Economic conditions, search for right fit driving marketing of 50-acre parcel

The Hastings Economic Development and Redevelopment Authority (HEDRA) and Rokos Advisors are playing a long game, making sure to get the right fit, on marketing a 50-acre piece of land in the Hastings Industrial Park.

HEDRA approved a contract with Rokos to market the land last summer. Since that time, interest rate increases and inflation have dramatically changed the Twin Cities metro development market.

Couple that with workforce issues and that fact that Hastings workers are higher paid than their counterparts throughout the area, and that explains the situation for marketing the parcel.

In partnership with Xcel Energy, the city already took steps to make the land Shovel Ready, meaning its virtually ready for a project. What kind of project remains to be seen.

Ra’eesa Motala, Rokos vice president, and Harry Ollington, an associate at the Minneapolis-based commercial real estate firm, gave a presentation to HEDRA members at the meeting Thursday, Feb. 9 at Hastings City Hall.

“We’re really excited to be partnering with the city,” said Motala. “We wanted to come out and give a quick overview on what we’ve been doing in terms of engagement, marketing and who we’re reaching out to as potential end users.

The site Rokos is marketing is at Spiral Boulevard and Enterprise Avenue.

Over the past few years, developers have bought tracts of land throughout the metro area and put up spec buildings that industrial tenants moved into with a large success rate. In the current economy, that’s not happening.

“It’s a fun, tricky time in the economy right now,” said Motala. “In the past three years, we’ve had quite a bit of spec development going on. That’s now happening now. Without a tenant willing to take the space, the building isn’t happening. Now, you have a developer, you have a tenant, then you’re going to put the building in the ground.”

She said they’ve had a developer offer to take the tract at no charge and then work to develop it and other possibilities that haven’t panned out.

“We’ve had a few offers on the site, but unfortunately the underwriting couldn’t pencil out. One wanted the land for zero dollars. We didn’t like that idea,” Motala said.

Hastings has many advantages, but the fact that the tract of land isn’t on the immediate highway makes it a little tougher to market.

“I think Hastings is very robust. There are a lot of opportunities here,” said Motala.

HEDRA Chair Peggy Horsch asked if there’s still a preconceived notion that Hastings is too far away.

“I think we all recognize it here on the panel. They still have the feeling we’re in the middle of nowhere. People that you’re approaching, do they readily recognize we are 20 minutes from St. Paul and 30 minutes from Minneapolis? Are you hearing any of that?” she asked.

Motala answered, “To a degree, yes, Hastings is still considered further out,” noting that in development terms, Hastings is 40 minutes from downtown Minneapolis based on Google maps and a driver at rush hour.

Ollington noted that newer developments in the Twin Cities metro are occurring near highway interchanges.

“Your access point is a little further from a major highway than they’d like to see,” she said.

Using the example of a grocery warehouse, she said trucking time is key.

“That nine minutes to Hwy. 6 is critical. It makes a big difference,” she said. “They look at how long it is going to take my truck driver to get from point A to point B. Is it worth the additional 20-30 miles to get to the highway.”

The labor piece is the other major obstacle. “We’re struggling with the labor piece. The access, we’ve got a good shot if someone wants to get to Wisconsin fast. If you want to go east, we’re good,” said Motala.

She said firms are looking to hire workers in the $16-$17 per hour range. The company connected with Hastings industries and found they pay higher than that.

“We’re a little on the high end here,” Motala said, but the benefits of Hastings could outweigh that problem.

“If a developer decides to buy the land for spec or built to suit, labor is the second question after location. We need to tell a story as to why we can justify that rate as to where the location is.”

She said there are several directions the parcel could take, from one large development hundreds of thousands of square feet in size, to more of a business park setting. A developer would buy the building and put up several buildings over phases, which Rokos thinks is the most likely avenue. Other sites are being used for single family home development, where all homes are rented out.

“Right now, it will continue to be marketed as an industrial site,” Motala said. “The scenario we see as being the most likely to land, it’s more of a park. This gives the developer the diversity of having multiple buildings. It gives the community the opportunity to bring more than one company to the neighborhood.”

City council and HEDRA member Dave Pemble inquired if the marketing should be toward one type of buyer.

“There’s a niche you can find,” he said, noting companies where the manifesting is clean and doesn’t infringe on neighboring areas.

“We should be concentrating down to a particular type instead of just saying we’ll take all interest through the spectrum. That’s my thinking. Are we smarter to look at the smaller buildings laid out into the area. That may be the easiest way to find some kind of manufacturing, industry or whatever to come into the Hastings area,” said Pemble.

Motala said she expects movement in the development market by the fourth quarter of this year.

City Community Development Director John Hinzman asked, “Take a look at the crystal ball here and the market conditions in Hastings, six months or one year down the road. What sort of things and opportunities do you potentially see for this site?”

“I do think six months is still too slim. The Fed raised rates a quarter point this week. The bet is they’re going to raise it another quarter before the summer,” said Motala. “I don’t think we’re going to see much stability until we go to ‘Q4’.”

She credited the Hastings economic development staff and HEDRA for the support Rokos has received in marketing the site.

“I will say you’ve got a great team here. They’re awesome,” she said.

On the overall plan for marketing, Motala said. “We’re trying to be a little bit more intentional with who gets the site long-term.”

Hinzman echoed that. “We’ve had a long history in the industrial park,” he said. “Understand that this is a piece that we’ve been saving for at least 20 years to be a real tax-job generator. We’ve spent a lot of time and capital to make sure the right individual, the right firm comes into the site. We’re looking at Rokos to help us out with that.”