commercial/industrial market analysis for scott county, minnesota

Commercial/Industrial

Market Analysis for Scott County, Minnesota

Prepared for:

Scott County Community Development Agency Shakopee, Minnesota

February 2012

1221 Nicollet Mall Suite 218 Minneapolis, MN 55403

612‐338‐0012 (fax) 612‐904‐7979 1221 Nicollet Mall, Suite 1218, Minneapolis, MN 55413

www.maxfieldresearch.com

February 17, 2012 Mr. William Jaffa Executive Director Scott County Community Development Authority 323 South Naumkeag Street Shakopee, Minnesota 55379 Dear Mr. Jaffa: Attached is a draft copy of our Commercial/Industrial Market Analysis for Scott County, Minnesota. The study examines employment data, building permit trends, SCALE parcel data, and market conditions in order to estimate excess demand for commercial and industrial acreage in Scott County from 2012 to 2030. The study reveals the amount of commercial and industrial space Scott County is expected to expand between 2012 and 2020, albeit at a slightly slower pace than estimated absorption from the 2006 study. Over the course of this decade we find approximately 1,500 acres are needed to accommodate projected growth. Presently there is enough Class I pad‐ready land to accommodate this demand through 2015, however Class II property will be need to be brought up to Class I (pad‐ready) meet this need through 2020. In order to reach Scott County’s 2030 goal to employ 50% of the County’s labor force in Scott County, approximately 19,000 jobs would need to be added today. Based on industry standards, Scott County would likely need about 650 acres in order to meet employment goals. We appreciate the opportunity to perform this market analysis and look forward to your feedback. Sincerely, MAXFIELD RESEARCH INC.

Matt Mullins Amanda Janzen Vice President Research Analyst Attachment

TABLE OF CONTENTS

Page EXECUTIVE SUMMARY .................................................................................................. 1 Study Purpose .......................................................................................................... 1 Population Analysis .................................................................................................. 1 Employment Analysis ............................................................................................... 1 New Construction Commercial and Industrial Building Permits ............................. 2 Market Analysis ........................................................................................................ 3 SCALE Summary ....................................................................................................... 7 Conclusions and Recommendations ........................................................................ 8 PURPOSE AND SCOPE ................................................................................................... 11 Study Purpose .......................................................................................................... 11 Study Scope .............................................................................................................. 11 EMPLOYMENT ANALYSIS .............................................................................................. 12 Introduction ............................................................................................................. 12 Population and Household Growth Trends and Projections ................................... 12 Employment Growth Trends .................................................................................... 17 Covered Employment .............................................................................................. 19 Wages by Industry ................................................................................................... 21 Resident Employment .............................................................................................. 21 Resident Education Levels ....................................................................................... 24 Commuting Patterns ................................................................................................ 25 Major Employers ...................................................................................................... 27 Establishments ......................................................................................................... 30 Industrial Establishments by Number of Employees ............................................... 31 Impact of Employment Trends ................................................................................ 31 BUILDING PERMIT ANALYSIS ........................................................................................ 33 Introduction ............................................................................................................. 33 Building Permit Trends ............................................................................................. 33 MARKET ANALYSIS ....................................................................................................... 38 Introduction ............................................................................................................. 38 Industrial Market Conditions ................................................................................... 39 Office Market Conditions ......................................................................................... 50 Retail Market Conditions ......................................................................................... 59 Land Market Conditions ........................................................................................... 66 Commercial Broker Interviews ................................................................................ 70 Industrial/Commercial Outlook ............................................................................... 73 Impact of Market Conditions ................................................................................... 74

SCALE OVERVIEW ......................................................................................................... 76 Introduction ............................................................................................................. 76 SCALE Summary Data ............................................................................................... 77 Acreage by Parcel Size and Class ............................................................................. 77 SCALE Classification by Submarket .......................................................................... 82 SCALE Submarket Breakdown .................................................................................. 85 SCALE Summary by Parcel Size and Market Value .................................................. 87 Acreage by Land Use ................................................................................................ 88 SCALE Summary ....................................................................................................... 89 INFRASTRUCTURE ANALYSIS ......................................................................................... 90 Introduction ............................................................................................................. 90 Infrastructure Analysis ............................................................................................. 92 Mass Transit ............................................................................................................. 95 CONCLUSIONS AND RECOMMENDATIONS.................................................................... 97 Introduction ............................................................................................................. 97 Estimates of Employment per Acre ......................................................................... 97 Employment Density ................................................................................................ 98 Jobs to Labor Force .................................................................................................. 99 Projected Demand for Office Space ......................................................................... 101 Projected Demand for Retail Space ......................................................................... 102 Projected Demand for Industrial Space ................................................................... 104 Projected Demand for Commercial/Industrial Land ................................................ 106 Demand Summary vs. SCALE Supply........................................................................ 109 Demand Comparison ............................................................................................... 112 Commercial/Industrial Recommendations .............................................................. 112 Online Marketing ..................................................................................................... 120 Minnesota Department of Employment and Economic Development ................... 121 ACRONYMS AND DEFINITIONS ..................................................................................... 122 Employment Terms .................................................................................................. 122 Lease Terms ............................................................................................................. 122

LIST OF TABLES

Table Number and Title Page A‐1 Population Growth Trends and Projections, Scott County, 1990 ‐ 2030 ................... 14 A‐2 Household Growth Trends and Projections, Scott County, 1990 ‐ 2030 ................... 15 A‐3 Employment Growth Trends and Projections, Scott County, 1990 ‐ 2030 ............... 18 A‐4 Estimated Covered Employment By Industry, Scott County & Metro Area, 2000 ‐

2030 ........................................................................................................................... 20 A‐5 Estimated Average Yearly Wage By Industry, Scott County & Metro Area, 2006 –

2011 ........................................................................................................................... 22 A‐6 Resident Employment, Scott County, 2000 ‐ 2011 .................................................... 23 A‐7 Educational Attainment for Residents 25 Years Old and Older, Scott County and

7‐County Metro Area, 2000 & 2010 .......................................................................... 24 A‐8 Scott County Commuting Patterns for Primary Jobs, 2009 ....................................... 26 A‐9 Major Employers, Scott County, 2010 ....................................................................... 28

A‐10 Establishments By Industry, Scott County, 2000 and 2009 ....................................... 30 A‐11 Industrial Business Growth By Size of Business, Scott County, 2006 ‐ 2009 ............. 32

BP‐1 Estimated Commercial/Industrial Building Permit Trends, New Construction 2006 ‐ 2011 ................................................................................................................ 34

BP‐2 Building Permit Total, Five Year Increments, 2001 ‐ 2011 ........................................ 36 BP‐3 Annual Average Permits Issued and Acreage Per Permit, Scott County, 1996 – 2000,

2001 – 2005, 2006 ‐ 2011 .......................................................................................... 36

MA‐1 Historical Industrial Vacancy Rates, Southwest Submarket, 2002 ‐ 2011 ................. 40 MA‐2 Historical Industrial Vacancy Rates By Product Type, Southwest Submarket,

2002 ‐ 2011 ................................................................................................................ 41 MA‐3 Vacancy & Absorption, Southwest Submarket, 2011 ................................................ 42 MA‐4 Historical Industrial Rental Rates, Southwest Submarket, 2002 ‐ 2011 .................... 44 MA‐5 Average Quoted Industrial Rental Rates (NET), Southwest Submarket, 2010 & 2011 45 MA‐6 Actively Marketing Industrial Properties by Submarket, Scott County, October 2011 47 MA‐7 Summary of Industrial Properties Currently Listed, Scott County, October 2011 .... 48 MA‐8 Office Vacancy & Absorption, Southwest Submarket, 2011 ..................................... 52 MA‐9 Average Quoted Office Rental Rates (NET), Southwest Submarket, 2010 & 2011 ... 54

MA‐10 Actively Marketing Office Buildings, Scott County, October 2011 ............................ 57 MA‐11 Historical Retail Vacancy By Specific Use, Scott County, 2006 to 2011..................... 61 MA‐12 Rental Rates By Type of Center & Submarket, Twin Cities Metro, 2011 ................... 62 MA‐13 Actively Marketing Retail Development By Submarket, Scott County, October 2011 64 MA‐14 Actively Marketing Land – Scott County, Carver County & 7‐County Metro Area,

Land Costs Per Square Foot & Acre, October 2011 ................................................... 66 MA‐15 Sold Land Transactions in Scott County By Submarket, 2010 to 2011 ...................... 68 MA‐16 Land Absorption by Acreage, Metro Area, 2005 – 2010 .............................................. 69

S‐1 SCALE Summary Data, Scott County, November 2011 .............................................. 80 S‐2 SCALE Acreage By Parcel Class & Size, Scott County, November 2011 ..................... 81 S‐3 SCALE Classification By Submarket & Acreage, November 2011 .............................. 84 S‐4 Parcels By Acreage, Submarket & Class, November 2011 ......................................... 86 S‐5 SCALE Summary By Parcel Size & Market Value, November 2011 ............................ 87 S‐6 Acreage By Land Use, November 2011 ...................................................................... 88

IA‐1 Site Selection, Key Location Factors and Attributes .................................................. 91 IA‐2 Infrastructure Investments, Scott County, 2012 ‐ 2021 ............................................ 93

CR‐1 Estimated Employment Per Acre, Commercial/Industrial Zoned Industries ............. 98 CR‐2 Average Employment Density, Square Foot/Employee ............................................ 99 CR‐3 Employment Goals by Job Density, 2010 to 2030 ..................................................... 100 CR‐4 Projected Demand for Office Space, Scott County, 2010 to 2030 ............................ 102 CR‐5 Demand for Retail Space, Scott County, 2010 to 2030 ............................................. 103 CR‐6 Projected Demand for Additional Industrial Space, Scott County, 2010 to 2030 ..... 105 CR‐7 Projected Demand for Commercial/Industrial Land, Scott County, 2012 ‐ 2020 ...... 107 CR‐8 Demand Summary with SCALE Acreage, Scott County, 2012 to 2020 ...................... 110 CR‐9 Summary of Commercial/Industrial Demand (Acres), Scott County, 2010 to 2030.. 112 CR‐10 Long Term High Growth/High Pay Jobs, Metro Area, 2009 to 2019 ......................... 116

LIST OF MAPS Table Number and Title Page 1. Scott County ............................................................................................................. 13 Infrastructure Analysis ................................................................................................... 94 SCALE Class I Countrywide Commercial and Industrial Areas ....................................... 126 SCALE Class II Countrywide Commercial and Industrial Areas ...................................... 127 SCALE Class III Countrywide Commercial and Industrial Areas ..................................... 128

EXECUTIVE SUMMARY

MAXFIELD RESEARCH INC. 1

Study Purpose

Maxfield Research Inc. was engaged by the Scott County Community Development Agency (Scott County CDA) to conduct an analysis of the Scott County commercial and industrial land supply. This study is an update of a previous assessment completed by Maxfield Research Inc. for the Scott County CDA in 2006.

Population Analysis

Scott County was the fastest‐growing county in Minnesota and one of the fastest growing counties in the United States during the last decade. Scott County added about 42,000 people during the 2000s, an increase of 46.3%

Due to the economic downturn, population and household growth will be stagnant for the next couple of years, with greater growth after 2015. By 2020, it is projected that Scott County will have a population of about 164,000 people, up from about 133,000 people in 2010.

Employment Analysis The following section examines employment growth trends for Scott County. Job growth is a key driver and indicator of potential demand for commercial and industrial space. Employment Growth Trends

There were a total of about 42,300 jobs in Scott County in 2010, of which about 79% were located in Shakopee, Savage, and Prior Lake.

The number of jobs in Scott County is projected to grow by 9,900 jobs this decade (+23.4%). This is higher than the Twin Cities Metro Area, which is projected to experience growth of 16% by 2020.

Employed People Living in Scott County

There is a large out migration of workers from Scott County. Only about 24% of Scott County residents in 2009 worked in Scott County. Of the 76% that commuted to jobs outside the County, the most commuted to jobs in Hennepin County (44%) followed by Dakota County (15%).

EXECUTIVE SUMMARY


Residents in Scott County may commute to Hennepin County due to higher wages. The overall average wage in Hennepin County is $60,242, or approximately $20,000 higher than Scott County’s average wage of $40,378.

Major Employers

The Shakopee Mdewakanton Sioux Community is one of the largest employers in the County. They own and operate Mystic Lake Casino Hotel, Little Six Casino, Dakota! Sport & Fitness, Playworks, Dakota Convenience Store, Dakota Meadows RV Park and Campgrounds, Dakota Meadows Storage Facility, and The Meadows at Mystic Lake Golf Club.

The largest employer in the County was Mystic Lake Casino with approximately 5,000

employees. Other top employers in the County include Valleyfair Amusement Park, Seagate Technology, and Shakopee School District.

Establishments

Overall, Scott County grew by nearly 905 establishments (+29%) between 2000 and 2009. Construction, Retail Trade, and Professional, Scientific, and Technical Services industries had

the largest number of establishments in both 2000 and 2009.

New Construction Commercial and Industrial Building Permits

The downturn of the economy had a significant impact on the commercial and industrial sectors. Scott County saw a drastic decline in the total number of new construction commercial and industrial building permits in the last ten years. There were 455 building permits issued between 2001 and 2005 compared to only 229 permits between 2006 and 2011.

New commercial and industrial development in Scott County was concentrated in

Shakopee. Between 2001 and 2011, Shakopee issued the most building permits each year, ranging from 11 to 39 permits per year.

EXECUTIVE SUMMARY


Commercial/Industrial Building Permits and Acres Developed

Scott County

2001‐2011

0

20

40

60

80

100

120

2001 2003 2002 2004 2005 2006 2007 2008 2009 2010 2011

Year

Number of Building Perm

its

0

50

100

150

200

250

300

Acres

Bui lding Permits

Acres

Market Analysis Employment growth in Scott County often drives demand for commercial and industrial development. On the supply‐side, the following section analyzes office, industrial and retail market trends in Scott County. Industrial Market Conditions in the Southwest Submarket Absorption

Over the past ten years the overall vacancy rate in the Southwest Submarket (where Scott

County is located) has fluctuated from a low of 10.5% in 2005 to a high of 17.3% in 2010. However, the Twin Cities industrial market is showing signs of stabilization and is on a path of slow recovery. The Southwest Submarket posted the most positive absorption from 2010 to 2011 in the Metro Area.

Among the three industrial product types, office warehouse has maintained the most

consistent vacancy rate from 2002 to 2011, having ranged from 9.3% to 14.4%. Bulk Warehouse vacancy rates have fluctuated significantly from 6.1% to 27.9%. Office showroom vacancy rates ranged from 10.2% to 21.7% in the last decade.

EXECUTIVE SUMMARY


In the Southwest Submarket, the three industrial product types absorbed nearly 290,000 square feet in the first half of 2011. Over the past year, absorption has been over 460,000 square feet.

Lease Rates

As illustrated in the table below, office showroom has the highest rents while bulk warehouse has the lowest. Office showroom rents are higher due to the high level of finishes versus warehouse space.

The average common area maintenance (CAM) and taxes per square foot was $1.40 for bulk warehouse, $3.35 for office warehouse, and $3.68 for office showroom.

Op. Expenses

Warehouse Office Taxes & Taxes

Bulk Warehouse $4.07 $6.99 $0.83 $1.40

Office Showroom $4.88 $9.44 $2.11 $3.68

Office Warehouse $4.16 $8.55 $1.41 $3.35

Bulk Warehouse $4.09 $7.04 $0.83 $1.41

Office Showroom $4.81 $9.37 $2.11 $3.66


Sources: NorthMarq, Maxfield Research Inc.

1st Half 2011

2nd Half 2010

AVERAGE QUOTED INDUSTRIAL RENTAL RATES (NET)

SOUTHWEST SUBMARKET

2ND HALF 2010 & 1ST HALF 2011

Properties Currently Marketing Industrial Space in Scott County

Overall, Scott County has 26 properties with available space currently marketing as of

October 2011. Combined, these properties are marketing 1.28 million square feet of space

One‐half of the listings are located in Shakopee, while 35% of the properties are in Savage. Combined, these two communities account for almost 95% of the marketing square footage (Shakopee 70.5%; Savage 24%). There are no properties marketing in Belle Plaine, Elko New Market, or any of the townships. A total of four properties are listed for‐lease or for‐sale.

The majority of industrial properties marketing are classified as bulk warehouse, while office‐warehouse make‐up the remainder. There are no office showroom properties actively marketing.

EXECUTIVE SUMMARY


Average lease rates range from $4.00 (warehouse) to $9.50 (office showroom) per square foot. Average operating expenses (CAM) are $1.07, while operating expenses are $1.55.

Office Market Conditions Absorption

Vacancy rates across the Metro Area have steadily increased since 2006 with the highest

vacancies in 2010. However, the overall vacancy rate declined in the Southwest Submarket in 2011. In 2010, 20.8% of office space was vacant, decreasing to 18.4% in 2011.

The declining vacancy rate was due to a positive absorption of over 264,000 square feet over this past year. The first half of 2011 posted the first positive absorption since 2007 prior to the Great Recession.

Lease Rates

As illustrated in the table below, Class A average rents peaked in 2009 at $15.80 per square foot, while both Class B and Class C rents peaked in 2007 ($12.30 and $10.30, respectively).

The average common area maintenance (CAM) and taxes ranged from over $11.00 for Class A space, $9.77 for Class B space, and about $8.00 for Class C space.

Year Class A Class B Class C

2002 $15.10 $11.38 $10.66

2003 $14.73 $11.13 $9.95

2004 $14.54 $11.27 $9.46

2005 $14.89 $11.62 $9.57

2006 $15.33 $12.06 $9.54

2007 $15.78 $12.30 $10.30

2008 $15.53 $11.94 $9.38

2009 $15.80 $11.70 $8.76

2010 $15.20 $11.49 $8.91

2011 $14.69 $10.96 $6.91


HISTORICAL OFFICE RENTAL RATES

SOUTHWEST SUBMARKET

1st HALF 2002‐2011

EXECUTIVE SUMMARY


Properties Currently Marketing Office Space in Scott County

Overall, Scott County has 33 office properties marketing as of October 2011. Over 180,000 square feet of space is currently available in Scott County.

Lease rates among properties actively marketing range from $6.00 to $34.00 per square foot. The median lease rate is $14.75.

The properties are distributed rather equally between for‐lease and for‐sale properties. Four of the properties are marketing either a for‐sale or for‐lease option. Additionally, nearly 80% of the properties are multi‐tenant buildings.

Retail Market Conditions Absorption

The vacancy rate in Scott County was 8.2% in 2011, up from 5.4% in 2010. Vacancy rates

vary significantly based on the retail center type. The one regional center (Southbridge Crossing) posted a vacancy rate of only 1.4%; whereas community centers had a 5.1% vacancy rate, and neighborhood centers was 18.6%.

