Updated Market Analysis for the Cedar Grove Redevelopment Area in Eagan, Minnesota

Transcription

1 Updated Market Analysis for the Cedar Grove Redevelopment Area in Eagan, Minnesota Prepared for: City of Eagan Eagan, Minnesota April First Avenue NE Suite 400 Minneapolis, MN

2 April 18, 2007 Mr. Jon Hohenstein Community Development Director City of Eagan 3830 Pilot Knob Road Eagan, MN Dear Mr. Hohenstein: Attached is a draft copy of the study An Updated Market Analysis for the Cedar Grove Redevelopment Area in Eagan, Minnesota. The study includes an analysis of the existing supply of and market conditions for retail, office, hospitality, and multifamily housing in the Cedar Grove Redevelopment Area. We also analyzed growth trends and demographic characteristics and the impact of these trends on the potential to develop various land uses within the redevelopment area. Based on our analysis, we believe the redevelopment area is well suited for a mix of retail, housing, and office space. We recommend a phased redevelopment approach, with the first phase that includes: senior cooperative, affordable rental, for-sale townhomes, neighborhood retail, and office. We believe the majority of retail and office space demand will come after Detailed recommendations can be found in the Conclusions and Recommendations section. Again, our recommendations are preliminary and will be further refined. We have enjoyed performing this study for you and are available should you have any questions or need additional information. Sincerely, MAXFIELD RESEARCH INC. Mary C. Bujold President Matt Mullins Senior Research Analyst Attachment

3 TABLE OF CONTENTS Page SUMMARY OF FINDINGS... 1 Purpose and Scope of Study... 1 Demand Summary... 1 Recommendations... 2 PURPOSE AND SCOPE... 5 PROJECT DESCRIPTION/SITE ANALYSIS... 6 Introduction... 6 Site Location... 2 Access and Visibility... 9 Appropriateness of Cedar Grove Redevelopment Area for Additional Retail, Office, Housing and Hospitality... 9 HOUSING ANALYSIS Introduction Housing Market Area Definition Demographic Overview For-Sale Housing Market Situation Existing Multifamily Subdivisions Interviews with Market Area Realtors Planned and Proposed For-Sale Developments Rental Market Analysis Competitive Rental Projects Planned and Proposed Rental Housing Senior Housing Analysis Housing Demand Analysis Summary of Housing Demand RETAIL MARKET ANALYSIS Introduction Market Area Definition Population and Household Growth Trends and Projections Population Age Distribution Daytime Population Categories of Goods Consumer Expenditure Patterns Regional Retail Development Trends Selected Retail Developments In and Near the Market Area Planned and Pending Retail Developments Projected Demand for Retail Space... 73

4 TABLE OF CONTENTS (Continued) Page OFFICE MARKET ANALYSIS Introduction Market Area Definition Employment and Business Growth Regional Office Development Trends Office Developments in Eagan Major Corporate Expansions in the Metro Area Projected Demand for Office Space HOTEL MARKET ANALYSIS Introduction Site Analysis Competitive Hotel Market Planned or Pending Hotels in the Market Area Summary of Interviews with Key Contacts Target Market Calculation of Room Demand CONCLUSIONS AND RECOMMENDATIONS Introduction Recommended Development Concept Housing Conclusions and Recommendations Retail Conclusions and Recommendations Office Conclusions and Recommendations Hospitality Conclusions and Recommendations

5 LIST OF TABLES Table Number and Title Page H-1 Population and Household Growth Trends and Projections, Eagan Housing Study Area, 1990 to H-2 Projected Age Distribution, Eagan Housing Market Area, 1990 to H-3 Household Income by Age of Householder, Eagan Market Area, H-4 Household Income by Age of Householder, Eagan Study Area, H-5 For-Sale Housing Loan Affordability, Eagan Market Area, 2006 Incomes H-6 Tenure by Age of Householder, Eagan Housing Market Area, 1990 & H-7 Household Type, Eagan Housing Market Area, 1990 & H-8 Multifamily Residential Sales, Eagan Market Area, 2002 through H-9 Single Family Residential Sales, Eagan Market Area, 2002 through H-10 Single Family Homes Currently Listed For-Sale, Eagan Market Area, February H-11 Multifamily Homes Currently Listed For-Sale, Eagan Market Area, February H-12 Current Pricing, Absorption and Unit Mix, Selected Active For-Sale Multifamily Developments, Eagan Market Area, April H-13 Average Rents/Vacancies Among Market Area Submarkets,4 th Quarter H-14 Monthly Rent Comparison Newer Rentals, Market Rate Rental Apartments and Townhomes, Eagan Market Area, April H-15 Existing Market-Rate Senior Housing Developments, Eagan Market Area, April H-16 Housing Demand Summary, Cedar Grove Redevelopment Area, R-1 Population and Household Growth Trends and Projections, Eagan Retail Market Area, 1990 to R-2 Projected Age Distribution, Eagan Retail Market Area, 1990 to R-3 Daytime Population, Eagan Retail Market Area, R-4 Household Expenditures by Selected Product Type, Eagan Market Study, R-5 Household Expenditures by Selected Product Type, Eagan Market Area, R-6 Retail Space Vacancy and Absorption, Dakota County, R-7 Rental Rates by Type of Center and Submarket, Twin Cities Metro, R-8 Selected Retail Centers, Eagan Market Area & Vicinity, 2006 Retail Rates R-9 Demand for Retail Space, Eagan Retail Market Area, 2006 to O-1 Employment Growth Trends and Projections, Eagan Office Study Area, 1990 to O-2 Office Jobs Growth Trends and Projections, Eagan Office Market Area, 1990 to O-3 Businesses by Industry and Size of Business, Eagan Market Area, O-4 Office Space Vacancy and Absorption, Dakota County, O-5 Stated Office Rental Rates, Dakota County, 2003 to O-6 Eagan Office Buildings Available for Lease, Eagan, April O-7 Selected Major Corporate Expansions and Relocations, Twin Cities Metro Area, O-8 Projected Demand for Leased Office Space, Eagan Market Area, 2007 to

6 LIST OF TABLES (continued) Table Number and Title Page L-1 Traffic Counts, L-2 Hotel Properties Surveyed in Hotel Trend Report, Eagan Hospitality Market Area, March L-3 Occupancy, Room Rate & Revenue, Eagan Hospitality Market Area, 1999 through L-4 Room Supply and Demand Trends, Eagan Hospitality Market Area, 2002 to L-5 Competitive Hotel Properties, Eagan Hospitality Market Area, March L-6 Conference and Banquet Facilities, Eagan, March L-7 Projected Room Demand, Eagan Hospitality Market Area, 2007 through CR-1 Demand Summary, Cedar Grove Redevelopment Area, CR-2 Potential Synergies Among Uses, Mixed-Use Developments

7 SUMMARYOF FINDINGS Purpose and Scope of Study Maxfield Research Inc. was retained by the City of Eagan to update previously conducted market research and analysis of the market potential for redevelopment in the Cedar Grove Redevelopment Area along Highway 77 and Highway 13 in Eagan, Minnesota. Our research includes an analysis of the existing supply of and market conditions for retail, office, hospitality and multifamily housing in the area. We also analyzed growth trends and demographic characteristics and the impact of these trends on the potential to develop various land uses in the targeted area. Demand Summary Based on our demographic and market analysis and our assessment of the Cedar Grove Redevelopment Area, we calculate the amount of additional housing, office, hospitality and retail that can be supported at the Site through DEMAND SUMMARY CEDAR GROVE REDEVELOPMENT AREA Recommended Uses Housing For-Sale Multifamily Units Senior Units Rental Market Rate Units Affordable/Subsidized Units Senior Units Retail 75,000 Square feet Office 60, ,700 Square feet Hotel 1 65 Rooms 1 Demand for hotel rooms is between 2007 and 2012 Source: Maxfield Research Inc. The table above summarizes our demand calculations for various uses in the Market Area, and the amount of each that could be captured by new development in the Cedar Grove Area through It should be noted our demand calculations and recommendations for each component are based on market conditions, thus, the Cedar Grove Redevelopment Area may not be able to accommodate all the various components when combined due to land constraints. The following is a summary of recommendations for redevelopment at the Site for housing, retail, office and hospitality. Detailed recommendations, including redevelopment potential for the Cedar Grove MAXFIELD RESEARCH INC. 1

8 SUMMARYOF FINDINGS Area, timing and appropriate lease rates/housing pricing are found in the Conclusions and Recommendations section. Recommendations Based on our analysis, the Site can support alternative uses on the property, including a mix of retail, housing, and office. Although we believe the site would be attractive to a corporate campus user, a corporate real estate user may never result and would acquire the majority of the land in the redevelopment area. As a result, planning for a corporate campus would delay redevelopment and is not guaranteed. Therefore, we recommend a mixed-use development that is flexible to accommodate changes in real estate demand over time. A phased approached should begin with the real estate components that are in the highest demand over the next five-years, as outlined in this section. Mixed-use developments tend to be complex and face several challenges; such as higher costs, financing gaps, and unproven concepts in some suburban locations. Therefore, master planning on behalf of the City and the selected developer will be essential for the success of the mixed-use project. Housing Recommendations The housing types that we believe would satisfy demand and that are most appropriate for the Site are listed as follows: 4 Main-Level-Living Styled Townhomes We recommend two-story side-by-side townhomes with the option for one-story townhomes occupying the end units. All units should feature master suites, with master bedroom and bath, on the main level, and have been popular with empty-nesters and independent seniors, as well as some middle-age couples. We recommend that most units be priced at about $285,000 to $325,000. Should an optional one-story end unit be offered for the higher-end market, we recommend prices starting at $325,000 with unfinished basements (preferably look-out or walk-out units if the topography warrants) to account for the decrease in overall density. 4 Side-by-Side and Back-to-Back Townhomes These units have been attractive to first-time homebuyers and younger move-up buyers. Typically, back-to-back units are priced more modestly and we recommend units starting at $235,000 and ranging in size from 1,300 to 1,450 square feet. Side-by-side units should have prices starting at $275,000 and sizes of between 1,500 and 1,650 square feet. Side-by-side units tend to appeal to a slightly broader market, including some older adults and retirees and some younger families with children as they are more affordable. 4 Senior Cooperative - We recommend share prices of between $32,000 and $54,000 ($40 per square foot) and monthly fees ranging between $750 and $1,240 per month (between $.92 and $.94 per square foot). We recommend that unit sizes range from roughly 800 to 850 square feet for a one-bedroom unit, 950 to 1,050 square feet for a one-bedroom plus den unit, 1,075 to 1,250 square feet for a two-bedroom unit and 1,280 to 1,350 square feet for a MAXFIELD RESEARCH INC. 2

9 SUMMARYOF FINDINGS two-bedroom plus den unit. It will be important to fully educate the target market to the benefits of this type of housing concept and that the payment of the share cost is an investment, not simply an entrance fee. In cooperative buildings, there is usually a much greater demand for two-bedroom versus one-bedroom units as there are usually a higher proportion of couples than singles. 4 Affordable Rental Property (Dakota County CDA) - We recommend an affordable rental housing component in the Cedar Grove Redevelopment Area that promotes transit-oriented development. After housing, transportation is one of the largest expenses for families. The need to own one or more cars, combined with housing costs, can place a heavy financial burden on many low and moderate income families. Thus, the Cedar Grove Redevelopment Area location would link housing to convenient access to transit, as well as retail and services within the redevelopment area. Retail Recommendations 4 The greatest retail demand in the Cedar Grove Redevelopment Area is for stores serving the local population with goods and services they purchase more frequently ( neighborhood retail ). Neighborhood retail provides convenience goods (such as restaurants and café s, pharmacy, etc.) and personal services (such as dry-cleaning, salons, fitness center, etc.) for the day-to-day needs of the immediate neighborhood and the community. 4 Based on the lease rates at competitive shopping centers in the Market Area, we believe net lease rates averaging $20 to $22 per square foot should be attractive to many of the potential retail tenants. Although national retail tenants can afford net rents of $20 and more, many local neighborhood retailers will not be able to afford rents at these levels. For this reason, we envision a retail concentration of national tenants or high-quality local/regional chains. Office Recommendations 4 Leased office space in a multi-tenant building will be most preferred by larger and mid-sized professional service businesses who seek a Site along Highway 77 and access to the labor pool. The majority of potential office users will be attracted to leased office space (excluding office suites) in either a stand-alone building or as a component of a mixed-use building. 4 Corporations seeking a high-profile site with Highway visibility will also consider the site for a freestanding corporate campus, much like the Thompson West campus in Eagan. However, this market is highly competitive and the United Properties site on the north side of Highway 13 has been marketing for five-plus years and has yet to secure an anchor tenant. Additionally, a corporate campus would likely require a substantial amount of land and would not be feasible for a mixed-use development. In order to attract a large corporate user, the City of Eagan would likely have to offer significant subsidies in order to compete with other communities seeking a corporate campus user. MAXFIELD RESEARCH INC. 3

10 SUMMARYOF FINDINGS 4 New office space at the Subject Site should capture net lease rates priced from $15.00 to $17.00 per square foot. These rates are similar to those found in higher-profile sites in the Market Area. Rent for office suites is typically higher than traditional office space on a per square-foot basis. We believe that rents that range from $300 to $800 per month would be competitive. The monthly rent would vary depending on building amenities and services included in the rent. Hospitality Recommendations 4 Based on our analysis, we do not recommend a hospitality use at the Cedar Grove Redevelopment Area in the short-term. With the addition of the proposed Comfort Suites in Eagan, we find that the market would be in relative equilibrium through MAXFIELD RESEARCH INC. 4

11 PURPOSE AND SCOPE Purpose and Scope Maxfield Research Inc. was retained by the City of Eagan to update previously conducted market research and analysis of the market potential for redevelopment in the Cedar Grove Redevelopment Area along Highway 77 and Highway 13 in Eagan, Minnesota. Our research includes an analysis of the existing supply of and market conditions for retail, office, hospitality and multifamily housing in the area. We also analyzed growth trends and demographic characteristics and the impact of these trends on the potential to develop various land uses in the targeted area. MAXFIELD RESEARCH INC. 5

12 PROJECT DESCRIPTON/SITE ANALYSIS Introduction The Cedar Grove Redevelopment Area is in the general vicinity of the Cedar Avenue (Highway 77) and Highway 13 intersection in Eagan, Minnesota. Eagan is a community of about 65,000 people located in the southeast portion of the Twin Cities Metro Area, located an equal distance from Minneapolis and St. Paul and minutes from the Minneapolis-St. Paul International Airport. The City of Eagan is nearly fully developed (estimated at 95% developed) and the Cedar Grove area is one of the oldest landmarks in the City. The proposed redevelopment is an effort to redefine the area based on market conditions to reposition underutilized land uses and provide a gateway to the City of Eagan. Site Location The Cedar Grove redevelopment site is located east of Cedar Avenue, encompassing property on the north and south sides of Highway 13. The site is located in the far northwest portion of Eagan s city limits and the Sites intersection provides the first exit to Eagan to the southbound motorist on Cedar Avenue. The majority of the redevelopment district is located between Cedarvale Boulevard and Cedarvale Parkway (the former Beau D Rue Drive), which is located south of Highway 13. A map on the following page shows the location of the Cedar Grove Redevelopment Area. The Cedar Grove Redevelopment Area south of Highway 13 includes the existing Cedarvale Mall and multiple free-standing retail and general businesses. Some of the area businesses include the Cedarvale Lanes, Cedarvale Professional Building, Minnesota Credit Union, Texaco, and U-Haul, among many others. Additionally, a number of the buildings are vacant in the area, and many of the structures have not been maintained. The Cedar Grove redevelopment site (south of Highway 13) is bordered by multi-family and single-family housing to the south. North of Highway 13, the redevelopment area is bounded by Silver Bell Road and includes mostly industrial properties, including Silver Bell Commons and the Silver Bell Business Center. River Ridge Condominiums is also located on the north side of Highway 13. The redevelopment area has some airplane noise that results from the new north-south airport runway at the Minneapolis/St. Paul International Airport. According to the Metropolitan Airports Commission (MAC), Runway 17/35 is projected handles 37% of all departures, and 17% of all arrivals in Therefore, building methods would have to be pursued to help mitigate the amount of airport noise that would be heard within the units. MAXFIELD RESEARCH INC. 6

