2011.09.12 EDA Packet - Laserfiche WebLink

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EXECUTIVE SUMMARY Typical tenants occupying office space in Hugo are businesses serving the local household and business base, such as dentists,chiropractors,optometrists, financial advisors, insur- ance, and accounting and tax services. The average size of the space these businesses oc- cupy is usually less than 2,000 square feet. Some potential users will seek space in tradi- tional office buildings, while some may prefer space located above retail stores and some may prefer street level retail space. We identified seven multi-tenant office buildings in the Secondary Market Area. We believe that many of the businesses in these office buildings serve households and busi- nesses in Hugo. Over the long-term, new office space in Downtown Hugo would have the ability to capture some of the tenants that are either currently in these buildings or would consider moving into these buildings. Net rents in selected SMA office buildings range from $9.00 per square foot to $16.00 per square foot. Currently, most office users in Hugo are paying rents that are lower than the current costs to construct new traditional office space. Our calculations show that the Downtown can support an additional 31,000 to 37,700 square feet of office space through 2015. We estimate that up to approximately 15,000 square feet of office space could be built immediately to satisfy pent-up demand. We recommend bringing the space on-line in several buildings with 10,000 to 15,000 square feet over the remainder of the next ten years. New office space in Downtown Hugo should capture net lease rates priced from $10.00 to $13.00 per square foot. These lease rates are likely higher than what current tenants are pay- ing at this time, as Hugo lacks newer office space and a number of professional office ser- vice firms office out of their homes. However, these rates are lower than those found in higher-profile sites in the Secondary Market Area. Rent for office suites is typically higher than traditional office space. We believe that rents that range from $300 to $800 per month would be competitive. Some office users will prefer to own their space versus leasing. While these could be businesses of various types, most businesses seeking ownership space will be smaller busi- nesses requiring less than 2,000 square feet. We do note, however, office condominiums currently marketing in nearby Centerville and in Mahtomedi are selling very slowly. We recommend a very cautious approach to office condominiums in Downtown Hugo, and do not recommend the development of office condominiums until the later part of this decade. Office locations along Highway 61 and the newly redesigned County Road 8 will be most appealing to potential office tenants. This is particularly true for a stand alone office build- ing. Due to the increasing traffic counts and the realignment, we recommend the first phase of office space development to be located near the Highway 61 and County Road 8 intersec- tion. NIAXFIELD RESEARCH INC. 6