An industrial outsider

Standard Heating and Air Conditioning on Lake Street feeling squeezed for space

Todd Ferrara has spent the past couple years searching for industrial land in Minneapolis to expand his family business, Standard Heating and Air Conditioning.

His company has outgrown the 410 W. Lake St. building it moved into in 1941, and large property tax increases caused by a boom in residential and commercial growth are making it expensive to stay there.

Finding a new space that's the right size, in good shape and affordable hasn't been easy, Ferrara said. If he can't find something in the city soon, Standard Heating and Air Conditioning could go the way of many industrial businesses that once thrived in Minneapolis.

&#8220If we don't find something within the next 18 months, it's inevitable that moving to the suburbs will become a real possibility,” he said.

Minneapolis lost 930 acres of industrial land between 1990 and 2004 while nearby suburbs gained hundreds, according to a recent City Council-commissioned study by Maxfield Research Inc. The city is still losing industrial-zoned property, largely the result of conversions to residential land, the study found. Recent small-area plans, if adopted, will further the depletion of industrial space.

&#8220We have put so much focus on commercial revitalization that we have neglected the rest of our employment base,” said City Councilmember Gary Schiff (9th Ward), chairman of the City Council's Zoning and Planning Committee.

Minneapolis' industry is needed to maintain a healthy economy, Schiff said, and the City Council hopes to adopt an industrial land use plan by summer's end. Planning and economic development staff will use the Maxfield study to develop a recommendation for the council, he said.

Industrial evolution

Flour mills, steel yards, smoke-belching factories, soot-faced workers laboring over big machines - some of the images often associated with industry - no longer fit the reality of 21st-century Minneapolis.

More traditional industries like power-generating facilities and machine shops now share the industrial label with research and development facilities, medicine-manufacturing businesses and laboratories, the Maxfield study explains.

Industry is different than what immigrants came to know a century or more ago, but many of its benefits are the same. It contributes to Minneapolis' economic diversity and property tax revenue, the study states. Industrial businesses also offer accessible, living-wage jobs to people with less than a four-year degree.

Though Maxfield researchers forecast the loss of more than 4,000 industrial jobs this decade, they expect the city to recover by 2020. Maxfield Research Analyst Mark Spector said industries could flourish in Minneapolis if the loss of land is addressed.

Demand for industrial property is already high, but industries aren't the only ones shopping.

Conversion craze

Market pressure has fueled a surge of industrial-to-residential conversions in recent years.

Fifteen such conversions were underway between 2002 and 2005 and a dozen others are planned, Spector said.

Conversions can create significant property value and tax-base increases, Maxfield found, but they are not always successful in areas where the best land use is industrial and inflated property prices make purchasing space difficult for industrial businesses.

Tolerant zoning codes have made conversions relatively easy, and once property goes from industrial to residential, it's nearly impossible to revert, said Judith Martin, president of the Minneapolis Planning Commission and director of the Urban Studies program at the University of Minnesota.

&#8220What we've been doing is nibbling away at the edges without any real plan of what should be done,” she said.

Minneapolis Principal City Planner Jennifer Jordan said zoning requirements aren't too permissive, but they are sometimes misused.

Industrial Living Overlay Districts (ILODs), for example, were created to transition old industrial sites to residential or commercial areas.

&#8220We've seen it creep in recent years to areas that aren't transitioning,” Jordan said.

The volume of residential projects is giving some industrial sites little breathing room.

Southwest is not a key industrial area in Minneapolis, but the handful of industrial businesses there have felt the swarm of condos and restaurants in recent years.

&#8220I don't know what I'm going to do,” said Paul Williams, who has owned Paul Williams Tire on 510 W. Lake St. since 1971. &#8220I wish I did know.”

Williams also owns a warehouse at 418 W. Lake St. and a supply building in Savage, Minn.

Residential and commercial growth near his store increased his property taxes from about $30,000 to $40,000 this year. Crime has increased, and business isn't as good as it used to be, he said. Upcoming payments for the reconstruction of Lake Street will be an added burden.

&#8220If I can't afford it, I might not be there anymore,” he said.

Williams said he might sell his Lake Street property - if the price is right. He has already received several offers from developers who are interested in creating a residential building complete with retail shops on his land. He turned down $2.1 million a couple years ago.

&#8220I've been told it's worth more than that,” Williams said.

Bennett Lumber, at 2828 Emerson Ave. S., might sell some of its expensive land, reducing its total acreage from 5 to about 2, said CEO Greg Cummins. The company is talking with developers about the possible sale and trying to form partnerships with other lumberyards with which it might work after the change.

Cummins said Bennett wants to stay in Minneapolis, where it has been for well over 100 years, but the business has to evolve to meet the needs of a changing community.

Industry protection

Minneapolis has no firm policy stating what should be done with its industrial land.

Without such a policy, there's not much the city can do to halt conversions, Jordan said.

&#8220We just need to have a clear policy on this,” she said. &#8220I think the study will help to do that.”

The Maxfield study offers several recommendations such as revising the Minneapolis Plan to more clearly designate industrial areas and outlining citywide guidelines for rezoning.

The creation of seven employment districts in which rezoning amendments for residential use are prohibited is another recommendation. ILODs would not be allowed in the new districts, according to the study.

Southwest is not included in any of the proposed districts because the area does not have a large concentration of industrial sites. Jordan said those businesses are still important, and it's possible the city's adopted plan will include relocation assistance for businesses like Standard Heating and Air Conditioning.

Ferrara and other business owners like Minneapolis because of its central location, freeway access, and strong employment and customer base.

Many of Ferrara's 68 employees live near his shop. One of them works out of a small store in St. Paul.

But he doesn't have space for the 20 trucks that come and go from his shop each day. His property tax payments have jumped from $13,059 in 2004 to $24,477 this year.

Other industrial sites he has seen for sale in Minneapolis are too big or too small, old, contaminated or in need of repair.

During a walk around his shop on a recent morning, Ferrara half-seriously joked about industrial employees commuting from the city to the suburbs for work.

&#8220My discouragement is that so much has been focused on housing that we're forgetting about industry and driving it out,” he said. &#8220We don't just want to have a bedroom community.”

Jake Weyer can be reached at 436-4367 and jweyer@mnpubs.com