German company plans new office building in Bloomington amid vacancies

At a time when office development in the Twin Cities has nearly ground to a halt and office vacancy rates in some parts of the suburbs rival those in downtown Minneapolis, an international sensor manufacturer is poised to build a 144,000-square-foot office building in Bloomington.

On Monday, Sick, a German sensor manufacturer, said it closed on an undeveloped site where it plans to build its North American headquarters at the corner of Lindau Lane and Winstead Way just east of the Mall of America.

"To have a headquarters being built at this time is a really significant investment both by retaining and creating new jobs with this expansion," said Jason Schmidt, assistant Bloomington Port Authority administrator.

Schmidt said office projects in the city dried up during the pandemic, and none are in the pipeline for future development.

Sick will retain and create a total of 247 full-time equivalent jobs with an overall median wage of $94,500.

New office development in the Twin Cities metro has been virtually nonexistent as the average vacancy rate in many suburbs hovers near all-time highs, rivaling even downtown Minneapolis.

At the end of June, the average vacancy rate in the south/airport submarket that includes the area surrounding the Mall of America was 28.7% compared with 29.7% in the Central Business District in downtown Minneapolis. That's according to a second-quarter report from Cushman and Wakefield that focused on multi-tenant buildings rather than corporate-occupied buildings.

"In general, the suburbs are doing better than downtown," said Dan Gleason, executive director of Cushman and Wakefield. "But unfortunately, we're going to see more new space come on the market."

Already, several corporations in the south metro have announced plans to reduce their office space in buildings. That includes Best Buy, Delta Air Lines and Unisys.

"Tenants are not adding bodies," Gleason said. "Companies are still dealing with work from home, so more new supply is getting delivered into the marketplace."

The largest office building under construction in the metro is the North Loop Green in Minneapolis' North Loop neighborhood. That massive, mixed-use development includes 350,000 square feet of office space in a 14-story tower.

Gleason said while Sick's new office building is a rarity today, there are many companies that are on the hunt for office space that better suits their space needs as employers look for ways to draw workers back to the office.

"There is activity in the marketplace, but it's a function of trying to create a better solution than somebody's couch," he said.

Gleason said the Bloomington site offers Sick employees a variety of attractive amenities, including state-of-the-art work spaces, access to public transportation and much nearby retail and restaurants in and around the Mall of America.

"That's going to be attractive [to employees]," he said. "Tenants who are in the marketplace are preferring an amenity-rich environment."

The site is next to a manufacturing facility the company completed last year and is in the heart of the city's growing South Loop commercial district, which aims to become a high-tech manufacturing hub.

To encourage development in that area, the city has extended a variety of incentives to Sick and other tech manufacturing companies, including Polar Semiconductor and SkyWater Technology.

The Bloomington Port Authority offered Sick more than $12.1 million in subsidies, including a discount on the land where it plans to build its new North American headquarters. The city sold the roughly 3½-acre parcel for $1.2 million, which is more than a third of its estimated market value.

Construction will begin next spring with additional phases taking place in the next 15 years.

Star Tribune staff writer Josie Albertson-Grove contributed to this report.