While some people refer to the last 11 months as the ‘Big Pause,’ it has been anything but that for real estate broker and business owner Mike Smith. He said, “I’ve been busy for the last 15 years, but never anything like this. The only word I have for this housing market is ‘crazy.’”
Smith owns Minneapolis-based Anderson Realty that also serves St. Paul. He said, “I thought 2020 was going to be a humungous year in the Twin Cities housing market before COVID-19 hit: people are leaving the coasts because of wildfires and hurricanes. This is a great place to live, and our population is growing by about 4,000 people every year.”
“They come to the Twin Cities and don’t think twice about spending $300,000 for a nice bungalow. In Boston, San Diego, or Seattle, that same house would cost upwards of $800,000. I helped at least a dozen parties move to the Twin Cities from both coasts last year.”
People are looking at their houses differently
When the reality of the pandemic set in, some homeowners started re-evaluating their homes and the way they lived in them. Sometimes, they found that the open floor plan they had loved before just didn’t suit them anymore.
Smith said, “Let’s face it, people are stuck at home. Many people work at home, teach their kids at home, and entertain themselves at home. Plenty of people started to feel the walls closing in around them. Those who can afford it may opt to move to a larger home, or at least one with more doors that close.”
It all adds up to a time like no other, with factors not seen before driving people to buy and sell in a frenzy.
Fast-moving, seller’s market
That frenzy didn’t abate, not even during the very real and painful weeks following George Floyd’s murder. Smith said, “As business owners on Lake Street and University Avenue were preparing for the possibility of property damage, I was outside nailing plywood across my office windows. Tucked into my back pocket, my cell phone never stopped ringing. People wanted to schedule showings all over Minneapolis and St. Paul, even during the week of curfew. I couldn’t understand it. We had to press pause.”
Commercial real estate in challenging times
David Wellington is executive vice president of the local commercial real estate company Wellington Management, started by his father in 1984. They currently own and manage about 100 commercial properties across the metro area.
Wellington said, “There’s a company mandate that we won’t buy a property more than 45 minutes from our offices on Energy Park Drive in St. Paul. My dad and I want to be good stewards of the properties we own and manage. We aren’t ‘flippers’. Long-term ownership and management is core to our business model. It’s not just about acquisitions and development for us.”
The Wellington Management logo can be seen on top of a crane on Snelling just south of University Avenue right now. The project they’re building there is a 160-unit, middle-income apartment complex. Called “The Pitch,” it is directly across the street from Allianz Field Soccer Stadium.
Wellington said, “We see the middle income demographic as one that is underserved. For many people, market rate rents are too high to be affordable, but they make too much money to qualify for low income housing.”
Studio, one, and two-bedroom apartments at “The Pitch” will start leasing in May or June, with occupancy available in September. Bremer Bank will be returning to that site, with a new bank on the first floor and the return of their drive-thru. Bremer Bank is also the project financier, and a longtime community partner with Wellington Management.
Wellington Management has 35 employees, and the pandemic has greatly affected their day-to-day work – like it has everywhere. Wellington said, “We’ve been communicating with about half of our 100 real estate tenants regularly. We’ve tried to be flexible, and where we can be, generous. There continues to be a mighty shake-out in the business world.”
“We’ve lost tenants, and we’re going to continue to lose tenants. Businesses are going to keep going under, but we are seeing reinvestment and new investment. Most importantly, we are seeing hope and a growing ingenuity in new partnerships.”
One example of an innovative partnership is Wellington Management’s new, mixed-use project on the northwest corner of University Avenue and Dale Street. Their community partner on that project is Neighborhood Development Center (NDC), whose offices will be on the main floor. NDC’s mission is to strengthen neighborhoods from within by fostering small business development.
In addition to its new headquarters, NDC will lease 7,000 square feet of first floor retail space to small business tenants, with an emphasis on serving minority entrepreneurs.
Currently under construction, the building will also offer 40 units of deeply affordable family housing. Included will be four long-term homeless units, with services provided by community partner Simpson Housing. The building will be jointly owned and managed by Wellington Management and NDC.
From crisis to optimism
The last year has brought financial and emotional challenges not many could have imagined, but Wellington feels like there’s an end in sight – at least as far as COVID-19 goes. He said, “As we worked with our tenants in the beginning, there was the big challenge of overcoming the fear of the unknown. That’s been converted into action steps we can legitimately take. With clearer communication from the new administration and growing vaccine availability, it feels like there’s a light drawing us through the tunnel. A lot of people are ready to get some of their normal life back.”