13 PROJECT DESCRIPTON/SITE ANALYSIS Cedar Grove Area Map MAXFIELD RESEARCH INC. 7

14 PROJECT DESCRIPTON/SITE ANALYSIS Cedar Grove Property Map MAXFIELD RESEARCH INC. 8

15 PROJECT DESCRIPTON/SITE ANALYSIS Access and Visibility The redevelopment Site has visibility from Highways 77 and 13. Cedar Avenue is a north-south principal arterial that starts in Eagan at the intersection of I-35E and runs north to Bloomington, Richfield, and Minneapolis. Most notably, the Site is located less than four miles south of the Mall of America and Interstate 494 via Highway 77. Interstate 494/694 is the major loop that serves the entire Twin Cities Metropolitan Area. Access to the Cedarvale Mall is somewhat challenging as the access point was relocated to Silver Bell Road with the construction of Highway 77. Therefore, access to the Cedarvale Mall at this time is somewhat difficult to the passing motorist. However, the removal of the Cedarvale Mall will provide for increased access and visibility to the Site. Traffic counts on Cedar Avenue increase significantly north of the Highway 13 intersection, increasing from 78,000 AADT (Average Annual Daily Traffic) south of Highway 13 to 94,000 AADT north of Highway 13. The table below illustrates traffic volumes as obtained from the Minnesota Department of Transportation. TRAFFIC VOLUMES Average Annual Location Trips/Day Cedar North of Hwy 13 94,000 Cedar South of Hwy 13 78,000 Hwy 13 East of Cedar Ave. 26,500 Hwy 13 West of Cedar Ave. 22,500 Source: Minnesota Department of Transportation Although the Site is visible from both Highways 77 and 13, visibility will be better along Highway 13. Visibility along Highway 77 will be challenging as motorists driving highway speeds quickly pass the site. However, visibility could be increased with signage or vertical height s of buildings. Appropriateness of Cedar Grove Redevelopment Area for Additional Retail, Office, Housing and Hospitality The Cedar Grove Redevelopment Area currently is underutilized, has a tired look, and is not being utilized to its highest and best use. Since the City of Eagan is approximately 95% developed and vacant land has dwindled; the redevelopment of this intersection has enormous potential to be a destination point in Eagan. The Site is suitable for a multitude of housing types, including general occupancy rental, for-sale condominiums and townhomes, and various agerestricted housing types. In addition, the Site will be able to capture a portion of Market Area demand for retail and office. However, the site will not be able to capture all of the Market Area demand, as no one location can capture 100% of the demand in a given area. MAXFIELD RESEARCH INC. 9

16 PROJECT DESCRIPTON/SITE ANALYSIS Cedarvale Redevelopment Entrance Sign New McDonald s located near the entrance of the Cedarvale Redevelopment Area MAXFIELD RESEARCH INC. 10

17 PROJECT DESCRIPTON/SITE ANALYSIS Lennar Townhome Development located south of Cedarvale Redevelopment Area River Ridge Condominiums, located north of Highway 13 on Silver Bell Road MAXFIELD RESEARCH INC. 11

18 HOUSING ANALYSIS Introduction This section of the report presents our analysis of the demand for multifamily housing in Eagan, based on our examination of demographic characteristics, growth trends, and the housing market situation in the Market Area. We first determined an appropriate draw area, or Market Area, from which housing in the Cedar Grove Redevelopment Area would likely attract buyers/renters. We then analyzed key demographic data in the Market Area, as they relate to the demand for new housing units. The market conditions of owned and rental housing in the Market Area were assessed and planned housing developments were identified. Based on our analysis, we evaluated and reassessed the potential demand for general occupancy rental and for-sale housing condominium/townhomes on the Site and recommended the most appropriate development formats to satisfy demand in the Cedar Grove Redevelopment Area. Housing Market Area Definition Maxfield Research Inc. determined the draw area for housing in the Cedar Grove Redevelopment Area based on geographic and man-made boundaries, commuting patterns, and our knowledge of Eagan and the south Metro Area. The draw area (Market Area) includes the Cities of Eagan, Apple Valley, Burnsville, Richfield, and East Bloomington. Residents residing and working in this geographic area comprise the largest potential market for new land uses on the Site. We also estimate a portion of housing demand will come from outside the Market Area. A map of the Market Area is shown on the following page. Demographic Overview Introduction Population, household, and employment growth trends are analyzed in this section because these are key indicators of the potential demand for new housing units. We also analyzed data on population age distribution, household income, household type and household tenure. This information is helpful in assessing demand for various housing products. Population and Household and Employment Growth Trends and Projections Table H-1 presents population, household, and employment growth trends and projections for the Market Area from 1990 to The 1990 and 2000 figures are from the Census Bureau and the 2010 and 2020 projections are from the Metropolitan Council. The 2007 and 2015 estimates were determined by Maxfield Research Inc. based on these data sources. MAXFIELD RESEARCH INC. 12

19 HOUSING ANALYSIS MAXFIELD RESEARCH INC. 13

20 HOUSING ANALYSIS The following are key points from Table H-1. In 2000, Eagan had 63,557 people, 23,773 households, and 42,114 jobs. During the 1990s, the Housing Market Area s population increased by 17.6% while households increased by 21.5% (from 75,691 to 91,986 households). In comparison, the Metro Area s population and household base grew by 15.4% and 16.7%, respectively, during the 1990s. The Market Area experienced a faster growth rate because parts of the Market Area were situated on the outer areas of the urbanized Metro Area, and were capturing increased development as the urban core expanded outward. Eagan s population grew by 34.1% between 1990 and 2000, compared to a 12.4% increase in the Remainder of the Market Area. However, the Market Area as a whole is projecting slower population growth through 2020, due the lack of land availability to accommodate new housing. Most new and future housing developments in Eagan will be the result of redevelopment or of in-fill sites in the next decade as the majority of land has been developed. Between 2000 and 2010, Eagan is projected to add 3,443 people (+5.4%) and the Housing Market Area is projected to add 21,443 people (+12.6%). This compares to a 18.6% projected growth rate in Dakota County and 15.7% in the Twin Cities Metro Area. Since households represent occupied housing units, household growth trends are a much better indicator of housing demand than population growth trends. Between 2000 and 2010, the Market Area is forecast to add 12,191 households. While this is a 13.3% increase, it is 4,104 fewer households than were added during the 1990s. This decline in overall growth is due to less land available for new development in the Market Area. Eagan is projected to add 2,727 households this decade, an 11.5% increase. The average household size in Eagan decreased from 2.72 people in 1990 to 2.67 people in 2000, with projections indicating 2.53 in 2010 and 2.43 in The aging of the population, including baby boomers into their 50s and 60s (who are becoming empty nesters) along with smaller average family sizes are the primary reasons for decreasing household size. These trends will continue to generate demand for more diverse housing products over the next 15 to 20 years. Eagan added 16,114 jobs in the 1990s for a 62.0% increase. During the same time period, the Market Area added approximately 44,226 jobs, roughly a 46.0% increase. From 2000 to 2010, Eagan was expected to add about 10,885 jobs (+25.8%) and the Market Area as a whole is expected to add over 33,200 jobs (+23.6%). MAXFIELD RESEARCH INC. 14

21 HOUSING MARKET ANALYSIS Census Estimate Projections 1990 to to to No. Pct. No. Pct. No. Pct. Population Eagan 47,409 63,557 65,967 67,000 67,500 68,000 16, , , Rem. of Study Area 151, , , , , ,640 18, , , Total 199, , , , , ,640 34, , , Dakota County 275, , , , , ,150 80, , , Twin Cities Metro Area 2,288,729 2,642,056 2,960,000 3,056,100 3,243,100 3,430, , , , Households Eagan 17,427 23,773 25,682 26,500 27,250 28,000 6, , , Rem. of Study Area 58,264 68,213 74,838 77,677 81,447 85,217 9, , , Total 75,691 91, , , , ,217 16, , , Dakota County 98, , , , , ,790 32, , , Twin Cities Metro Area 875,504 1,021,454 1,156,096 1,213,800 1,300,000 1,386, , , , Employment Eagan 26,000 42,114 49,734 53,000 54,850 56,700 16, , , Rem. Of Study Area 70,266 98, , , , ,951 28, , , Total 96, , , , , ,651 44, , , Dakota County 106, , , , , ,340 42, , , Twin Cities Metro Area 1,284,995 1,563,245 1,742,694 1,819,600 1,910,850 2,002, , , , Sources: Bureau of the Census: U.S. Census of Population and Housing Metropolitan Council Maxfield Research Inc. TABLE H-1 POPULATION AND HOUSEHOLD GROWTH TRENDS AND PROJECTIONS EAGAN HOUSING STUDY AREA 1990 to 2020 Change MAXFIELD RESEARCH INC. 15

22 HOUSING MARKET ANALYSIS The graph below presents population, household, and employment growth in the Eagan Housing Market Area from 1990 to , ,000 Population, Household, and Employment Growth Eagan Housing Market Area 1990 to , , ,000 50,000 0 Population Households Employment Age Distribution The age distribution of the population relates to the type of housing needed in a given community. Younger and older people are more attracted to higher density housing located near urban services and entertainment; middle-aged people (particularly those with children) prefer lower-density single-family homes. Table H-2 presents the age distribution of the Market Area population from the 1990 and 2000 Censuses and estimated to 2010 by Maxfield Research, based on data from Claritas, Inc (a national demographics firm). The table shows the number of people and the percent of the population in eight age categories. The following are key points from Table H-2. During the 1990s, the Eagan Housing Market Area experienced a loss in people age 25 to 34, decreasing by 7,029 people (-15.6%). However, the Market Area witnessed a surge in the 45 to 54 age cohort, increasing by 12,082 people (+58.0%), and the senior population (age 65+), increasing by 6,276 people (+46.3%). Between 2000 and 2010, the Eagan Housing Market Area is projected to experience population declines in the under 18, 25 to 34, and 35 to 44 age cohorts. Together, these age cohorts are expected to lose about 8,277 people (-5.8%). MAXFIELD RESEARCH INC. 16

23 HOUSING MARKET ANALYSIS TABLE H-2 PROJECTED AGE DISTRIBUTION EAGAN HOUSING MARKET AREA 1990 to 2010 Change Census Forecast Age No. Pct. No. Pct. Eagan Under 18 14,097 19,056 17,593 4, , to 24 4,340 4,700 5, , to 34 13,530 10,583 8,576-2, , to 44 8,824 13,715 10,965 4, , to 54 3,919 9,023 11,558 5, , to 64 1,711 3,806 7,755 2, , to ,739 3,150 1, , and over , Subtotal 47,409 63,557 67,000 16, , Remainder of Market Area Under 18 39,429 42,463 42,600 3, to 24 15,217 15,449 16, to 34 31,387 27,305 26,054-4, , to 44 25,202 29,689 28,746 4, to 54 16,899 23,877 31,190 6, , to 64 10,983 14,577 23,575 3, , to 74 8,081 9,141 13,142 1, , and over 4,497 8,027 10,257 3, , Subtotal 151, , ,971 18, , Market Area Total Under 18 53,526 61,519 60,193 7, , to 24 19,557 20,149 22, , to 34 44,917 37,888 34,630-7, , to 44 34,026 43,404 39,711 9, , to 54 20,818 32,900 42,748 12, , to 64 12,694 18,383 31,330 5, , to 74 8,811 10,880 16,292 2, , and over 4,755 8,962 11,732 4, , Total 199, , ,971 34, , Sources: Bureau of the Census; Claritas, Inc. Maxfield Research Inc. MAXFIELD RESEARCH INC. 17

24 HOUSING MARKET ANALYSIS With its location in a more urban setting, the Site will appeal mostly to the multifamily housing market. While multifamily housing attracts people of most ages, it is dominated by younger and older households. The Site s primary appeal will be to young singles and couples (the ages 25 to 34 cohort), middle-age households without children (the ages 35 to 44 cohort), and empty nesters and young seniors (ages 65+). Through 2010, the 25 to 34 age cohort is projected to decrease by 3,258 people, the 55 to 64 cohort is projected to significantly increase by 12,947 people and seniors by 8,182 people. In 2000, the Market Area had 19,842 people age 65 and over. By 2010, the senior population is projected to grow to about 28,000 seniors, an increase of 41.2%. The projected increase in the senior population indicates there will be additional demand for senior housing in the Market Area. Many of the recent housing trends have been driven by lifestyle changes as significant portions of the population reach transitional ages. During the 1990s, younger baby-boomers (those ages 25 to 34 in 1990) aged into their mid-30s to early-40s, fueling a high level of demand for ownership housing, particularly single-family homes since many people in this group have children. Meanwhile, older baby-boomers (those ages 35 to 45 in 1990) aged into their mid-40s to early-50s. This trend has fueled demand for alternative housing options, particularly townhomes and condominiums, because many older adults opt to downsize from single-family homes due to a decreasing need for space and other lifestyle changes. During the coming decade, a large proportion of the baby-boom generation will age into their 50s and 60s. The Market Area s 55 to 64 population is projected to grow by 12,950 people between 2000 and 2010 (+70.4%). This trend will lead to even greater demand for for-sale multifamily housing. 140,000 Projected Age Distribution Eagan Market Area (1990, 2000, & 2010) 120, ,000 HHD's 80,000 60,000 40,000 20, Age Group MAXFIELD RESEARCH INC. 18

25 HOUSING MARKET ANALYSIS Household Income Household income data help ascertain the demand for different types of owned and rented housing based on the size of the market at specific cost levels, and also provides insight into the amount of discretionary dollars that consumers may have to spend on goods and services. In general, housing costs of up to 30% of income are considered affordable by the Department of Housing and Urban Development (HUD). Tables H-3 and H-4 show household incomes in the Eagan Market Area for 2006 and 2011, respectively. Household income data was compiled by Claritas, Inc. (a nationally recognized demographics firm) and adjusted by Maxfield Research Inc., based on household estimates from Minnesota Planning, the State Demographer s Office. The following are key points from Table H-3 and H-4. Household income data helps in determining the demand for different types of owned and rented housing based on the size of the market at specific incomes levels. The median household income in Eagan in 2006 is estimated to be $77,368 compared to $62,237 in the remainder of the Market Area. By 2011, Eagan s median income is projected to climb to $84,504 (a 9.2% increase). Assuming housing costs absorb 30% of gross income, a household earning the Eagan median household income in 2006 ($77,368) could afford a maximum purchase price of about $193,400 to $232,100 (calculating a home purchase price of 2.5 to 3.0 times household income). It should be noted, however, that most households earning the median income own their housing. Households ages 25 to 34 are typically in the rental market or entry-level for-sale market. Their median income in 2006 (Eagan) is estimated to be $65,688. With this income, a household could afford a monthly rent of about $1,640 (including rent, utilities, and garage parking) or a maximum purchase price of about $164,200 to $197,000. Young households earning the median income will primarily be a market for entry-level ownership housing or higher-end rental housing. Households ages 35 to 64 had among the highest estimated median incomes in Eagan in 2006 ($90,598, $96,213 and $78,791, respectively, for ten-year age groups). As households become empty nesters, they often opt for for-sale townhomes or condominiums, which require less maintenance, allowing them to spend more time on other activities, such as travel. Households ages 55 to 64 are projected to add about 3,800 households between 2006 and 2011, an increase of 24.8%. MAXFIELD RESEARCH INC. 19