Absorption was negative this past year (‐58,000 square feet) as vacancy rates increased. This is highly attributed to the significant spike in vacant space in the neighborhood sector, which had a negative absorption of over ‐82,000 square feet.

Lease Rates

Average lease rates in the Southwest Submarket ranged from approximately $17.20 to $20.34 per square foot, the highest of the four submarkets in the Metro Area.

The average common area maintenance (CAM) and taxes were $4.05 and $4.88 per square foot respectively, also the highest among all four submarkets.

EXECUTIVE SUMMARY


Avg. Avg.

Location Low ‐ High CAM Taxes

SubmarketNortheast $14.16 ‐ $18.47 $3.60 $4.48Northwest $14.52 ‐ $17.00 $3.59 $3.71Southeast $15.02 ‐ $17.68 $3.22 $4.04Southwest $17.21 ‐ $20.34 $4.05 $4.88

Twin Cities Metro Area

Neighborhood $14.51 ‐ $17.00 $3.46 $3.96Community $17.29 ‐ $20.18 $3.14 $4.40

Regional $18.69 ‐ $29.92 $6.48 $6.41

Mpls CBD $11.33 ‐ $32.58 $10.19 $3.89

Sources: Minnesota Shopping Center Association, 2011

Maxfield Research, Inc.

Avg. Net Rental Rates

RENTAL RATES BY TYPE OF CENTER & SUBMARKET

TWIN CITIES METRO

2011

Properties Currently Marketing Retail Space in Scott County

Overall, Scott County has 25 retail properties marketing as of October 2011. Over 274,000 square feet is for‐lease in the County.

Shakopee has 13 properties marketing over 189,000 square feet of space, about 70% of the County’s inventory. Although Savage has 7 properties marketing, they combine for about 25,000 available (9% of the County’s available square footage). Likewise, Prior Lake has only four properties marketing but makes up just over 20% of the inventory.

Average lease rates among the properties actively marketing is just under $15.00 per square foot. Operating expenses average $3.43 and taxes average $4.67.

SCALE Summary Maxfield Research compiled commercial/industrial land uses information based on data compiled from the Scott County Planning Department and Scott County Assessor’s Office. The data was assembled to inventory parcels based on the “readiness” for future commercial/industrial development. Parcels are classified as follows: Class I: Property that is already platted and “pad ready.” Interior lot improvements have been completed and development only required building permit or site plan approvals.

EXECUTIVE SUMMARY


Class II: Property is guided and zoned for commercial/industrial use within the 2030 growth boundary or MUSA boundary. Public infrastructure is readily accessible to the property and has sufficient capacity to serve the development.

Class III: Property is guided for commercial/industrial uses on locally adopted land use map.

Combined, there are 633 parcels with over 8,100 acres identified for commercial or

industrial development in Scott County. About 62% of the parcels are vacant, while about 48% have some type of structure on the premises.

Class III properties account for nearly 50% of the parcels and 73% of the total acreage. Class I properties make‐up 7% of the total acreage, whereas Class II properties account for 20%.

Class I pad‐ready site’s make‐up 7% of the County’s total acreage, yet account for 32% of total market value. Only eight Class I properties are larger than 10 acres, the median Class I size is just 1.8 acres.

In the seven municipal jurisdictions, there is a combined 2,220 acres available. The City of Shakopee boasts about 750 acres, containing one‐third of the acreage within all of Scott County municipalities. Prior Lake has the second highest land holdings, encompassing 570 acres (26%).

Shakopee has the largest inventory of pad‐ready sites (i.e. Class I), boasting over 290 acres. Prior Lake, Elko New Market, and Jordan all have between 50 and 60 Class I acres. Combined, these four communities account for 85% of the Class I inventory.

Conclusions and Recommendations Jobs to Labor Force

Scott County has a total of approximately 42,300 jobs. As a result, the County does not

have enough jobs to employ the total labor force. Scott County can only employ 56% of the County’s current labor force, and this assumes all residents would work in the County. Furthermore, only 23.7% of Scott County residents work in the County.

In order to achieve a 50% capture from Scott County’s labor force (2030 goal), the County would need to add approximately 19,000 jobs in 2010.

Based on industry standards, Maxfield Research Inc. calculated a need for about 660 acres in 2010 in order to meet employment goals.

EXECUTIVE SUMMARY


SCALE data revealed an inventory of 540 Class I acres. Therefore, there is not enough land today to achieve the County’s goal of a 50% labor force capture rate. Because of employment growth, acreage needs will increase significantly over the next two decades.

Projected Demand for Office, Retail, and Industrial Uses

Demand for commercial/industrial real estate uses was calculated based on projected employment and household figures and applying industry averages. The following table summarizes demand by product type over the next two decades.

RetailOfficeIndustrial 93 ‐ 186 239 ‐ 358 332 ‐ 544Total 169 ‐ 262 349 ‐ 468 518 ‐ 730

Source: Maxfield Research Inc.

Note: Demand projections based solely on household growth and employment

projections.

SUMMARY OF COMMERCIAL/INDUSTRIAL DEMAND (ACRES)SCOTT COUNTY2010 to 2030

2010 ‐ 2030

13550

5620

2010 ‐ 2020 2020 ‐ 2030

7931

Projected Demand for Commercial/Industrial Land

Based on historical building permits and land absorption, we calculated demand for

commercial and industrial zoned land between 2012 and 2020. After deducting the acreage currently marketing and planned in Scott County, we reach the projected excess demand for commercial/industrial land that could be developed in Scott County over this decade.

The projected excess demand is the amount of additional commercial and industrial land that could potentially be absorbed in each submarket. Each submarket can capture a portion of this demand, depending on a multitude of factors such as site characteristics (e.g. land price, access, etc.), location and amount of commercial/ industrial zoned acreage, completion of infrastructure investments, and available incentives.

Given the continued economic recovery and depressed real estate markets, the majority of demand will be for later part of this decade (2016+). Submarkets closer to the Metro core and with premium sites for commercial and industrial products will likely experience more development in the short‐term.

Among cities, the amount of excess demand falls within a range. Shakopee shows the

largest excess demand with 685 acres potentially absorbed between 2012 and 2020. New Prague (Scott County portion) displays the smallest amount of excess demand with 27 acres potentially absorbed during the eight year period.

EXECUTIVE SUMMARY


Commercial and industrial land demand in the townships shows the potential to absorb about 470 acres this decade. However, the estimated excess demand is likely overstated and will not be realized this decade.

In the short‐term, there is demand for approximately 290 acres through 2015. Currently

there are 652 acres classified as Class I sites (pad‐ready), therefore there is ample shovel‐ready sites in the short‐term. Additionally, each municipal submarket has enough Class I acreage to meet demand.

Combined, there is enough Class I and Class II land (over 2,100 acres) to accommodate

demand between 2012 and 2020 (1,506 acres). All of the communities have enough Class I and Class II land supply to meet this demand through 2020.

2012‐ 2016‐ 2012‐Submarket 2015 2020 2020 Class I Class II Class III

Belle Plaine 12.0 33.9 45.9 12.7 252.4 49.2Elko New Market 10.8 25.2 36.1 50.6 127.9 56.9Jordan 11.2 30.4 41.6 57.9 84.3 0.0New Prague 6.7 20.7 27.4 8.0 6.9 0.0Prior Lake 39.2 96.3 135.6 59.8 259.0 252.2Savage ‐0.8 66.3 65.5 29.4 156.1 7.4Shakopee 139.9 544.9 684.8 292.5 419.6 38.8Townships 70.4 398.8 469.2 29.3 341.1 5,543.6Total 289.4 1,216.5 1,506.0 540.2 1,647.2 5,948.2

1 Scott County Portion Only


SCALE ACREAGE

DEMAND SUMMARY w/SCALE ACREAGESCOTT COUNTY2012 to 2020

0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0

Belle Plaine

Elko New Market

Jordan

New Prague

Prior Lake

Savage

Shakopee

Townships

Acres

Submarket

Demand Summary: 2012 to 2020

2012‐2015

2016‐2020

PURPOSE AND SCOPE


Study Purpose

Maxfield Research Inc. was engaged by the Scott County Community Development Agency (Scott County CDA) to conduct an analysis of the Scott County commercial and industrial land space. This study is an update of a previous assessment completed by Maxfield Research for the Scott County HRA in 2006.

Study Scope The scope of this study includes:

An analysis of employment, commuter‐shed, and economic growth trends and projections in Scott County between 2000 and 2030;

A review of historical and current industrial, office, retail, and land market conditions in Scott County;

Analysis of SCALE property data and outcomes;

An examination of the commercial/industrial land supply and building permit trends in Scott County;

A forecast of the commercial and industrial land absorbable in Scott County between 2012 and 2030; and

High‐level recommendations on targeted industries and marketing.

The report contains primary and secondary research. Primary research includes interviews with builders/developers, commercial brokers, County/City staff and others involved in the commercial/industrial market in Scott County. All of the market data on existing/pending developments was collected by Maxfield Research Inc. and is accurate to the best of our knowledge. Secondary data, such as U.S. Census data, is credited to the source and is used as a basis for analysis. Data was collected and analyzed for each city in the County as well as for two rural areas – the high‐growth townships and the low‐growth townships.

EMPLOYMENT ANALYSIS


Introduction The following section examines employment growth trends for Scott County. Job growth is a driver and indicator of potential demand for commercial and industrial space. The data from 1990, 2000 and 2010 is from the Minnesota Department of Employment and Economic Development, while the 2020 projections were based on data supplied by Metropolitan Council with adjustments downward by Maxfield Research Inc. to account for the economic slowdown during the recession. The employment analysis and subsequent sections of this study organize data for Scott County overall and by the following submarkets:

Cities High Growth Townships Low Growth

Townships Belle Plaine Cedar Lake Township Blakeley Township Elko New Market

Credit River Township Belle Plaine Township

Jordan New Market Township Helena Township New Prague Spring Lake Township Jackson Township Prior Lake Louisville Township Savage Sand Creek Township Shakopee St. Lawrence

Township

The map on the next page displays Scott County and its submarkets.

Population and Household Growth Trends and Projections Table A‐1 and A‐2 present population and household growth trends and projections for Scott County from 1990 projected to 2030. Included in the figures is the portion of New Prague located in Le Sueur County. The data from 1990, 2000 and 2010 is from the U.S. Census, while the 2020 and 2030 projections were based on data supplied by Metropolitan Council and recent housing construction trends along with the Minnesota Demographic Center for the portion of New Prague located in Le Sueur County. Maxfield Research Inc. adjusted projections from Metropolitan Council and the Minnesota Demographic Center downward based on the slowdown in the housing market during the recession.

EMPLOYMENT ANALYSIS


Map 1 Scott County

EMPLOYMENT ANALYSIS


Projection Projection 1990 ‐ 2000 2000 ‐ 2010 2010 ‐ 2020 2020 ‐ 2030

1990 2000 2010 2020 2030 No. Pct. No. Pct. No. Pct. No. Pct.

Belle Plaine 3,149 3,789 6,661 8,400 11,500 640 20.3 2,872 75.8 1,739 26.1 3,100 27.0

Elko New Market¹ 450 804 4,110 6,400 10,200 354 78.7 3,306 411.2 2,290 55.7 3,800 37.3

Jordan 2,909 3,833 5,470 6,550 8,500 924 31.8 1,637 42.7 1,080 19.7 1,950 22.9

New Prague² 3,569 4,559 7,321 9,000 10,500 990 27.7 2,762 60.6 1,679 22.9 1,500 14.3

Prior Lake 11,482 15,917 22,796 29,000 35,700 4,435 38.6 6,879 43.2 6,204 27.2 6,700 18.8

Savage 9,906 21,115 26,911 32,700 38,900 11,209 113.2 5,796 27.4 5,789 21.5 6,200 15.9

Shakopee 11,739 20,568 37,076 47,000 52,000 8,829 75.2 16,508 80.3 9,924 26.8 5,000 9.6

Subtotal 43,204 70,585 110,345 139,050 167,300 27,381 63.4 39,760 56.3 28,705 26.0 28,250 16.9

Cedar LakeTwp. 1,688 2,197 2,779 3,050 3,700 509 30.2 582 26.5 271 9.8 650 17.6

Credit River Twp. 2,854 3,895 5,096 6,000 6,900 1,041 36.5 1,201 30.8 904 17.7 900 13.0

New Market Twp. 2,008 3,057 3,440 4,000 4,700 1,049 52.2 383 12.5 560 16.3 700 14.9

Spring Lake Twp. 2,853 3,681 3,631 3,850 4,200 828 29.0 ‐50 ‐1.4 219 6.0 350 8.3

Subtotal 9,403 12,830 14,946 16,900 19,500 3,427 36.4 2,116 16.5 1,954 13.1 2,600 13.3

Belle Plaine Twp. 691 806 878 950 1,100 115 16.6 72 8.9 72 8.2 150 13.6

Blakeley Twp. 456 496 418 490 540 40 8.8 ‐78 ‐15.7 72 17.2 50 9.3

Helena Twp. 1,107 1,440 1,648 1,750 2,000 333 30.1 208 14.4 102 6.2 250 12.5

Jackson Twp. 1,359 1,361 1,464 1,500 1,650 2 0.1 103 7.6 36 2.5 150 9.1

Louisville Twp. 910 1,359 1,266 1,300 1,450 449 49.3 ‐93 ‐6.8 34 2.7 150 10.3

Sand Creek Twp. 1,511 1,551 1,521 1,600 1,700 40 2.6 ‐30 ‐1.9 79 5.2 100 5.9

St. Lawrence Twp. 418 472 483 500 550 54 12.9 11 2.3 17 3.5 50 9.1

Subtotal 6,452 7,485 7,678 8,090 8,990 1,033 16.0 193 2.6 412 5.4 31,750 353.2

Scott County Total 59,059 90,900 132,969 164,040 195,790 31,841 53.9 42,069 46.3 31,071 34.2 31,750 19.4

Metro Area Total 2,288,729 2,642,062 2,849,567 3,035,000 3,255,000 353,333 15.4 207,505 7.9 185,433 7.0 220,000 7.2

² Includes the portion of New Prague located in Le Sueur County

Sources: U.S. Census, Metropolitan Council, Maxfield Research Inc.

Census

Population

Cities

High Growth Townships

TABLE A‐1

Low Growth Townships

¹ Elko and New Market merged in 2007. Population has been combined.

Change

POPULATION GROWTH TRENDS AND PROJECTIONS

SCOTT COUNTY

1990 ‐ 2030

EMPLOYMENT ANALYSIS


Projection Projection


Belle Plaine 1,092 1,396 2,362 3,000 4,200 304 27.8 966 69.2 638 27.0 1,200 28.6

Elko New Market¹ 157 286 1,259 2,000 3,450 129 82.2 973 340.2 741 58.9 1,450 42.0

Jordan 1,042 1,349 1,871 2,300 3,050 307 29.5 522 38.7 429 22.9 750 24.6

New Prague² 1,329 1,694 2,711 3,400 4,000 365 27.5 1,017 60.0 689 25.4 600 15.0

Prior Lake 3,901 5,645 8,447 11,000 13,700 1,744 44.7 2,802 49.6 2,553 30.2 2,700 19.7

Savage 3,255 6,807 9,116 11,200 13,600 3,552 109.1 2,309 33.9 2,084 22.9 2,400 17.6

Shakopee 4,163 7,540 12,772 17,000 19,188 3,377 81.1 5,232 69.4 4,228 33.1 2,188 11.4

Subtotal 14,939 24,717 38,538 49,900 61,188 9,778 65.5 13,821 55.9 11,362 29.5 11,288 18.4

Cedar Lake Twp. 523 719 939 1,050 1,300 196 37.5 220 30.6 111 11.8 250 19.2

Credit River Twp. 864 1,242 1,662 2,000 2,400 378 43.8 420 33.8 338 20.3 400 16.7

New Market Twp. 627 956 1,146 1,350 1,620 329 52.5 190 19.9 204 17.8 270 16.7

Spring Lake Twp. 899 1,217 1,267 1,400 1,550 318 35.4 50 4.1 133 10.5 150 9.7

Subtotal 2,913 4,134 5,014 5,800 6,870 1,221 41.9 880 21.3 786 15.7 1,070 15.6

Belle Plaine Twp. 211 266 310 340 400 55 26.1 44 16.5 30 9.7 60 15.0

Blakeley Twp. 140 166 165 200 230 26 18.6 ‐1 ‐0.6 35 21.2 30 13.0

Helena Twp. 352 450 548 620 725 98 27.8 98 21.8 72 13.1 105 14.5

Jackson Twp. 459 461 486 500 565 2 0.4 25 5.4 14 2.9 65 11.5

Louisville Twp. 278 410 425 450 520 132 47.5 15 3.7 25 5.9 70 13.5

Sand Creek Twp. 412 478 554 620 680 66 16.0 76 15.9 66 11.9 60 8.8

St. Lawrence Twp. 122 144 161 175 200 22 18.0 17 11.8 14 8.7 25 12.5

Subtotal 1,974 2,375 2,649 2,905 3,320 401 20.3 274 11.5 256 9.7 415 12.5


Metro Area Total 875,504 1,021,454 1,117,749 1,205,000 1,315,500 145,950 16.7 96,295 9.4 87,251 8.5 110,500 9.2


Sources: U.S. Census, Metropolitan Council, Maxfield Research Inc.

TABLE A‐2

HOUSEHOLD GROWTH TRENDS AND PROJECTIONS

SCOTT COUNTY

1990 ‐ 2030

2020 ‐ 2030

Cities



¹ Elko and New Market merged in 2007. Households has been combined.

Households Change

2000 ‐ 2010 2010 ‐ 20201990 ‐ 2000Census

EMPLOYMENT ANALYSIS


Scott County was the fastest‐growing county in Minnesota and one of the fastest growing counties in the United States during the last decade. Scott County added about 42,000 people during the 2000s, an increase of 46.3%. Growth accelerated from the 1990s primarily because available land for development closer to the core of the Twin Cities has diminished and the Bloomington Ferry Bridge opening in 1995 resulted in commuting to jobs in the southwest Twin Cities more convenient.

On March 21, 2006 both the Cities of Elko and New Market passed a referendum to merge. The new city was named Elko New Market with the merger taking effect on January 1, 2007. Historical demographic data for 1990 and 2000 has been merged to reflect this change.

The Shakopee Mdewakanton Sioux Community (SMSC) has a strong presence in Scott County. It is currently estimated that the SMSC owns, in either trust or fee title, about 1,000 acres in Shakopee and 973 acres of land in Prior Lake. As a result, land for future development within the city boundaries is limited and will rely on annexing land in adjacent townships to accommodate future growth.

