City of no industry

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June 28, 2004 // UPDATED 2:16 pm - April 25, 2007
By: Scott Russell
Scott Russell

A housing boom is gobbling up industrial land, especially in Downtown. Are we squandering manufacturing jobs?

Apurva and Dr. S.K. Patel are doing what many Downtown developers do these days: buying an old industrial building and turning it into housing. Next month, the old Flo-Pac building at 918 N. 3rd St. will reopen as the 30-unit 918 Lofts.

What is one small part of Downtown's ongoing housing boom is one more small industrial opportunity lost. Old mills, factories and warehouses are giving way to condos, lofts and townhomes.

How much industrial land has the city lost to housing conversion?

No one knows.

Some city leaders, such as City Councilmember Gary Schiff (9th Ward), say Minneapolis needs to take a hard look at its industrial land-use policy -- what industry it wants to attract and where it should go.

"We know where we want to build the housing; we don't know where we want to build the jobs," Schiff said.

Mike Christenson, who develops jobs partnerships at the city's Community Planning and Economic Development Department, says, "The pressure on the city to move housing into industrial lands is increasing," noting that Minneapolis has $2.8 billion in housing projects underway.

Ironically, losing industrial land to housing may undermine a key city goal: creating neighborhoods where all residents -- including those with blue collars -- can walk to jobs. "If we lost the industrial base, where will the jobs go and how will people walk to work?" Christenson asks.

Staff and policy-makers have raised such questions in recent years. However, such broad planning has languished as staff focuses on new development applications amid budget cuts.

Barb Sporlein, the city's new planning director, said her work plan includes developing a city industrial land-use policy.

"Since I started, I have heard the perception that industrial users are being chased out," she said. "We have little ready-to-go industrial land available, especially if you think about contamination. I don't know what the real story is, and we want to get it."

The issue exists citywide. South Minneapolis has almost no industrially zoned land. What little there is lies along the Midtown Greenway, an abandoned rail line and future transit corridor, and Hiawatha Avenue, home to light-rail transit. Both are targeted for housing development, city leaders say.

In North Minneapolis, the Above the Falls Master Plan envisions more housing and parks, and less industry.

Not everyone laments lost industrial land.

Several developers say industry has left not just Minneapolis, but Minnesota and the nation -- so the city should move on. Downtown remains a powerful job magnet that is luring new residents with white and blue collars who are tired of traffic congestion and suburban boredom. Downtown is becoming a place where people walk to work, just not necessarily to factories.

Land of I-LOD

The 918 Lofts is the Patels' first housing development.

They own hotels and Alternative Lodging, a company that provides short-term rentals for newly relocated business executives who are searching for permanent housing.

The Patels saw a huge demand for housing Downtown and started looking to buy a building. They found a historic building designed by Long and Kees and used by brush-maker Flo-Pac for manufacturing and storage. The property had a 2003 market value of $575,000, according to the Hennepin County Web site.

The Patels estimate that purchasing and rehabbing the building will cost $9 million, about 15 times than the property's current value. They are selling the condos for between $240,000 and $425,000 each. Half the units already are sold.

The building is zoned I-2 industrial, which normally would prohibit residences. The city has created an Industrial Living Overlay District, or I-LOD, to allow housing in the area.

The city has approximately 4,500 acres of industrially zoned land, said Blake Graham, the city's manager of zoning and development controls. Some 500 acres, or more than 10 percent have I-LODs, paving the way for housing.

I-LODs exist mostly in the Downtown riverfront's North Loop, Downtown East and East Bank neighborhoods.

The 918 Lofts' block does not have a residential feel. It includes Brandon's 923 Club (now closed), All Safe Fire and Security, Y+A Architects, Downtown Ministorage and Spectra Images, a graphics company.

The city put several conditions on the 918 Lofts' permits because of All Safe's noise. For instance, the Patels must clearly tell buyers they are moving into an industrial area and nearby businesses could continue to operate.

Yet this is a transitional area. Housing developments are going up nearby, such as the lofts at 801 Washington Ave. N. and Basset Creek Lofts, 901 N. 3rd St., Apurva Patel said.

"You will see a revitalization of this whole quadrant in two years," he said. "If the new [baseball] stadium goes in -- look out."

Patel said this part of North Loop did not have much heavy industry, but the city would face "a huge issue" with residential developments going into industrial areas.

One of the more stark examples is the East Bank's Stone Arch Apartments, 601 SE Main St. -- 221 units plunked down between steel tube maker Metal-Matic, 629 SE 2nd St., and the University of Minnesota steam plant. The city required the developer to build the apartments with high-sound-insulating materials and windows.

On the nearby Pillsbury "A" Mill blocks, developer SchaferRichardson is pursuing plans to build 1,095 condos and 100,000 square feet of commercial space.

