Insights from Experts: Matt Rauenhorst on MSPBJ’s Table of CRE Experts


Matt Rauenhorst, Vice President, Real Estate Development
Years with Opus: 13 years
Project Credits: 365 Nicollet Luxury Multifamily, Lincoln Drive Apartments, Variant Luxury Mixed-Use Development, Oxbō Luxury Mixed-Use Development, The Foundry, Venue at Dinkytown, The Station on Washington and Stadium Village Flats
Event: Minneapolis/St. Paul Business Journal's Table of Experts

Key Points from the Panel

  • On office space in the Minneapolis CBD: "In the downtown core, there are some larger spaces; Wells Fargo has gone from being a tenant to an owner. As to the next downtown high-rise building, we are seeing them, it's just that they're multifamily. The demand in that space is strong, but when it comes to office, the net rents are very close to where they've been for 25 years. Perhaps the best way to make a downtown high-rise work for new office development today is if you could somehow build on stilts and start at floor 20. To be successful in today's market, a downtown office high-rise would have to be a user-driven build-to-suit with some limited speculative space on the top floors."
  • On speculative office development: "I think beyond being user-driven, what will make speculative office work is the floor plan being the right layout for the workplace of the future, this includes an open floor plan that maximizes the efficiency and creates spaces where people want to work. The cost of new space may be more, but we believe that added real estate cost is offset by productivity gains and efficient use of space. There are several credible studies highlighting the relation between quality workspace with increased productivity. The economic benefits of productivity gains greatly outweigh the costs of marginally more expense real estate. As a result of this, we've been having discussions with some of our clients who would be great candidates to benefit from this approach, asking them, 'Is rent the sole driver of your real estate solution driver, or can we help you quantify the impact of improved productivity and retention of your employees?'"
  • On the commercial real estate market in the Twin Cities: "At this time we see the most activity in two sectors. First is industrial, not only in the Twin Cities, and the state of Minnesota, but around the country. Nationally there has been and continues to be a lot of growth in that space. The other is multifamily, where we're seeing strong demand in cities with jobs growth. Particular to this market, we have either under construction or completed in the past 90 days, 950 units of multifamily across Minneapolis, St. Paul and Edina. Multifamily has been driven by a new and growing group of renters: those who rent by choice — which is a trend we see continuing. We're optimistic for well-located properties that have the amenities, proximity to transit and access to local employers. An apartment provides a level of flexibility that doesn't come with homeownership. Across Minnesota, homeownership rates fell through the recession, and while they have increased some, they haven't gone back up to pre-recession levels because there isn't the same desire to own among millennials and empty nesters. As the quality and amenities of multifamily increase, it makes the decision to choose renting versus ownership even easier."
  • On our development work: "Historically, Opus's primary product types are office and industrial, and these are still significant pieces of business today. In the past five years, multifamily and student housing have been a growing component of our business. Looking forward we are focused on growing two categories: senior living and health care. There is a wave of baby boomers who will age into senior living over the next two decades in the Twin Cities market and nationally. And expectations and needs in this segment are evolving, so these residences will need to be fully amenitized and offer a continuum of care to meet the diverse needs of prospective residents — from independent living to assisted living and memory care facilities — so we are designing and building with all that in mind. We look forward to kicking off our first senior living project this fall in Minnetonka at Interstate 394 and Hopkins Crossroad. Likewise, a growing aging population, consumer expectations for service delivery and other trends in health care are driving toward a greater need for outpatient services and smaller clinics and away from hospital campus-centered delivery. Collectively, these trends are shifting the health care real estate landscape significantly to more of a retail model. That said, leveraging our extensive experience in the retail sector, we've recently developed a unique modular approach to scalable clinic design to support health care clients in addressing shifting market demand effectively and efficiently."