Prior Lake has an Orderly Annexation Agreement with Spring Lake Township. This agreement will add approximately 3,000 acres to the City. Although the 3,000 acres was planned to be annexed by 2024, slowed growth is expected to extend the date of annexation. Given the slowdown in the housing market, the annexation of portions of Spring Lake Township is estimated to occur between 2020 and 2030.

Shakopee has an Orderly Annexation Agreement with Jackson Township. This agreement includes the entirety of the Township but with no definite timeline. Shakopee may also consider annexing land within Louisville Township, but there is not an Orderly Annexation Agreement with Louisville Township.

Belle Plaine also has an Annexation Agreement with Belle Plaine Township and Blakeley Township.

Scott County’s population is projected to increase from about 133,000 in 2010 to about 164,000 in 2020. Approximately 90% of this new growth is expected to occur in the incorporated cities.

Scott County added about 15,000 households during the 2000s, and is projected to add about 12,400 households between 2010 and 2020. Since households represent occupied housing units, this growth translates into roughly the need for 12,400 housing units in the County this decade.

EMPLOYMENT ANALYSIS


Scott County Household Growth Leaders, 2000 to 2010

City 2010 2020 Change

Shakopee 12,772 17,000 4,228

Prior Lake 8,447 11,000 2,553

Savage 9,116 11,200 2,084

Elko‐New Market 1,259 2,000 741

Belle Plaine 2,362 3,000 638

New Prague 2,711 3,400 689

Households

The current downturn in the economy combined with a sharp reduction in home values has led to reduced demand for new housing for the past couple of years. Thus, we project that about 60% of the growth this decade will occur after 2015, with the remaining 40% occurring between 2010 and 2015.

The higher rate of household growth compared to population growth in the County can be attributed declining household sizes (2.98 people per household in 1990, to 2.91 in 2000 and 2.87 in 2010). These rates are declining because of several factors, including the aging of the population, couples’ decisions to have fewer children than their parents, or no children at all, as well as an increase in single‐person households.

Employment Growth Trends Table A‐3 shows the total number of jobs by community from 1990 projected to 2030. The data from 1990, 2000 and 2010 is from the Metropolitan Council, while the 2020 and 2030 projections were based on data supplied by Metropolitan Council with adjustments downward by Maxfield Research Inc. to account for the economic slowdown during the recession. The Metropolitan Council computed the employment forecasts by projecting the region's share of national forecasted growth (from the Bureau of Economic Analysis).

There were a total of about 42,300 jobs in Scott County in 2010, the majority of which were located in the following communities:

Shakopee ‐ 18,807 jobs, 44.4% of the County Prior Lake ‐ 7,735 jobs, 18.2% of the County Savage ‐ 6,735 jobs, 15.9% of the County

In 2009, Scott County was ranked 17th by Money Magazine for experiencing the highest job growth in the Country, with 51.9% growth from 2000 to 2008. However, due to the economic downturn during the end of the decade, Scott County only had a net increase of about 6,600 jobs between 2000 and 2010, an increase of 18.5%.

EMPLOYMENT ANALYSIS


Change

Projection Projection


Belle Plaine 931 1,428 1,939 2,800 3,700 497 53.4 511 35.8 861 44.4 900 24.3

Elko New Market¹ 113 248 347 700 1,000 135 119.5 99 39.9 353 101.7 300 30.0

Jordan 913 1,321 1,592 2,100 2,700 408 44.7 271 20.5 508 31.9 600 22.2

New Prague² 1,044 3,043 2,897 3,500 4,000 1,999 191.5 ‐146 ‐4.8 603 20.8 500 12.5

Prior Lake 3,000 7,972 7,735 9,500 11,000 4,972 165.7 ‐237 ‐3.0 1,765 22.8 1,500 13.6

Savage 3,180 5,366 6,735 8,500 9,500 2,186 68.7 1,369 25.5 1,765 26.2 1,000 10.5

Shakopee 8,500 13,938 18,807 22,500 30,000 5,438 64.0 4,869 34.9 3,693 19.6 7,500 25.0

Subtotal 17,681 33,316 40,052 49,600 61,900 15,635 88.4 6,736 20.2 9,548 23.8 12,300 19.9

Cedar Lake Twp. 25 91 82 95 110 66 264.0 ‐9 ‐9.9 13 15.9 15 13.6

Credit River Twp. 100 265 399 450 500 165 165.0 134 50.6 51 12.8 50 10.0

New Market Twp. 113 262 326 350 450 149 131.9 64 24.4 24 7.4 100 22.2

Spring Lake Twp. 100 176 387 450 500 76 76.0 211 119.9 63 16.3 50 10.0

Subtotal 338 794 1,194 1,345 1,560 456 134.9 400 50.4 151 12.6 215 13.8

Belle Plaine Twp. 40 77 68 80 90 37 92.5 ‐9 ‐11.7 12 17.6 10 11.1

Blakeley Twp. 20 70 69 90 100 50 250.0 ‐1 ‐1.4 21 30.4 10 10.0

Helena Twp. 50 473 147 160 170 423 846.0 ‐326 ‐68.9 13 8.8 10 5.9

Jackson Twp. 50 92 168 250 370 42 84.0 76 82.6 82 48.8 120 32.4

Louisville Twp. 200 476 267 275 300 276 138.0 ‐209 ‐43.9 8 3.0 25 8.3

Sand Creek Twp. 75 249 298 350 370 174 232.0 49 19.7 52 17.4 20 5.4

St. Lawrence Twp. 100 145 48 60 100 45 45.0 ‐97 ‐66.9 12 25.0 40 40.0

Subtotal 535 1,582 1,065 1,265 1,500 1,047 195.7 ‐517 ‐32.7 200 18.8 235 15.7



Sources:Metropolitan Council; Maxfield Research Inc.

¹ Elko and New Market merged in 2007. Employment has been combined.


TABLE A‐3

EMPLOYMENT GROWTH TRENDS AND PROJECTIONS

SCOTT COUNTY

1990 ‐ 2030

2020 ‐ 2030

Cities


Employment

2000 ‐ 2010 2010 ‐ 20201990 ‐ 2000Metropolitan Council

EMPLOYMENT ANALYSIS


The number of jobs in Scott County is projected to grow by about 9,900 jobs this decade (+23.4%). This is higher than the Twin Cities Metro Area, which is projected to experience growth of 16% by 2020. In fact, The Metro Area lost nearly 44,000 jobs between 2007 and 2010 and lost about 73,500 jobs during this decade, according to data from the Minnesota Department of Employment and Economic Development. During this period, Scott County was second lowest in the Metro Area in job loss (‐143 jobs) after Carver County (‐124 jobs).

Among cities, Shakopee is expected to experience the largest employment growth between 2010 and 2020. Another 3,700 jobs are expected to be located in Shakopee by 2020, which represents an increase of approximately +19.6%.

Covered Employment Table A‐4 presents covered employment estimates for Scott County in 2000, 2005, 2010 and through 2nd Quarter 2011 as well as employment projections for 2020 and 2030. Covered employment data comes from the Minnesota Department of Employment and Economic Development and is calculated as an annual average. Covered employment data does not include most farm jobs or self‐employed people. Each industry includes private and/or government jobs. It should be noted that the industries are based on the North American Industry Classification System (NAICS), which revises the classifications every five years. The 2002 and 2007 revisions affected the “Information” and “Public Administration” industries in 2005 and are inconsistent with the 2000, 2010, and 2011 data. Projections for the number of industries are only available at the Metro Area level. Therefore, Maxfield Research Inc. calculated employment projections for Scott County based on 2020 and 2030 projections for the Twin Cities Metro Area and the ratio of Scott County jobs to the Metro Area. These numbers are adjusted to reflect land availability throughout the Metro Area.

Scott County lost ‐633 jobs between 2005 and 2010, or ‐1.6%. In contrast, the Metro Area lost nearly ‐60,000 jobs between 2005 and 2010, or ‐3.8%.

Between 2000 and 2010, the largest job losses in Scott County took place in Manufacturing (‐814 jobs), Construction (‐699 jobs), and Natural Resources/Mining (‐66 jobs). The largest job increases occurred in Education & Health Services (+3,184 jobs), Trade, Transportation, and Utilities (+1,675 jobs), and Leisure and Hospitality (+789 jobs).

Between 2010 and 2020, there are no industries forecast to decline in employment. The largest growth is expected in Education & Health Services (+2,638 jobs), Trade, Transportation, and Utilities (+1,899 jobs), and Manufacturing (+984 jobs).

EMPLOYMENT ANALYSIS


2000 2005 2010 2011¹ 2020² 2030² 2000 ‐ 2010 2010 ‐ 2020 2020 ‐ 2030

No. Pct. No. Pct. No. Pct. No. Pct. No. Pct. No. Pct. No. Pct. No. Pct. No. Pct.

Natural Resources/Mining 200 0.6% 164 0.4% 134 0.3% 112 0.3% 229 0.5% 273 0.4% ‐66 ‐33.0% 95 70.8% 44 19.1%

Construction 3,272 9.4% 4,368 10.7% 2,573 6.4% 2,377 5.9% 2,980 6.0% 3,700 6.0% ‐699 ‐21.4% 407 15.8% 720 24.2%

Manufacturing 5,502 15.9% 4,257 10.4% 4,688 11.6% 4,829 12.0% 5,672 11.5% 7,040 11.5% ‐814 ‐14.8% 984 21.0% 1,368 24.1%

Trade, Transportation, Utilities 5,823 16.8% 7,611 18.6% 7,498 18.6% 7,534 18.8% 9,397 19.0% 11,584 18.9% 1,675 28.8% 1,899 25.3% 2,187 23.3%

Information³ 45 0.1% 362 0.9% 61 0.2% 60 0.1% 107 0.2% 176 0.3% 16 35.6% 46 74.8% 70 65.4%

Financial Activities 754 2.2% 937 2.3% 900 2.2% 870 2.2% 1,156 2.3% 1,476 2.4% 146 19.4% 256 28.5% 320 27.7%

Professional & Business Services 3,334 9.6% 3,992 9.8% 4,026 10.0% 4,101 10.2% 4,858 9.8% 5,779 9.4% 692 20.8% 832 20.7% 921 19.0%

Education & Health Services 4,549 13.1% 6,209 15.2% 7,733 19.2% 7,725 19.3% 10,371 20.9% 13,891 22.6% 3,184 70.0% 2,638 34.1% 3,520 33.9%

Leisure & Hospitality 8,241 23.8% 5,537 13.5% 9,030 22.4% 8,604 21.4% 9,938 20.1% 11,319 18.4% 789 9.6% 908 10.1% 1,380 13.9%

Other Services 1,583 4.6% 1,383 3.4% 1,576 3.9% 1,611 4.0% 2,116 4.3% 2,751 4.5% ‐7 ‐0.4% 540 34.3% 635 30.0%

Public Administration³ 1,386 4.0% 6,056 14.8% 2,024 5.0% 2,301 5.7% 2,708 5.5% 3,463 5.6% 638 46.0% 684 33.8% 754 27.9%

Total 34,689 100.0 40,876 100.0 40,243 100.0 40,124 100.0 49,533 100.0 61,451 100.0 5,554 16.0% 9,290 23.1% 11,918 24.1%

Natural Resources/Mining 3,220 0.2% 3,568 0.2% 3,432 0.2% 3,511 0.2% 3,442 0.2% 3,408 0.2% 212 6.6% 10 0.3% ‐33 ‐1.0%

Construction 75,163 4.9% 78,475 4.9% 49,804 3.2% 47,736 3.1% 55,693 3.3% 64,210 3.4% ‐25,359 ‐33.7% 5,889 11.8% 8,516 15.3%

Manufacturing 217,162 14.0% 186,238 11.7% 156,463 10.2% 158,535 10.3% 178,364 10.5% 199,993 10.6% ‐60,699 ‐28.0% 21,901 14.0% 21,630 12.1%

Trade, Transportation, Utilities 341,196 22.0% 327,778 20.6% 294,275 19.2% 292,733 19.0% 325,155 19.1% 360,869 19.2% ‐46,921 ‐13.8% 30,880 10.5% 35,713 11.0%

Information 3,095 0.2% 44,470 2.8% 40,815 2.7% 40,527 2.6% 42,658 2.5% 45,224 2.4% 37,720 1218.7% 1,843 4.5% 2,566 6.0%

Financial Activities 126,980 8.2% 136,930 8.6% 130,795 8.5% 131,568 8.5% 142,766 8.4% 155,415 8.3% 3,815 3.0% 11,971 9.2% 12,649 8.9%

Professional & Business Services 263,779 17.0% 244,025 15.3% 248,431 16.2% 251,585 16.3% 285,777 16.8% 322,851 17.2% ‐15,348 ‐5.8% 37,346 15.0% 37,073 13.0%

Education & Health Services 263,963 17.0% 302,256 19.0% 341,516 22.3% 349,891 22.7% 378,507 22.2% 410,972 21.9% 77,553 29.4% 36,991 10.8% 32,465 8.6%

Leisure & Hospitality 138,716 9.0% 150,712 9.5% 148,265 9.7% 147,570 9.6% 160,038 9.4% 174,132 9.3% 9,549 6.9% 11,773 7.9% 14,094 8.8%

Other Services 55,633 3.6% 55,169 3.5% 52,166 3.4% 52,011 3.4% 57,376 3.4% 63,323 3.4% ‐3,467 ‐6.2% 5,210 10.0% 5,947 10.4%

Public Administration 60,763 3.9% 63,754 4.0% 67,435 4.4% 65,576 4.3% 72,223 4.2% 79,603 4.2% 6,672 11.0% 4,788 7.1% 7,379 10.2%

Total 1,549,670 100.0 1,593,375 100.0 1,533,397 100.0 1,541,243 100.0 1,702,000 100.0 1,880,000 100.0 ‐16,273 ‐1.1% 168,603 11.0% 178,000 10.5%

¹ 2011 data is through 2nd Quarter

² Projections based on MN Department of Employment and Economic Development

³ Change in NAICS classificiations skewed numbers ‐3.8%

Sources: MN Department of Employment and Economic Development; Maxfield Research Inc.

‐59978.0

Seven‐County Metro Area

Scott County

Employment Change

TABLE A‐4

ESTIMATED COVERED EMPLOYMENT BY INDUSTRY

SCOTT COUNTY & METRO AREA

Annual Average 2000 ‐ 2030

EMPLOYMENT ANALYSIS


Wages by Industry Table A‐5 displays average yearly wages by industry in Scott County, Hennepin County, and the Metro Area from 2006 through 2nd Quarter 2011. Data is from the Minnesota Department of Employment and Economic Development. The data does not account for number of full‐time versus part‐time workers.

The average wage in Scott County increased from $37,908 in 2006 to $40,378 in 2011, or an

increase of +6.5% (+1.3% annually). The Metro Area average wage rose from $48,100 to $54,496 in the same period, which is an increase of +13.3% (+2.6% annually). Overall, workers in the Metro Area take home a higher wage than workers in Scott County (about $12,000 more annually over the past five years).

Maxfield Research Inc. also included Hennepin County wages since a large proportion of Scott County residents commute to Hennepin County for employment (see Table A‐8 for more information). In 2011, the overall average wage is approximately $20,000 higher in Hennepin County than Scott County.

In Scott County, the Professional and Business Services and the Manufacturing industry groups show the highest average wage during the six years. Workers in the Professional & Business Services industry group averaged a wage of about $62,000 in 2011, which is an increase of $6,240 (+11.2%) from 2006.

Resident Employment Table A‐6 presents resident employment data for Scott County from 2000 through 2011. Resident employment data is calculated as an annual average and reveals the work force and number of employed people living in the County. It is important to note that not all of these individuals work in the County.

While Table A‐3 showed that there were about 42,300 jobs in Scott County in 2010, Table A‐6 shows that there were about 70,000 employed people in the County. This indicates that a large percentage of Scott County residents are commuting to jobs located outside of the County. This is further highlighted by worker commuting data shown in Table A‐8.

The unemployment rate has increased steadily since 2000, up from 2.6% to a peak at 7.6% in 2009. However, the unemployment rate dropped to 7.0% in 2010 and 6.0% in 2011, indicating economic recovery in Scott County. In addition, Scott County’s unemployment rate consistently remained below that of the State of Minnesota between 2000 and 2011.

EMPLOYMENT ANALYSIS


Change

2006 2007 2008 2009 2010 2011¹ 2006 ‐ 2011

No. No. No. No. No. No. No. Pct.

Natural Resources/Mining $40,664 $39,364 $39,780 $38,930 $45,604 $42,328 $1,664 4.1

Construction $49,868 $52,381 $53,560 $51,584 $52,208 $48,776 ‐$1,092 ‐2.2

Manufacturing $54,444 $56,524 $58,344 $57,096 $62,400 $58,604 $4,160 7.6

Trade, Transportation, Utilities $33,228 $33,748 $35,256 $34,372 $34,892 $35,412 $2,184 6.6

Information $49,660 $54,496 $22,880 $24,648 $25,636 $25,636 ‐$24,024 ‐48.4

Financial Activities $38,532 $39,260 $41,132 $39,000 $42,120 $41,626 $3,094 8.0

Professional & Business Services $55,848 $58,084 $62,712 $61,464 $65,260 $62,088 $6,240 11.2

Education & Health Services $34,008 $36,192 $35,984 $36,660 $37,128 $36,556 $2,548 7.5

Leisure & Hospitality $16,484 $16,640 $16,432 $16,172 $16,588 $16,146 ‐$338 ‐2.1

Other Services $21,424 $23,244 $23,348 $24,492 $28,260 $26,052 $4,628 21.6

Government $36,244 $37,440 $38,740 $47,788 $41,028 $41,626 $5,382 14.8

Total $37,908 $39,000 $40,040 $39,468 $41,184 $40,378 $2,470 6.5


Construction $57,356 $59,696 $62,764 $61,100 $60,528 $60,190 $2,834 4.9

Manufacturing $58,604 $60,996 $62,192 $62,452 $66,040 $67,444 $8,840 15.1


Information $67,600 $71,136 $70,512 $71,916 $75,400 $79,092 $11,492 ‐100.0



Education & Health Services $43,420 $44,720 $44,408 $45,760 $45,552 $43,888 $468 1.1

Leisure & Hospitality $21,580 $22,308 $23,192 $22,568 $31,252 $22,230 $650 3.0

Other Services $30,992 $32,396 $32,656 $33,072 $31,148 $30,654 ‐$338 ‐1.1

Government $49,556 $51,272 $53,768 $54,600 $54,184 $55,536 $5,980 12.1

Total $52,884 $56,524 $58,500 $56,368 $58,396 $60,242 $7,358 13.9


Construction $53,924 $56,524 $59,332 $58,396 $57,928 $57,356 $3,432 6.4

Manufacturing $58,812 $61,204 $62,088 $62,244 $65,572 $66,196 $7,384 12.6


Information $64,064 $67,600 $67,444 $68,276 $70,668 $75,504 $11,440 ‐100.0



Education & Health Services $41,028 $42,588 $42,744 $43,836 $43,888 $42,432 $1,404 3.4

Leisure & Hospitality $18,252 $18,824 $19,500 $19,292 $20,228 $24,596 $6,344 34.8

Other Services $28,964 $29,588 $59,332 $30,000 $29,380 $29,380 $416 1.4

Government $46,748 $48,464 $50,595 $51,896 $51,844 $53,040 $6,292 13.5

Total $48,100 $50,804 $52,364 $51,376 $52,988 $54,496 $6,396 13.3

¹ 2011 data is through 2nd QuarterSources: MN Department of Employment and Economic Development; Maxfield Research Inc.