University of Minnesota officials worry about the conflicts between new residents and the plant's noise, vibration and odor.

An attorney representing the University wrote, "The proposed development is located in an area that has been highly industrial for more than a century and near the largest institutional steam plant in the state."

Out with the old

Sherman Malkerson has bought and sold North Loop industrial properties for decades, and sees more housing and residential conflicts coming. Citing the upper Mississippi's new Riverview Homes, 2225 W. River Rd. N., near industry such as a Cemstone cement mixing plant, 65 26th Ave. N., Malkerson said, "Wait until that one gets going. Wait until the residents start moving in and you get a north wind."

Malkerson once owned the Flo-Pac building, he said. As he sees it, Minneapolis -- like the rest of the country -- has lost a lot of industrial jobs, and it isn't all bad.

"We have gone beyond that," he said. "That kind of stuff is taking place in Taiwan. I don't think that manufacturing drives the city of Minneapolis economy anymore -- and I don't think it is necessary that it does."

Zoning administrator Graham said the city still has core industrial areas in Northeast Minneapolis and the University Research Park.

The market forces converting Downtown industrial land does not mean the city is losing good, high-paying, blue-collar jobs, he said.

"I don't know that we are really degrading our industrial capacity to a great extent," Graham said. "I am not certain we are going to displace viable industrial land uses that weren't going away anyway."

In recent years, the city has removed less-than-desirable industry near residential areas. The city is paying $1.6 million to buy Scrap Metal Processors, Inc., 150 Girard Ave. N. to clear land for Van White Memorial Boulevard, a new north-south connector from Dunwoody Institute through Heritage Park, a new North Side housing development.

In Southwest Minneapolis, the city used eminent domain to buy a Sowles Crane storage yard along the Midtown Greenway for new housing.

In Downtown, developers such as Kit Richardson say the old industrial buildings -- with their low ceilings and slow elevators -- are ill-adapted for modern industry.

And not all conversions are from industry to housing.

Richardson cited the Liten Paper building, 701 Washington Ave. N. Before its conversion, it had first-floor retail, second-floor offices and the rest was warehouse.

"You would look at it -- it is an industrial building in an industrial area," he said. "In the upper floors, there was no one there. ... there were very few jobs in the building."

Now, architecture firm Hammel Green Abrahamson owns the building and has hundreds of employees, he said.

"These buildings are being converted because the owners have decided the buildings are not longer functional and need to be sold," Richardson said.

Malkerson said he is not concerned about the shrinking pool of industrially zoned land. He points to the North Washington Industrial Park, a project he has worked on. The city has helped convert underutilized, contaminated land into a jobs park with modern facilities just a stone's throw north of North Loop.

"We are talking about one-story buildings with adequate ceiling heights, adequate dockage, adequate off-street parking -- stuff that is competitive with what you can find out in Eden Prairie," he said.

According to a city Web site, job park businesses include: Ambassador Press, a commercial printer, 1400 Washington Ave. N.; ASI Sign Company, 1200 Washington Ave. N., DHL Worldwide, an international courier, 1100 Washington Ave. N.; Omni Manufacturing, an office equipment company, 1300 Washington Ave. N.; Rochford Supply, a fabric and textile firm, 1500 Washington Ave. N., and Stremel Manufacturing, a high-tech metal manufacturing company, 260 Plymouth Ave. N.

The Portland model

Schiff, chair of the Council's Zoning and Planning Committee, said he is itching to tackle the industrial land-use issue.

"The city does have a goal of increasing employment," he said. "It doesn't necessarily have to be in conflict with increasing our residential population -- if we know where we want to increase those jobs and where we want to build the housing."

He said Minneapolis should follow Portland, Oregon's example. It needs to inventory current industrial businesses and their job base and do a market analysis to understand Minneapolis' strongest niches.

One area of regional advantage is industrial baking, he said.

"A great example is the New French Bakery in Seward. They started with five employees a decade ago, now they have expanded and they have over 100 employees," he said.

Schiff estimated the industrial study would cost approximately $300,000 and take four months. "We can't begin to start to make some of these [land-use] choices until we have a plan," he said. The choices "just show up as individual conflicts between neighbor and neighbor."

Michael McLaughlin, who heads the Greater Northside Business Association and other neighborhood business associations, said he has heard for at least three years that the city wants to create an overall industrial land use policy.

It has not materialized -- and it is detrimental to places such as the Bassett Creek Valley just west of Downtown, he said. A new neighborhood Master Plan called for replacing established industries with housing.

"There is a case here where some of the neighborhood folks and the neighborhood organizations are leading that charge to convert that industrial use to residential use -- getting ahead of the market," McLaughlin said. "That is definitely where we have seen conflicts."