office property.
“No expenses were spared on this building,” Leviton said. “An owner-occupier built it as a showpiece, something that would show well for a long period of time. The audio-visual equipment, the finishes, the amenities, everything is top end. That helped attract buyers.”
Nick Leviton, Senior Vice President, Colliers
Laura Moore, vice president of Colliers’ Minneapolis-St. Paul, also represented the seller in this deal. Jason Sell of Cushman & Wakefield represented the buyer.
Leviton said that the sale is evidence that the office market, while struggling, is far from dead. The right properties in the right locations will still sell, he said.
Shortly before the COVID pandemic took hold, the previous owners of the building renovated about one-third of its space. That space was never occupied until the sale, meaning that it was in what Leviton calls pristine condition.
The Plymouth building also came with its own office furniture, much of which was barely used. That, too, sweetened the deal for the buyer, Leviton said.
“Any group looking at this building was comparing it against office space that had to be completely built out from scratch,” he said. “The cost of construction permits is exorbitant today. The work that goes into building an office from scratch is intense. Even renovating an existing space can be time-consuming and expensive. Our building was being compared to properties that would require significant improvements from both a cost and time perspective. That’s part of the reason why our building attracted so much attention from buyers.”
Then there is the outdoor space that comes with 13305 12th Ave. N. Outdoor space has become a desired amenity by office tenants, who often promote it as one way to entice their workers back to the office. As Leviton says, smaller buildings such as the Plymouth space rarely feature the kind of extensive office space that this property offers.
This doesn’t mean that selling 13305 12th Ave. N. came without challenges. As Leviton says, buyers and lenders were still leery of higher interest rates when this deal was negotiated.
“There was a time when people almost put their pencils down and pulled away from doing any deals,” Leviton said. “Everyone saw interest rates go up and no one knew whether they would stop or move back down. Nobody wanted to guess and do anything for that first part of 2023. The whole financing piece was a challenge.” The buyer of the Plymouth property, though, was ready to move, even in an environment in which interest rates were higher. Leviton said that the buyer was willing to commit to the space for a seven- to 10-year period. That made its decision to invest in 13305 12th Ave. N. an easier one, he said.