Seven‐County Metro Area

Hennepin County

Average Yearly Wage

Scott County

TABLE A‐5

ESTIMATED AVERAGE YEARLY WAGE BY INDUSTRY

SCOTT COUNTY & METRO AREA

Annual Average 2006 ‐ 2011

EMPLOYMENT ANALYSIS


Scott County Labor Force

2000 to 2011

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

80,000

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Persons

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Unemployment Rate

Labor Force Unemployment Rate

RESIDENT EMPLOYMENT

Minnesota

Labor Unemployment Unemployment

Force Employment Unemployment Rate (Pct.) Rate (Pct.)

54,253 52,845 1,408 2.6 3.1

58,535 56,580 1,955 3.3 3.8

61,835 59,333 2,502 4.0 4.5

64,913 62,226 2,687 4.1 4.9

65,619 63,093 2,526 3.8 4.6

69,810 67,266 2,544 3.6 4.2

71,935 69,382 2,553 3.5 4.1

73,192 70,191 3,001 4.1 4.6

74,631 70,956 3,675 4.9 5.4

75,153 69,470 5,683 7.6 8.1

75,292 70,048 5,244 7.0 7.3

75,413 70,858 4,555 6.0 7.3

Change 2000‐2011

Number 21,160 18,013 3,147 ‐‐‐ ‐‐‐

Percent 39.0 34.1 223.5 ‐‐‐ ‐‐‐

* Based on monthly averages through November 2011

Sources: MN Dept. of Employment and Economic Development; Maxfield Research Inc.

2011*

2005

2009

2008

2010

2007

2006

2000

2004

2003

2002

2001

TABLE A‐6

2000‐2011

SCOTT COUNTY

Year

EMPLOYMENT ANALYSIS


Resident Education Levels Table A‐7 shows the educational attainment of the workforce age 25‐years old and older for Scott County and the Metro Area in 2000 and estimates for 2010 (based on information from the American Community Survey).

Compared to the Metro Area, Scott County has larger portions of workers with a high school

diploma and associate degrees. The Metro Area has larger percentages of workers without a high school diploma, some college, and with graduate and professional degrees. The County and Metro Area had the same percentage of workers (27%) with a bachelor’s degree in 2010.

The data show that education levels have increased in Scott County. In 2010, residents with

Bachelor’s Degrees made up the largest group residents (27%), a change from 2000 when the largest group of residents (28%) had only a high school diploma.

Number Pct.Eduational Attainment Number Pct. Number Pct. Change Change

Less than HS Diploma 4,977 9% 5,027 6% 50 1%HS Diploma 15,800 28% 20,901 25% 5,101 32%Some College, No Degree 13,588 24% 17,382 21% 3,794 28%Associate Degree 4,865 9% 8,134 10% 3,269 67%Bachelor's Degree 12,817 23% 22,527 27% 9,710 76%Grad. or Prof. Degree 3,517 6% 8,920 11% 5,403 154%

Less than HS Diploma 157,647 8% 134,619 7% ‐23,028 ‐15%HS Diploma 412,907 22% 424,258 22% 11,351 3%Some College, No Degree 409,609 22% 407,695 22% ‐1,914 0%Associate Degree 128,876 7% 170,927 9% 42,051 33%Bachelor's Degree 411,587 22% 503,525 27% 91,938 22%Grad. or Prof. Degree 181,464 10% 249,679 13% 68,215 38%

Sources: U.S. Census Bureau; Maxfield Research Inc.

TABLE A‐7EDUCATIONAL ATTAINMENT FOR RESIDENTS 25 YEARS OLD AND OLDER

SCOTT COUNTY AND 7‐COUNTY METRO AREA2000 & 2010

Scott County

7‐County Metro Area

2000 2010 2000 to 2010

EMPLOYMENT ANALYSIS


Commuting Patterns Table A‐8 shows estimated commuter patterns to and from Scott County based on data obtained from the U.S. Census Bureau Local Employment Dynamics (2009 is the most recent data available). The data shows the work destinations for people who live in the County, as well as where employees live who are employed in the County. It should be noted that the job count is based only on primary jobs.

There is a large out migration of workers from Scott County. Only 23.7% of Scott County residents in 2009 also worked in Scott County. Of the 76.3% that commuted to jobs outside the County, the most commuted to jobs in Hennepin County (44.1%) followed by Dakota County (14.8%).

Worker Commute Patterns

Scott County, 2009

0

3,000

6,000

9,000

12,000

15,000

18,000

21,000

24,000

27,000

Hennepin Scott Dakota Ramsey Carver Anoka Le Sueur Rice Other

No. o

f Workers

Scott County Resident's Place of Employment

Place of Residence of Workers in Scott County

Out of the seven counties in the Metro Area, Scott County had the second lowest percentage of residents that live and work in the same county. Below shows the counties from highest to lowest.

50.2% live and work in Hennepin County 46.9% live and work in Dakota County 46.1% live and work in Anoka County 42.5% live and work in Washington County 41.7% live and work in Carver County 23.7% live and work in Scott County 16.8% live and work in Ramsey County

EMPLOYMENT ANALYSIS


About half of the jobs in Scott County in 2009 were filled by people living outside of the County. Most of these people lived in Dakota County (15.1% of commuters to Scott County jobs), Hennepin County (14.6%) and Le Sueur and Carver Counties (about 5% each). As transportation costs and commuting times increase, we project that a greater percentage of people working in Scott County will also choose to live in Scott County, increasing housing demand.

Place of Residence Employment Count Percent

Scott Hennepin 26,464 44.1%

Scott Scott 14,238 23.7%

Scott Dakota 8,889 14.8%

Scott Ramsey 3,375 5.6%

Scott Carver 2,591 4.3%

Scott Anoka 811 1.4%

Scott Le Sueur 449 0.7%

Scott St. Louis 343 0.6%

Scott Blue Earth 300 0.5%

Scott Rice 261 0.4%

Scott Other 2,231 3.7%

59,952 100.0%

Scott Scott 14,238 43.6%

Dakota Scott 4,924 15.1%

Hennepin Scott 4,784 14.6%

Carver Scott 1,758 5.4%

Le Sueur Scott 1,529 4.7%

Ramsey Scott 796 2.4%

Rice Scott 736 2.3%

Sibley Scott 453 1.4%

Anoka Scott 443 1.4%

Wright Scott 376 1.2%

Other Scott 2,640 8.1%

32,677 100.0%

Sources: US Census Bureau; Maxfield Research. Inc.

Place of Residence for Workers Commuting to Scott County

TABLE A‐8

SCOTT COUNTY COMMUTING PATTERNS FOR PRIMARY JOBS

2009

Place of Employment for Scott County Residents

EMPLOYMENT ANALYSIS


Major Employers Table A‐9 shows the major employers by Scott County municipality in 2010 based on data provided by ESRI and Infogroup, national demographics firms. The business inventory database is compiled from multiple sources; including directory resources from the yellow and white pages, annual reports, 10ks, SEC filings, government data, U.S. Postal Service, business trade directories, newspapers, etc. To ensure accurate information, phone telephone verifications are completed for each business in the database. The data is characterized based on the six‐digit North American Industry Classification System (NAICS). The NAICS is the standard used by Federal statistical agencies in classifying business establishments for the purpose of collecting, analyzing, and publishing statistical data related to the U.S. business economy. The Shakopee Mdewakanton Sioux Community is one of the largest employers as they own

and operate Mystic Lake Casino Hotel, Little Six Casino, Dakotah! Sport & Fitness, Playworks, Dakota Convenience Store, Dakota Meadows RV Park and Campgrounds, Dakota Meadows Storage Facility, and The Meadows at Mystic Lake Golf Club.

The largest employer in the County was Mystic Lake Casino in Prior Lake with approximately 5,000 employees in 2010.

Shakopee had the greatest number of employers (17 employers) with 200 or more

employees followed by Savage with 7 employers with 200 or more employees. Shakopee has several top employers including, Valleyfair Amusement Park and Seagate

Technology, which employ 1,500 and 1,100 people, respectively. It is important to note that Valleyfair employment is seasonal. There are about 70 full‐time, year‐round employees and 1,500 seasonal employees.

Public school districts are a major employer in every city except Elko New Market.

However, Elko New Market does not have its own school district, but rather is served by either the Lakeville or New Prague Public School Districts.

EMPLOYMENT ANALYSIS


Employer Products/Services

Estimated

Employees

Shakopee

Valleyfair Amusement Park Amusement Park & Arcades 1,500

Seagate Technology Computer & Peripheral Equipment Manufacturing 1,100

Shakopee School District #720 Elemetary & Secondary Schools 970

Scott County Executive, Legislative, & Other Gen. Govt. 800

Allina Hospitals & Clinics General Medical & Surgical Hospitals 700

Canterbury Park Racetrack Racetrack 550

ADC Telecommunications, Inc. Electrical & Electronic Goods Merchant Wholesalers 450

St. Francis Regional Medical Ctr. General Medical & Surgical Hospitals 400

Imagine Print Solutions Printing Services 385

Manheim Northstar Minnesota Wholesale Automobile Auction 350

Vertis Communications Book Publishers 330

Certain Teed Corp. Petroleum & Coal Product Manufacturing 275

Anchor Glass Container Corp. Glass & Glass Product Manufacturing 273

Q Logic Corp Computer Services 270

Super Walmart Miscellaneous Durable Goods Merchant Wholesalers 250

Corrections Facility Correctional Institutions 225

K Mart Distribution Center Miscellaneous Durable Goods Merchant Wholesalers 200

Subtotal 9,028

Savage

Continental Machines Inc. Other General Purpose Machinery Manufacturing 356

Fabcon Inc. Cement & Concrete Product Manufacturing 275

Ind School District #719 Elemetary & Secondary Schools 275


Chief Manufacturing Inc. Mount, Rack and Lifts Manufacturing 255

Lifetime Fitness Fitness and Recreational Sports Centers 250

Super Target Miscellaneous Durable Goods Merchant Wholesalers 200

Savage Natural Resource Spec Legislative Bodies 150

Axel's Bonfire Woodfire Cooking Full‐Service Restaurants 150

Silgan Container Corp. Boiler, Tank & Shipping Container Manufacturer 145

Master Electric Co Inc. Building Equipment Contractors 140

Rollx Vans Wheelchair Van Sales 125

BF Nelson Corp Paperboard Containers and Boxes Manufacturer 100

Cub Foods Grocery & Related Product Wholesalers 100

Waste Management Inc. Waste Collection 100

Subtotal 2,888

Prior Lake

Mystic Lake Casino Casino 5,000


Playworks Child Day Care Services 175

Dakotah! Sport & Fitness Fitness and Recreational Sports Centers 150

Village Market Grocery Store 100

Subtotal 5,975

2010

SCOTT COUNTY

TABLE A‐9

MAJOR EMPLOYERS

EMPLOYMENT ANALYSIS


Employer Products/Services

Estimated

Employees

New Prague

New Prague ISD #721 Elemetary & Secondary Schools 545

Chart Industires Machine Shops 500

Queen of Peace Hospital General Medical & Surgical Hospitals 350

Mala Strana Health Care Center Nursing Care Facilities 150

New Prague Golf Club Golf Courses 85

Scott Equipment Machinery, Equipment, & Supplies Merchant Wholesalers 80

Econo Foods Grocery Store 75

Con Agra Grain & Oilseed Milling 60

Subtotal 1,845

Belle Plaine

Belle Plaine Lutheran Home Nursing Care Facilities 250

Belle Plaine Public Schools‐ISD #716 Elemetary & Secondary Schools 90

Stier Bus Co Transportation Services 45

Emma Krumbee's Family Restaurant Full‐Service Restaurants 45

Belle Plaine Country Store General Merchandise Store 40

Supervalu Grocery Store 35

State Bank of Belle Plaine Depository Credit Intermediation 26

Subtotal 531

Jordan

Jordan Public School District #717 Elemetary & Secondary Schools 212

Valley Plumbing Inc Building Equipment Contractors 175

SM Hentges & Sons Inc. Highway, Street & Bridge Construction 150

Jordan Transformer LLC Transformer Repair 90

Engel Diversified Industries 50

Kurt Manufacturing 395 Ervin industrial dr 33211610 50

Wolf Motors Co Automobile Dealers 35

Subtotal 762

Elko New Market

Friedges Drywall Drywall and Insulation Contractor 50

Viking Concrete & Masonry Masonry Contractor 30

Elko Speedway Racetracks 30

Ryan Contracting Construction Contractor 30

Subtotal 140

Scott County Total 21,029

Sources: ESRI; Maxfield Research Inc.

(continued)

TABLE A‐9

MAJOR EMPLOYERS

SCOTT COUNTY

2010

EMPLOYMENT ANALYSIS


Establishments Table A‐10 displays the number of establishments, or businesses, in 2000 and 2009. Data is provided by the U.S. Census Bureau; County Business Patterns program. Data from 2009 is the most current data available.

Overall, Scott County grew by 905 establishments (+29.3%) during the 2000‐2009 period.

Construction, Retail Trade, and Professional, Scientific, and Technical Services industries had

the largest number of establishments in both 2000 and 2009.

Professional, Scientific, and Technical Services, Construction, Retail Trade, and Health Care and Social Assistance industries also show the largest growth between 2000 and 2009. Professional, Scientific, and Technical Services added almost 170 establishments (+72.8%), Construction added close to 115 establishments (+27.3%), and Retail Trade grew by about 100 establishments (+39.3%).

No. Pct.

Educational Services 13 0.6% 34 1.1% 21 161.5%Health Care and Social Assistance 117 5.4% 224 7.2% 107 91.5%Real Estate and Rental and Leasing 76 3.5% 137 4.4% 61 80.3%Professional, Scientific, and Technical Services 228 10.4% 394 12.8% 166 72.8%Industries Not Classified 3 0.1% 5 0.2% 2 66.7%Finance and Insurance 95 4.3% 154 5.0% 59 62.1%Information 20 0.9% 31 1.0% 11 55.0%Waste Management and Remediation Services 140 6.4% 209 6.8% 69 49.3%Arts, Entertainment, and Recreation 44 2.0% 64 2.1% 20 45.5%Retail Trade 247 11.3% 344 11.1% 97 39.3%Other Services (except Public Administration) 209 9.6% 289 9.4% 80 38.3%Utilities 3 0.1% 4 0.1% 1 33.3%Construction 417 19.1% 531 17.2% 114 27.3%Transportation and Warehousing 87 4.0% 109 3.5% 22 25.3%Accommodation and Food Services 147 6.7% 184 6.0% 37 25.2%Management of Companies and Enterprises 16 0.7% 20 0.6% 4 25.0%Manufacturing 151 6.9% 180 5.8% 29 19.2%Wholesale Trade 159 7.3% 168 5.4% 9 5.7%Agriculture, Forestry, Fishing and Hunting 5 0.2% 4 0.1% ‐1 ‐20.0%Mining, Quarrying, Oil and Gas Extraction 8 0.4% 5 0.2% ‐3 ‐37.5%

Total 2,185 100.0% 3,090 100.0% 905 29.3%

Sources:U.S. Census Bureau Business Patterns; Maxfield Research Inc.

Establishments Establishments

TABLE A‐10ESTABLISHMENTS BY INDUSTRY

SCOTT COUNTYAnnual Average 2000 and 2009

2000‐20092000 2009 Change

EMPLOYMENT ANALYSIS


Industrial Establishments by Number of Employees Table A‐11 shows the number of industrial business and related employment for Scott County. Data is provided by the U.S. Census Bureau; County Business Patterns program. Data from 2009 is the most current data available. Overall business growth is an important indicator of the local economy’s health and overall industrial market conditions. The industries shown do not represent all users of industrial space nor do they account for employers who do not use industrial space (retailer employers, for example). However, these industries account for the majority of users.

Of the 988 industrial businesses in Scott County in 2009, 65% had fewer than five

employees, 14% had between five and nine employees, and the remaining 21% had more than 10 employees.

Although 79% of industrial businesses in Scott County have fewer than 10 employees, employees at these businesses account for about 18% of the total employees.

Large companies over 100 employees accounted for just over 2% of total businesses in

2009. However, these companies accounted for 44% of the total employees.

Impact of Employment Trends The majority of the jobs in Scott County (83%) are located in Shakopee, Savage, and Prior Lake. While Scott County underwent very strong job growth in the early 2000s, the County lost approximately ‐2,500 jobs since 2006. Job growth is projected to increase over the next decade and outpacing the Metro Area. The majority of the job growth is expected to be seen in cities rather than the townships; specifically the aforementioned Shakopee, Savage, and Prior Lake. Approximately 24% of Scott County residents live and work in Scott County. This is significantly lower than Hennepin, Anoka, Dakota, Carver, and Washington Counties, which all have over 40% of residents living and working in the same county. A main priority for Scott County will be to create high‐quality and fair‐paying jobs to provide opportunities for existing residents as well as to draw new residents working in the County to live in Scott County.

EMPLOYMENT ANALYSIS


Size of Business

(in # of emps.) No. Pct. No. Pct. No. Pct. No. Pct. No. Pct.

