Buyers wanted: A primer on selling commercial properties

ST. CLOUD, Minn. — There were several things one new St. Cloud business was looking for before stitching themselves into the fabric of the area business community.

The obvious answer is an existing customer base. But there’s more that can draw a business in.

Get ready to roll out the welcome mat.

“(Everyone) wants to be wanted,” said Dennis Jensen, director of marketing and ecommerce at Runnings.

The business landscape of a community is ever-changing as businesses open, expand, rebrand. But what can be done to help fill commercial properties when businesses close, leaving the storefront dark and the parking lot empty?

The Minnesota Commercial Association of Real Estate/Realtors public commercial listing site showed 250 commercial properties for sale or lease in and surrounding Sartell, Sauk Rapids, St. Cloud, Waite Park and St. Joseph as of last week. Eighty of these sites were land, while 67 were offices, 66 were retail and 28 were industrial. Six were specialty properties and three are multi-family dwellings. MNCAR is a commercial real estate brokerage organization with more than 1,200 members.

This is not an exhaustive list of commercial buildings in the area. (For instance, the former Gander Mountain building, which closed in 2017, is listed for sale through Miller Properties & Investments but is not on the MNCAR site.) St. Cloud Economic Development Director Cathy Mehelich said outside the Twin Cities metro area, some properties don’t get listed or are for sale by owner.

There are several things that can make a building hard to sell, said Scott Schmitt, a commercial/investment associate and business broker for Coldwell Banker Commercial Orion Real Estate in Waite Park.

This include functional obsolescence, not enough parking and poor accessibility (for example, no way to turn into the business when traveling a certain direction on a divided roadway).

Size also correlates with difficulty to sell. Generally, a bigger property is harder to sell, the St. Cloud Times reported.

“You’re fishing in a smaller pond in terms of users, available users or interested users for those really large spaces,” Greater St. Cloud Development Corporation President Patti Gartland said.

For one thing, it’s a larger investment, both Gartland and Schmitt said.

“The challenges are just greater with the larger spaces,” Greater St. Cloud Development Corporation Business Development Director Larry Hosch said.

But in his experience, Schmitt said, generally “if properties are priced right … things sell within a reasonable time frame.”

The old mantra is also right: There’s something to be said for location, location, location.

“Division Street, Second Street (South) seem to still kind of be the sought-after corridors in St. Cloud,” Schmitt said.

Since 2017, St. Cloud has seen more than 140 development projects totaling more than $366 million in value. Of these, 87 were tax-generating properties, according to the city’s development activity dashboard, which lists new construction and development activities (remodels, renovations, etc.) worth $250,000 or more. By industry type, the service industry had the most development projects (37), followed by public (31) and retail (21).

But there are scores of details to iron out before — and after — the sign can change from “for sale” to “sold.” That’s where the area’s economic and business development professionals come in.

Mehelich said the city’s focus is largely on employers offering high wage and skilled jobs — that’s what state and local financing assistance really focuses toward. When they meet with the EDA, it’s often when they’re looking for unlisted properties that might suit their needs. This is what happened with the Gateway Motel redevelopment, Mehelich said; the developer selected the site and reached out to the office to find out about any help they could get overcoming the challenges a redevelopment of that property would mean.

“We often serve as a matchmaker and connector in that sense, but also in connecting folks with resources, particularly as it relates to reuse or redevelopment opportunities,” Mehelich said.

Mehelich said the city also tries to be proactive in bringing businesses into the two business parks owned by the city, in which the city has “significant investments.” It also continues to focus on redeveloping the East Side.

“Oftentimes developers are looking for the path of least resistance, and redevelopment is not one of the paths of least resistance,” Mehelich said. “… We try to shorten the path of least resistance as much as possible through resources that we provide.”

Still, the city can only help to a point. In the end, the property owner and buyer still have to reach an agreement.

“That’s where we tend to see deals fall apart more than anything, and that’s out of our control,” Mehelich said.

