Kraus-Anderson just can't get enough of downtown Minneapolis

Kraus-Anderson's legacy in downtown Minneapolis is already cemented. More than 100 years ago an earlier incarnation of the company built the original Dayton's building; in the 1980s the company built what was then Pillsbury Center and last year it redeveloped a full city block that includes the HQ Apartments, a hotel, brewery and a new Kraus-Anderson corporate headquarters building.

And now, the company is poised to start construction on a 16-story, $105 million luxury apartment building that is across the street from its HQ mixed-use project.

"We've owned the block we're on since the 1940s and having rebuilt and consolidated our offices here we're very proud to call it home," said Michael Hille, executive vice president of Kraus-Anderson Realty and Development Cos. "When this opportunity arrived, we wanted to be first in line to take advantage of it if it."

The building, called the Larking, will fill a mostly vacant half-block site that fronts 8th Street between Portland and Chicago Avenues that has been home to a Wells Fargo Bank branch at 800 Park Ave.

Kraus-Anderson is doing site work in preparation for a new Wells Fargo building, which will eventually be integrated into the tower. Also planned is 15,000 square-feet of retail space on the first floor of the tower and three levels of underground parking.

While the Larking will have 341 market-rate apartments, it won't radically change the skyline. But it will fill another important gap in Elliot Park, a historic and economically diverse community that's nestled between two rapidly developing neighborhoods: Downtown West and Downtown East, an area that's known as East Town.

"As Elliot Park and East Town continues to grow we've carved out this cool little community within a community," said Hille. "We have a lot of people on the streets; everyone is utilizing our courtyard on the HQ block."

"If HQ was James Bond's 007, then this is Holly Golightly from 'Breakfast at Tiffany's,' " Hille said.

The project comes at an increasingly competitive time for the rental market in downtown. Last year, developers completed 1,286 units in downtown and a record number of completions are expected next year. The average vacancy rate in downtown Minneapolis during the first quarter was 5.2%, according to Marquette Advisors. That's double last year at the same time.

With so many units coming on line at a time of slowing absorption, Hille expects developers to cancel some of the projects that have been announced, so that by the time the Larking starts leasing up in 2022, "occupancy will catch up with delivery and we'll be in good shape."

The 1.14-acre site became available after Wells Fargo, which owned the site, issued a request for proposals.

Kraus-Anderson first considered a six-story stick-built building for the site. But Jordan Munro, community organizer with the Elliot Park Neighborhood Inc., said there was support for more density.

Munro said neighborhood also wants more retail and services to serve the growing number of residents, many of them young professionals who reverse commute to jobs in the suburbs where they have access to shopping and services. One of the top priorities for the neighborhood, he said, is attracting a grocery store and more restaurants.

"People want to have access to basic groceries and healthy produce within walking distance, and a nice healthy restaurant," said Munro. "There is very little food access, especially on the weekends because all [the] skyways close."

Jim Buchta • 612-673-7376