Construction1 to 4 415 70.1 428 73.3 401 73.8 406 76.5 ‐9 ‐2.25 to 9 86 14.5 76 13.0 75 13.8 60 11.3 ‐26 ‐30.2

10 to 19 46 7.8 43 7.4 33 6.1 37 7.0 ‐9 ‐19.620 to 49 33 5.6 24 4.1 19 3.5 20 3.8 ‐13 ‐39.450 to 99 6 1.0 7 1.2 7 1.3 5 0.9 ‐1 NA

100 or more 6 1.0 6 1.0 8 1.5 3 0.6 ‐3 NATotal Businesses 592 100.0 584 100.0 543 100.0 531 100.0 ‐61 ‐10.3

Manufacturing1 to 4 79 44.9 79 43.6 75 40.8 77 42.8 ‐2 ‐2.55 to 9 31 17.6 38 21.0 38 20.7 35 19.4 4 12.9

10 to 19 23 13.1 24 13.3 30 16.3 29 16.1 6 26.120 to 49 22 12.5 19 10.5 16 8.7 16 8.9 ‐6 ‐27.350 to 99 5 2.8 6 3.3 9 4.9 8 4.4 3 60.0

100 or more 16 9.1 15 8.3 16 8.7 15 8.3 ‐1 ‐6.3Total Businesses 176 100.0 181 100.0 184 100.0 180 100.0 4 2.3

Wholesale Trade1 to 4 105 59.0 100 56.5 94 55.0 91 54.2 ‐14 ‐13.35 to 9 28 15.7 26 14.7 32 18.7 30 17.9 2 7.1

10 to 19 21 11.8 25 14.1 20 11.7 22 13.1 1 4.820 to 49 17 9.6 18 10.2 16 9.4 15 8.9 ‐2 ‐11.850 to 99 4 2.2 4 2.3 6 3.5 7 4.2 3 NA

100 or more 3 1.7 4 2.3 3 1.8 3 1.8 0 NATotal Businesses 178 100.0 177 100.0 171 100.0 168 100.0 ‐10 ‐5.6

Transportation and Warehousing1 to 4 67 68.4 70 67.3 74 65.5 71 65.1 4 6.05 to 9 9 9.2 8 7.7 10 8.8 13 11.9 4 44.4

10 to 19 7 7.1 11 10.6 11 9.7 10 9.2 3 42.920 to 49 6 6.1 9 8.7 10 8.8 9 8.3 3 50.050 to 99 5 5.1 3 2.9 6 5.3 4 3.7 ‐1 ‐20.0

100 or more 4 4.1 3 2.9 2 1.8 2 1.8 ‐2 NATotal Businesses 98 100.0 104 100.0 113 100.0 109 100.0 11 11.2

Total Industrial Businesses1 to 4 666 63.8 677 64.7 644 63.7 645 65.3 ‐21 ‐3.25 to 9 154 14.8 148 14.1 155 15.3 138 14.0 ‐16 ‐10.4

10 to 19 97 9.3 103 9.8 94 9.3 98 9.9 1 1.020 to 49 78 7.5 70 6.7 61 6.0 60 6.1 ‐18 ‐23.150 to 99 20 1.9 20 1.9 28 2.8 24 2.4 4 20.0

100 or more 29 2.8 28 2.7 29 2.9 23 2.3 ‐6 ‐20.7Total Businesses 1,044 100.0 1,046 100.0 1,011 100.0 988 100.0 ‐56 ‐5.4

Sources: U.S. Census Bureau Business Patterns; Maxfield Research Inc.

2007 2008 2009

TABLE A‐11INDUSTRIAL BUSINESS GROWTH BY SIZE OF BUSINESS

SCOTT COUNTY2006 ‐ 2009

2006 to 2009

Number of Establishments Change

2006

BUILDING PERMIT ANALYSIS


Introduction The following section reviews commercial and industrial building permit trends over the past decade. Because building permits precede construction, they are considered a leading indicator for the construction industry and the overall economy. Most construction typically begins soon after the permit is issued by the local governmental authority. Data is presented for each submarket in Scott County.

Building Permit Trends Table BP‐1 displays the number, estimated acreage, and value of building permits issued for new commercial and industrial construction in each submarket from 2006 to 2011. The data was collected through municipal building inspections departments and data provided by the GIS Department at Scott County.

New commercial and industrial development was concentrated in Shakopee. Between 2006

and 2011, Shakopee issued the most building permits each year, ranging from 11 to 24 permits per year. Shakopee also showed the largest amount of acreage developed each year, ranging from 82 acres to 142 acres. The average number of building permits granted per year in Shakopee is 19 and the average acreage per permit was 5.5 acres.

Prior Lake had the second largest amount of new commercial/industrial developments. Prior Lake granted 29 building permits between 2006 and 2011. The average number of permits and acreage per permit were 5.8 and 2.0, respectively.

Savage issued the third largest amount of new commercial/industrial building permits with a total of 20 permits between 2006 and 2011. The average number of permits and acreage per permit were 3.3 and 3.5, respectively.

Among the townships, Louisville Township had the most building permits issued (15 permits) between 2006 and 2011. Close proximity to Shakopee and Highway 169 may have contributed to development in Louisville Township.

In Scott County overall, the number of acres developed decreased from about 205 acres in 2006 to only 85 acres in 2011 (see chart on page 35). However, it should be noted that the acreage is unavailable in the townships. A number of factors could explain the decline in acreage per permit. First, developers may have been responding to a trend toward smaller‐site developments. Second, developers may have pursued a strategy of phased development during the commercial and industrial downturn. During a period of high commercial vacancy rates and low lease rates, a financial strategy may include building a first‐phase, three‐acre project instead of a complete 20‐acre campus.



No. Acres $ No. Acres $ No. Acres $ No. Acres $ No. Acres $ No. Acres $ Permits Acr./Per.

Cities

Belle Plaine 2 11.3 $4,965,000 2 9.7 $10,194,863 0 0 $0 2 10.5 $2,220,372 1 4.9 $288,229 1 0.5 $1,176,672 1.6 3.1Elko New Market 1 1.2 $800,000 0 0 $0 4 4.9 $807,050 0 0 $0 0 0 $0 0 0 $0 1.0 0.2Jordan 7 13.9 $2,274,415 0 0.0 $0 1 1.6 $55,000 2 1.3 $164,402 0 0 $0 1 0.9 $422,000 2.0 0.2New Prague¹ 2 4.9 $5,000,000 1 0 $625,000 3 7.2 $3,858,920 0 0 $0 0 0 $0 0 0 $0 1.2 0.5Prior Lake 7 12.8 $11,330,000 11 31.4 $16,639,000 6 14.6 $12,139,000 3 6.8 $2,843,000 2 5.3 $560,000 0 0 $0 5.8 2.0Savage 9 19.8 $12,823,000 4 31.1 $15,715,000 3 4.5 $3,700,000 1 3.4 $1,740,683 2 7.3 $4,587,000 1 1.2 $1,200,000 3.3 3.5Shakopee 19 142.0 $34,321,858 18 98.3 $12,755,184 11 103.2 $9,796,783 18 86.7 $36,498,145 24 106.0 $28,875,577 24 82.0 $5,722,215 19.0 5.5


Cedar Lake Twp 0 na $0 0 na $0 0 na $0 0 na $0 0 na $0 0 na $0 0.0 naCredit River Twp 2 na $151,254 0 na $0 0 na $0 0 na $0 0 na $0 0 na $0 0.4 naNew Market Twp 1 na $660,000 0 na $0 0 na $0 0 na $0 0 na $0 0 na $0 0.2 naSpring Lake Twp 5 na $631,500 1 na $958,000 1 na $265,620 0 na $0 0 na $0 0 na $0 1.4 na


Belle Plaine Twp 0 na $0 0 na $0 0 na $0 0 na $0 0 na $0 0 na $0 0.0 naBlakely Twp 0 na $0 1 na $61,500 0 na $0 0 na $0 0 na $0 0 na $0 0.2 naHelena Twp 0 na $0 0 na $0 1 na $250,720 0 na $0 0 na $0 0 na $0 0.2 naJackson Twp 0 na $0 1 na $412,384 0 na $0 2 na $648,662 0 na $0 0 na $0 0.6 naLouisville Twp 4 na $1,748,986 9 na $981,395 0 na $0 2 na $193,729 0 na $0 0 na $0 3.0 naSand Creek Twp 0 na $0 2 na $2,343,754 0 na $0 0 na $0 0 na $0 0 na $0 0.4 naSt. Lawrence Twp 0 na $0 4 na $49,785 0 na $0 0 na $0 0 na $0 0 na $0 0.8 na

Totals

Cities 47 205.9 $71,514,273 36 171 $55,929,047 28 136.1 $30,356,753 26 108.6 $43,466,602 29 123.4 $34,310,806 27 84.7 $8,520,887 32.2 4.5High Growth Twps 8 0.0 $1,442,754 1 0 $958,000 1 0.0 $265,620 0 0.0 $0 0 0 $0 0 0 $0 2.0 naLow Growth Twps 4 0.0 $1,748,986 17 0 $3,848,818 1 0.0 $250,720 4 0.0 $842,391 0 0 $0 0 0 $0 4.3 naTownships 12 0.0 $3,191,740 18 0 $4,806,818 2 0 $516,340 4 0.0 $842,391 0 0 $0 0 0 $0 6.0 naScott County 59 205.9 $74,706,013 54 171 $60,735,865 30 136.1 $30,873,093 30 108.6 $44,308,993 29 123.4 $34,310,806 27 84.7 $8,520,887 38.2 3.8

New Prague² 1 0.2 $71,000 3 13 $9,020,478 0 0 $0 1 1.7 $1,390,000 0 0 $0 0 0 $0 0.8 1.0

¹ Includes building permits located only in Scott County portion of New Prague ² Includes building permits located only in Le Seuer County portion of New Prague Sources: Cities of Belle Plaine, Elko, Jordan, New Market, New Prague, Prior Lake, Savage, Shakopee, (listed) Townships, Scott County GIS Department, and Maxfield Research.

2008 2009 201120102007 2006‐2011Annual Avg.

2006

TABLE BP‐1ESTIMATED COMMERCIAL/INDUSTRIAL BUILDING PERMIT TRENDS

NEW CONSTRUCTION2006‐2011



Commercial/Industrial Building Permits and Acres Developed

Scott County

2001‐2011

0

20

40

60

80

100

120

2001 2003 2002 2004 2005 2006 2007 2008 2009 2010 2011

Year

Number of Building Perm

its

0

50

100

150

200

250

300

Acres

Bui lding Permits

Acres

Table BP‐2 shows the change in total number, estimated acreage, and value of building permits between 2001‐2005 and 2006‐2011 and Table BP‐3 shows the change in annual average number of permits and acreage per permit between 2001‐2005 and 2006‐2011.

The downturn of the economy had a significant impact on the commercial and industrial

sectors. Scott County saw a drastic decline in the total number of new construction commercial and industrial building permits in the five years. There were 455 new building permits issued between 2001 and 2005 compared to only 229 permits between 2006 and 2011. The annual averages associated with the number of permits issued in Scott County were 88.6 permits between 2001 and 2005 down to 38.2 permits between 2006 and 2011.

While the average annual number of permits declined from 88.6 to 36.7 between 2001‐2005 and 2006‐2011, the number of acres per building permit increased from 3.1 acres to 3.8 acres.

All municipalities and townships had a reduction in building permits over the second half of the decade. However, the townships had the largest decline from 88 permits in 2001‐2005 to 36 permits in 2006‐2011. The Great Recession was one of the key reasons there was less demand for new commercial and industrial space in the townships.



Permits Acres Value Permits Acres Value

Belle Plaine 19 28.5 $19,119,978 8 36.9 $18,845,136Elko New Market 26 43.9 $1,715,426 5 6.1 $887,050Jordan 28 42.7 $21,278,870 11 17.7 $2,915,817New Prague¹ 13 26.5 $9,149,334 6 12.1 $9,483,920Prior Lake 75 131.9 $44,112,700 29 70.9 $43,511,000Savage 59 72.7 $99,655,386 20 67.3 $39,765,683Shakopee 147 631.5 $148,776,151 114 618.2 $127,969,762Cities Total 367 977.7 $343,807,845 193 829.2 $243,378,368

Townships 88 na $18,664,076 36 na $9,357,289

Scott County 455 977.7 $362,471,921 229 829.2 $252,735,657

New Prague² 4 5.3 $3,590,423 5 14.7 $10,481,478

Note: Not all geography's had acreage numbers available in 2005.

¹ Includes building permits located only in Scott County portion of New Prague ² Includes building permits located only in Le Seuer County portion of New Prague Sources: Scott County GIS Department; City Building Departments; Maxfield Research Inc.

TABLE BP‐2

2001 to 2005 2006 to 2011

BUILDING PERMIT TOTALFIVE‐YEAR INCREMENTS

2001 to 2011

Permits Acre/Permit Permits Acre/PermitPermits Acr./Per. Permits Acr./Per. Permits Acr./Per. No. No. No. No.

Belle Plaine 0.8 5.0 3.8 2.4 1.6 3.1 3.0 ‐2.6 ‐2.2 0.7Elko New Market 0.0 0.0 5.2 1.7 1.0 0.2 5.2 1.7 ‐4.2 ‐1.5Jordan 1.6 2.1 3.4 1.5 2.0 0.2 1.8 ‐0.6 ‐1.4 ‐1.3New Prague 0.6 5.0 2.6 2.0 1.2 0.5 2.0 ‐3.0 ‐1.4 ‐1.5Prior Lake 3.8 13.0 15 1.8 5.8 2.0 11.2 ‐11.2 ‐9.2 0.2Savage 4.0 5.0 11.8 1.2 3.3 3.5 7.8 ‐3.8 ‐8.5 2.3Shakopee 12.4 14.7 29.4 4.2 19.0 5.5 17.0 ‐10.5 ‐10.4 1.3

Townships 7.7 na 11.3 na 6.0 na 3.6 na ‐5.3 na

Scott County ‐‐ ‐‐ 88.6 3.1 38.2 3.8 ‐‐ ‐‐ ‐50.4 0.7

TABLE BP‐3ANNUAL AVERAGE PERMITS ISSUED AND ACREAGE PER PERMIT

SCOTT COUNTY1996‐2000, 2001‐2005, 2006‐2011

Sources: Scott County GIS Department; City Building Departments; Maxfield Research Inc.

Change (2005‐2011)1996‐2000Annual Avg. Annual Avg. Change (2000‐2005)

2001‐2005Annual Avg.2006‐2011



Annual Average Permits Issued and Acreage Per Permit

Scott County

2001‐2005 & 2006‐2011

89

38

3.8

3.1

0

10

20

30

40

50

60

70

80

90

100

2001‐2005 2006‐2011

Year

Average

Annual Number of

Building Perm

its

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

10.0

Acres Per Perm

it

Average Annual Building Permits

Acres Per Permit

MARKET ANALYSIS


Introduction The previous section outlined employment and demographic growth in Scott County, which often drives demand for commercial and industrial development. On the supply‐side, the following section analyzes office, industrial and retail market trends in Scott County. Information on actively marketing properties is provided by Minnesota Commercial Association of Realtors database (MNCAR Exchange) while data on vacancy, absorption and rents is provided by NorthMarq ( a commercial real estate broker). Data provided by NorthMarq is presented by submarkets. Below is a map showing the submarkets in the Metro Area. Scott County is located in the Southwest Submarket.

Metro Area Submarkets

The commercial real estate market in the Twin Cities has improved in 2011 for all product types (office, retail, and industrial) as the industry continues to recover from the Great Recession. Positive absorptions and decreased vacancy rates indicate the commercial real estate market has likely bottomed out. Across most property sectors, well‐located newer properties have experienced the strongest activity, whereas older, less desirable properties continue to struggle. Conditions are still favorable for tenants as they continue to “move‐up” and upgrade into locations and sites with higher amenities; at the expense of older properties.

The following sections provide an overview of commercial market conditions in the Southwest Submarket. Detailed definitions of commercial real estate terms are located in the Appendix of the report.

MARKET ANALYSIS


Industrial Market Conditions The Twin Cities industrial market is showing signs of stabilization and is on a path of slow recovery. The Southwest Submarket (where Scott County is located) posted the most positive absorption this past year in the Metro Area. The following charts and data were compiled from either Northmarq or the Minnesota Commercial Association of Realtors database (MNCAR Exchange). Key points follow.

Vacancies and Absorption Tables MA‐1 and MA‐2 show the historical industrial vacancy rate and the vacancy rate by industrial type between the 1st Half 2002 to 2011. Table M‐3 shows current vacancy and absorption through the 1st Half 2011. Key points follow.

The overall vacancy rate in the Metro Area was 18.2% in 2011. Individual submarkets varied

from 15% in the Northwest to 19.3% in the Southeast.

Over the past ten years, the overall vacancy rate in the Southwest Submarket has fluctuated from a low of 10.5% in 2006 to a high of 17.3% in 2010. However, the vacancy rate decreased over the past year by over one percent, resulting in a 16.1% vacancy rate in 2011.

Including sublease space, the vacancy rate is slightly higher than the overall vacancy rate each year and had a low of 11.3% in 2005 to a high of 20.2% in 2010. Historically, the spread between the vacancy rate and sublease space has averaged 1.9% since 2002. However, over the past few years the vacancy rate with sublease space has been averaging about 3% higher. This has been the result of many companies downsizing during the recession.

Among the three industrial product types, office warehouse maintained the most consistent

vacancy rate over the past decade, having ranged from 9.3% to 14.4%. Bulk Warehouse vacancy rates have fluctuated significantly from 6.1% to 27.9%. Over this timeframe, vacancies have averaged:

Bulk Warehouse: 16.7% Office Showroom: 16.0% Office Warehouse: 12.4%

Both Bulk Warehouse and Office Showroom posted positive and gainful absorptions

between 2010 and 2011. Office Warehouse vacancies were stable, increasingly by only 0.2%.

Combined, the three product types represent 288 properties and posted positive absorption of nearly 290,000 square feet in the first half of 2011. Over the past year, absorption has been over 460,000 square feet.

