Transportation System Funding to Create New Development ‘Hot Zones’ in Twin Cities

By Boyd Stofer, President/Chief Executive Officer, United Properties

There are, as every Twin Cities resident knows, two real seasons in the metropolitan area: winter and road construction. 

Road construction season is about to become even more intense thanks to the record $1.2 billion that Minnesota is spending on transportation work this year, following last year’s then-record $1 billion worth of transportation spending.

Given that a significant portion of the state transportation funding is targeted for the Twin Cities area, it’s worth taking a closer look at what this increase in spending could mean for the future of commercial development activity in the region.

Some Cities Should Prepare for Larger-Scale Development

With so many immediate transportation improvement projects, the biggest implication for future commercial real estate development is the effect these changes will have on smaller cities not accustomed to large-scale commercial development. Those cities would do well to consult with city leaders from places like Eagan, Eden Prairie and Maple Grove, where the past 10 years have been dominated by accelerated development. 

Those cities that have had well-planned growth decide early how to manage their undeveloped land and create specific plans for land use. Two common issues are where to place industrial uses and how much mixed use the city can support. Cities may undervalue industrial development, but when located correctly, these users provide a consistent tax base and stable employment opportunities for nearby residents. The popular mixed-use approach may not be appropriate or feasible for each city.

Four New ‘Hot Zones’

Based on a the approved funding and the plans published by the Minnesota Dept. of Transportation (MNDOT) we have identified four major “hot zones,” where new transportation projects may create new opportunities for commercial real estate development during the next few years:

• In the Northwest quadrant of the Twin Cities, work includes the construction of an interchange at the intersection of Highways 169 and 610 and the realignment of Highway 81 where it meets Highway 610 in Brooklyn Park. Target has announced plans to build a new office-retail complex near the intersection, which is likely to spur additional mixed-use development. Additionally, the new 40-mile-long Northstar Commuter Rail line is slated to run between downtown Minneapolis and Big Lake, stopping in six different cities. Along this rail line, residential and service retail are the most likely development opportunities.
• In the Southwest quadrant, the completion of the U.S. Highway 212 corridor through Chanhassen to the City of Carver will have a major impact on traffic flow in the area, with the most impact on Carver and Cologne, both still quite rural in nature. The state is also building a new bridge across the Minnesota River at Chaska to carry traffic on Highway 41, thereby creating greater access to “south of the river” cities such as Chaska, Shakopee, Jordan, Belle Plaine and other points south and west. Some of these communities will see an increase in new residential development, although industrial will continue to move to the southwest when easier access to the I-494 loop is available.
• On the Northeast side of the Twin Cities, MNDOT is at work unknotting the confusing weave of freeway intersections involving I-35E and I-694 in the Little Canada area. Once completed, traffic will move more freely to the north on I-35E as well as on the east-west I-694 route, potentially spurring more development in cities such as Lino Lakes, Hugo and Forest Lake. Industrial development will likely expand in these communities, along with additional retail.
• In the Southeast quadrant, MNDOT is removing a major traffic bottleneck with the replacement of the Wakota Bridge carrying I-494 over the Mississippi River. The work also involves improving the I-494 and Highway 61 interchange, which will bring more development attention to surrounding communities such as St. Paul Park, Cottage Grove, South St. Paul, Woodbury and perhaps as far south as Hastings. Much of this land is considered prime for industrial development, given the improved access and lower prices than some other areas.

One thing is certain: the Twin Cities transportation system is expanding outward to accommodate both increased population growth and greater economic development.  Even cities in the inner loop will likely experience change as some commercial uses move outside the core of the metro, leaving behind opportunities for redevelopment. Cities that have a vision and an updated comprehensive plan for dealing with these changes can put themselves in the driver’s seat. Developers who understand the growth prospects of the entire Twin Cities area and the comprehensive plans of the most-affect cities will be best-positioned to take advantage of these opportunities.