26 HOUSING MARKET ANALYSIS TABLE H-3 HOUSEHOLD INCOME BY AGE OF HOUSEHOLDER EAGAN MARKET AREA (Number of Households) Age of Householder Total Eagan Less than $15, $15,000 to $24, $25,000 to $34,999 1, $35,000 to $49,999 3, $50,000 to $74,999 5, ,176 1,381 1, $75,000 to $99,999 4, ,235 1, $100,000 or more 8, ,041 3,054 3,060 1, Total 25,412 1,265 4,666 7,037 6,494 3,751 1, Median Income $77,368 $50,350 $65,688 $90,598 $96,213 $78,791 $52,885 $34,081 Remainder of Study Area Less than $15,000 4, ,054 $15,000 to $24,999 5, ,201 $25,000 to $34,999 7, ,216 1,269 1,036 1, ,211 $35,000 to $49,999 11, ,226 2,476 1,905 1,656 1,247 1,088 $50,000 to $74,999 16, ,886 4,002 3,474 2,226 1, $75,000 to $99,999 11, ,427 3,126 3,241 1, $100,000 or more 16, ,075 4,102 5,613 3, Total 73,892 4,124 13,110 16,200 16,393 11,557 6,580 5,928 Median Income $62,237 $39,501 $61,791 $69,553 $80,071 $69,606 $45,325 $30,857 Market Area Total Less than $15,000 5, ,159 $15,000 to $24,999 6, ,340 $25,000 to $34,999 9,271 1,018 1,605 1,549 1,311 1,230 1,194 1,364 $35,000 to $49,999 14,936 1,174 3,133 3,251 2,524 2,020 1,543 1,291 $50,000 to $74,999 22,170 1,281 5,062 5,383 4,477 3,153 1, $75,000 to $99,999 16, ,281 4,361 4,481 2, $100,000 or more 25, ,116 7,156 8,673 4, Total 99,304 5,389 17,776 23,237 22,887 15,308 8,014 6,693 Median Income $66,109 $42,048 $62,814 $75,926 $84,651 $71,857 $46,678 $31,225 Sources: Claritas, Inc. Maxfield Research Inc. MAXFIELD RESEARCH INC. 20

27 HOUSING MARKET ANALYSIS TABLE H-4 HOUSEHOLD INCOME BY AGE OF HOUSEHOLDER EAGAN STUDY AREA (Number of Households) Age of Householder Total Eagan Less than $15, $15,000 to $24, $25,000 to $34,999 1, $35,000 to $49,999 3, $50,000 to $74,999 5, ,064 1, , $75,000 to $99,999 4, , $100,000 or more 10, ,353 2,836 3,744 2, Total 26,773 1,344 4,375 5,951 6,964 5,083 2, Median Income $84,504 $55,617 $74,073 $96,406 $105,704 $89,868 $57,559 $36,733 Remainder of Study Area Less than $15,000 4, $15,000 to $24,999 4, ,176 $25,000 to $34,999 7, ,009 1,161 1,280 $35,000 to $49,999 11, ,812 1,970 1,871 1,939 1,580 1,300 $50,000 to $74,999 16,988 1,065 3,451 3,654 3,552 2,569 1, $75,000 to $99,999 12, ,484 2,988 3,345 2,254 1, $100,000 or more 21, ,721 4,821 7,119 4,716 1, Total 78,624 4,288 12,373 15,380 17,842 14,034 8,277 6,430 Median Income $67,346 $43,094 $67,889 $76,001 $86,529 $74,541 $48,427 $33,740 Market Area Total Less than $15,000 5, , ,035 $15,000 to $24,999 5, ,067 1,315 $25,000 to $34,999 8, ,180 1,171 1,132 1,226 1,406 1,463 $35,000 to $49,999 14,649 1,225 2,479 2,522 2,489 2,389 2,019 1,526 $50,000 to $74,999 22,369 1,475 4,515 4,818 4,514 3,607 2,377 1,063 $75,000 to $99,999 17, ,279 3,956 4,494 3,126 1, $100,000 or more 31, ,074 7,657 10,863 6,904 1, Total 105,397 5,632 16,748 21,331 24,806 19,117 10,407 7,356 Median Income $71,704 $46,082 $69,504 $81,694 $91,912 $78,616 $50,296 $34,117 Sources: Claritas, Inc. Maxfield Research Inc. MAXFIELD RESEARCH INC. 21

28 HOUSING MARKET ANALYSIS Household Income Median Income 2011 Median Income # of Households 30,000 27,000 24,000 21,000 18,000 15,000 12,000 9,000 6,000 3, Age Group $100,000 $90,000 $80,000 $70,000 $60,000 $50,000 $40,000 $30,000 $20,000 $10,000 $0 Seniors ages 65 and over are a market for multifamily housing, including rental and owned housing. Typically, seniors no longer need the amount of space in their single-family homes and will seek multifamily housing that will free them from home maintenance. The median income in 2006 is an estimated $46,678 for younger seniors (ages 65 to 74) and $31,225 for older seniors (ages 75 and over). Between 2006 and 2011, senior households (age 65+) are projected to add 3,056 households, an increase of 20.8%. Younger senior households typically have a higher median income than older senior households because a greater percentage of younger seniors are still working or are twoperson households (hence, drawing a greater amount of social security). While they typically have lower incomes, seniors often have substantial equity in existing homes and greater savings that they can allocate toward new housing. Homeownership Loan Affordability Table H-5 and the chart below illustrate the number of households that can afford to purchase housing based on a 30% allocation of income to housing. The chart also assumes a 6.2%, 30- year mortgage and no existing equity or down payment. As shown in the Table, the number of households that could afford a $375,000 mortgage is roughly one-half the number that could afford a $200,000 mortgage. MAXFIELD RESEARCH INC. 22

29 HOUSING MARKET ANALYSIS TABLE H-5 FOR-SALE HOUSING LOAN AFFORDABILITY EAGAN MARKET AREA 2006 Incomes Loan No. of Income Amount Qualified HHD's* $100,000 88,205 $125,000 82,684 $150,000 76,887 $175,000 70,788 $200,000 64,689 $225,000 59,149 $250,000 53,717 $275,000 48,286 $300,000 42,854 $325,000 38,517 $350,000 34,535 $375,000 30,553 $400,000 26,571 $425,000 23,505 $450,000 20,882 $475,000 18,260 $500,000 15,638 $600,000 9,690 $750,000 5,359 $1,000,000 1,991 $2,000, * Assumes a 30% allocation of income to housing and a 6.2% 30-year mortgage with no existing equity. Source: Maxfield Research Inc. MAXFIELD RESEARCH INC. 23

30 HOUSING MARKET ANALYSIS HHD's 100,000 90,000 80,000 70,000 60,000 50,000 40,000 30,000 20,000 10,000 0 $100,000 $125,000 Tenure by Age of Householder Income Qualified Households Eagan Market Area $150,000 $175,000 $200,000 $225,000 $250,000 $275,000 $300,000 $325,000 $350,000 $375,000 $400,000 $425,000 $450,000 $475,000 Maximum Affordable Loan Value (Minus Equity) Loan Amount $500,000 $600,000 $750,000 $1,000,000 $2,000,000 Table H-6 shows the number of owner and renter households in the Market Area by age group in 1990 and This data is useful in determining demand for certain types of housing since housing preferences change throughout an individual s life cycle. The following are key points from Table H-6: In 2000, 72.4% of the households in the Market Area owned their housing. In comparison, the homeownership rate for the Twin Cities was 71%. The homeownership rate in the Market Area is higher in 2000 than it was in In 1990, the homeownership rate was 69.2%. About 87% of people age 55 to 64 owned a home in the Eagan Housing Market Area in However, by the time households reach their senior years, rental housing often becomes a more desirable option than homeownership. About 70% of people age 75+ owned a home in the Eagan Market Area in In 2000, the percentage of households in the Market Area that rented their housing decreased from 83.8% of 15-to-24-year olds to 12.9% of 55-to-64-year olds, but then increased back to 29.6% of households ages 75 and over. The on Page 29 highlights the shifts in owned and rented housing by age group. MAXFIELD RESEARCH INC. 24

31 HOUSING MARKET ANALYSIS TABLE H-6 TENURE BY AGE OF HOUSEHOLDER EAGAN HOUSING MARKET AREA 1990 & Change No. Pct. No. Pct. No. 15 to 24 Owner % % 135 Renter 4, % 4, % to 34 Owner 12, % 10, % -2,247 Renter 10, % 8, % -1, to 44 Owner 15, % 19, % 3,865 Renter 4, % 5, % 1, to 54 Owner 10, % 16, % 5,995 Renter 1, % 3, % 1, to 64 Owner 6, % 9, % 3,154 Renter 1, % 1, % to 74 Owner 4, % 5, % 1,166 Renter % 1, % Owner 1, % 4, % 2,212 Renter % 1, % 783 Total Owner 52, % 66, % 14,280 Renter 23, % 25, % 2,015 Metro Area 68.0% 71.0% Sources: Census Bureau; Metropolitan Council; Maxfield Research Inc. We project that the homeownership rate will increase again during this decade, due to several factors. Two primary factors are that the baby boom generation will remain in high homeownership stages of their lives (they will be ages 46 to 64 in 2010), and low mortgage rates are making ownership more affordable. We believe that these two factors will contribute to demand for multifamily for-sale housing in the Market Area, and the subject Site has the potential to capture a portion of this demand. MAXFIELD RESEARCH INC. 25

32 HOUSING MARKET ANALYSIS HHDs 20,000 18,000 16,000 14,000 12,000 10,000 8,000 6,000 4,000 2,000 0 Owner Renter Pct. Own Tenure by Age Eagan Market Area to to to to to to Age 100.0% 90.0% 80.0% 70.0% 60.0% 50.0% 40.0% 30.0% 20.0% 10.0% 0.0% Pct. Own Household Type As with age distribution, the trends in types of households have an impact on the demand for different types of housing. Table H-7 presents data on the types of households in the Market Area in 1990 and Family households include married-couple families with children (socalled "traditional" families), married couples without children (mostly empty nesters, but also young married couples who have not yet had children or will never have children), and otherfamily households, such as single parents. Non-family households include people living alone and other roommates (unrelated individuals living together, including unmarried couples). The following are key findings from the table. In 2000, married couples accounted for 54.5% of all households in the Market Area. During the 1990s, the Market Area added 1,973 married couple families with children and 3,800 married couples families without children. Married couples without children include empty nesters, which are increasingly a market for for-sale multifamily housing, and younger couples without children, who are also a primary market for rental housing and for-sale multifamily housing. Married couples with children are primarily a market for single-family homes. Other families (11,225 in 2000) also are not a primary market for multi-family housing, as this category includes single-parents and unmarried couples with children. MAXFIELD RESEARCH INC. 26

33 HOUSING MARKET ANALYSIS Family Households Non-Family Households Total HH's Married w/ Child Married w/o Child Other * Living Alone Roommates** Number of Households Eagan 17,427 23,773 6,428 8,389 4,352 5,736 1,805 2,456 3,308 5,468 1,534 1,873 Rem.of Market Area 58,264 68,213 17,021 17,033 16,587 19,003 7,116 8,769 13,070 18,310 4,470 5,112 Market Area Total 75,691 91,986 23,449 25,422 20,939 24,739 8,921 11,225 16,378 23,778 6,004 6,985 Percent of Total Eagan Rem.of Market Area Market Area Total No. Pct. No. Pct. No. Pct. No. Pct. No. Pct. No. Pct. Eagan 6, % 1, % 1, % % 2, % % Rem.of Market Area 9, % % 2, % 1, % 5, % % Market Area Total 16, % 1, % 3, % 2, % 7, % % * Single-parents and unmarried couples with children ** Includes unmarried couples without children Source: US Census Bureau TABLE H-7 HOUSEHOLD TYPE EAGAN HOUSING MARKET AREA 1990 & 2000 Change MAXFIELD RESEARCH INC 27

34 HOUSING MARKET ANALYSIS There were 30,763 non-family households in the Market Area in This included 23,778 people living alone and 6,985 roommate households. People living alone increased from 16,378 households in 1990 to 23,778 households in 2000 (a 45% increase). Seniors comprise a significant portion of this category and will be a primary market for redeveloped housing because living within walking distance to shopping and retail, thereby reducing the need to drive, is very important to seniors. Roommate households consist of unrelated people living with each other to share housing costs and also unmarried couples without children, among others. These people also tend to be younger. They often prefer to live in locations that are closer to entertainment, activities and other nightlife. Roommate households increased by 981 households or 16.3% in the 1990s. The increased diversity of household types in the Market Area, caused by overall lifestyle changes, is creating a need for a wider range of housing options. For example, non-family householders tend to rent their housing more so than the other household types. This category includes many elderly widows as well as young people. Young people typically do not have sufficient incomes to purchase housing, while single seniors are more likely to move to multifamily housing to shed the burden of home maintenance and to have more opportunities for socialization. 30,000 25,000 Eagan Housing Market Area Household Type 1990 and Number of HHD's 20,000 15,000 10,000 5,000 0 Married w/ Child Married w/o Child Other * Living Alone Roommates** Household Type MAXFIELD RESEARCH INC. 28

35 HOUSING MARKET ANALYSIS For-Sale Housing Market Situation Introduction This section provides an overview of the for-sale housing market situation in the Housing Market Area. Included are an evaluation of multifamily and single-family home resales, an overview of active townhome and condominium developments and an inventory of pending developments in the area. Maxfield Research analyzed housing resale data for the Market Area communities. Multifamily Home Resales Table H-8 presents summary data for most resales and a large portion of new sales of multifamily housing units in the Market Area from 2002 through The table shows the number of units sold each year, the median sale price, and average number of days on the market according to the Regional Multiple Listing Service (MLS). The following are key points from Table H-8. The median resale price of multifamily units in Eagan increased from $148,937 in 2002 to $173,250 in This represents a 16.3% increase over the time period or about 3.3% per year, on average. Overall, the median sale price of for-sale multifamily units in the Market Area communities increased from about $151,200 in 2002 to $180,500 in This represents a 19.4% increase, or about 3.9% per year. An average of about 1,800 condo and townhomes were sold annually in the Market Area between 2002 and Of those, about one-third, or about 590 units, was sold in Eagan annually. In 2006, the median sale price of condo/townhomes in the Eagan Market Area was about $173,250. Based on the industry standard that a household can afford a home priced 3.0 to 3.5 times their income (not including savings or debt that a household may have), a household would need an annual income of approximately $50,000 to $69,000 to afford a median-priced unit. Based on data from Table H-3, 66% of the Market Area s households ages 25 to 34 (a primary market for townhomes/condominiums) had incomes of $50,000 or more, as did 71% of households ages 55 to 74 (also a primary market for townhomes/condominiums). It should be noted that householders ages 55 and over also typically have substantial equity in an existing home and substantial savings that they can use toward the purchase of a new home. MAXFIELD RESEARCH INC. 29

36 HOUSING MARKET ANALYSIS TABLE H-8 MULTI FAMILY RESIDENTIAL SALES EAGAN MARKET AREA 2002 through 2006 Average Median Average Market Number Selling % Selling % Time City/County Year of Sales Price Chg. Price Chg. (Days) Eagan $148, $153, $154,950 4% $163,949 7% $166,000 7% $179,718 10% $166,900 1% $179,668 0% $173,250 4% $183,569 2% 68 Apple Valley $155, $163, $166,450 7% $176,815 8% $174,600 5% $187,651 6% $179,500 3% $192,132 2% $180,000 0% $194,903 1% 68 Bloomington East $110, $116, $114,000 4% $120,358 3% $115,500 1% $116,223-3% $150,250 30% $162,631 40% $233,970 56% $254,712 57% 241 Burnsville $153, $153, $163,000 6% $167,121 9% $169,900 4% $172,446 3% $176,950 4% $181,989 6% $173,250-2% $175,761-3% 71 Richfield $124, $128, $126,500 1% $125,445-3% $139,900 11% $180,796 44% $187,500 34% $195,617 8% $155,800-17% $171,178-12% 121 Total Market Area ,636 $151, $155, ,897 $160,026 6% $167,867 8% ,007 $167,661 5% $178,388 6% ,921 $174,311 4% $184,706 4% ,547 $180,446 4% $191,391 4% 86 Sources: Regional Multiple Listing Service of Minnesota (MLS) Maxfield Research Inc. MAXFIELD RESEARCH INC. 30