MARKET ANALYSIS


18.1%

15.0%

19.3%

16.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

Northeast Northwest Southeast Southwest

Vacan

cy Rate

Submarket

Twin Cities Industrial Vacancy by Submarket1st Half 2011

Vacancy Vacancy Rate

Year Rate w/Sublease

2002 14.2% 17.2%

2003 15.9% 17.7%

2004 16.5% 17.5%

2005 11.6% 13.5%

2006 10.5% 11.3%

2007 11.0% 12.1%

2008 11.7% 13.2%

2009 16.1% 18.8%

2010 17.3% 20.2%

2011 16.1% 18.8%


TABLE MA‐1

HISTORICAL INDUSTRIAL VACANCY RATES

SOUTHWEST SUBMARKET

1st HALF 2002‐2011

MARKET ANALYSIS


Historic Industrial Vacancy Rate

Southwest Submarket

2002 ‐2011

14.2%

17.3%

16.1%

18.8%

15.9%

16.5%

11.6% 10.5%11.0%

11.7%

16.1%

17.2% 17.7%17.5%

13.5%

11.3%12.1%

13.2%

18.8% 20.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Vacancy Rate

Vacancy Rate

Vacancy Rate w/Sublease

Vacancy Vacancy Rate Vacancy Vacancy Rate Vacancy Vacancy Rate

Year Rate w/Sublease Rate w/Sublease Rate w/Sublease

2002 16.5% 21.6% 14.8% 17.7% 12.8% 14.9%

2003 24.8% 28.0% 13.9% 16.5% 13.2% 13.7%

2004 27.9% 28.5% 11.9% 13.8% 14.0% 14.6%

2005 18.8% 19.4% 10.2% 13.7% 9.3% 10.7%

2006 11.9% 12.5% 11.5% 13.4% 9.4% 9.6%

2007 6.1% 6.8% 14.1% 16.4% 11.1% 11.7%

2008 6.8% 6.8% 14.7% 18.4% 11.8% 12.8%

2009 21.2% 21.8% 17.7% 21.0% 13.3% 16.3%

2010 18.7% 20.0% 21.7% 25.5% 14.2% 17.1%

2011 14.3% 15.6% 20.2% 23.5% 14.4% 17.3%


TABLE MA‐2

Bulk Warehouse

HISTORICAL INDUSTRIAL VACANCY RATES BY PRODUCT TYPE

SOUTHWEST SUBMARKET

1st HALF 2002‐2011

Office Showroom Office Warehouse

MARKET ANALYSIS


Industrial Vacancy Rate by Product Type

1st Half 2002‐2011

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Year

Vacancy Rate

Bulk Warehouse Office Showroom Office Warehouse

Bulk Office Office Total

Warehouse Showroom Warehouse SW

Total Buildings 27 98 163 288

Net Rental Area 4,716,392 7,004,052 11,867,077 23,587,521

Vacancy

Vacant Space 672,867 1,415,316 1,711,967 3,800,150

Pct. Vacant 14.3% 20.2% 14.4% 16.1%

Sublease Space 63,884 233,088 344,269 641,241

Pct. Vacant w/sublease 15.6% 23.5% 17.3% 18.8%

Absorption

2nd Half 2010 182,757 ‐42,160 31,300 171,897

1st Half 2011 207,568 90,296 ‐8,073 289,791

Last 12 Months 390,325 48,136 23,227 461,688


1ST HALF 2011

1st Half 2011

TABLE MA‐3

VACANCY & ABSORPTION

SOUTHWEST SUBMARKET

MARKET ANALYSIS


Historical Industrial Absorption

SW Submarket

1st Half 2002 ‐ 2011

‐255 ‐209

570

419 418

68

‐876

‐52

907

290

‐1000

‐800

‐600

‐400

‐200

0

200

400

600

800

1000

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Year

Sq. Ft. (In thousands)

Lease Rates Tables MA‐4 and MA‐5 present historical and quoted industrial rental rates for the Southwest Submarket. Key points follow.

Average rents for both Industrial Office and Industrial Warehouse have remained relatively

stable over the past decade. Average rents for Office were lowest in 2004 ($8.10) and peaked in 2009 ($8.59). Warehouse rents ranged from $4.34 in 2011 and peaked at $4.91 in 2008.

Historically, average Warehouse rents are approximately 50% lower than the average rent for the Office component. It is important to note that a blended rate is attained when mixing an Office and Warehouse component.

Based on their respective Office and Warehouse components in Table MA5, the average net

rent varied by type of space. The Office component is priced at least 70% higher than the Warehouse component. The average rents are summarized below (warehouse & office).

Bulk Warehouse: $4.07 | $6.99 Office Showroom: $4.88 | $9.44 Office Warehouse: $4.16 | $8.55

MARKET ANALYSIS


As illustrated in Table MA‐4, Office Showroom has the highest rents while Bulk Warehouse has the lowest. Office Showroom rents are higher due to the high level of finishes versus warehouse space.

The average common area maintenance (CAM) and taxes per square foot was $1.40 for Bulk Warehouse, $3.35 for Office Warehouse, and $3.68 for Office Showroom.

Industrial Rents by Submarket

1st Half 2011

$4.29 $4.44 $4.29 $4.34

$7.64

$8.23 $8.12$8.43

$2.79$2.51 $2.37

$3.00

$0.00

$1.00

$2.00

$3.00

$4.00

$5.00

$6.00

$7.00

$8.00

$9.00


Avg. Warehouse

Avg. Office

Op. Ex. & Taxes

Year Office Warehouse

2002 $8.44 $4.42

2003 $8.23 $4.42

2004 $8.10 $4.52

2005 $8.23 $4.63

2006 $8.43 $4.80

2007 $8.44 $4.83

2008 $8.59 $4.91

2009 $8.52 $4.42

2010 $8.46 $4.35

2011 $8.43 $4.34


TABLE MA‐4

HISTORICAL INDUSTRIAL RENTAL RATES

SOUTHWEST SUBMARKET

1st HALF 2002‐2011

MARKET ANALYSIS


Historic Industrial Vacancy Rate

Southwest Submarket

2002 ‐2011

14.2%

17.3%

16.1%

18.8%

15.9%

16.5%

11.6% 10.5%11.0%

11.7%

16.1%

17.2% 17.7%17.5%

13.5%

11.3%12.1%

13.2%

18.8% 20.2%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Vacancy Rate

Vacancy Rate


Op. Expenses

Warehouse Office Taxes & Taxes

Bulk Warehouse $4.07 $6.99 $0.83 $1.40

Office Showroom $4.88 $9.44 $2.11 $3.68


Bulk Warehouse $4.09 $7.04 $0.83 $1.41

Office Showroom $4.81 $9.37 $2.11 $3.66



1st Half 2011

2nd Half 2010

TABLE MA‐5

AVERAGE QUOTED INDUSTRIAL RENTAL RATES (NET)

SOUTHWEST SUBMARKET


MARKET ANALYSIS


$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00


Warehouse ‐ Avg. Quoted Rents (net)1st Half 2011

Cam

Taxes

Warehouse

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00


Office‐ Avg. Quoted Rents (net)1st Half 2011

Cam

Taxes

Office

Industrial Properties Currently Marketing Tables MA‐6 shows detailed information on the number of industrial properties marketing in Scott County, including information on type of use, ceiling height, building size and availability, lease rates, list price, etc. Table MA‐7 shows summary data of the properties currently marketing in each submarket. For‐lease and for‐sale buildings are separated. Key points follow. As of October 2011, there are 26 properties with available space currently marketing among

all industrial types. Combined, these properties are marketing 1.28 million square feet of space.

MARKET ANALYSIS


Ceiling Year Bldg. Avail. Min. Div. Max. Contig. Lease Rates PSF/ Lease Taxes Op. Ex. List Price

Property Name/City Address Specific Use Height Built Size Sq. Ft. Sq. Ft. Sq. Ft. List Price Type PSF PSF PSF

The Bohn Building 18190 Dairy Flex/RD 26 2007 30,125 12,270 1,220 9,650 $4.50 ‐ $8.00 NNN $1.50 $1.25 ‐‐

520 6th St NW 520 6th St NW Light Industrial ‐‐ 1995 1,840 1,840 ‐‐ ‐‐ $250,000 ‐‐ $2.93 ‐‐ $136

Prior Lake Business Center 16873 Fish Point Light Industrial 19 1995 46,975 46,975 7,000 46,975 $4.50 ‐ $8.50 | $2,695,000 Net $1.23 ‐‐ $57

Prior Lake Business Center 16874 Fish Point Light Industrial 19 1998 21,900 21,900 21,900 21,900 $4.50 ‐ $8.50 | $1,270,000 Net $1.23 ‐‐ $58

Bohn Distribution Center 6613 Highway 13 Bulk Warehouse 28 1995 381,733 178,164 25,000 178,164 $4.15 Net ‐‐ $1.40 ‐‐

Huntington Building 14399 Huntington Bulk Warehouse 24 1988 244,050 22,471 22,471 22,471 $4.25 Net $1.23 $0.85 ‐‐

Prior Lake Marine 14869 Highway 13 Light Industrial 13 1975 14,154 14,154 ‐‐ ‐‐ $1,850,000 ‐‐ $3.65 ‐‐ $131

12545 Boone Ave S 12545 Boone Ave S Light Industrial ‐‐ ‐‐ 2,625 2,625 ‐‐ ‐‐ $499,000 ‐‐ ‐‐ ‐‐ $190

Custom Welding 12445 Boone Ave. Light Industrial 14 1979 3,200 3,200 ‐‐ ‐‐ $329,900 ‐‐ ‐‐ ‐‐ $103

12600 Creekview Ave 12600 Creekview Ave Warehouse ‐‐ Distribution 20 1998 10,201 10,201 ‐‐ ‐‐ $1,245,000 ‐‐ ‐‐ ‐‐ $122

7125 126th St W 7125 126th St W Warehouse ‐‐ Distribution 20 2002 21,000 8,400 2,800 5,600 $9.00 | $2,190,000 Mod. ‐‐ ‐‐ $104

Eagle Creek 8675 Eagle Creek Warehouse ‐‐ Distribution 24 2006 122,912 65,669 14,400 65,669 $4.50 ‐ $8.50 NNN $2.16 $0.78 ‐‐

12770 Creekview Ave 12770 Creekview Ave Warehouse ‐‐ Distribution ‐‐ 2006 2,623 2,623 ‐‐ ‐‐ $215,900 ‐‐ ‐‐ ‐‐ ‐‐

River Crossings Distribution Center 4241 12th Bulk Warehouse 32 2000 161,995 21,590 21,590 21,590 $4.50 ‐ $9.00 NNN $1.21 $0.88 ‐‐

Valley Oaks Distribution Center 5301 12th Bulk Warehouse 24 1998 182,880 25,101 25,101 74,189 $4.50 ‐ $9.50 Net ‐‐ $2.14 ‐‐

Valley Corporate Campus 6021 Broadband Bulk Warehouse 26 2001 500,000 500,000 60,000 500,000 Negotiable ‐‐ ‐‐ ‐‐ ‐‐

MN Valley Distritution Center III 3530 4th Bulk Warehouse 32 1998 232,000 232,000 116,000 232,000 $4.50 ‐ $9.00 NNN ‐‐ ‐‐ ‐‐

12718 Dem Con Blvd 12718 Dem Con Blvd. Heavy‐Mfg 16 1966 8,680 8,680 8,680 8,680 $4.42 NN ‐‐ ‐‐ ‐‐

12850 Chestnut Blvd 12850 Chestnut Blvd Other ‐‐ 1997 7,452 1,863 1,863 1,863 $9.67 | $750,000 Gross ‐‐ ‐‐ $101

Park 2000 Southwest Phase II 5555 12th Warehouse ‐‐ Distribution 24 2000 128,537 42,240 15,200 42,240 $4.00 ‐ $8.50 NNN $0.84 $1.10 ‐‐

Progress Valley Park 600 Canterbury Drive Warehouse ‐‐ Distribution 18 1979 71,400 3,986 3,986 3,986 $4.50 ‐ $8.00 NNN $1.54 $1.34 ‐‐

Park 2000 Southwest Phase III 5775 12th Warehouse ‐‐ Distribution 24 2001 133,000 42,925 10,000 29,918 $4.50 ‐ $9.50 NNN $0.19 $2.03 ‐‐

101 Industrial Center 7700 County Road 101 Warehouse ‐‐ Distribution 16 1973 40,000 2,380 2,380 2,380 $4.00 Net $1.30 $0.35 ‐‐

373 Canterbury Rd S 373 Canterbury Drive Warehouse ‐‐ Distribution ‐‐ ‐‐ 10,832 10,800 ‐‐ ‐‐ $675,000 ‐‐ $1.47 ‐‐ $62

Hansen Building 1513 Hansen Warehouse ‐‐ Distribution 16 ‐‐ 20,000 4,752 4,752 4,752 $4.50 ‐ $8.50 Net $1.27 $0.38 ‐‐

Shakopee Industrial Suites 588 Citation Warehouse ‐‐ Distribution 17 2007 15,738 6,693 1,831 6,703 $4.00 Net $1.95 $1.14 ‐‐

Sources: MNCAR, Maxfield Research Inc.

Jordan

New Prague

Prior Lake

Savage

Shakopee

Table MA‐6

Actively Marketing Industrial Properties by Submarket

Scott County

October 2011

MARKET ANALYSIS


For‐Lease

Total Avg. Op Exp Avg. TaxesSubmarket Total BW OW OS Marketing SF Per SF Per SF

Belle Plaine ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐Elko/New Market ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐Jordan 1 1 ‐‐‐ ‐‐‐ 12,270 $1.25 $1.50New Prague ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐Prior Lake 2 ‐‐‐ 2 ‐‐‐ 68,875 ‐‐‐ $1.23Savage 4 4 ‐‐‐ ‐‐‐ 274,704 $1.01 $2.34Shakopee 10 9 1 ‐‐‐ 383,530 $0.94 $1.14

High Growth Twp. ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐Low Growth Twp. ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐

Scott County 17 14 3 0 739,379 $4.00 ‐ $9.50 $1.07 $1.55

For‐Sale

Submarket Total BW OW OS Total SF Low Price High Price

Belle Plaine ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐Elko/New Market ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐Jordan ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐New Prague 1 1 ‐‐‐ ‐‐‐ 1,840 ‐‐‐ ‐‐‐Prior Lake 2 ‐‐‐ 2 ‐‐‐ 68,875 $1,270,000 ‐ $2,695,000Savage 6 3 3 ‐‐‐ 53,803 $215,900 ‐ $2,190,000Shakopee 2 2 ‐‐‐ ‐‐‐ 18,284 $675,000 ‐ $750,000

High Growth Twp. ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐Low Growth Twp. ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐ ‐‐‐

Scott County 11 6 5 0 142,802 $215,900 ‐ $2,695,000

*Note: BW = Bulk Warehouse, OW = Office Warehouse, OS = Office Showroom. Sources: MNCAR, Maxfield Research, Inc.

Median Price

‐‐‐‐‐‐

$712,500

‐‐‐‐‐‐

‐‐‐$250,000$1,982,500$872,000

‐‐‐$4.50 ‐ $8.50$4.15 ‐ $9.00

‐‐‐‐‐‐

$4.00 ‐ $9.50

$792,250

TABLE MA‐7SUMMARY OF INDUSTRIAL PROPERTIES CURRENTLY LISTED

SCOTT COUNTYOctober 2011

Lease RatesPer SF

‐‐‐‐‐‐

$4.50 ‐ $8.00

One‐half of the listings are located in Shakopee, while 35% of the properties are in Savage.

Combined, these two communities account for almost 95% of the marketing square footage (Shakopee 70.5%; Savage 24%).

There are no properties marketing in Belle Plaine, Elko New Market, or any of the

townships. A total of four properties are listed for‐lease or for‐sale.

The majority of industrial properties marketing are classified as Bulk Warehouse, while the remainder is Office Warehouse. There are no office showroom properties actively marketing.

Average lease rates range from $4.00 (Warehouse) to $9.50 (Office Showroom) per square

foot. Average operating expenses (CAM) are $1.07, while operating expenses are $1.55.

MARKET ANALYSIS


The median list price among industrial properties for‐sale is approximately $792,000. However, sale prices vary from $215,900 upwards to $2,695,000 with price‐per‐square foots ranging from $57 to $190.

Compared to the 2006 Scott County Commercial/Industrial Study, there are substantially

fewer buildings listed for‐lease or for‐sale. There were 50 actively marketing buildings in 2006, or about double from October 2011.

Pending Industrial Projects Maxfield Research inventoried staff members in the planning or building permits department in each submarket. The purpose was to identify any pending industrial developments that may affect demand and the land supply in Scott County. The following are key findings from those interviews. New Prague Chart Industries: The City of New Prague is working with Chart Industries on a possible 180,000 square foot new manufacturing facility adjacent to their current site on the corner of Highway 21 and County Road 37. The project would also include a 20,000 square foot office building. No formal applications have been made.

Shakopee The following two projects have not been formally applied or approved by the City, however both projects have been discussed with the City. SanMar Corp.: SanMar Corp. has a purchase agreement with the Opus Group to purchase a 45‐acre site along Canterbury Road and 4th Avenue. The company plans to develop a 580,000 square foot distribution center that would employ about 150 employees with plans to employ up to 350 employees within a few years. SanMar hopes to occupy the new facility in 2013 while pursuing a temporary facility in Shakopee sometime in 2012. The company has applied for tax increment financing (TIF). Consequently, no formal development application has been applied for at this time. Trystar Inc.: Trystar Inc. plans to relocate its manufacturing plant from Faribault to Shakopee. Trystar has a purchase agreement on a 28‐acre site in the Dean Lakes development along Highway 169 and Canterbury Road. The company plans to build a $15 million, 175,000 square foot facility that is estimated to employ over 100 employees. Trystar has applied for some financial assistance that is under city review. Consequently, no formal development application has been applied for at this time.

MARKET ANALYSIS


Elko New Market

International Motorsports Entertainment Development Corporation (IMEDC): The IMEDC is proposing to build a motorsports complex called Minnesota Speedway Park that will consist of a 7/8‐mile oval racetrack with seating for up to 65,000 people, a 1/4‐mile drag strip with seating for up to 35,000 people, a hotel, conference and exhibition center. The Minnesota Speedway Park would be located on approximately 400 acres at the northwest corner of I‐35 and County Road 2. The land is currently in New Market Township and would need to be annexed into Elko New Market. The IMEDC goal is to have the facility open for race events in 2014; however, an environmental assessment would need to be conducted prior to construction. No formal applications have been submitted to the City. No pending industrial developments were identified in Belle Plaine, Jordan, Prior Lake, and Savage.

Office Market Conditions Vacancy rates across the Metro Area have steadily increased since 2006 before plateauing in 2010, indicating the market for office space has bottomed out. A market bifurcation continues to dominate the industry as Class A and updated Class B properties outperform older Class B and Class C properties. Like the industrial market, Scott County is included in the Southwest submarket of the Twin Cities. Data presented in this section is sourced from both Northmarq and MNCAR. Office space is presented in three categories: Class A, Class B, and Class C (see definitions in the Appendix). Class A signifies a higher‐value building with associated higher lease rates. Class C indicates a lower‐value building often at a less desirable location and charging lower lease rates. Class B shows the value characteristics of a building between Class A and Class C. Vacancy and Absorption Table MA‐8 shows the amount of vacant office space and absorption in the Southwest Submarket by building class over the past year. The charts that follow illustrate historic absorption and vacancy from 2002 to 2011. The data is gathered from NorthMarq.

The overall vacancy rate declined in the Southwest Submarket over the past year. In 2010,

20.8% of office space was vacant, decreasing to 18.4% in 2011.

A positive absorption of over 264,000 square feet resulted over this past year, resulting in a declining vacancy rate. Year‐over‐year, 2011 posted the first positive absorption since 2007 prior to the Great Recession.

