Developer United Properties sells former HQ in Gaviidae Common on Nicollet Mall

Downtown Minneapolis office sales have been a rarity in the past three years, but United Properties notched two just last month.

One week after the $225 million office sale of the new RBC Gateway tower on Nicollet Mall, United found a buyer for its former headquarters in Gaviidae Common, a mixed-use building that was once a luxury retail destination.

New Zealand-based Zuru paid $4.15 million in cash for 26,703 square feet of office space, known as Suite C, on the fourth floor of the building. The deal included $100,000 in office furniture.

Zuru, a consumer-goods company that does business with Target Corp., declined to comment on the deal.

The building's parking, which a separate entity owns, was not included. Nor did it include an office condo on the third floor of the building that United Properties also owns, said listing agent Tom Tracy of Cushman and Wakefield.

"It's a very well-located space," Tracy said. "It's a unique opportunity in a mixed-use building that's evolved."

Once completed in 1989, Gaviidae was superlative in several ways. Star architect César Pelli designed the building, which was home to Saks Fifth Avenue and several other high-end retailers. It also occupies a prime location at S. 7th Street and Nicollet Mall across from the IDS Tower and on the same block as Wells Fargo Center, which Pelli also designed.

The 443,000-square-foot project was one of several attempts at bringing high-end retail downtown. Saks Fifth Avenue became a discount store in 2005 and closed in 2015. Across the street and connected by skyway, phase two of the project opened in 1991 and included a Neiman Marcus store, which closed in 2013.

Today, the building's main retail anchor is Walgreens, one of downtown's only drugstores. The building is also home to the Dayton YMCA, which moved into the upper three floors of the building in 2016.

Tracy, who is executive director of Cushman's investor services group and the lead in its Minneapolis Central Business District agency leasing business, represented United on the sale.

Chris Wold, vice president of asset management for United Properties, said the company's third-floor space is vacant, but the company is marketing it for sale or lease with Cushman and Wakefield.

The latest sale is a small win for the north end of Nicollet Mall, which has a glut of vacant retail space and still is saddled with a massive office sublease space in the City Center building that Target vacated at the beginning of the pandemic.

Though many office building owners in the Twin Cities are eager to sell as vacancy rates remain near historic highs and values decline, there have been only two significant sales so far this year. Green Street, a national real estate research firm, said sales of smaller spaces like this one in Gaviidae are far more common than larger ones because private buyers — who are more likely to hold the buildings than an institutional buyer — tend to drive those less-expensive sales.

The firm said sales of commercial real estate valued at $5 million to $25 million fell 29% during the first half of the year, half the decline for buildings valued at more than $25 million.

"Right now, if you're taking a sub-$100 million deal to market, most likely your buyer is going to be a private investor, either a family office, a high-net-worth individual," said Kevin Aussef, global chief operating officer for capital markets at CBRE, in a statement.