37 HOUSING MARKET ANALYSIS Median Resale $200,000 $150,000 $100,000 $50,000 $151,175 Eagan Market Area Multifamily Resales 2002 to 2006 $160,026 Median Selling Price $167,661 $174,311 $180,446 2,500 2,000 1,500 # of Resales Number of Sales $ Year 1,000 $200,000 Eagan Multifamily Resales 2002 to ,000 $150,000 $148,937 $154,950 $166,000 $166,900 $173, Median Sales $100, # of Resales $50,000 Median Selling Price Number of Sales 400 $ Year 200 Single-Family Home Resales Table H-9 summarizes resale data for single-family homes in the Market Area from 2002 through The following are key findings from Table H-9. The median sale price of single-family homes in 2006 in the Market Area was $262,800. This was an increase from $211,020 in Overall, the median price of homes increased MAXFIELD RESEARCH INC. 31

38 HOUSING MARKET ANALYSIS by 24.5% during the five-year period, or about 4.9% per year. In comparison, the median price of condo/townhomes increased by 16.3% during the same period. The median price of single-family homes in Eagan was $293,700 in 2006, an increase of 27.1% from 2002 ($231,000 median), or about 5.4% per year. Eagan had the highest median price among the five MLS districts in the Market Area. TABLE H-9 SINGLE FAMILY RESIDENTIAL SALES EAGAN MARKET AREA 2002 through 2006 Average Median Average Market Number Selling % Selling % Time City/County Year of Sales Price Chg. Price Chg. (Days) Eagan $231, $261, $260,000 13% $292,882 12% $272,000 5% $307,676 5% $288,000 6% $331,597 8% $293,700 2% $335,200 1% 61 Apple Valley $220, $252, $239,450 9% $268,507 6% $249,000 4% $285,859 6% $282,500 13% $319,321 12% $280,000-1% $321,861 1% 65 Bloomington East $183, $184, $197,000 8% $202,057 10% $212,000 8% $214,382 6% $225,000 6% $226,186 6% $224,250 0% $223,190-1% 54 Burnsville $219, $246, $238,000 8% $260,725 6% $252,250 6% $287,413 10% $273,000 8% $307,037 7% $270,000-1% $303,921-1% 64 Richfield $182, $186, $197,630 8% $200,358 7% $213,200 8% $214,799 7% $225,000 6% $227,839 6% $225,000 0% $229,925 1% 55 Total Market Area ,545 $211, $232, ,733 $231,175 10% $251,804 8% ,576 $244,142 6% $269,120 7% ,505 $261,623 7% $287,333 7% ,045 $262,801 0% $289,658 1% 60 Sources: Regional Multiple Listing Service of Minnesota (MLS) Maxfield Research Inc. MAXFIELD RESEARCH INC. 32

39 HOUSING MARKET ANALYSIS Eagan accounted for roughly 25% of all Market Area single-family homes sold in The average time on market for single-family homes listed for sale was 60 days in 2006, up from 29 days in 2002, indicating the market has slowed considerably since $250,000 Eagan Market Area Single-Family Resales 2002 to 2006 $261,623 $231,175 $244,142 $211,020 $262,801 3,000 $200,000 2,500 Median Resale $150,000 $100,000 2,000 # of Resales $50,000 Median Selling Price Number of Sales 1,500 $ Year 1,000 Median Sales $300,000 $250,000 $200,000 $150,000 $100,000 $231,000 Eagan Single-Family Resales 2002 to 2006 $260,000 $272,000 $288,000 $293,700 1, # of Resales $50,000 $0 Median Selling Price Number of Sales Year MAXFIELD RESEARCH INC. 33

40 HOUSING MARKET ANALYSIS Market Area Active Listings Tables H-10 and H-11 show all the active single-family and multifamily homes currently listed for sale in the Market Area distributed into multiple price ranges. Data was provided by the Regional Multiple Listing Service. Key findings from Tables H-10 and H-11 include: There are about 730 single-family homes listed for sale in the Market Area at this time. The median and average prices of the homes listed for sale is approximately $293,000 and $347,000, respectively. The median and average list price for single-family homes in Eagan is $360,000 and $397,000, respectively. Approximately 36% of the homes for sale are priced below $300,000, 28% are priced in the $300s, and 20% are priced above $500,000. Single-family homes listed less than $200,000 account for only 6% of all listings, while homes listed greater than $500,000 account for 13% of listings. Over one-half (55%) of the single-family listings are priced in the $200,000s. The median and average multifamily home listed for sale in the Market is $180,400 and $204,000 respectively. Approximately 63% of all multifamily listings are priced below $200,000 in the Market Area. Only 10% of the listings are priced $300,000 or more. Like the Market Area, the majority of listings in Eagan are priced below $200,000 (61%). About 16% of Eagan s listings are priced $300,000 or more. Eagan accounted for 23% of all single-family listings and 31% of all multifamily listings in the Market Area. MAXFIELD RESEARCH INC. 34

41 HOUSING MARKET ANALYSIS Eagan Apple Valley Bloomington Burnsville Richfield Market Area East Price Range No. Pct. No. Pct. No. Pct. No. Pct. No. Pct. No. Pct. < $99, % 0 0.0% 1 1.2% 0 0.0% 0 0.0% 1 0.1% $100,000 to $149, % 0 0.0% 0 0.0% 0 0.0% 1 0.6% 1 0.1% $150,000 to $174, % 0 0.0% 3 3.7% 0 0.0% 3 1.9% 6 0.8% $175,000 to $199, % 1 0.6% % 1 0.6% % % $200,000 to $224, % % % 2 1.2% % % $225,000 to $249, % % % % % % $250,000 to $299, % % 8 9.9% % % % $300,000 to $349, % % 4 4.9% % 6 3.9% % $350,000 to $399, % % 3 3.7% % 3 1.9% % $400,000 to $449, % % 0 0.0% 2 1.2% 0 0.0% % $450,000 to $499, % % 0 0.0% 4 2.4% 0 0.0% % $500,000 to $599, % % 0 0.0% % 1 0.6% % $600,000 to $749, % 6 3.8% 1 1.2% 8 4.7% 0 0.0% % $750,000 to $999, % 7 4.5% 0 0.0% 9 5.3% 0 0.0% % $1,000,000 and Over 0 0.0% 3 1.9% 1 1.2% 2 1.2% 0 0.0% 6 0.8% % % % % % % Minimum Maximum Median Average $199,900 $893,000 $359,900 $396,959 Sources: Regional Multiple Listing Service of MN Maxfield Research Inc. TABLE H-10 SINGLE FAMILY HOMES CURRENTLY LISTED FOR-SALE EAGAN MARKET AREA February 2007 $189,900 $3,695,000 $319,900 $423,501 $97,500 $1,590,000 $228,400 $255,901 $189,900 $1,500,000 $289,900 $369,408 $134,900 $599,900 $232,200 $238,982 $97,500 $3,695,000 $293,199 $346,988 MAXFIELD RESEARCH INC. 35

42 HOUSING MARKET ANALYSIS Active Single-Family Listings Eagan Market Area - February 2007 Active Listings # of Listings Under $200,000 $200,000 to $249, $250,000 to $299, $300,000 to $349, $350,000 to $399,999 Listing Price 58 $400,000 to $499, $500,000 to $749, $750,000 to $999,999 6 $1,000, Active Single-Family Listings Eagan - February 2007 Active Listings # of Listings Under $200,000 $200,000 to $249,999 $250,000 to $299,999 $300,000 to $349,999 $350,000 to $399,999 Listing Price $400,000 to $499,999 $500,000 to $749,999 6 $750,000 to $999,999 0 $1,000,000+ MAXFIELD RESEARCH INC. 36

43 HOUSING MARKET ANALYSIS TABLE H-11 MULTIFAMILY HOMES CURRENTLY LISTED FOR-SALE EAGAN MARKET AREA February 2007 Eagan Apple Valley E. Bloomington Burnsville Richfield Market Area Price Range No. Pct. No. Pct. No. Pct. No. Pct. No. Pct. No. Pct. < $99, % 6 2.5% 3 8.6% % % % $100,000 to $149, % % % % % % $150,000 to $174, % % 2 5.7% % % % $175,000 to $199, % % % % 4 9.5% % $200,000 to $224, % % 3 8.6% % 2 4.8% % $225,000 to $249, % % 1 2.9% % 0 0.0% % $250,000 to $299, % % % 9 5.0% 4 9.5% % $300,000 to $349, % 6 2.5% 3 8.6% 9 5.0% 0 0.0% % $350,000 to $399, % 5 2.1% 0 0.0% 6 3.3% 0 0.0% % $400,000 to $500, % 3 1.3% 0 0.0% 0 0.0% 0 0.0% % $500,000 and Over 7 3.2% 5 2.1% 2 5.7% 0 0.0% 0 0.0% % % % % % % % Minimum Maximum Median Average $55,000 $690,000 $179,900 $216,848 $79,900 $699,900 $186,500 $206,091 $89,900 $1,049,000 $209,900 $257,521 $64,000 $399,000 $179,900 $190,466 $53,750 $269,900 $126,400 $136,018 $53,750 $1,049,000 $180,430 $203,871 Sources: Regional Multiple Listing Service of MN Maxfield Research Inc. MAXFIELD RESEARCH INC. 37

44 HOUSING MARKET ANALYSIS # of Listings Under $200,000 Active Multifamily Listings Eagan Market Area - February $200,000 to $249, $250,000 to $299, $300,000 to $349,999 Listing Price 16 $350,000 to 399,999 Active Listings 24 $400,000 and Over Active Multifamily Listings Eagan - February 2007 Active Listings # of Listings Under $200, $200,000 to $249,999 $250,000 to $299, $300,000 to $349,999 Listing Price 5 $350,000 to 399, $400,000 and Over MAXFIELD RESEARCH INC. 38

45 HOUSING MARKET ANALYSIS Existing Multifamily Subdivisions Table H-12 profiles selected actively marketing multifamily developments in the Eagan Market Area. The table includes the year the development was platted and/or built, number of units, available units, base home price with high range, and unit size range. We have excluded developments currently pending and which have not started marketing. Key points from Table H-12 follow. We identified approximately 1,550 multifamily condominium, townhome, and twin homes units in 18 developments we selected in the Market Area. Condominium units account for about 40% of the inventory, while townhomes and twin homes comprise 60%. Of the total units, 820 are available, having sold about 47% of the surveyed inventory. Eagan accounts for 25% of the Market Area s multifamily for-sale inventory. Townhomes and twin homes account for 90% of Eagan s for-sale multifamily developments. Approximately 80% of this inventory remains unsold at this time. The average base price among actively marketing developments in the Market Area is $235,500. The average price among all price ranges is about $335,500. Uptown Landing in Burnsville is selling units through liquidation, as slow sales resulted in foreclosure for the original developer. Chateau Ridge in Burnsville is also in the process of selling the remaining units to a lender for liquidation. Market Area condominium price points range start at $134,900 at Uptown Landing and range up to $1,000,000 at Reflections at Bloomington Central Station. Unit sizes range from 679 to 2,315 square feet. Absorption among the surveyed multifamily developments in the Market Area averaged 25 units per month for the selected projects marketing. After accounting for the length of time each project has been marketing, approximately 1.6 unit per month has been absorbed per project. Three projects selected performed far above the rest. These projects include Reflections at Bloomington Central Station, (8.6 units/mo.) Park Crest on Nicollet (3.5 units/mo.) and Cobblestone Lake (3.2 units/mo.). Nicols Ridge is a community of townhomes and condominiums priced between $285,000 and $320,000 located just south of the Cedar Grove Redevelopment Area. The project is being developed by U.S. Home Corporation ( Lennar ) and was originally approved in November Development has been slowed due to changing hands of developers. There are 8 units available among the 48 townhome units and all 14 condominium units have been sold. It is undecided at this time what type of for-sale housing will be developed in subsequent phases. MAXFIELD RESEARCH INC. 39

46 HOUSING MARKET ANALYSIS TABLE H-12 CURRENT PRICING, ABSORPTION, AND UNIT MIX SELECTED ACTIVE FOR-SALE MULTIFAMILY DEVELOPMENTS EAGAN MARKET AREA April 2007 Housing Year Total Available Home Prices Unit Size Development Type Platted/Built Units Units Min Max Min Max Eagan Steeplechase Townhomes $343,975 - $585,000 1,739-3,400 Lexington Ridge Townhomes $587, ,700 + Homestead Village Twin Homes $299,900 - $399,900 2,575 Eagan Heights Townhomes $234,900 + N/A Nicols Ridge 1 Townhomes & Condo $284,990 - $318,990 2,085-2,095 River Ridge Condominiums $149,900 - $349, ,770 Apple Valley Midtown Place* Townhomes & Condo $230, ,779-2,294 Cobblestone Lake Townhomes $208, ,670-3,100 Cobblestone Lake South Shore Townhomes $550, ,195-3,100 Burnsville River Valley Commons Townhomes $275, ,460-2,112 Chateau Ridge 2 Condominiums $197,900 - $488, ,100 Nicollet Commons Condominiums $195,000 - $304, ,360 Park Crest on Nicollet Condominiums $149,900 - $329, ,894 Uptown Landing Condominums $134,900 - $229,000 1,141-1,649 Villas in the Heart of Burnsville Townhomes & Twin Homes $339,900 - $375,729 1,897-2,273 East Bloomington Reflections at BCS Condominiums $166,000 - $1,000, ,315 Village on 9 Mile Creek Townhomes $197,400 - $460,686 1,043-1,819 Richfield Kensington Park Condominiums $143,200 - $322, ,482 Totals/Averages 1, % 1 Represents Phase I and Phase II (48 row townhomes and 14 condos) $260,531 1,806 Avg. Base 2 Remaining units will be wholesaled Source: Maxfield Research Inc. MAXFIELD RESEARCH INC. 40

47 HOUSING MARKET ANALYSIS Phase II of the master-planned community, Cobblestone Lake in Apple Valley is currently marketing and in nearing completion. Cobblestone Lake will have over 2,500 total units when finished, including single-family homes, townhouses, with some first-floor retail and office space located below housing. Villas in the Heart of Burnsville is a 14-unit, townhome project of Brason Builders, Inc. The two- to three-bedroom units are priced from $340,000 to $330,000. All units have two stories and all would have at least partial basements. Some units would have tuck-under garages. Stonebridge Development is currently marketing an 84-unit condominium project, Park Crest on Nicollet, in Heart of the City. This project is located just south of the Villas in the Heart of Burnsville. One- two- and three-bedroom units are being offered, ranging in price from $149,900 to $329,900. The second phase of the Village on 9 Mile Creek was originally slated for condominiums. However, due to poor sales, townhomes are now being marketed for the second phase. Interviews with Market Area Realtors Maxfield Research conducted interviews with Realtors and brokers in the Eagan Market Area. Key findings from the interviews are presented below. The number of listings increased dramatically from 2005 to 2006, while at the same time buyer demand has decreased. This has resulted in a shift to a buyers market and an oversupply of homes in the Twin Cities. It is a common consensus among Realtors that the housing market is slower than a year ago, although many Realtors are anticipating an increase in sales sometime in late Overall, it has been hard to sell homes at all price points. Although sales for the first few months of 2007 sales have been very slow, Realtors are somewhat optimistic that the Spring market will pick-up soon. According to the St. Paul Area Association of Realtors, this year has gotten off to the slowest start in eight years. Housing affordability is slowing increasing as the number of number of buyers has decreased and inventories are at all time highs. The supply of existing single-family homes on the market is about seven months, while new construction has about an 11-month supply. Sellers have become more realistic and motivated and are beginning to set more realistic listing prices. Sellers today realize that the market dynamics have changed and it is now a buyers market. MAXFIELD RESEARCH INC. 41