MARKET ANALYSIS


Class A office space represents about 58% of the total office inventory in the Southwest Submarket and posted the lowest vacancy rate in 2011 (16.7%). Across the Metro Area, Class A office space continues to outperform older Class B and Class C properties as many tenants “moved up” during the recession at the expense of older facilities.

Twin Cities Office Vacancy Rate by Class

1st Half 2011

15.3%

22.4%

26.4%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Class A Class B Class C

Property Class

Vacancy Rate

Office Vacancy by Submarket

1st Half 2011

18.9%21.0%

30.2%

19.7% 19.2%

23.3%

14.0%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

35.0%

Mpls. CBD

Northeast

Northwest

South/Airport

Southwest

St. Paul CBD

West

Submarket

Vacancy Rate

MARKET ANALYSIS


Class A Class B Class C Total

Total Buildings 51 69 26 146

Net Rental Area 8,275,526 4,922,637 1,082,922 14,281,085

Vacancy

Vacant Space 1,381,428 906,733 343,662 2,631,823

Pct. Vacant 16.7% 18.4% 31.7% 18.4%

Sublease Space 197,947 257,135 6,584 461,666

Pct. Vacant w/sublease 19.1% 23.6% 32.3% 21.7%

Absorption

2nd Half 2010 97,985 ‐97,268 ‐22,467 ‐21,750

1st Half 2011 332,701 ‐30,804 ‐37,581 264,316

Last 12 Months 430,686 ‐128,072 ‐60,048 242,566


1ST HALF 2011

1st Half 2011

TABLE MA‐8

OFFICE VACANCY & ABSORPTION

SOUTHWEST SUBMARKET

Historical Office Vacancy Rate

Southwest Submarket

2002 ‐2011

14.7%

20.8%

18.4%

21.7%

17.0%

14.4%12.1% 11.7%

13.0%

15.8%

20.5%18.3%

19.6%

17.4%

14.2% 13.8%

17.1%

19.2%

24.5%

24.3%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Vacancy Rate

Vacancy Rate


MARKET ANALYSIS


Historical Absorption ‐ SW Submarket

1st Half 2002 ‐ 2011

‐252

‐87

373

138

200

‐151

‐211

‐16

327264

‐300

‐200

‐100

0

100

200

300

400

500

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011Year

Sq. Ft. (In thousands)

Lease Rates Table MA‐9 presents rental rates (net) by class for the Southwest submarket over the past year. Key points follow.

Average rents for all classes of office buildings decreased from 2010 to 2011. Class A and

Class B average rents decreased by less than 5%, while Class C buildings decreased by 22%. Class A average rents peaked in 2009 at $18.80 per square foot, while both Class B and Class

C rents peaked in 2007 ($12.30 and $10.30, respectively).

The average common area maintenance (CAM) and taxes ranged from over $11.00 for Class A space, $9.77 for Class B space, and about $8.00 for Class C space.

The total rent (rent plus expenses) averages approximately $26.00 for Class A space, $20.75

for Class B space, and $14.80 for Class C space.

MARKET ANALYSIS


Avg. Avg. Avg. Op. Expenses

Rate (Net) Taxes Op. Ex. & Taxes

Class A $14.69 $4.18 $7.09 $11.27

Class B $10.96 $3.14 $6.63 $9.77

Class C $6.91 $2.49 $5.41 $7.90

Class A $15.19 $4.41 $6.74 $11.15

Class B $11.49 $3.19 $6.58 $9.77

Class C $8.91 $2.48 $5.38 $7.86


1st Half 2011

2nd Half 2010

TABLE MA‐9

AVERAGE QUOTED OFFICE RENTAL RATES (NET)

SOUTHWEST SUBMARKET


$14.69$10.96

$6.91

$4.18

$3.14

$2.49

$7.09

$6.63

$5.41

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00


Avg. Ren

t

Average Office RentsSW Submarket ‐ 1st half 2011

Avg. Op. Ex. Avg. Taxes Avg. Rate (Net)

MARKET ANALYSIS


$15.10

$14.73 $14.54 $14.89$15.33

$15.78 $15.53 $15.80 $15.20

$14.69

$11.38 $11.13 $11.27 $11.62$12.06 $12.30 $11.94

$11.70$11.49

$10.96$10.66$9.95

$9.46 $9.57 $9.54$10.30

$9.38$8.76 $8.91

$6.91

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

$16.00

$18.00

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

Vacan

cy Rate

Historic Office Rental Rates (Net)Southwest Submarket‐ 2002 ‐2011


Avg. Office Rents by Submarket

1st Half 2011$12.79

$11.42

$10.06

$12.31 $12.82

$9.07

$13.30

$0.00

$2.00

$4.00

$6.00

$8.00

$10.00

$12.00

$14.00

Mpls CBD

Northeast

Northwest

South/Aiport

Southwest

St. Paul CBD

West

Submarket

Avg. Net Rent

Office Properties Currently Marketing Table MA‐10 shows the number of office buildings currently marketing in Scott County. Information was collected by Maxfield Research Inc. in October 2011 from the Minnesota Commercial Property Exchange (MNCAR). The table displays key features such as type of use, tenancy, square footage, available space, lease rates or list price, operating expenses, and taxes per square foot in each submarket. The following summarizes key findings.

MARKET ANALYSIS


Overall, Scott County has 33 office properties marketing. Over 180,000 square feet of space is currently available in Scott County.

Among the submarkets, Savage has the most office buildings marketing office space (17 buildings). However, many of these properties are smaller office condos. As a result, Savage accounts for about 26% of the total square footage marketing in the County.

The properties are distributed equally between for‐lease and for‐sale properties. Four of

the properties are marketing either a for‐sale or for‐lease option. Additionally, nearly 80% of the properties are multi‐tenant buildings.

Although Prior Lake has only seven properties marketing, these buildings account for about

one‐third of the available space in Scott County. The majority of this space is attributed to the 4385 Fountain Hills property, accounting for over 35,000 square feet.

Lease rates among actively marketing properties actively range from $6.00 to $34.00 per

square foot. The median lease rate is $14.75.

MARKET ANALYSIS


Year Building Specific Bldg. Avail. Min.Divs. Max. Contig. Pricing L:ease List Price

Property Name Address Built Class Use Tenancy Size Sq. Ft Sq. Ft. Sq. Ft. List Price | Lease Rate Type Sq. Ft

Belle Plaine

139 Main St E 139 Main 1905 B General Multi‐Tenant 14,268 14,268 ‐‐ 14,268 $245,500 ‐‐ $17

104‐106 Main St E 104 Main 1920 C General Multi‐Tenant 3,390 3,390 ‐‐ 3,390 $99,800 ‐‐ $29

125 Main St E 125 Main ‐‐ B General Multi‐Tenant 9,600 9,600 ‐‐ 9,600 $197,500 ‐‐ $21

Prior Lake

16152‐16154 Main Ave 16152 Main B General Multi‐Tenant 5,371 2,934 2,934 2,934 $420,000 | $15.00 Gross $78

16151 Main Ave SE 16151 Main 1938 C General Multi‐Tenant 8,195 8,195 ‐‐ 8,195 $499,000 ‐‐ $61

Northlake Office Centre I 14198 Commerce 1987 B General Single‐Tenant 10,982 2,955 708 1,352 $13.00 NNN ‐‐

Northlake Office Centre III 14162 Commerce 1995 B General Multi‐Tenant 9,341 4,365 1,245 3,120 $13.00 NNN ‐‐

The Rock Creek Building 16180 Hastings 2006 A General Multi‐Tenant 17,000 3,194 894 2,300 $6.00 ‐ $8.00 Net ‐‐

4385 Fountain Hills Dr 4385 Fountain Hills 2000 ‐‐ Other Multi‐Tenant 35,749 35,749 ‐‐ 35,749 $1,395,000 ‐‐ $39

Savage

4029 125th St W 4029 125th 1963 B General Multi‐Tenant 1,800 1,800 ‐‐ 1,800 $190,000 ‐‐ $106

The Pointe Professional Center 13875 Highway 13 2003 B General Multi‐Tenant 24,000 1,967 1,967 1,967 $15.00 ‐ $17.00 Net ‐‐

Heatherton Ridge 8766 Egan 2005 B General Multi‐Tenant 2,140 1,040 ‐‐ 1,040 $77,777 ‐‐ $36

Heatherton Ridge Office Condos 8734 Egan 2005 B General Multi‐Tenant 3,224 2,080 ‐‐ 2,080 $87,777.00 ‐‐ $27

Heatherton Ridge 8710 Egan 2005 A General Multi‐Tenant 3,184 3,186 ‐‐ 3,186 $57,777.00 ‐ $249,000.00 ‐‐ $18

12764 Creekview Ave 12764 Creekview 2006 C General Single‐Tenant 2,532 2,532 ‐‐ 2,532 $269,000 ‐‐ $106

Savage Business Lofts 8636 Eagle Creek 2007 A General Single‐Tenant 2,625 2,625 ‐‐ 2,625 Negotiable ‐‐ ‐‐

Savage Lofts 8694 Eagle Creek 2006 B General Single‐Tenant 2,786 2,786 ‐‐ 2,786 $399,000 ‐‐ $143

Savage Business Lofts 8382 Eagle Creek ‐‐ A General Single‐Tenant 35,547 3,547 ‐‐ 3,547 Negotiable ‐‐ ‐‐

Savage Business Lofts 8640 Eagle Creek 2007 A Loft Single‐Tenant 3,736 3,736 ‐‐ 3,736 $399,000 ‐‐ $107

Savage Business Lofts 8646 Eagle Creek ‐‐ A General Multi‐Tenant 12,829 548 548 548 Negotiable | $21.90 NNN ‐‐

8674 Eagle Creek Pkwy 8674 Eagle Creek ‐‐ A General Multi‐Tenant 3,828 3,828 3,828 3,828 $550,000 | $18.00 Gross $144

Savage Crossings Office Building 7533 Egan 2005 A General Multi‐Tenant 18,500 4,130 1,086 3,044 $13.50 ‐ $14.50 Net ‐‐

Twin Lakes Executive Park 7447 Egan 2001 A General Multi‐Tenant 38,474 4,712 474 2,433 $16.00 ‐ $22.00 Gross ‐‐

Klein Bank Building 14141 Glendale 1985 C General Multi‐Tenant 13,038 5,351 405 2,735 $10.00 NNN ‐‐

7675 Hwy 13 W 7675 Highway 13 1960 B General Multi‐Tenant 7,082 800 350 450 $625,000 | $12.75‐$13.75 Gross $88

Savage Medical Building 6350 143rd St. A Medical Multi‐Tenant 32,000 3,300 3,300 3,300 $34.00 Gross ‐‐

Shakopee

Canard Aerospace Building 250 Fuller 2003 A General Multi‐Tenant 24,756 10,859 1,000 4,103 $16.00 Net ‐‐

4601 Dean Lakes Blvd 4601 Dean Lakes ‐‐ A General Single‐Tenant 98,351 18,481 3,792 14,689 ‐‐ ‐‐ ‐‐

River City Centre 2 115 1st ‐‐ B General Multi‐Tenant 12,393 2,133 1,330 2,133 $14.00 NNN ‐‐

Dean Lakes Health 4201 Dean Lakes 2004 A Medical Multi‐Tenant 20,000 2,778 1,500 2,778 $20.00 NNN ‐‐

Citizens State Bank of Shakopee 1100 4th 1980 B General Multi‐Tenant 18,000 4,913 975 1,364 $22.00 Gross ‐‐

Lewis Street Office Building 205 Lewis ‐‐ B General Multi‐Tenant 7,800 448 448 448 $16.00 Gross ‐‐

Laurent Building 100 Fuller 1900 C General Multi‐Tenant 12,524 7,856 168 4,065 $600,000 Gross $48


TABLE MA‐10

ACTIVELY MARKETING OFFICE BUILDINGS

SCOTT COUNTY

October 2011

MARKET ANALYSIS


Pending Office Projects Maxfield Research inventoried staff members in the planning or building permits departments in each submarket. The purpose was to identify any pending office developments that could affect demand and the land supply in Scott County. The following are key findings from those interviews. Jordan A 3,168 square foot dental office is currently under construction at 301 Eldorado Drive. Anticipated opening is March 2012. Prior Lake River Valley Veterinary Service: The animal clinic is proposing to double the size of their 7,000 square foot building located at 15900 Jordan Avenue. River Valley Veterinary Service received $57,000 in TIF funds for the expansion. However, the project is on hold while the City Council considers repealing the requirement for new commercial buildings to require sprinkler systems. Savage Fairview Clinic: Fairview Health Services is currently constructing an 11,500 square foot medical clinic. It is located at 5725 Loftus Lane. Anticipated opening is February 2012. Beckhoff Automation LLC: The high‐tech computer part manufacturer received approval to build a 47,500 square foot office and warehouse facility at the northwest corner of McColl Drive and Dakota Avenue. Beckhoff Automation is currently located in Burnsville, but is outgrowing its current space and hopes to relocate by summer 2012. Elko New Market Northfield Hospital & Clinics: Northfield Hospital & Clinics plans to construct a new primary care medical clinic on a four acre parcel in the Elko Marketplace development located at the southwest corner of France Avenue and County Road 2. No formal application has been submitted to the city as anticipated construction start is within two to four years. New Market Bank: New Market Bank plans to relocate from their downtown location to the Elko Marketplace development. No formal application has been submitted to the city as anticipated construction start is within two to four years. No pending office developments were identified in Belle Plaine, New Prague, and Shakopee.

MARKET ANALYSIS


Retail Market Conditions Maxfield Research analyzed retail market trends for Scott County, including retail space absorption, vacancy rates, average net rents, and actively marketing retail properties. This information is useful is assessing the potential for retail demand in Scott County since the overall health of the local retail market influences future development potential. The Metro Area retail market has been improving as vacancies are at the lowest since 2008. A number of big box and junior box spaces were vacated during the recession that have been backfilled as retailers upgrade locations and take advantage of very favorable lease terms. Vacancy rates have decreased the most in the first‐ring markets while the outer ring markets (outside the I‐494/694 loop) have been the highest. Retailers are drawn to those sites due to the higher daytime populations, income levels, and population densities. Absorption and Vacancy According to the Minnesota Shopping Center Association (MSCA), there are 461 retail properties in the Metro Area with 30,000 square feet or more (gross leasable area or GLA). The data excludes single‐tenant, freestanding retail space and includes only multi‐tenant shopping centers. MSCA classifies shopping centers in three major categories: Neighborhood, Community, and Regional shopping centers. Like the previous commercial sectors, Scott County is included in the Southwest Submarket. Table MA‐11 shows the amount of vacant retail space and absorption in Scott County from 2006 to 2011 by type of center. Key points follow.

The overall retail vacancy rate in the Metro area was 7.5% in 2011, down from 8.3% in 2010.

Vacancy rates in regional centers posted the lowest rates (3.2%), while the Minneapolis Central Business District (CBD) was the highest (24.5%).

The vacancy rate in the Southwest Submarket was 7.0% in 2011, up from 6.3% in 2010.

Combined, there is over 2 million square feet of retail space among the twelve retail centers in Scott County. There are seven neighborhood centers that account for approximately 30% of the total available square feet, four community centers making up 45.5%, and one regional center that accounts for 25%.

Vacancy rates vary significantly based on the retail center type. The one regional center

(Southbridge Crossing) posted a vacancy rate of only 1.4%; whereas community centers had a 5.1% vacancy rate, and neighborhood centers was 18.6%.

Absorption was negative this past year (‐58,000 square feet) as vacancy rates increased.

This is highly attributed to the significant spike in vacant space in the neighborhood sector, which had a negative absorption of over ‐82,000 square feet.

MARKET ANALYSIS


11.7%

6.2%

3.2%

24.5%

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

30.0%

Neighborhood Community Regional Mpls CBD

Vcancy Rate

Type of Center

Vacancy by Type of CenterTwin Cities Metro Area ‐ 2011

7.3%

8.2%

5.9%

7.0%

0.0%

1.0%

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%


Vacan

cy Rate

Submarket

Retail Vacancy by SubmarketTwin Cities Metro Area ‐ 2011

MARKET ANALYSIS


Number of GLA Vacant Vacancy Annual

Year Centers (Sq. Ft.) (Sq. Ft.) Rate Absorp.

Neighborhood Centers

2006 5 389,158 7,897 2.0% ‐‐

2007 6 493,321 71,430 14.5% 40,630

2008 6 493,321 13,947 2.8% 57,483

2009 8 672,088 110,669 16.5% 82,045

2010 7 613,808 31,621 5.2% 20,768

2011 7 613,808 114,356 18.6% ‐82,735

10.7%

Community Centers

2006 4 880,481 3,645 0.4% ‐‐

2007 5 1,080,481 34,154 3.2% 169,491

2008 5 1,080,481 76,231 7.1% ‐42,077

2009 4 1,008,278 91,516 9.1% ‐87,488

2010 4 942,481 75,107 8.0% ‐49,388

2011 4 942,481 48,180 5.1% 26,927

5.5%

Regional Centers

2006 1 515,175 6,268 1.2% ‐‐

2007 1 515,175 7,668 1.5% ‐1,400

2008 1 515,175 7,668 1.5% 0

2009 1 515,175 3,978 0.8% 3,690

2010 1 515,175 5,005 1.0% ‐1,027

2011 1 515,175 7,365 1.4% ‐2,360

1.2%

Total

2006 10 1,784,814 17,810 1.0% ‐‐

2007 12 2,088,977 113,252 5.4% 208,721

2008 12 2,088,977 97,846 4.7% 15,406

2009 13 2,195,541 206,163 9.4% ‐1,753

2010 12 2,071,464 111,733 5.4% ‐29,647

2011 12 2,071,464 169,901 8.2% ‐58,168

5.8%

Sources: MSCA, Maxfield Research Inc.

Historic Average

Historic Average

TABLE MA‐11

HISTORICAL RETAIL VACANCY BY SPECIFIC USE

SCOTT COUNTY

2006 to 2011

Historic Average

Historic Average

MARKET ANALYSIS


Lease Rates Table MA‐12 shows median net rental rates (excluding expenses) for all shopping centers in each submarket in the Metro Area, according to the Minnesota Shopping Center Association (MSCA). It is important to keep in mind that per square foot rental rates can vary greatly, even within the same retail center, with anchor tenants typically paying lower per square foot rents compared to small retailers. Small retailers often benefit from being located close to larger anchor tenants because of the customer traffic they generate. Furthermore, shopping center owners lease large blocks of space to anchor tenants at a lower rental rate, since their presence helps to market and generate higher rents for smaller spaces. Generally, the low end of the median rent range shown in Table MA‐12 reflects rents paid by larger anchor tenants, while higher rents are those paid by in‐line retailers. Data is not available for Scott County separately and is included in the Southwest Submarket. Key points follow.

