Despite social unrest and a pandemic-induced economic recession, builders large and small kept on building last year in St. Paul.
Property owners pulled $692 million in building permits in 2020, up from $550 million the year before and 2 percent above the city’s six-year average, according to a Pioneer Press analysis.
New multi-family apartment buildings led the way, and properties along the Green Line saw a flurry of activity, six years after the light rail was extended to the capital city.
“This narrative that cities are dying, and no one wants to live here, and no one wants to do business here? I can’t find evidence that’s true,” said city council member Mitra Jalali, who represents Ward 4, the city’s northwest corner, which was ground zero for new real estate development last year.
Jalali has heard every kind of comment about the building activity around Raymond and University avenues, near the Minneapolis border. Some constituents celebrate the addition of new housing, while others bemoan the high monthly rents and construction noise associated with apartments that have yet to open to the public.
Nearby, Vandalia Tower near Vandalia and University avenues in Ward 4 recently completed an 18-month renovation that has helped draw tenants from the North Loop and elsewhere in Minneapolis. Of the 15 properties his company manages across the metro, “most of our leasing activity is there,” said Michael Wendorf, a leasing agent with Principled Real Estate Advisors. “We’re pleasantly busy here. And that’s good for St. Paul.”
Further east along the Green Line, around Snelling and University avenues, multiple apartment buildings with some luxury units are under development or ready for lease. The largest building permit pulled in the city during the first 12 months of the pandemic was for a mixed residential-commercial development under construction in front of a Goodwill outlet store near University and Fairview avenues.
The five-story, two-building, affordable-housing development at 1845 W. University Ave. will offer 243 apartments and 2,500 square feet of ground-level commercial space when it opens in a few months. Developer Reuter Walton and the Frana Cos. predict a total investment of $64 million by the time it opens.
“A significant increase in the complexity and size of development projects is contributing to the rise in permit valuations,” said Ricardo Cervantes, director of the St. Paul Department of Safety and Inspections, in a written statement.
The Green Line corridor has stayed hot in the early months of 2021, too.
At Raymond and University avenues, Minneapolis-based Kraus-Anderson Development Co. broke ground in late February on 222 units of market-rate apartments at the old U.S. Bank site across from Key’s Cafe. Three months later, the company began redeveloping the vacant Walmart Supercenter east of University and Snelling avenues into a big-box home decor center.
“I think the Green Line brought different opportunities, and there was quite a degree of older real estate that had lived through its useful life and was ripe for redevelopment,” said Matt Alexander, a senior vice president with Kraus-Anderson.
DOWNTOWN CLOSE BEHIND
Since the start of 2020 through March of this year, Ward 4 has counted 14 major projects representing some $245 million of construction activity, eclipsing most of the other wards combined.
Ward 2 has been busy, too, with 20 big projects worth $215 million spanning downtown St. Paul, the West Side, part of West Seventh Street, Cathedral Hill and the eastern stretches of Grand Avenue.
Elsewhere, master planning documents call for thousands more housing and commercial units in Highland Park at the former Ford auto manufacturing site, now known as Highland Bridge, and the city is working through redevelopment planning for the former Hillcrest Country Club. It may not be long before those political wards, 3 and 7, begin to show similar levels of real estate activity.
Meanwhile, the Greater East Side and Payne-Phalen remain quiet, with Ward 6 landing just three of the city’s 62 major projects permitted from January 2020 through March 2021. The other wards each had just a handful of big projects. In the three wards with the least amount of construction activity, the largest new projects were public school additions.
The East Side, North End and Como areas are “very single-family residential,” said city council president Amy Brendmoen, who represents Ward 5, which spans much of Rice Street and the Como neighborhood. “But I think we’ll see investments on Larpenteur Avenue and Rice Street in the coming years.”
Overall, building projects of any size were up citywide last year, from new decks to remodeled office buildings. Property owners likely responded to low interest rates, a stubbornly strong stock market and healthy housing demand in the core cities, as well as a resilient white-collar job sector throughout the Twin Cities metro area.
That said, the opening months of 2021 were softer than 2020 and 2019 when it comes to the construction of multi-family apartment buildings and mixed commercial-residential structures in St. Paul. From January through May of this year, construction companies pulled just 10 building permits for those types of projects, compared with 25 a year ago at this time, and 20 the year before.
Industry experts caution that comparing permits for short periods may not be particularly meaningful, especially given vagaries such as the weather and pandemic-era staffing in permitting departments.
Madison Equities principal Jim Crockarell has been bullish about remodeling his downtown properties during the pandemic, even as office workers Zoom in from afar.
“The rumors were that people were leaving St. Paul — residential and commercial tenants. We have not seen that to be true,” he said. “We are having surprisingly good success with rentals, in spite of the fact the downtown is still seemingly empty.”
In 2020, Madison Equities remodeled three floors of the Lowry Building at Fourth and Wabasha streets, or 60 of 150 units. Over the past four or five months, the company has managed to fill most of those vacancies. Just down the street at 325 Cedar St., Madison Equities spent the greater part of the pandemic on a $25 million, top-to-bottom remodel of the Degree of Honor Building into 78 upscale apartments. Rents there are at a higher price point than the Lowry, and units have been moving slower.
“We’re not renting them as quickly as the cheaper units at the Lowry, but we’ve had a good reception,” said Crockarell, who plans a similar conversion of the Park Square Court building by Mears Park if inflation doesn’t hike construction costs too high. “So far, it looks promising for St. Paul.”
Even with all the new apartments, St. Paul still has a serious need for affordable housing, and city officials don’t always agree on how to get more of it.
Reports from apartment listing agencies show the pandemic didn’t bite into rents as much as one might have expected. In St. Paul, a median-value two-bedroom apartment rented for $1,335 per month as of April, compared with $1,200 a year ago, according to HousingLink.org. Year-over-year changes were less dramatic across the river, with the same unit renting for $1,400 in Minneapolis, an increase of 2 percent.
Alarmed by the uptick in rents, the St. Paul Planning Commission now is studying inclusionary zoning — the possibility of mandating that affordable housing be included in major new construction — and eliminating parking minimums, which would make it even easier for developers to build real estate in neighborhoods they previously had limited access to due to zoning.
The city council and mayor have been battling over a planned housing development off Lexington Parkway and University Avenue that Jalali and other critics say ought to offer cheaper units.
The 288-unit Alatus project, Jalali said, isn’t really affordable, even though half the units would be studios and one-bedrooms that meet the technical definition, at roughly $1,000 to $1,100 per month. She acknowledges that stand has put her at odds with constituents who see greater housing density as a partial answer to housing supply shortages.
“We can’t address our housing shortage without supply. We also can’t have equity without a bigger anti-displacement strategy,” Jalali said. “We need to do both and all, yesterday. We can’t rely on good will as public policy. We need actual strategies and tools as guarantees. … And I think the Alatus situation has exposed that in a really clear way.”