48 HOUSING MARKET ANALYSIS Some builders, mainly the large national builders, are building homes for losses right now to reduce inventory and exit out of some product types. New home prices are as low as they can go for new construction. Due to the increase in listing inventories throughout 2006, sellers have been reducing list prices while the days on market have increased. At the same time, builders have increased incentives to combat the slowing market. A number of buyers are on the sidelines and are concerned over affordability. Many of these buyers are under the assumption that real estate has been over inflated over the past five years and prices could be cut even further. Many Realtors believe the south-metro condominium market is severely overbuilt. A number of projects have experienced very slow absorptions and many planned projects have not moved ahead as planned. Some Realtors believe more projects will be forced to firesale their units in response to a slow market. According to one Realtor, the bulk of the market for condominiums in Eagan is believed to be between $150,000 and $200,000. As a result, it is likely a new condo development would require public financing assistance to work financially. Planned and Proposed For-Sale Developments Maxfield Research interviewed municipal staff members in Market Area cities in order to identify pending for-sale multifamily developments that may be competitive with a new for-sale project in Eagan. Due to the current housing slowdown, a number of these projects have been approved and are awaiting the market to correct itself before moving forward. The following describes multifamily projects that are planned or pending in the Market Area that could be potentially competitive with a new for-sale development on the Subject Site. Eagan Epic Development has received preliminary approvals for a project to be named Natures Point, a proposed 28-unit twin home development on approximately 13-acres. However, the project has not been submitted for final plat. Apple Valley A 28-acre mixed-use development, called The Village at Founders Circle by New Century Inc., is proposed to be located south of 150 th Street on Galaxie Avenue, occupying 26 acres of Apple Valley s Legacy Village. The project consists of many phases including a GrandStay Hotel, 50,000 square feet of retail and office space and a combination of rental and for-sale housing. Although the developer is planning to start MAXFIELD RESEARCH INC. 42

49 HOUSING MARKET ANALYSIS rental construction this year, there are long-range plans that could include either condominiums or townhomes on the site. Wensmann Homes is also developing a mix of for-sale townhomes and condominiums on a site north of the existing Fischer Marketplace, north of County Road 42 and east of Galaxie Avenue, near the Sam s Club and Menards. A total of 270 units are planned in Midtown Village, with the first phase consisting of 174 units. However, it is unclear at this time when or if the 2 nd phase of about 100-units will be developed. Burnsville There are currently no planned or pending rental projects in Burnsville. East Bloomington A 216 condominium development called Portland Commons has been approved at 8735 Portland Avenue South. The proposed project would be located on the Shady Lane Mobile Home Park and would feature four buildings consisting of 54-units each. According to the City, the project is currently on hold. McGough is in the process of refining plans for Phase II of the Reflections at Bloomington Central Station. Phase II will begin with the development of 150 condominium and townhome units, in addition to a 350-room hotel and central park. Phase II of the Village on 9 Mile Creek is planned west of the current development. The original project had included a second 60-unit condominium building along with an additional 20 townhomes. However, this plan was changed to include only townhomes. Ron Clark Construction is considering developing for-sale condominiums on a site located in the southeast quadrant of the intersection of Interstate 494 and Highway 100. Initial plans include four low-rise buildings totaling 250- to- 300 units. The proposal has not yet been brought to the City. The Surmodics property, at 106 th and Lyndale, has been sold to Laukka Javris Inc. who plans to raze the building and build a residential development on the 27-acre parcel. The proposed project calls for 88 condominiums, 42 townhomes, and 17 villa homes. The project was approved in Fall Richfield With the new north-south runway which recently opened at the Minneapolis-St. Paul International Airport, the City of Richfield and the Richfield Housing and Redevelopment Authority hired JLG Architects to create a master plan for redevelopment along State Highway 77 the area most affected by the increase in airport noise. The 12- to 15-year plan, approved by the City in September 2004, calls for a mix of office development, retail, and sound-insulated multifamily housing to replace neighborhoods MAXFIELD RESEARCH INC. 43

50 HOUSING MARKET ANALYSIS currently made up of single-family homes. The plan calls for seven blocks of new multifamily housing. Still in the early stages of planning, the development of this housing is most likely years off and will require a good deal of public financing as soundinsulation requirements will greatly increase project costs for such housing. Ryan Companies is the master developer and has signed letters of intent from Super Target and Home Depot. Rental Market Analysis Introduction This section provides an overview of the rental market situation in the Market Area. Overall vacancy and average monthly rents for selected communities in and near the Market Area were examined, using data from GVA Marquette Advisors. This data provides valuable insight regarding the demand for new rental product in Eagan Monthly Rent and Vacancy Trends Table H-13 shows average monthly rent and vacancy rate data for communities in the Market Area as of 4 th Quarter The data is compiled from GVA Marquette Advisors and are available for the communities of Eagan, Burnsville, Richfield, Apple Valley/Rosemount, and Bloomington. The following are key points concerning the Eagan Market Area rental market. The equilibrium vacancy rate for rental housing is considered to be 5.0%. This vacancy rate allows for normal turnover and an adequate supply of alternatives for prospective renters. As of 4 th Quarter 2006, the apartment vacancy rate in the selected Market Area communities ranged from 4.2% in Bloomington to 6.3% in Apple Valley/Rosemount. The vacancy rate in the Twin Cities was 4.7%, up from 4.0% in 3 rd Quarter In effect, the supply of rental housing is currently adequate to meet demand. The vacancy rate has increased from 6.1% last year and is largely the result of low mortgage rates which have made ownership more affordable and attractive to some potential renters. The average monthly rent in the Market Area in 4 th Quarter 2006 was $633 for studio units, $740 for one-bedroom units, $898 for one-bedroom-plus-den units, $932 for two-bedroom units, $1,158 for two-bedroom-plus-den units, and $1,165 for three-bedroom units. Overall, these rents are slightly lower than the Metro average ($751 for one-bedroom units, $947 for two-bedroom units, and $1,255 for three-bedroom units). Apple Valley/Rosemount had the highest average rents in the Market Area, while Richfield had the lowest. Richfield has an older supply of rental units which contributed to its lower average monthly rent, not because higher rents could not be achieved if new product was available. MAXFIELD RESEARCH INC. 44

51 HOUSING MARKET ANALYSIS Overall, average monthly rents increased in the Market Area communities during the past year, except for Richfield in which average monthly rents decreased slightly by 0.8%. Average monthly rents increased by 4.8% in Eagan, 1.7% in Apple Valley/Rosemount, 1.5% in Bloomington, while the Metro Average increased by 2.4%. TABLE H-13 AVERAGE RENTS/VACANCIES AMONG MARKET AREA SUBMARKETS 4th Quarter 2006 Ave. Rent Community Studio 1BR 1BR/D 2BR 2BR/D 3BR 3BR/D Total Increase Eagan Rent $635 $760 $828 $930 $1,091 $1,310 $1,397 $878 Vacancy Rate 1.6% 3.9% 6.6% 4.8% 2.2% 6.5% 3.3% 4.4% 4.8% Apple Valley/Rosemount Rent $560 $843 $955 $1,066 $1,317 $1,250 $1,899 $1,031 Vacancy Rate 3.9% 3.3% 0.0% 8.9% 10.9% 5.3% 0.0% 6.3% 1.7% Burnsville Rent $652 $768 $878 $908 $1,228 $1,125 $1,526 $883 Vacancy Rate 6.8% 3.9% 3.2% 4.7% 7.9% 5.4% 12.2% 4.6% 0.4% Richfield Rent $582 $639 $1,295 $853 N/A $1,187 N/A $736 Vacancy Rate 6.7% 6.3% 0.0% 6.6% N/A 1.4% N/A 6.2% -0.8% Bloomington Rent $639 $759 $941 $955 $1,010 $1,095 N/A $844 Vacancy Rate 1.8% 4.0% 0.6% 4.6% 5.1% 7.2% N/A 4.2% 1.5% Twin Cities Metro Area Rent $605 $751 $1,021 $947 $1,405 $1,255 $1,490 $871 Vacancy Rate 3.4% 3.9% 5.2% 5.1% 12.1% 7.5% 5.4% 4.7% 2.4% Sources: GVA Marquette Advisors; Maxfield Research Inc. Competitive Rental Projects Table H-14 provides a summary of newer competitive rental properties in the Market Area. We present this information here to provide an overall picture of the health of the newer rental properties in the area. Projects are shown with number of units, a rent range, a square-foot range, vacancies and an average rent per square foot. The following are key points from our survey of existing competitive developments. Over 1,800 units were surveyed in the Market Area, located in 12 projects. The overall vacancy rate for comparable projects is 9.5%. The average rent per square foot at the projects surveyed was $0.96 per square foot. MAXFIELD RESEARCH INC. 45

52 HOUSING MARKET ANALYSIS Avg. Year No. No. Vacancy Rent Square Feet Rent/ Project Name City Built Units Vac. Rate 1 Range 1 Range Sq. Ft. Boulder Ridge (TA) * ** Apple Valley % $925 - $1,525 1,007-1,928 $0.81 Hearthstone (TA) Apple Valley % $899 - $1, ,101 $1.07 Kingston Green * Apple Valley % $895 - $1, ,619 $0.90 Palomino East Apple Valley % $875 - $1, ,199 $1.15 Dakota Station Burnsville % $920 - $1, ,412 $1.09 Grande Market Place (TA) Burnsville % $595 $1, ,528 $0.89 Provence ** Burnsville % $1,170 - $1, ,320 $1.10 Wingate Townhomes (TH) ** Burnsville % $1,223 - $1,450 1,516-2,118 $0.77 Cedar Villas (TH) ** Eagan % $1,125 $1,440 1,385-2,077 $0.78 Glen Pond II * ** Eagan % $560 - $1, ,100 $0.97 Promenade Oaks (TH) ** Eagan % $799 - $1, ,000 $0.84 The Oaks on Pleasant Richfield % $750 - $1, ,457 $1.18 Totals/Avg. 1, % $560 - $1, ,118 $0.96 (TH) Townhome style. (TA) Townhome and apartment units. 1 Rents and Vacancies are averaged over the past year * Rents at these projects adjusted to exclude heat, which is included in base rent. ** Projects include garage rate in rent. Other projects charge additional $30 to $65 per month for garage spot. Note: All properties include one enclosed parking stall per unit. Sources: GVA Marquette Advisors; Maxfield Research Inc. TABLE H-14 MONTHLY RENT COMPARISON - NEWER RENTALS MARKET RATE RENTAL APARTMENTS AND TOWNHOMES EAGAN MARKET AREA APRIL 2007 MAXFIELD RESEARCH INC. 46

53 HOUSING MARKET ANALYSIS Typical in-unit amenities are a washer/dryer, modern kitchen amenities such as a built-in microwave and dishwasher, and walk-in closets. Features such as central air, balconies/patios, vaulted/high ceilings are found in most properties. Other features such as fireplaces, and wood trim, and marble tile are not standard, but can be found in some of these developments. Common area and recreational amenities found among the competitive properties include outdoor pools, exercise rooms, party rooms, underground parking, and storage lockers. Several properties also have sauna/jacuzzis, indoor pools, tanning salons, business centers, tennis, or racquetball courts. Other key features that renters are looking for are in balcony/patio, unit washer/dryer, walk-in closets, and Internet and Cable TV hookups Planned and Proposed Rental Housing Maxfield Research interviewed community development staff at communities in the Market Area to determine if any proposed developments in the Market Area would be potential competitive with a new project in the Cedar Grove Redevelopment Area. A description of each of the projects is presented below: Eagan Sunrise Properties LLC has proposed a 107-unit general-occupancy apartment building to be named Kennealy Ridge Apartments on 6.8 acres located at 2101 Wuthering Heights Road. The project has received all approvals and the City is awaiting a signed contract from the developer. Construction is tentatively scheduled to begin sometime in Apple Valley Tuscany Apartments at Legacy Village in Apple Valley received a building permit, but has yet to begin construction. Tuscany Apartments will be located south of the Legacy Townhomes in the southwest corner of Legacy Village in Apple Valley. Omni Investments is the developer and Hartford Group A/E, Inc. is the architect and engineer. The 244-unit complex will consist of 195 market rate and 49 affordable units. City staff said they have not heard that that this project is on hold and expect it to move forward. Quoted rents are currently averaging $1.02 to $1.17 per square foot, and range from $850 to $1,160 for onebedroom units, $995 to $1,395 for two-bedroom units, and $1,575 for three-bedroom units. Apartments will feature high ceilings, simulated granite countertops, advanced telecommunications package, full kitchen appliances including microwave and dishwasher, full-size washer and dryer, paneled doors, woodwork and kitchen cabinets, individuallycontrolled heating and air conditioning, and a storage locker. The common area will include underground, heated parking, indoor and outdoor swimming pool, community room with full kitchen and wet bar, fitness center with whirlpool, two-story entry lobby with fireplace, and children s outdoor play area. MAXFIELD RESEARCH INC. 47

54 HOUSING MARKET ANALYSIS The Village at Founders Circle will incorporate a 197-unit rental component as a part of its 26-acre, 495-unit development at Galaxie Avenue and 153 rd Street. According to the City the developer plans on breaking ground in Fall 2007 and all of the units will have market rate rents. Hartford Group, Inc., is proposing two rental developments at Central Village in Apple Valley. Originally proposed as office condominiums, Legacy Apartments North would have 129 units in three separate buildings and Legacy Apartments South would have 96 units located in one four-story building. The developer has not submitted an application to the city, and the proposal remains in preliminary stages. Preliminary plans indicated first-level commercial with 3-levels of rental housing above for the Legacy Apartments North project. According to the City, it is unclear when the development will proceed. Venstar LLC had previously submitted a concept sketch plan to the City of Apple Valley s Planning Commission. The developer was proposing a 300-unit market rate apartment complex along with 30 market rate rental townhome units on a site near 147 th Street and Flagstaff Avenue. The Planning Commission expressed some concern over maintaining the property as industrial and the City is currently completing a City of Apple Valley industrial study. It is unclear at this point if the City will allow a rezoning of all of the property, none of the property or perhaps a partial rezoning. We are unclear at this time if Venstar will proceed with the project. Burnsville There are currently no planned or pending rental projects in Burnsville. Richfield With the new north-south runway which recently opened at the Minneapolis-St. Paul International Airport, the City of Richfield and the Richfield Housing and Redevelopment Authority hired JLG Architects to create a master plan for redevelopment along State Highway 77 the area most affected by the increase in airport noise. The 12- to 15-year plan, approved by the City in September 2004, calls for a mix of office development, retail, and sound-insulated multifamily housing to replace neighborhoods currently made up of singlefamily homes. The plan calls for seven blocks of new multifamily housing. Still in the early stages of planning, the development of this housing is most likely years off and will require a good deal of public financing as sound-insulation requirements will greatly increase project costs for such housing. Ryan Companies is the master developer and has signed letters of intent from Super Target and Home Depot. East Bloomington There are currently no planned or pending rental projects in East Bloomington. MAXFIELD RESEARCH INC. 48

55 HOUSING MARKET ANALYSIS Senior Housing Analysis The term senior housing refers to any housing development that is restricted to people age 55 or older. Today, senior housing includes a spectrum of housing alternatives, which occasionally overlap, thus making the differences somewhat ambiguous. However, the level of support services offered best distinguishes them. For analytical proposes, Maxfield Research Inc. classifies senior projects into four categories based on the level and type of services offered: 4 Adult projects are similar to a general occupancy apartment or condominium building, in that they offer virtually no services but have age-restrictions (typically 55 or 62 or older). Organized activities and a transportation program are usually all that are available at these projects. Because of the lack of services, Adult/Few-Services projects typically do not command the rent premiums of more service-intensive senior housing. This product has been one of the most popular types of senior housing developed in recent years because it appeals to seniors who do not need services, but desire to downsize their housing and/or rid themselves of home maintenance. Unlike other more service-intensive senior developments which are primarily rental, adult projects come in a variety of forms: single-family homes in an age-restricted subdivision, age-restricted townhome communities, condominiums, cooperatives and apartment buildings. 4 Congregate projects offer support services, such as meals and/or housekeeping. In some buildings, the services are available on an optional basis so those residents who do not need them do not have to pay for them. In others, services are included in the monthly rents. These projects generally have more common areas and usually attract a slightly older, frailer population than adult housing. The typical residents are persons in their late 70s or early 80s. They tend to have higher monthly costs (due to the service component) and sometimes require an entry fee. Sponsorship by a religious or health care organization is common. In recent years, some congregate projects have added the availability of personal care services to accommodate an aging resident population. The majority of congregate developments are positioned as rentals since most prospective residents (and their families) do not wish to have the commitment of home ownership. A few condominiums and cooperative developments do offer some limited supportive services, however, typically on an optional basis. These services are usually added as the development s population ages in place. 4 Assisted Living facilities come in a variety of forms, but the target market for most is very frail seniors, generally age 75 or older (but can be much younger, depending on their health situation), who are in need of extensive support services. Absent an assisted living option, these seniors may otherwise need to move to a nursing facility. At a minimum, assisted living projects include two meals per day and weekly housekeeping in the monthly fee, with the availability of a third meal and personal care (either included in the monthly fee or for an additional cost). Assisted living facilities also have either staff on duty 24 hours per day or at least 24-hour emergency response. Some assisted living facilities offer self-contained dwelling units similar to a regular senior apartment building with full kitchens and spacious rooms. Projects offering kitchens in the MAXFIELD RESEARCH INC. 49

