Industrial Demand Drives Conversion Success

It is 2021 and there is no doubt that the industrial market has been wildly expanding everywhere we look. In the post pandemic world consumers and businesses will look at how they make, buy, sell and deliver goods and services differently. 

In late 2019, KimbleCo was tapped by an existing client to list a building in the north metro area of the Twin Cities after a successful conversion of another one of their properties from a single tenant office building to a multi-tenant office building. The building KimbleCo was asked to list for sale or lease was a 10-year-old, 92,000 sf, 24-foot clear height industrial building built out as 100% office in a master planned industrial park. It had been the regional branch for a global technology firm for 10 years. The office build-out was beautiful and was fully furnished with top-of-the-line office furniture throughout. While the building had all of the bells and whistles to house office users, it had been listed for lease and/or sale for a couple of years with little activity. 

This northeast metro suburb was growing and the KimbleCo team saw the promise and the opportunities the building and location could offer to office or industrial users. In the spirit of trying to limit the owner’s costs as much as possible, KimbleCo listed the building for lease and sale first as an office building rather than immediately converting to an industrial use. Concurrently with leasing efforts, the team did its due diligence to understand the zoning and city requirements and the building conversion requirements as well as the cost to convert from office use to industrial. Early into leasing, the activity on the building, as well as in the market in general, showed that most users were looking for industrial space. To make sure we translated data into real information, we dug deeper into the market. It became even more clear that this was not a desired location or property for most office users while industrial users could not see past the beautiful office build out to the underlying industrial bones of the building.

Working closely with the ownership team, we made a compelling case to convert the building from office to industrial use. Among other factors, the following lead to the decision to convert: 

• No office lease greater than 6,500 sf had been signed in the previous year and a half, and none larger than 10k sf in at least the previous 6 years in Blaine, MN 

• Circumstances of the global pandemic were negatively impacting the office market

• Circumstance of the global pandemic were positively impacting industrial businesses necessitating the need for more space

• Limited industrial space availability in the NE suburbs

The decision to convert was made in November of 2020. KimbleCo was selected to project manage the work and engaged the contractor and architect by December, with the schedule for completion of the building conversion by spring of 2021. A marketing plan focused on industrial brokers and industrial users was developed noting the spring availability. Almost as quickly as the building could be ready, the results of the decision were successful. As soon as January of 2021 negotiations began with a tenant for just over 2/3rds of the building and a lease was signed in February 2021. A smart decision based on real data and information led to a successful transformation and outcome. 

Product Type

Industrial
 

Scope of Services

Brokerage and Project Management
 

Client

Gladstone Commercial
 

Goals and vision

Find a tenant or buyer in the quickest time at the highest price
 

challenges

Great office space in an industrial building in the wrong location

Perception of distance to CBD

Unable to lease to industrial users outfitted as office

Outcomes

Industrial conversion in a hot market

Lease signed within 3 months of decision to convert the building

Happy owner and tenant