On the other hand, there are people that do make it happen without calling on the city at all.

“There continues to be active reinvestment along Division Avenue and some of the other key corridors of the city,” Mehelich said. “… A lot of those reinvestments are happening without city assistance.”

The Greater St. Cloud Development Corporation has its own focal area when it comes to business attraction: think manufacturing-type work, and service providers for whom at least 50% what they produce or provide is exported outside the region, Gartland said. That, and everything downtown.

GSDC also helps connect businesses with site selection, connecting with its network of brokers to see what may be out there, GSDC Business Development Director Leslie Dingmann said.

For these companies, the GSDC can serve as a conduit in dealing with six cities, three counties and a multitude of brokers.

“We’re there to help do that on their behalf,” Gartland said.

A few times a year, an existing company will come to the GSDC looking at different options to expand — in this region, or in another place the company is located. Additionally, Gartland estimated the GSDC receives around 50 business attraction inquiries in a year.

Some of them are unlikely, like asks for an existing facility with specs of which there just isn’t one in the area. But some of them have good potential, and it’s Dingmann and Hosch’s job to ferret out those with that potential.

Many of those inquiries come from the state, asking its regional hubs to provide a short list of facilities that the state can then provide to a company doing a nationwide search, Dingmann said.

It’s normal for businesses to already know the basics about a community — demographics, population, basic infrastructure — before looking for sites, Dingmann said. According to Gartland, for many, one of the baseline questions is how to access the labor force to fill jobs.

In the greater St. Cloud area, there are some plus points on this front. Colleges and universities are talent generators. So are strong school districts. Being a regional center also bodes well, as does easy access to the Twin Cities but a lower cost of living.

Hosch said it’s also attractive for prospective incoming companies to see a community that works well together, whose city and regional leadership and educational institutions are engaged and interacting with business leaders. He sees that as a regional strength, too.

Runnings opened its St. Cloud location in September in the building formerly occupied by Shopko East. The Shopko store closed in May 2019 after the company filed for bankruptcy earlier that year.

Runnings have been dotting the upper Midwest over the course of 73 years. That’s given the company a familiarity with the area, and with what communities within those states would be a good fit for the company, Jensen said.

“You don’t need to look at statistics, for the most part, to identify whether or not a community is going to have a demand for the items that you’re selling,” Jensen said of the upper Midwest. “Us being in the area for this long, we know that folks in Minnesota — they farm.”

They also garden, fish and hunt. They are, as Jensen puts it, “outdoor lifestyle affiliated.”

And Runnings saw that in St. Cloud.

“We’ve been waiting to get into this market for a long time, and things just didn’t really work out for us to be there,” Jensen said in a phone interview.

Then, the property seller sent in an inquiry about the former Shopko East in St. Cloud. Jensen said the company gets inquiries every week from people asking them to take a look at empty buildings. For the most part, inquiries come from people involved in economic development work. But they also come from individuals, telling the company they want to see a Runnings in their hometown.

When inquiries come in, Runnings checks to make sure the proposed location would be far enough away to prevent competing with its own existing stores. Additionally, other retailers in the same market can be an indicator of demand in that region.

In a later email, Jensen said the selection process for St. Cloud site took five months.

Since the mid-1980s, Runnings has intentionally focused on larger markets where there’s likely an existing facility left empty by someone else. Goodbye, Shopko. Hello, Runnings.

“We felt very good about the shape of the building,” Jensen said. “I mean, we felt like there was a lot of strength to it. … For the most part, the building as a whole was in really good (condition) — same for the parking lot.”

Jensen said Runnings would rather move into an existing building in good shape than start fresh with a new build. For one thing, it’s cheaper. For another, much of the infrastructure is already there.

But in addition, one of the first things the company looks for is whether local entities are willing to work with the company, Jensen said. And using an existing property can help with that.

“We find that the communities, they want to work with us because they’ve got a vacant building there that’s not doing anything,” Jensen said. “They want someone to fill it.”

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