56 HOUSING MARKET ANALYSIS units may include only two meals per day while those without kitchens in the units generally provide three meals per day. Other projects do not have kitchens and are merely updated versions of board-and-care facilities with sleeping units and communal living spaces. Monthly fees vary depending on the number and type of services included, and the size of the units, but most facilities have fees starting at roughly $2,000 per month. Virtually all assisted living housing is rental. 4 Memory Care facilities, designed specifically for persons suffering from Alzheimer s disease or other dementias, are one of the newest trends in senior housing. Most facilities consist of suite-style or studio apartment units (although usually with no kitchen facilities), and large communal areas for activities and programming. In addition, staff typically undergoes specialized training in the care of this population. Because of the greater amount of individualized personal care required by this population, staffing ratios are much higher than traditional assisted living. Thus, the costs of care are also higher. Typical monthly fees for memory care units start at about $3,000 per month. However, unlike conventional assisted living, which deals almost exclusively with widows or widowers, a higher proportion of persons afflicted with Alzheimer s disease are in two-person households. That means the decision to move a spouse into a memory care facility involves the caregiver s concern of incurring the costs of health care at a special facility while continuing to maintain their home. As Figure 1 shows below, the senior housing products available today, when combined with long-term care facilities, form a full continuum of care from virtually no services to an intensive service level. FIGURE 1 CONTINUUM OF HOUSING AND SERVICES FOR SENIORS Single-Family Home Townhome or Apartment Age-Restricted Independent Townhomes or Apartments Congregate Apartments w/ Optional Services Congregate Apartments w/ Intensive Services Assisted Living Nursing Facilities Memory Care Units Fully Independent Lifestyle Fully or Highly Dependent on Care Source: Maxfield Research Inc. Senior Housing Product Type Table H-15 shows an inventory of market rate senior housing in the Eagan Housing Market Area by the five product types described above. In total, there are about 3,100 market rate senior housing units in the Market Area. Key points follow. MAXFIELD RESEARCH INC. 50

57 HOUSING MARKET ANALYSIS Project Location Ownership Units Vacant* Base Monthly Fee Range* Year Open ADULT / FEW SERVICE Lake Shore Drive Condominiums Richfield Condo $59,900-$150,150 SP; $272-$431 A 1982 Woodlake Point Richfield Condo $92,000-$185,000 SP; $240-$515 A 1986 Summerhill of Apple Valley Apple Valley Cooperative $48,430-$68,320 SP; 1,074-$1,445 M 2003 Applewood Pointe of Bloomington Bloomington Cooperative 95 0 $133,600-$265,280 SP; $334-$1,940 M 2006 Realife Cooperative - Bloomington Bloomington Cooperative 78 0 $22,651-$46,051 SP; $557-$1,112 M 1999 Realife Cooperative on Lyndale Bloomington Cooperative $30,900-$52,414 SP; $700-$1,180 M 2004 Summerhill of Bloomington Bloomington Cooperative 40 0 $24,000 -$54,000 SP; $729-$1,647 M 2002 Grammercy Park of Bursnville Burnsville Cooperative $196, ,2000 SP; $320-$383 M Parkway Cooperative of Burnsville Burnsville Cooperative $21,911-$44,845 SP; $533-$1,072 M 1997 Realife Cooperative of Burnsville Burnsville Cooperative $20,410 - $42,560 SP; $531-$1,116 M 1996 Grammercy Park of Eagan Eagan Cooperative 69 3 $34,355-$86,660 SP; $684-$1,774 M 2001 Gramercy Park Cooperative Richfield Cooperative $41,580-$128,665 SP; $1,085-$2,383 M 2000 Timbers at Apple Valley Apple Valley Rental $980-$1,670 M 2003 Meadowood Village Burnsville Townhomes 75 0 $159,900-$194,900 SP; $75 A 1998 Timberwood Village Eagan Townhomes 40 0 $233,000-$287,500 SP; $197 A 1996 Timberwood Village II Eagan Townhomes 12 0 $233,000-$287,500 SP; $197 A 2000 Total 1, CONGREGATE Optional Services Mainstreet Village Richfield Rental 69 2 $1,062-$2,725 M 2000 Village Shores Richfield Rental $1,005-$1,564 M 1995 Summerhouse of Bloomington Bloomington Rental 88 1 $24,000-$54,000 EF; $729-$1,647 M 1999 Service Intensive Services Apple Valley Villa Apple Valley Rental $920-$1,851 M 1986 Regent at Burnsville (IL) Burnsville Rental 76 0 $1,550-$2,700 M 2004 Rivers Estates Burnsville Rental $1,300-$2,350 M 1999 Keystone of Eagan (IL) Eagan Rental 78 0 $1,210-$2,205 M 2004 Total ASSISTED LIVING Centennial House of Apple Valley Apple Valley Rental $2,670-$3,250 M 1996 Meadow Woods Bloomington Rental $2,385-$3,320 M 1989 Arbors at Ridges Burnsville Rental 45 4 $2,514-$3,358 M 2002 Carefree Living Burnsville Rental 95 0 $2,289-$2,755 M 1987 Emerald Crest Burnsville Rental 24 3 $2,560-$3,200 M 2000 Regent at Burnsville (AL) Burnsville Rental 36 0 $2,130-$4,095 M 2004 The Rivers Manor Burnsville Rental 58 1 $2,300-$3,955 M 1999 Commons on Marice (AL) Eagan Rental 73 1 $2,295-$5,710 M 1999 Keystone of Eagan (AL) Eagan Rental 34 0 $2,515-$3,845 M 2004 Mainstreet Village (AL) Richfield Rental 31 2 $3,174-$3,845 M 2001 The Pines Richfield Rental 82 0 $1,660-$4,665 M 2000 Total MEMORY CARE Emerald Crest Burnsville Rental 36 0 $4,050-$4,450 M 1999 Regent at Burnsville (MC) Burnsville Rental 24 0 $5,000-$6,100 M 2004 Clarebridge of Eagan Eagan Rental 52 6 $2,850-$3,395 M 1998 Commons on Marice (MC) Eagan Rental 23 8 $4,580-$6,015 M 1999 Keystone of Eagan Eagan Rental 14 0 $3,805 M 2004 Total Total Market-Rate Senior 3, % * Average fees & vacancies over the past year SP=Sale/Share Price M=Monthly Fee/Rent D=Daily Fee EF= Entry Fee Source: Maxfield Research Inc. TABLE H-15 EXISTING MARKET-RATE SENIOR HOUSING DEVELOPMENTS EAGAN MARKET AREA APRIL 2007 MAXFIELD RESEARCH INC. 51

58 HOUSING MARKET ANALYSIS 4 Including both ownership and rental senior housing product types, the Market Area had an overall vacancy rate of 4.1%. Senior housing vacancy rates are considered to be at equilibrium at 5.0% vacancy. 4 Approximately one-half of the Market Area s senior housing is active adult product, the majority of which is owner-occupied housing. For-sale senior housing, both condominiums and cooperatives, have gained popularity in recent years and there is a growing trend in senior housing toward homeownership. As the younger senior cohort (those ages 65 to 74) swells with baby boomers in the next 10 to 15 years, we anticipate the demand for senior ownership housing to increase significantly. To some degree, this is already occurring due to changing lifestyles, better health among the senior population, and low interest rate mortgages. However, the pending demographic shift will have an even more pronounced effect on the senior housing market. 4 Senior cooperative share prices range from $20,040 at $357,200, with monthly fees ranging from $320 to $1,940. However, the majority of share prices are priced below $60,000. Senior condominiums have purchase prices ranging from $59,900 to $185,000, plus association fees. 1,600 1,400 1,200 Housing Type Vacancy Rate 1,417 Eagan Market Area Senior Housing Types 10.0% 9.0% 8.0% 7.0% 1, % Units % 4.0% Vac. Rate % 2.0% % 0 Adult Rental Adult Owner Congregate Assisted Living Memory Care 0.0% 4 Congregate senior housing product types, including both optional- and service-intensive projects, account for about 26% of the Market Area s senior housing. Optional service facilities offer care for an additional fee, while service-intensive buildings automatically add MAXFIELD RESEARCH INC. 52

59 HOUSING MARKET ANALYSIS services into the rent. Each type of project attracts a different type of resident. Independent residents will value the security from knowing services are available, but will desire the freedom to choose services a-la-carte. A frailer resident will pay for services as part of a higher rent because they will regularly use services. Competitive Pending Senior Developments Maxfield Research did not identify any planned or proposed senior projects in the Market Area. Housing Demand Analysis Table H-16 presents housing demand calculations for Eagan and the Cedar Grove Redevelopment Area between 2000 and The demand calculations utilize base findings from the 2005 Comprehensive Housing Needs Assessment for Dakota County, Minnesota completed by Maxfield Research Inc. However, demand calculations were updated to account for new developments constructed since that time. Demand calculations are provided for the following housing types: Rental Housing Market rate rental Affordable/subsidized Senior (includes all service levels) For-Sale Housing Single-family Multifamily Senior The following points summarize our demand calculations. 4 Per the 2005 Comprehensive Housing Needs Assessment for Dakota County, we verified the number of supportable units in Eagan between 2000 and Next, we estimate 30% of the total demand for housing units in Eagan will come from people currently living outside of Eagan. A small portion of this market will be from second home-buyers, such as snow-birds heading south for the winters and investment home sales. For senior housing, this demand will consist primarily of parents of adult children living in Eagan or others having an orientation to the area, as well as former residents who desire to return. 4 From the 2000 to 2020 estimates, units constructed and marketing between 2000 and 0007 were subtracted, resulting in demand for housing units between 2007 and The demand figures in Table H-16 are for the City of Eagan. Any one location, including Cedar Grove Redevelopment Area, can only capture a portion of the demand. Capture rates for Site are adjusted based on the strengths and weaknesses of the area, and the characteristics and target markets of the specific housing type. Additionally, population trends and land availability are key factors. Capture rates are also adjusted based on housing trends in the Twin Cities Metro Area. Excluding single-family housing, the Site should be able to capture at a minimum 35% of Eagan s demand. MAXFIELD RESEARCH INC. 53

60 HOUSING MARKET ANALYSIS TABLE H-16 HOUSING DEMAND SUMMARY CEDAR GROVE REDEVELOPMENT AREA Market Rate RENTAL HOUSING Affordable/ Subsidized Senior Eagan housing demand ( ) (plus) Demand from outside Eagan (30%) (equals) Demand for rental housing in Eagan ( ) = ,100-1,286 (minus) Rental units built in Eagan (equals) Housing demand in Eagan = (times) Proportion of Eagan demand capturable by Cedar Grove Site x 35% - 35% 35% 35% 35% 35% (equals) Total rental demand at Cedar Grove Site ( ) = Single- Family** FOR-SALE HOUSING Multi- Family Senior Eagan housing demand ( ) 1,175-1,360 1,500-1, (plus) Demand from outside Eagan (30%) (equals) Demand for for-sale housing in Eagan ( ) = 1,679-1,943 2,143-2, (minus) For-sale units built in Eagan , (equals) Housing demand in Eagan / = ,869-2, (times) Proportion of Eagan demand capturable by Cedar Grove Site x 0% - 0% 35% - 35% 35% - 35% (equals) Total for-sale demand at Cedar Grove Site ( ) = Source: Maxfield Research Inc. MAXFIELD RESEARCH INC. 54

61 HOUSING MARKET ANALYSIS Summary of Housing Demand Table H-16 shows a summary of estimated housing demand in the Cedar Grove Redevelopment Area through It is important to point out that this summary shows demand potential among various product types and it is unlikely all housing types could be developed on the Site. Detailed conclusions and recommendations for housing uses can be found in the Conclusions and Recommendations. MAXFIELD RESEARCH INC. 55

62 RETAIL MARKET ANALYSIS Introduction The following points outline our methodology for assessing the potential for future retail development within the Cedar Grove Redevelopment Area. First, we determine an appropriate draw area, or Market Area, from which retail in the redevelopment area would likely attract the majority of its customers. We then analyze population and household growth in the Market Area, as growth trends and demographic characteristics will affect the vitality of retail in the future. We analyze consumer expenditure data for people residing in the Market Area and identify daytime population counts, since some demand for goods and services on the Site may come from people who do not reside in the Market Area, but are employed there. We review secondary data on retail development trends in Dakota County and the Twin Cities Metro Area, focusing on the impact of development trends on the retail potential in Eagan. We assess the existing supply of retail space in the Cedar Grove Redevelopment Area vicinity, including information on the retail mix, vacancies, and visual impact of the area. Based on our analysis of demographic growth, consumer expenditures and the current market situation, we then quantify demand for retail space on the Site through 2015, recommend a mix of uses that would be appropriate for the Cedar Grove Redevelopment Area, and evaluate the conditions necessary to attract certain type of users to subject Site. Market Area Definition The majority of people who would shop at retail establishments within the Cedar Grove Redevelopment Area would be from the immediate area and those persons who are employed in Eagan who reside outside of the Market Area. Thus, we define the Retail Market Area as the following census tracts within the communities of Eagan, Apple Valley, and Burnsville The map on the following page illustrates the Retail Market Area. MAXFIELD RESEARCH INC. 56

63 RETAIL MARKET ANALYSIS Population and Household Growth Trends and Projections Table R-1 shows the Retail Market Area s population and household growth trends and projections from 1990 to The 1990 and 2000 figures are from the U. S. Census Bureau, while the 2010 and 2020 projections are made by the Metropolitan Council and Claritas. MAXFIELD RESEARCH INC. 57

64 RETAIL MARKET ANALYSIS The following are key points about population and household growth trends and projections in the Market Area. In 2000, the Retail Market Area had 41,107 people and 16,525 households. This represented population growth of 17.1% during the 1990s and household growth of 28%. Growth over the next 10 years is projected to be strong as well, with the population growing by 13.1%, to a total of 46,500 people, and households growing by 15.1%, to a total of about 19,025 households in Continued growth in the Market Area will support the potential for additional retail. The Cedar Grove Site will have an opportunity to capture a portion of retail expenditures from an additional 2,500 households in the Market Area this decade. TABLE R-1 POPULATION AND HOUSEHOLD GROWTH TRENDS AND PROJECTIONS EAGAN RETAIL MARKET AREA 1990 to 2020 Census Projection Change 1990 to to No. Pct. No. Pct. Population Market Area Total 35,109 41,107 46,500 46,850 47,200 5, , Eagan 47,409 63,557 67,000 67,500 68,000 16, , Dakota County 275, , , , ,150 80, , Twin Cities Metro Area 2,288,729 2,642,056 3,056,100 3,243,100 3,430, , , Households Market Area Total 12,907 16,525 19,025 19,564 20,102 3, , Eagan 17,424 23,773 26,500 27,250 28,000 6, , Dakota County 98, , , , ,790 32, , Twin Cities Metro Area 875,504 1,021,454 1,213,800 1,300,000 1,386, , , Sources: Bureau of the Census: U.S. Census of Population and Housing Metropolitan Council Claritas, Inc. Maxfield Research Inc. Population Age Distribution Demand for retail goods and services in any given area can be highly influenced by the age of its population, since a shift in spending habits accompanies a person s aging through the life cycle. Table R-2 examines the population age distribution of the Market Area by using 2000 figures obtained from the Census and estimates and projections based on data obtained from Claritas Inc. The following are key points from Table R-2. MAXFIELD RESEARCH INC. 58

