MARKET TREND: Repurposing Underutilized Property Driving New Retail Development


As with the housing market, retail property owners and developers are seeking to densify uses on well-located properties in urban core areas, at a higher rate than they are perusing new suburban greenfield developments. However, unlike housing, retail can’t densify by simply going vertical with multiple stories—instead, property owners, tenants and city staff are getting creative to find new alternatives to spur retail development. For example, in many major retail trade areas, the addition of outparcels—also called pad sites or carve-outs—have been popping up all over the Twin Cities metro area. This trend has been inspired by property owners looking to increase portfolio value from repurposing the underutilized land areas found on its properties.

Historically, when many retail centers were constructed, the city parking requirement mandated a minimum of five parking stalls per 1,000 square feet of retail space. Owners and cities alike have realized that for most of the year, this amount of parking far exceeds what is truly needed for the normal course of business. Multi-modal transportation alternatives have also lessened the need for traditional huge seas of parking. So today, many cities are now relaxing parking standards and are working with owners to lower parking ratios, sometimes to 4.5 stalls or below per 1,000 square feet of retail space. While this may seem like a slight difference, in a 300,000-square-foot retail center, this half a stall decrease in parking ratio over the entire property could amount to an acre or more, which provides sufficient land area for a new multi-tenant retail building, restaurant or drive-thru facility. Shopping centers adding structured parking can create even more areas in outlying parts of a property for new development.


Due to these factors, outparcels are underway in nearly every large retail area in the Twin Cities metro. Examples can be found along France Avenue in Edina and at the Southdale Mall, where portions of the parking lot were sold for new multifamily and hotel developments. In addition, Restoration Hardware and Shake Shack are both constructing at Southdale on outparcels. Starbucks recently opened further south on a new pad site at Centennial Lakes. Other examples can be found at shopping centers across the metro, including: Ridgedale, Knollwood, Rosedale and Burnsville Center, which are exploring carve-outs for uses such as banks, multifamily residential, quick service restaurants and other retail uses. Community shopping centers, including properties in Eagan, Woodbury and Maple Grove, are actively pursuing this as well and are finding ways to maximize the value of excess land—for example, the addition of Portillo’s on a pad site at Arbor Lakes in Maple Grove. Even freestanding retailers like Cub Foods, Target and The Home Depot are actively selling or ground leasing pad sites in front of its stores.


Increasing density for a property is a trend that is impacting all areas of real estate as owners are incentivized to reevaluate and optimize the best use of their land. Retail will continue to follow housing and transit trends and is continually changing to meet the demands of its customers. The trend of densification and reimagining land use across retail product types is one that will continue and likely increase in frequency in the coming years.


Tom Palmquist

Senior Vice President

Colliers International | Minneapolis - St. Paul

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September 6, 2019

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