Upsized 100,500 s.f. MOB in Lakeville, Minn.. satisfies tenant demand
By John B. Mugford
Lakeville Specialty Center recently opened in the growing Minneapolis suburb of Lakeville, Minn. The developer, Davis, doubled the size of the project to 100,500 s.f. after receiving city approvals for an MOB of 50,000 square feet. (Photo courtesy of Davis)
As far as Mark A. Davis is concerned, acquiring vacant parcels on speculation is not his preferred strategy.
“It doesn’t usually make sense financially to hold onto land like that,” says Mr. Davis, the founder and a principal with the long-time, Minneapolis-based healthcare real estate (HRE) firm bearing his name.
However, the HRE firm, which has developed about 40 projects in its history, has built many long-term relationships with healthcare provider clients throughout the Greater Twin Cities area of Minneapolis and St. Paul, Minn. So the Davis team knew, through ongoing discussions with these clients, that plenty of additional medical outpatient building (MOB) space was needed in the growing suburb of Lakeville, Minn., about 25 miles south of downtown Minneapolis.
According to the U.S. Census Bureau, the Lakeville’s population has increased 74.8 percent since the year 2000 and now stands at an estimated 76,243.
So, heeding the calls for more MOB space in the growing suburb, Davis gained control of a 4.3-acre parcel at 18645 Orchard Trail in Lakeville in 2019. The site is in a commercial area rife with well-known retailers such as Target, and is just off busy U.S. Interstate 35, which connects to both downtown Minneapolis and St. Paul, the state’s capital.
The original plans called for an MOB of about 50,000 square feet, and Davis heard from a wide variety of providers interested in the space. As the firm’s leasing team, which includes and is led by Principal Jill K. Rasmussen, spoke with potential tenants, one of them, MNGI Digestive Health, which had 10 other locations at the time, identified Lakeville as a market expansion target and selected the Davis site as the best option.
As Davis worked to line up tenants, develop its plans for the project and obtain city approval, the COVID-19 pandemic caused a delay for almost all business endeavors, including the Lakeville project.
At a certain point in the process – as the pandemic shutdowns were easing – and with MNGI committed to leasing just less than about 50 percent of the space, Davis pulled the trigger on acquiring the land and moved forward with its plans.
“Typically, we only start projects when we’re at, or at least close to, having 50 percent of them pre-leased,” Mr. Davis tells HREI. “So, we decided to move forward, as we were quite confident, as a result of our talks with other prospective tenants, that we could fill the remaining space.”
Then, however, one of the Twin Cities’ larger health systems, Minneapolis-based Allina Health, which operates 12 hospitals and nearly 100 clinics in Minnesota and western Wisconsin, made it known that it, too, was in search of a place to offer a wide variety of specialty services and surgeries in growing Lakeville as well. The system already offered primary care and other services in a 12,500 square foot facility a few miles to the south of the Davis site.
So, Allina put out a request for proposals (RFP) for development options in Lakeville and eventually chose Davis and its planned project for a new location to offer specialty services.
After receiving a commitment from Allina, Davis began working with the health system on its space needs in the future MOB.
“We’d already received the approval for a 50,000 square foot MOB,” Mr. Davis recalls. “But as we worked with Allina, it became clear we were going to have to build a larger facility – a much larger building, in fact, as their space needs were quite large.”
Digging in
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