Downtown St. Paul’s residential population has almost doubled from roughly 4,900 to 9,500 residents in eight years — a potential mixed-blessing for an area that continues to shed older offices and lacks contiguous, high-end office space.

The restaurant-and-retail picture downtown is even more complicated. The number of storefronts is down, but the space they use is up. That is because restaurant openings, which tend to occupy more room than typical storefronts, remain a bright spot.

That’s the outlook from the Greater St. Paul Building Owners and Managers Association, which released its “Downtown St. Paul DataSource report” on Monday.

From a residential perspective, “it’s one of the fastest-growing downtowns in the country,” said Joe Spartz, president of the Greater St. Paul Building Owners and Managers Association.

As for commercial spaces, there is a push for building owners to upgrade and diversify their office environments to better reflect modern demand for collaborative areas.

“If people build good design, people will want to be here,” said Joe Spencer, president of the Downtown St. Paul Business Alliance.

A WELCOME MAT FOR DOWNTOWN RESIDENTS

The total number of people living in what BOMA dubs the St. Paul “Central Business District” has grown from 4,862 in 2010 to 9,457 by August of 2018, a 95 percent increase. Downtown added 500 people last year alone.

New apartments have fueled much of that growth, said Mary Bujold, president of Maxfield Research Inc., in a statement. Maxfield assembled the population data through surveys.

Downtown St. Paul has added 2,328 apartments the past eight years. And it’s still not enough to keep up with demand.

According to the report:

For condos and other owner-occupied units, the vacancy rate was less than one-third of one percent (0.3 percent.)

Downtown apartments have a vacancy rate of 3.8 percent, well below the 5.5 percent housing advocates see as the “break even” point where rents stay flat.

“Talk about pent-up demand. … In general, the Twin Cities is a hot market for apartments,” Spartz said. “There are other areas of the country that are softening up, but the Twin Cities still has a very strong demand.”

Developers continue to take weathered, older office and retail buildings — officially known as “Class B” and “Class C” office space — and convert them into relatively high-end apartments.

In the pipeline are art studios, retail and office buildings such as the Jax Building, Park Square Court, the east tower of the First National Bank building, the former Pioneer Press building on Cedar Street and the Seestedt’s Carpet and Linoleum building. All are being redeveloped into properties that are mostly residential or have a large hotel component.

NOT ENOUGH FLEXIBLE, HIGH-END OFFICE SPACE

Some observers have expressed concern that downtown St. Paul is losing too much office space in the course of residential conversions. Spartz isn’t convinced.

The overall office occupancy rate in the BOMA report was 92 percent, including competitive, government and owner-occupied office space.

Spartz is interested in seeing developers create flexible, higher-end office environments where startup companies, mid-level software developers and major employers can expand.

On Nov. 5, MPR/American Public Media will debut the Glen Nelson Center and Lunar Startups — a satellite workspace for news radio reporters with a start-up incubator attached. Because sometimes the best ideas 💡 come from everywhere else. pic.twitter.com/PXoym2iHPJ — FredMelo, Reporter (@FrederickMelo) October 22, 2018

“If they weren’t converting ‘B’ and ‘C’ office space over to residential, the question is, would it be sitting empty?” Spartz said. “If the market is in that transition period right now, … what we really need in the marketplace is … some new product. And new product is going to be ‘A’ space.”

To that end, there’s been some recent bright spots downtown.

A coalition of development partners — including Pak Properties, Schafer Richardson, the Halverson and Blaiser Group, and others — recently converted the former Ecolab Tower at 370 Wabasha St. into the Osborn370. The site bills itself as being home to the highest concentration of innovation-related businesses in the east metro.

Software developers for Reeher college fundraising software have assigned seating with the option of open space, Top-Gun styled-sound-proof rooms named Maverick, Cougar, Ice Man, etc., as well as upright breakroom-style areas. They came from Blair-Arcade to Osborn370 a year ago pic.twitter.com/kGV0h2RQmu — FredMelo, Reporter (@FrederickMelo) October 22, 2018

Osborn370 tenants include Reeher software, which expanded from 60 employees to 70 after relocating from the Blair-Arcade building on Selby Avenue, the “farm to fork” agricultural startup incubator known as TechStars, and an innovation center run by Minnesota Public Radio/American Public Media, which is working with the entrepreneurial incubator known as Lunar Startups.

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Sept. 30 is last day for public comment on Pigs Eye Lake makeover With innovation in mind, a combination of open-air work environments, small conference rooms and alcove-like spaces has allowed businesses to mix-and-match work environments. “We are trying to give people options, said Jeff Freeland Nelson, executive director of American Public Media’s Glen Nelson Center, which will host a grand opening in the building in November.

A few blocks away, Commercial Real Estate Services recently converted a long-vacant Woolworth’s department store building at 428 Minnesota St. into The 428, which offers some 50,000 square feet of high-end office and co-working space. Davis called that an ambitious project and a strong start.

“If somebody wants 5,000 square feet, they can find that, no problem,” Spartz said. “But if someone is looking for 75,000 square feet, we don’t have it in downtown St. Paul. That’s why we need to bring on new product.”

MORE ROOM TO EAT, FEWER PLACES TO SHOP

Despite an uptick in bar and restaurant openings, there are four fewer retailers in downtown St. Paul than in 2016. The total numbers of retailers dropped from 288 to 284, according to the report.

Despite the drop, more space is in use.

Restaurants and retailers are occupying more square footage downtown than they did two years ago — from 1.27 million square feet in 2016 to 1.35 million in 2018. The reasoning: Restaurants often require more space than traditional storefronts.

Meanwhile, another major retail departure appears imminent.

The BOMA report did not incorporate the future of the Sears store on Rice Street, which was included this month in a round-up of Sears locations likely to close by the end of the year. What will happen to the building and its large parking lot remains unclear.

HOW MACY’S SITE SET NEW COURSE

The former Macy’s Department Store at 400 Wabasha St. is one of a handful of downtown St. Paul properties that has changed ownership without becoming residential.

The property is now home to the Minnesota Wild practice rink, a two-level Walgreens, Minnesota Housing Finance Agency, the St. Paul Police Department and a TRIA Orthopedic Clinic, among other uses. It was redeveloped by the St. Paul Port Authority and the Hempel Cos.

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“Over the past 10 years — but specifically the last five years — there’s been a seismic shift in the universe of properties where uses are changing, like the Macy’s building,” said Rob Davis, a vice president with the Excelsior Group, a full-service real estate management and advisory firm in St. Louis Park. “(Macy’s) was repositioned as ‘specialty office’ and a different type of retail.”