65 RETAIL MARKET ANALYSIS The age distribution in Table R-2 indicates that as of 2007, the Market Area is comprised of a higher proportion of middle-age families. The Market Area has 33.5% of its population between ages 25 and 44 and only 7.4% of the population is comprised of seniors. During the next decade, the 45 to 64 and 65+ age cohorts are projected to grow strongly. By 2020, those ages 45 to 64 are expected to add 2,389 people (+20.3%) while seniors are to see an increase of 1,517 people (+45.6%). The age distribution shown in Table R-2 suggests that children of families in the Market Area seek housing elsewhere when they reach their 20s. This could be due to a desire to live closer to the Metro core, or for other reasons. The end result is that the population or customer base in the Market Area is more skewed toward older adults who often have more disposable income than younger adults. TABLE R-2 PROJECTED AGE DISTRIBUTION EAGAN RETAIL MARKET AREA 1990 to 2020 Change Census Estimate Forecast Age No. Pct. No. Pct. Under 18 10,449 10,606 10, % % 18 to 24 3,956 4,151 4, % % 25 to 44 14,572 15,030 13, % -1, % 45 to 64 9,660 11,769 14,158 2, % 2, % 65 and over 2,470 3,326 4, % 1, % Total 41,107 44,882 47,200 3, % 2, % Sources: Bureau of the Census; Claritas, Inc. Maxfield Research Inc. 16,000 Projected Age Distribution Eagan Market Area 2007 and ,000 12,000 10,000 Persons 8,000 6, ,000 2,000 0 Under to to to and over Age Group MAXFIELD RESEARCH INC. 59

66 RETAIL MARKET ANALYSIS Daytime Population Table R-3 shows the daytime population and resident workforce population in the Market Area according to Claritas, Inc. People working in the Market Area who do not live there are a potential supplemental retail market base to Market Area residents. Maintaining and expanding the employment base near the Site is important because the presence of the employee base will contribute to retail sales, and thus increase the viability of additional retail. Table R-3 shows that about 22,100 people worked in the Market Area in 2006, and approximately 25,500 people ages 16 and over lived in the Market Area. In essence, this means that during the day, the Market Area has a net loss in worker-age population of approximately 3,500 people who commute to jobs elsewhere in the Metro Area. TABLE R-3 DAYTIME POPULATION EAGAN RETAIL MARKET AREA 2006 Work Here/ Total Employees Total Workers Live Here Working in Area Living in Area Ratio Market Area Total 22,141 25, Sources: Claritas, Inc., Maxfield Research Inc. While the employee base in the Market Area adds to the potential retail customer base in addition to Market Area residents the vast majority of people do most of their shopping closer to their homes. Typically, only a small portion of an area s non-resident employee base regularly patronizes retail businesses in that area. Restaurants with lunch menus benefit the most from non-resident employees. Consequently, the addition of office space, new housing developments, and retail would significantly increase the daytime population in the Cedar Grove Redevelopment Area. Categories of Goods Retail goods are usually divided into three categories of goods: neighborhood, shopping and specialty goods. Neighborhood (convenience) goods are those that are bought frequently and are therefore usually purchased where it is most convenient to buy them, usually near home or work (food, personal care goods and services, pharmaceuticals, alcoholic beverages). Shopping goods are those that shoppers will take more care and spend greater effort to purchase and for which they prefer to have a comparative selection so that quality, types and price can be compared. Specialty goods are those for which shoppers expend the greatest effort and for which there is little competition (unique goods or items for which there are few substitutes or alternatives). The draw area for shopping, and therefore, its size, is affected by the availability of such goods. MAXFIELD RESEARCH INC. 60

67 RETAIL MARKET ANALYSIS The draw area for most neighborhood goods in a suburban area is less than two miles. Shopping goods retailers and specialty goods retailers are fewer and farther apart than neighborhood retailers. As such, the draw area for both shopper s goods and specialty items is much larger, typically five or more miles in a suburban setting. Historically, most retail stores were independently owned and located in individually owned buildings in a downtown. Today, most retail stores are national retailers that are located in shopping centers along major Highways. Shopping centers are classified into three categories: Neighborhood, Community, and Regional shopping centers. Neighborhood Centers range from about 30,000 to 180,000 square feet and are typically anchored by a grocery store and/or drug store. These centers serve the day-to-day shopping needs of surrounding neighborhoods within a one- to two-mile radius (serving 10,000 to 40,000 people). Community Centers typically have between 180,000 and 500,000 square feet, although some newer power centers are larger, with up to 800,000 square feet. Community centers are usually anchored by a discount and/or department store and include a variety of smaller tenants. Power centers have multiple large format big-box stores, or category killers with few, if any smaller stores. Power centers are included in the community center inventory for data shown later in this study. Community centers draw from a larger geographic area about four to five miles and serve a population of up to 150,000. Regional Centers range from about 300,000 to 1.2 million square feet of gross leasable area and must include at least one (usually two or more) major department store, along with a variety of additional shops. Most regional centers are enclosed malls, such as Southdale Mall and the Mall of America. However, some of today s new power centers have draw areas similar to a traditional enclosed mall. These shopping centers have the largest draw areas among the three shopping center classifications and typically serve a population of about 250,000 or more. Consumer Expenditure Patterns Tables R-4 and R-5 show consumer expenditures for retail goods and services in the Market Area in 2006 and 2011, according to data obtained from Claritas, Inc. This data is used to calculate demand for retail space, based on projected population growth in the area and the resulting growth in consumer expenditures. The following are key points from the consumer expenditure data. Market Area consumers are projected to spend $806 million in 2006 on the retail goods and services shown in Table R-4 (this excludes housing, insurance, health care, and education). Average annual expenditures were estimated to be about $44,700 per household and $18,500 per capita in the Market Area. MAXFIELD RESEARCH INC. 61

68 RETAIL MARKET ANALYSIS TABLE R-4 HOUSEHOLD EXPENDITURES BY SELECTED PRODUCT TYPE EAGAN MARKET AREA 2006 Total Average Average Market Index Category ($000's) Per HH Per Capita to Metro Food at Home 101,337 5,622 2, Food Away from Home 99,228 5,505 2, Alcoholic Beverages at Home 17, Alcoholic Beverages away from Home 8, Personal Care Products 19,539 1, Personal Expenses and Services 34,139 1, Smoking Prods/Supplies 16, Prescription Drugs 35,563 1, Day Care 6, Apparel 93,694 5,198 2, Housekeeping Supplies 6, Household Textiles 12, Furniture 16, Major Appliances 7, Small Appliances/Houseware 15, Misc. Household Equip. 12, TV, Radio & Sound Equipment 38,808 2, Sports and Recreation 32,607 1, Reading Materials 12, Travel 33,436 1, Photographic Equipment 2, Pet Expenses 9, Cars and Trucks - New 64,511 3,579 1, Cars and Trucks - Used 43,584 2,418 1, Gasoline and Motor Oil 30,949 1, Vehicle Maintenance/Repair 33,815 1, Total 806,294 44,732 18, Neighborhood Goods & Services 427,968 23,743 9,834 Shopping/Specialty Goods & Services 205,467 11,399 4,721 Bold items reflect neighborhood-oriented goods and services Italicized items reflect shopping/specialty-oriented goods and services Sources: Claritas, Inc. Maxfield Research Inc. Annual Expenditures MAXFIELD RESEARCH INC. 62

69 RETAIL MARKET ANALYSIS TABLE R-5 HOUSEHOLD EXPENDITURES BY SELECTED PRODUCT TYPE EAGAN MARKET AREA 2011 Total Average Average Market Index Category ($000's) Per HH Per Capita to Metro Food at Home 116,195 6,073 2, Food Away from Home 119,696 6,256 2, Alcoholic Beverages at Home 20,912 1, Alcoholic Beverages away from Home 10, Personal Care Products 25,102 1, Personal Expenses and Services 45,345 2,370 1, Smoking Prods/Supplies 18, Prescription Drugs 60,537 3,164 1, Day Care 7, Apparel 110,971 5,800 2, Housekeeping Supplies 8, Household Textiles 16, Furniture 21,238 1, Major Appliances 8, Small Appliances/Houseware 18, Misc. Household Equip. 15, TV, Radio & Sound Equipment 51,200 2,676 1, Sports and Recreation 42,322 2, Reading Materials 13, Travel 43,241 2, Photographic Equipment 3, Pet Expenses 12, Cars and Trucks - New 75,422 3,942 1, Cars and Trucks - Used 55,620 2,907 1, Gasoline and Motor Oil 44,848 2, Vehicle Maintenance/Repair 46,034 2,406 1, Total 1,011,830 52,884 22, Neighborhood Goods & Services 535,628 27,995 11,837 Shopping/Specialty Goods & Services 254,278 13,290 5,619 Bold items reflect neighborhood-oriented goods and services Italicized items reflect shopping/specialty-oriented goods and services Sources: Claritas, Inc. Maxfield Research Inc. Annual Expenditures MAXFIELD RESEARCH INC. 63

70 RETAIL MARKET ANALYSIS Of the 26 categories of retail items in Tables R-4 and R-5, 15 are neighborhood goods and services. They are a mix of goods that would mostly serve the local population (people living in the Market Area) and employees at businesses near the subject Site. These 15 categories are bolded in the tables. The expenditures in 2006 for these neighborhood goods from the Market Area were approximately $23,700 per household and $9,800 per capita. The two categories accounting for the greatest percentage of consumer expenditures are Food at Home (groceries) and Food Away from Home (restaurants), both of which are neighborhood retail goods. Food at Home or grocery accounts for 12.6% of household expenditures while Food Away from Home accounts for 12.3% of household expenditures. According to Claritas Inc. s Market Index, the average household expenditure in 2006 for most items by Market Area residents was about the same as the Metro average, as indicated by an overall market index of 1.01 (residents in the Eagan Retail Market Area spent 1% more on consumer goods than the metro average). Regional Retail Development Trends The vast majority of new retail space in the Market Area is added in shopping centers. This section provides an overview of the current conditions of shopping center space in the south Metro Area. The regional retail data analyzed is for the Dakota County as defined in the Commercial Real Estate Report, published by Colliers Turley Martin Tucker. The Market Area census tracts are located in this retail submarket. The data analyzed includes retail space absorption, vacancy rates, and average net rents, and is from the Commercial Real Estate Report. The Commercial Real Estate Report data is based on a survey of Metro Area shopping centers with at least 30,000 square feet of gross leasable area and excludes single-tenant, freestanding retail space. The Commercial Real Estate Report classifies shopping centers in three categories: Neighborhood, Community, and Regional shopping centers (see the definition of each on Page 57). Retail Space Vacancy and Absorption Table R-6 shows the growth of retail space by type (neighborhood, community, and regional), along with the number of centers, vacancy, and net absorption for Dakota County, as well as the Twin Cities for 4 th Quarter 2003 to 4 th Quarter The following are key points from Table R-6. MAXFIELD RESEARCH INC. 64

71 RETAIL MARKET ANALYSIS Total Total Annual Market No. of Rentable Amount Percent Net Sector Year Centers Area Vacant Vacant Absorption Dakota County Neighborhood ,843, , % ,968, , % 271, ,102, , % 126, ,079, , % -117,061 Community ,972,385 62, % ,860, , % -182, ,108,734 52, % 328, ,108,734 22, % 29,563 Regional ,028,000 40, % ,028, , % -104, ,028,000 16, % 128, ,028,000 34, % -18,500 Total ,843, , % ,856, , % -14, ,239, , % 583, ,215, , % -105,998 Metro Area Total Neighborhood ,693,457 1,511, % ,613,137 1,341, % 89, ,232,000 1,318, % -358, ,495,221 1,541, % 40,991 Community ,782, , % ,306, , % 1,811, ,680, , % 1,365, ,298, , % -359,462 Regional ,124, , % ,599,117 1,967, % -629, ,620,112 1,198, % 789, ,656,112 1,264, % -29,624 Downtown ,521, , % ,482, , % -66, ,359, , % -106, ,359, , % 0 Total ,121,376 3,454, % ,001,181 4,132, % 1,205, ,892,142 3,333, % 1,690, ,809,457 3,598, % -348,095 Sources: Towle Real Estate: Towl Report 2007 Maxfield Research Inc. TABLE R-6 RETAIL SPACE VACANCY AND ABSORPTION DAKOTA COUNTY (Fourth Quarter) MAXFIELD RESEARCH INC. 65

72 RETAIL MARKET ANALYSIS The distribution of retail space in the Dakota County as of the 4 th Quarter of 2006 was 42.7% neighborhood, 29.2% community and 28.1% regional. There were 45 neighborhood shopping centers with an average size of 68,424 square feet, 10 community centers with an average size of 210,873 square feet, and three regional centers that average 676,000 square feet. Through 4 th Quarter 2006, roughly 236,000 square feet (neighborhood retail space) has been added in Dakota County, posting an increase in retail space of 8.3% between 2003 and Community retail space increased by 6.9%, adding 136,400 square feet. The overall vacancy rate in the Dakota County Sector was 4.3%, down from 5.9% from 4 th Quarter Comparatively, the overall vacancy rate was 6.2% in the Twin Cities Metro Area. Metro-wide, the amount of retail space increased by 4.9% from 2003 through The greatest growth was in community retail (18.3% growth, or 2.5 million square feet), followed by regional retail (+2.8% growth, or 532,000 square feet). Neighborhood retail space decreased slightly by 1.0%, a loss of 198,200 square feet. The high growth of community retail is attributed to the trend of developing "big box" retailers, such as Best Buy, Office Depot, and Pet Smart in "power centers," or large community centers. To a great extent, these "power centers" are capturing a portion of the retail dollars that previously were spent at neighborhood and regional retail centers. This trend somewhat reduces the overall amount of retail space that can be supported at the Site, since some of the neighborhood retail expenditures by Market Area residents are made at power centers in the Market Area. Dakota County Retail Space 4th Quarter ,500, % Square Feet 3,000,000 2,500,000 2,000,000 1,500, % 3,079,060 2,108,734 Dakota County 2006 Vacancy Rate 2,028, % 7.0% 6.0% 5.0% 4.0% 1,000, , % 1.7% 3.0% 2.0% 1.0% 0 Neighborhood Community Regional 0.0% MAXFIELD RESEARCH INC. 66

73 RETAIL MARKET ANALYSIS Dakota County Retail Types 4th Quarter % 42.7% 29.2% Neighborhood Community Regional Older retail centers, such as located in the Cedar Grove Redevelopment Area, have become ripe for redevelopment in many other cites in the Metro Area. Cities such as Burnsville, Hopkins, Maple Grove, Richfield, and St. Louis Park have constructed or are planning mixed-use developments supporting retail shops and restaurants, housing, transportation hubs, schools, etc. In most of these municipalities, an older or outdated retail land use was removed for the redevelopment of the area. Stated Net Rental Rates Table R-7 shows median net rental rates (excluding expenses) for all shopping centers in each submarket in the Twin Cities, according to the Minnesota Shopping Center Association (2006). It is important to keep in mind that per square foot rental rates can vary greatly, even within the same retail center, with anchor tenants typically paying lower per square foot rents compared to small retailers. Small retailers often benefit from being located close to larger anchor tenants because of the customer traffic they generate. Furthermore, shopping center owners lease large blocks of space to anchor tenants at a lower rental rate, since their presence helps to market and generate higher rents for smaller spaces. Generally, the low end of the median rent range shown in Table R-7 reflects rents paid by larger anchor tenants, while higher rents are those paid by inline retailers. The following are key points from Table R-7. The Southwest Submarket has the highest average net rental rates in the Metro Area, averaging $20.80 per square foot. Furthermore, the Southwest Submarket has the highest average CAM and taxes among the four Submarkets. Net rental rates for neighborhood centers in the Metro Area ranged from $14.48 to $17.10 per square foot in Rates of $14.48 or slightly above would be those paid by larger anchor tenants in shopping centers or by small tenants in older shopping centers in locations MAXFIELD RESEARCH INC. 67

74 RETAIL MARKET ANALYSIS with less traffic and visibility. Fast-food restaurants usually pay the highest rates at near $20.00 per square foot. Common area maintenance (CAM) fees among Metro Area neighborhood centers averaged $2.82 per square foot and taxes averaged $3.42 per square foot in Combining CAM fees and taxes with the average net rent of $15.79 per square foot, retail tenants (neighborhood centers) would be paying about $22.00 per square foot gross. TABLE R-7 RENTAL RATES BY TYPE OF CENTER & SUBMARKET TWIN CITIES METRO 2006 Avg. Net Rental Rates Avg. Avg. Location Low - High CAM Taxes Submarket Northeast $ $21.51 $2.76 $3.22 Northwest $ $19.31 $2.82 $3.29 Southeast $ $18.55 $2.71 $3.23 Southwest $ $23.94 $2.98 $3.95 Twin Cities Metro Area Neighborhood $ $17.10 $3.03 $3.04 Community $ $20.76 $2.93 $3.57 Regional $ $47.46 $6.41 $6.49 Mpls CBD $ $28.55 $13.35 $2.79 Sources: Minnesota Shopping Center Association, 2006 Maxfield Research, Inc. $30.00 Avg. of All Operating Expenses by Submarket $25.00 $20.00 $15.00 Low Net Avg. CAM Avg. Taxes $3.22 $3.29 $3.23 $2.76 $2.82 $2.71 $3.95 $2.98 $10.00 $5.00 $14.83 $14.31 $15.31 $17.65 $0.00 Northeast Northwest Southeast Southwest SubMarket MAXFIELD RESEARCH INC. 68

75 RETAIL MARKET ANALYSIS $35.00 $30.00 $25.00 $20.00 $15.00 $3.03 Avg. of All Operating Expenses - Twin Cities Metro Area Avg. Taxes Avg. CAM Low Net $3.04 $3.57 $2.93 $6.49 $2.79 $6.41 $13.35 $10.00 $5.00 $14.48 $16.55 $19.99 $14.82 $0.00 Neighborhood Community Regional Mpls CBD Retail Type Selected Retail Developments In and Near the Market Area Maxfield Research Inc. collected information on selected shopping centers in Eagan and in close proximity to the Market Area. The Market Area includes seven neighborhood centers and one community center. Outside the Market Area, eight neighborhood centers and two community centers are profiled. Cedarvale Mall is not profiled as it is not currently marketing space and is almost completely vacant. Table R-8 lists the centers surveyed with information on total space and square feet available, lease rates, and the center s tenant mix. The data reflects year 2006 lease rates and was obtained from the Minnesota Shopping Center Association annual report and the Minnesota Commercial Association of Realtors. Key points from Table R-8 follow. Overall, the seven Market Area shopping centers combine for 583,227 square feet (for an average size of about 73,000 square feet). The shopping centers had a combined 90,000 square feet of vacant space, most of which is located in a few shopping centers, for an overall vacancy of 14%. (That vacant space does not include Cliff Lake Marketplace, which is under construction.) This vacancy rate is higher than that of Dakota County as a whole (4.3%). Older neighborhood centers tend to have much higher vacancy rates than newer neighborhood centers and community centers. The lease rates at the Market Area neighborhood shopping centers range from $5 per square foot net to $22 per square foot net. Higher lease rates are at newer neighborhood centers and community centers. MAXFIELD RESEARCH INC. 69

76 RETAIL MARKET ANALYSIS TABLE R-8 SELECTED RETAIL CENTERS EAGAN MARKET AREA & VICINITY 2006 RETAIL RATES Year Year Total Vac. Lease Center Name / Address Built Reno. Space Rate Rate CAM Tax Summary of Tenants Market Area Neighborhood Centers Cedarvale Business Center NA - 24, % $10 $3.88 $1.75 Chinese Restaurant, Beauty School 3902 Cedar Grove Pkwy Eagan Cedarcliff Shopping Center , % $13-$18 $3.29 $3.03 Brueggers Bagels, Caribou Coffee, Broadway Pizza, Cliff Road Aveda Retail Center, dental office, wine store, flower Eagan store Cliff Lake Marketplace U/C - 14, % $23 NA NA Under construction Cliff Rd and Cliff Lake Rd NNN Eagan The Crossings in Eagan , % $17 $3.43 $2.80 Jerry's Floor Store, Now Care Medical, JeBo Hair, Rahncliff Ct. U.S. Postal, orthodontist, chiropracter, dental office, Eagan gift store, fan store, pizza parlor Diffley Square , % $19-$23 $2.66 $1.73 Blackhawk Liquors, Star Tribune, dance studio, 4130 Blackhawk Road tanning salon, Wells Fargo Financial, rental center, Eagan karate studio, Curves for Women, day-care Town and Country Square , % $10-$23 $2.66 $2.03 Family Dollar, Car Quest, Shooters Billiards, Hwy. 13 East Hardware Hank, Mill End Fabrics, Jimmy John's, Burnsville Caribou Coffee Yankee Square Shopping Ctr , % $7 $3.15 $2.50 Z-Teca Mexican Grill, Italian Pie Shoppe Yankee Doodle Rd. Eagan Continued MAXFIELD RESEARCH INC. 70

77 RETAIL MARKET ANALYSIS TABLE R-8 SELECTED RETAIL CENTERS EAGAN MARKET AREA & VICINITY 2006 RETAIL RATES Continued Year Year Total Vac. Lease Center Name / Address Built Reno. Space Rate Rate CAM Tax Market Area Community Centers Cliff Lake Centre , % N/A $6.23 $ Cliff Lake Road Eagan Eagan Neighborhood Centers Outside Of Market Area Duckwood Square , % NA NA NA Goodyear Tire, Eye clinic 1340 Duckwood Drive Eagan Lexington Center , % $16 $3.67 $3.53 Chriopractors, Liquor Store, Pet Store 4250 Lexington Ave S Eagan Hilltop Plaza , % $15-$18 $5.53 NA NA Pilot Knob Rd Eagan Hawthorne Ridge , % $22 $2.14 $0.61 A Snap Fitness, Rosy Nails, Slate Constuction 525 Diffley Rd Eagan Northwood Court U/C - 10, % $26 $3.34 $2.16 NA Northwood Pkwy and Yankee Doodle Rd Eagan Oakview Plaza NA - 10, % $17 NA NA Liquor Store, Cousins Subs, Embroidery Shop 3090 Courthouse Ln Employment Agency Eagan Thomas Lake Center , % $10-$16 $3.29 $2.75 Snyder Drug Store, True Value Hardware, Care Care, 1565 Cliff Road coffee shop, Subway, State Farm Insurance, cleaners Eagan chiropracter, dental, day-care, Bonfire Grill Town Center Shops , % $16 $3.79 $3.41 Treasure Island, Animal Inn Pet Food Outlet Denmark Avenue UPS Store, tanning salon, dentist, salon, pizza, Eagan Orek Vacuums, pediatric, etc. Continued Summary of Tenants Target, Cub Foods, U.S. Bank, Norwest Fabrics dry cleaner, optical store, Davanni's, Hallmark, dentist, HR Block, travel agency, Great Clips, etc. MAXFIELD RESEARCH INC. 71

78 RETAIL MARKET ANALYSIS TABLE R-8 SELECTED RETAIL CENTERS EAGAN MARKET AREA & VICINITY 2006 RETAIL RATES Continued Year Year Total Vac. Lease Center Name / Address Built Reno. Space Rate Rate CAM Tax Summary of Tenants Eagan Community Centers Outside of Market Area Eagan Promenade , % $20 $2.37 $4.72 Byerly's, Barnes & Noble, OfficeMax, Old Navy, Promenade Place Pier I Imports, Hallmark, Paper Warehouse, Famous Footwear, Barnes & Noble, Bed Bath & Beyond, Petsmart, Michaels, TJ Maxx Eagan Town Center , % $20 $1.75 $3.76 Rainbow Foods, Pet Food Warehouse, Walgreen's Town Center Drive Old Chicago, Radioshack, salon & spa, floral, Video Update, liquor store, chinese restaurant Sources: MN Shopping Center Association; MNCAR Maxfield Research, Inc. MAXFIELD RESEARCH INC. 72

79 RETAIL MARKET ANALYSIS Neighborhood shopping centers in and near the Market Area were built between 1965 and 1991, while the majority were built in the 1980 s. The older shopping centers can typically be financially feasible with net rents lower than new projects, because they typically have a lower debt burden. However, if these projects cannot maintain occupancy at stabilized levels, they may have difficulty. A new project within the Cedar Grove Redevelopment Area would likely need to have rents higher than most neighborhood shopping centers in the area because of the costs of land acquisition, development, and financing. Retailers need to be willing to pay higher rents in exchange for a new development that is able to attract and retain customers. Planned and Pending Retail Developments One project is under construction in the Market Area at this time. Cliff Road Properties is building a 15,000-square foot building at the existing Cliff Lake Center. The expansion will include a pet store and other retail businesses. Projected Demand for Retail Space Earlier sections studied shopping patterns and factors that influence the demand for retail space in the Market Area, such as population growth and consumer expenditure trends, and reviewed the current supply of retail space. Table R-9 combines the demand and supply data to calculate the amount of retail space (gross leasable area in square feet) supportable within the draw area. The figures used for the calculations reflect the amount of dollars spent on consumer goods and services (from consumer expenditure reports from Claritas, Inc.), the estimated median sales per square foot for neighborhood retail centers (from Dollars and Cents of Shopping Centers, Urban Land Institute), and the estimated current supply of retail space in the Market Area (from the secondary sources and field work by Maxfield Research Inc.). Also shown in the table is a calculation for net leakage. Net leakage is the amount of consumer spending for convenience goods and services that is likely to be spent outside of the Market Area. This calculation is based on the proportion of consumer expenditures that can be captured by retail space in the area. Based on a comparison of total retail sales data from the Minnesota Department of Revenue with household expenditure data from Claritas, Inc., we estimate that retail space in the Eagan Retail Market Area is currently capturing about 80% of the total retail expenditures by residents. The net leakage figures in the demand tables are based on the estimated leakage after new space would be added in the Market Area. Based on the wide variety of goods currently offered in the Retail Market Area, we estimate that leakage would remain relatively constant into the future. MAXFIELD RESEARCH INC. 73

80 RETAIL MARKET ANALYSIS Table R-9 calculates demand for neighborhood and specialty retail space in Eagan Retail Market Area, generally, and at the Cedar Grove Redevelopment Area, specifically. The following bullet points summarize our demand calculations presented in Table R-9. TABLE R-9 DEMAND FOR RETAIL SPACE EAGAN RETAIL MARKET AREA 2006 to Market Area Purchasing Power Market Area Households 18,025 19,079 20,102 (times) Annual Neighborhood Household Expenditures 1 x $35,142 $41,285 $46,814 (equals) Total Market Area Expenditures = $633,442,128 $787,684,968 $941,061,474 Approx. % Leakage Outside the Market Area 2 20% 20% 20% (minus) Leakage Outside of Market Area - $126,688,426 $157,536,994 $188,212,295 (equals) Total Purchasing Power = $506,753,702 $630,147,974 $752,849,179 (divided by) Average sales per Sq. Ft. 3 / $300 $323 $375 (equals) Total Retail Space Demand (Sq. Ft.) = 1,689,179 1,949,805 2,007,225 Retail Demand Potential 2006 to to 2020 Retail Space Demand Growth 260,626 57,421 (times) Amount Capturable by Site x 20% 40% Demand for Additional Retail Space at Site (in sq. ft.) 52,125 22,968 1 Neighorhood and Specialty retail only. 2 Leakage is equal to the estimated amount of retail dollars spent outside the Market Area. 3 From Dollars and Cents of Shopping Centers, Urban Land Institute -- adjusted by Maxfield Reseach Inc. Sources: Claritas; Dollars and Cents of Shopping Centers, Urban Land Institute; Maxfield Research Inc. Table R-1 shows total Market Area households of approximately 18,000 in Based on our analysis of consumer expenditure data, we estimate that consumer expenditures for the types of neighborhood and specialty goods and services that could be purchased in the Market Area are about $35,000 per household. Average household expenditures are obtained from Table R-4 and Table R-5. Multiplying the consumer expenditure figure by the number of households results in total retail sales of $633 million. However, factoring in leakage of retail dollars spent by Market Area residents to centers outside of the Market Area at 20%, the total demand in the Market Area is reduced to $507 million. (Leakage could potentially decline if particular types of retail were developed at the Cedar Grove Redevelopment Area. However, because of Eagan s location near other retail corridors in Apple Valley, Bloomington, and Burnsville, we do not believe it would be significantly lowered.) MAXFIELD RESEARCH INC. 74

81 RETAIL MARKET ANALYSIS Utilizing average sales per square foot from Dollars and Cents of Shopping Centers and adjusted to account for location factors by Maxfield Research, we divide the average sales per square foot of retail space that results in Market Area demand for about 1.7 millionsquare feet in 2006, increasing to about 2.0 million-square feet in The 2006 figures are consistent with our competitive market analysis and estimates of additional retail space in the Market Area. The Cedar Grove Redevelopment Area will compete with other areas in the Eagan Retail Market Area for new retail stores over this period. We estimate that this area would be able capture 20% of the retail demand, or about 52,000 square feet between 2006 and We estimate that, between 2011 and 2020, this area would be able to capture a greater percentage of demand as the entire area becomes more developed and there are fewer redevelopment sites available. We estimate that the capture rate would increase to 40%, creating demand for an additional 23,000 square feet of retail at the Cedar Grove Redevelopment Area. MAXFIELD RESEARCH INC. 75

82 OFFICE MARKET ANALYSIS Introduction This section of the report calculates the potential demand for new office development within the Cedar Grove Redevelopment Area by examining employment and business growth trends, regional office market conditions, and the existing supply of office space in the Eagan Market Area. Market Area Definition The large percentage of demand for office space at the Site will be from businesses serving the growing local household and business base. These users include insurance agents, attorneys, architects, graphic designers, real estate agents, accountants, financial planners, banks, dentists, chiropractors and medical offices. Most are small businesses with fewer than 10 employees, requiring spaces of less than 2,000 square feet. There is potential for the Cedar Grove area to attract small professional businesses, including those with a regional or national customer base. In addition, due to the Site s visibility and location, the Site could attract potential users such as a smaller corporate headquarters. The Site is located at an intersection with high traffic counts and also has the potential to support larger businesses that are looking for space in an easily accessible location. Typically, these owners and executives prefer to office close to their homes and therefore, would consider occupying space in the Cedar Grove Redevelopment Area. The map on the following page represents the Market Area from which new office development in Cedar Grove Redevelopment Area would draw the majority of its tenants. The Office Market Area includes Eagan, Apple Valley, Burnsville, and East Bloomington. Employment and Business Growth Overall Employment Growth Table O-1 presents total employment growth trends and projections in the Market Area from 1990 to Table O-2 shows, according to data from the Metropolitan Council, the estimated percentage of total employment that would occupy office space. The figures were compiled by Maxfield Research, based on data from the Minnesota Department of Trade and Economic Development and the Census Bureau. The following are key points from Tables O-1 and O-2. The Market Area added 43,598 jobs (a 47.5% percent increase) between 1990 and This growth increased the total number of jobs in the Market Area to 135,300 in From 2000 to 2010, the Market Area is projected to add 26,000 jobs (a 19.2% increase). Of the projected growth during this decade, 11,000 new jobs (42% of all new jobs in Market Area) are projected to be located in Eagan. MAXFIELD RESEARCH INC. 76

83 OFFICE MARKET ANALYSIS MAXFIELD RESEARCH INC. 77