Average lease rates in the Southwest Submarket ranged from approximately $17.20 to

$20.34 per square foot, the highest of the four submarkets.

The average common area maintenance (CAM) and taxes among were $4.05 and $4.88 per square foot respectively, also the highest among all four submarkets.

Together with CAM and taxes, the typical retailer in the Southwest Submarket is paying

over $26.00 per square foot.

Avg. Avg.

Location Low ‐ High CAM Taxes

SubmarketNortheast $14.16 ‐ $18.47 $3.60 $4.48Northwest $14.52 ‐ $17.00 $3.59 $3.71Southeast $15.02 ‐ $17.68 $3.22 $4.04Southwest $17.21 ‐ $20.34 $4.05 $4.88

Twin Cities Metro Area

Neighborhood $14.51 ‐ $17.00 $3.46 $3.96Community $17.29 ‐ $20.18 $3.14 $4.40

Regional $18.69 ‐ $29.92 $6.48 $6.41

Mpls CBD $11.33 ‐ $32.58 $10.19 $3.89

Sources: Minnesota Shopping Center Association, 2011

Maxfield Research, Inc.

Avg. Net Rental Rates

TABLE MA‐12

RENTAL RATES BY TYPE OF CENTER & SUBMARKET

TWIN CITIES METRO

2011

MARKET ANALYSIS


$14.16 $14.52 $15.02$17.21

$3.60 $3.59 $3.22

$4.05$4.48 $3.71 $4.04

$4.88

$0.00

$5.00

$10.00

$15.00

$20.00

$25.00

$30.00


SubMarket

Avg. of All Operating Expenses by Submarket ‐ 2011

Low Net Avg. CAM Avg. Taxes

Retail Properties Currently Marketing Table MA‐13 shows Scott County retail buildings currently marketing, and includes information on type of use, available square footage, lease rates, operating expenses, and taxes per square foot in each submarket. The data is collected from the Minnesota Commercial Association of Realtors (MNCAR) listing service. Key points follow.

All of the properties marketing are for‐lease; there were no retail properties identified as

for‐sale in Scott County. There is only one single‐tenant retail space actively marketing as nearly all of the listed properties are multi‐tenant buildings.

Overall, Scott County has 25 retail properties marketing as of October 2011. Over 274,000 square feet is for‐lease in the County. Based on a total inventory of over 1.7 million square feet among the properties, 16% of the space is vacant.

Shakopee has 13 properties marketing over 189,000 square feet of space, about 70% of the

County’s inventory. Although Savage has 7 properties marketing, there is only 25,000 square feet available (9% of the County’s available square footage). Likewise, Prior Lake has only four properties marketing but has over 56,000 square feet (20% of the inventory).

Average lease rates among the properties actively marketing is just under $15.00 per square foot. Operating expenses average $3.43 and taxes average $4.67.

The majority of available space is smaller and will target in‐line retailers. The median

minimal divisible square footage was 1,500 square feet, while the median maximum contiguous square feet was about 3,000.

MARKET ANALYSIS


Year Bldg. Avail. Min. Div. Max. Contig. Lease Rates Lease Taxes Op. Ex.Property Name/City Address Specific Use Built Size Sq. Ft. Sq. Ft. Sq. Ft. Sq. Ft. Type Tenancy PSF PSF

Belle Plaine

SW of Hwy 169 and Main St Hwy 169 & Main St. Anchored Strip Center ‐‐ 46,240 3,240 1,080 3,240 $19.00 NNN Multi‐Tenant ‐‐ ‐‐

Prior Lake

Northgate Center 15875 Franklin Trl. Convenience/Strip Center 1999 79,832 20,972 1,032 9,810 $9.00 ‐ $14.00 NNN Multi‐Tenant ‐‐ $5.85

Shoppes of Boudin Crossings 6880 Boudin St. Other ‐‐ 25,000 7,900 7,900 7,900 Negotiable NNN Multi‐Tenant ‐‐ ‐‐

Gateway Center 5101 Gateway Neighborhood Center 1979 24,973 11,830 11,830 11,830 Negotiable Net Multi‐Tenant ‐‐ ‐‐

South Lake Village 16731 Hwy. 13 Neighborhood Center 1984 70,925 15,754 937 10,000 $12.00 ‐ $16.00 NNN Multi‐Tenant $3.46 $2.38

Savage

Savage Town Square Outlot Building 14025 Hwy. 13 Community Center ‐‐ 7,373 3,834 1,125 1,455 Negotiable ‐‐ Multi‐Tenant $5.80 $4.15

Sand Square 3965 Egan Dr. Convenience/Strip Center ‐‐ 15,000 3,600 1,200 2,400 $12.00 NNN Multi‐Tenant $3.94 $4.61

Savage Crossings 7705 Egan Dr. Convenience/Strip Center 2003 14,000 2,047 2,047 2,047 $22.00 NNN Multi‐Tenant $8.33 $4.79

Savage Town Square 14075 Hwy. 13 Neighborhood Center 2002 83,600 5,818 1,508 2,408 Negotiable ‐‐ Multi‐Tenant $7.75 $3.21

Savage Town Square Outlot Building 14025 Hwy. 13 Community Center ‐‐ 7,373 3,834 1,125 1,455 Negotiable ‐‐ Multi‐Tenant $5.80 $4.15

O'Connel Square 5715 Egan Neighborhood Center 2002 55,043 4,827 1,586 1,632 $15.00 ‐ $24.00 NNN Multi‐Tenant $5.82 $3.74

Woodridge Pond I 14247 O'Connel Other 1998 6,292 954 1,205 2,159 Negotiable ‐‐ Multi‐Tenant $5.43 $4.51

Shakopee

1301 Greenwood Ct 1301 Greenwood Ct. Automotive 2006 21,340 21,340 21,340 21,340 Negotiable ‐‐ Single‐Tenant ‐‐ ‐‐

Shakopee Valley Marketplace 1501 17th Ave. Community Center 2000 146,430 1,850 1,850 1,850 Negotiable ‐‐ Multi‐Tenant $4.27 $2.34

Shakopee Commons Shopping Center 1329 Heather St. Convenience/Strip Center 2000 12,739 1,500 1,500 1,500 $17.00 NNN Multi‐Tenant $4.65 $2.40

Shakopee River City Centre 300 1st Ave. Convenience/Strip Center 1998 25,343 2,133 1,330 2,133 $14.00 NNN Multi‐Tenant $3.95 $1.51

Eagle Creek Plaza 471 Marschall Rd. Convenience/Strip Center 1987 26,260 1,280 1,280 2,980 $14.00 NNN Multi‐Tenant ‐‐ ‐‐

Shakopee Shopping Center 1698 Vierling Dr. Freestanding ‐‐ Big Box 1999 103,000 67,470 67,470 67,470 Negotiable NNN Multi‐Tenant $2.86 $1.35

MN Vinyl and Aluminum Systems 12820 Emery Way Freestanding ‐‐ Other ‐‐ 13,641 13,161 13,161 13,161 $7.00 Net Multi‐Tenant $2.00

6268 Co Rd 101 E Building 6268 Co. Rd. 101 General/Street Retail 1983 28,000 14,000 5,000 14,000 $14.50 Net Multi‐Tenant $1.04 $0.30

Dean Lakes Development ‐‐ General/Street Retail ‐‐ 14,400 4,450 1,102 2,900 Negotiable NNN Multi‐Tenant $6.28 $5.54

Southbridge Crossing 8030 Old Carriage Ct. Regional Center 2002 515,175 2,859 2,859 2,859 $20.00 ‐ $22.00 NNN Multi‐Tenant $6.96 $4.52

Shakopee Town Square 1100 Shakopee Town Community Center 1973 222,481 40,730 1,350 19,910 $3.00 ‐ $10.00 ‐‐ Multi‐Tenant $1.00 $3.02

Shakopee Crossroads Center 1106 Vierling Neighborhood Center 1999 140,741 13,981 1,190 6,000 $20.00 ‐ $23.00 ‐‐ Multi‐Tenant ‐‐ ‐‐

1228 Vierling Drive 1228 Vierling Dr. General 1999 12,108 4,650 4,650 4,650 Negotiable NNN Multi‐Tenant ‐‐ ‐‐


Table MA‐13

Actively Marketing Retail Developments by Submarket

Scott County

October 2011

MARKET ANALYSIS


Pending Retail Projects Maxfield Research inventoried staff members in the planning or building permits departments at each submarket. The purpose was to identify any pending retail developments that could affect demand and the land supply in Scott County. The following are key findings from those interviews. Belle Plaine Oppidan: A new 6,000 square foot retail center opened in November 2011 located next to the Coborn’s Superstore on Enterprise Drive. A 3,000 square foot McDonald’s anchors the complex and also includes Verizon Wireless, Great Clips and Dominos Pizza. Jordan Scott County CDA and St. Francis Regional Medical Center: A mixed‐use development consisting of independent senior units, 8,000 square foot library, a 5,000 square foot clinic and a 2,000 square foot pharmacy will start construction in spring 2012. Scott County CDA would own the senior housing units and the library and St. Francis Regional Medical Center would operate the clinic and pharmacy. The development would consist of two buildings at the intersection of Creek Lane South and Seville Drive with the library and senior housing in one building and the clinic and pharmacy in the other building. Shakopee Jo‐Ann Fabric and Craft: A new 17,040 square foot store is currently under construction next to Lowe’s Home Improvement store in the Dean Lakes PUD. Jo‐Ann Fabric and Crafts is currently located in the Shakopee Town Square Mall and hope to relocate in mid‐2012. Elko New Market Firm Group and New Market Bank: A mixed‐use development consisting of senior housing and commercial space is proposed on a four‐acre parcel located at the northwest corner of Dakota Avenue and County Road 2. No formal application has ben submitted to the City and the number of units and square footage of the commercial space is unknown. No pending retail developments were identified in New Prague, Prior Lake, and Savage.

MARKET ANALYSIS


Land Market Conditions Commercial and residential land prices continue to stabilize, albeit at a fraction of the cost compared to the boom years of last decade. Buyers continue to find steeply discounted prices pushing land pricing to the bottom. Many retailers are taking advantage of low prices and purchasing property that was previously unachievable prior to the bust. Most retail has been concentrated on infill sites within the I‐494/694 core in close proximity to density. Land transactions have picked up over the past year as national fast‐food restaurants/fast‐food casual have been seeking outlots. Speculative land buys are not expected to return for a few more years as build‐to‐suite is the preferred method today. Maxfield Research Inc. identified land market trends in Scott County and the Metro Area. Table MA‐14 illustrates actively marketing land while Table MA‐15 identifies land sale transactions in Scott County from 2010 to October 2011. Both tables are derived from the MNCAR database. Key findings from the tables follow.

Land Use PSF Acre PSF Acre PSF Acre

Agriculture $1.03 $44,867 $1.41 $61,420 $0.75 $32,670

Industrial ‐ Manufacturing $3.25 $141,570 $2.92 $127,195 $3.02 $131,551

Industrial ‐ Other $5.16 $224,770 $3.26 $142,006 $3.65 $158,994

Industrial ‐ Warehouse/Dist. $2.40 $104,544 $2.52 $109,771 $3.43 $149,411

Mixed Use $3.83 $166,835 $6.26 $272,686 $9.62 $419,047

Office ‐ General ‐‐ ‐‐ $21.60 $940,896 $11.69 $509,216

Office ‐ Medical ‐‐ ‐‐ ‐‐ ‐‐ $17.63 $767,963

Other $4.83 $210,395 $3.98 $173,369 $8.23 $358,499

Pad Site $6.86 $298,822 ‐‐ ‐‐ $9.05 $394,218

Raw Land $3.83 $166,835 $0.44 $19,166 $5.54 $241,322

Residential ‐ Hotel/Motel ‐‐ ‐‐ ‐‐ ‐‐ $16.46 $716,998

Residential ‐ Multifamily $6.43 $280,091 $6.17 $268,765 $12.45 $542,322

Residential ‐ Single‐family $0.82 $35,719 $0.84 $36,590 $1.46 $63,598

Residential ‐ Mobile Home ‐‐ ‐‐ ‐‐ ‐‐ $4.20 $182,952

Retail ‐ Freestanding $8.18 $356,321 ‐‐ ‐‐ $11.15 $485,694

Retail ‐ General $4.88 $212,573 ‐‐ ‐‐ $10.43 $454,331

Retail ‐ Restaurant ‐‐ ‐‐ $13.64 $594,158 $19.78 $861,617

Retail ‐ Shopping Center ‐‐ ‐‐ $1.67 $72,745 $8.78 $382,457


October 2011

Scott County Carver County 7‐County Metro

Table MA‐14

Actively Marketing Land ‐ Scott County, Carver County, & 7‐County Metro Area

Land Costs Per Square Foot (PSF) & Acre

MARKET ANALYSIS


As illustrated in table MA‐14, retail land uses typically earn among the highest prices per square feet among all real estate types, regardless of location. However, medical office users will also pay top dollar for premium sites.

The majority of the time, industrial uses command the lowest land costs per square foot among all commercial real estate products.

Compared to the Metro Area, actively marketing land in Scott County costs on average about 25% less.

Due to the high demand for multifamily rental over the past year, land costs have recently been driven up for quality rental housing sites. On the contrary, single‐family land costs today are the lowest among all product types, including agricultural land.

Only ten commercially‐oriented land transactions have occurred in Scott County in 2011. Comparatively, there were 23 transactions in 2010. The communities of Belle Plaine and Jordan accounted for about one‐half of all transactions.

Prime retail and medical office real estate types commanded the highest per‐square‐foot land costs. The highest land cost PSF approached $16.00 for a bank in Shakopee, while a medical office user in Savage paid $14.00 PSF.

Most industrial‐oriented land has sold from $3.00 to $5.00 PSF.

MARKET ANALYSIS


Address Use of Property Sq. Ft. Acres Sold Price PSF Price/Acre Closed Date Zoning

Belle Plaine

270th St W Vacant Land 2,482,920 57.0 $855,000 $0.34 $15,000 8/16/2011 A‐3

Vacant Land 211 Rural Vacant Land 4,912,696 112.8 $274,300 $0.06 $2,432 6/13/2011 ‐‐

10685 230th St W ‐‐ 450,410 10.3 $170,000 $0.38 $16,441 6/11/2010 I‐C

1010 East Enterprise Drive Grocery Store 258,152 5.9 $1,399,660 $5.42 $236,030 5/26/2010 I/C; Ind/Comm

SWC Cty Rd 64 & Kittson Blvd. Future Retail 44,592 1.0 $300,000 $6.73 $294,118 5/26/2010 I/C; Ind/Comm

225th St W Vacant Land‐Restaurant 44,866 1.0 $300,000 $6.69 $291,262 5/26/2010 I‐C

Enterprise Drive Vacant Land‐Supermarket 213,879 4.9 $1,399,660 $6.54 $285,063 5/26/2010 I‐C

Elko

New Market Place Blvd Vacant Land‐Bank 73,616 1.7 $331,700 $4.51 $196,272 12/30/2010 PUD

263rd St E Vacant Land 130,680 3.0 $75,000 $0.57 $25,000 5/27/2010 I1

Helena Township

Redwing Ave Vacant Land 4,659,613 107.0 $910,631 $0.20 $8,513 9/28/2010 UER

Jordan

551 SEVILLE DR 300 Commercial 257,875 5.9 $518,000 $2.01 $87,500 7/25/2011 C3

3385 Bluff Dr Vacant Land 199,504 4.6 $105,000 $0.53 $22,926 4/20/2011 I

301 Eldorado Dr Vacant Land‐Dental Office 40,946 0.9 $208,500 $5.09 $221,809 12/20/2010 C3

Vacant Land Vacant Land‐Commercial & Ag 2,547,824 58.5 $550,000 $0.22 $9,403 11/30/2010 UBR

Aberdeen Ave & Beaumont Blvd Vacant Land 217,800 5.0 $435,000 $2.00 $87,000 1/10/2011 UER

20801 Johnson Memorial Dr Vacant Land‐Conservation 4,513,687 103.6 $473,800 $0.10 $4,572 12/23/2010 UER

Sutton Lake Blvd S Vacant Land 3,484,800 80.0 $580,000 $0.17 $7,250 11/15/2010 A‐1

Dairy Lane Vacant Land‐construction 690,426 15.9 $700,000 $1.01 $44,164 7/22/2010 I1

8900 Old Highway 169 Blvd Ag Land 6,743,523 154.8 $2,800,000 $0.42 $18,087 4/22/2010 UER

New Prague

302 2nd St NE Vacant Land‐Drainage Pond & Redev. 165,092 3.8 $182,500 $1.11 $48,153 3/31/2011 RM & B1

255th St W Vacant Land 3,484,800 80.0 $520,000 $0.15 $6,500 2/5/2010 A‐1

Prior Lake

Texas Ave Ag Land 8,681,508 199.3 $1,793,790 $0.21 $9,000 5/13/2011 UER

16735 Franklin Trail SE Vacant Land‐Commercial 46,173 1.1 $425,000 $9.20 $400,943 3/31/2011 C‐2

Savage

Dakota Ave S Vacant Land‐Public Improvements 120,225 2.8 $348,502 $2.90 $126,269 2/12/2010 R3

Egan Dr & Dakota Ave S Vacant Land‐Medical 134,600 3.1 $1,892,100 $14.06 $612,330 10/5/2010 C2

12945 Eagle Creek Parkway Industrial build‐to‐suit 139,392 3.2 $672,152 $4.82 $210,048 7/20/2010 BP, Business Park

12945 Eagle Creek Parkway Warehouse 182,952 4.2 $672,152 $3.67 $160,036 7/20/2010 BP; Business Park

129xx Eagle Creek Parkway Vacant Land‐Industrial Warehouse 182,952 4.2 $672,152 $3.67 $160,036 7/19/2010 BP

Shakopee

950 ALYSHEBA RD Vacant Land‐Multi family 211,701 4.9 $50,000 $0.24 $10,288 5/26/2011 R3

4th Ave Vacant Land‐Industrial 2,218,510 50.9 $6,433,965 $2.90 $126,330 5/13/2011 I‐1

Johnson Memorial Dr Vacant Land 1,206,176 27.7 $325,000 $0.27 $11,737 12/20/2010 C‐1

1411 E 160th St ‐‐ 2,896,304 66.5 $640,000 $0.22 $9,626 12/20/2010 UER

SWC of 4th Ave & CR #83 Vacant Land 1,945,389 44.7 $2,500,000 $1.29 $55,979 12/28/2010 I1

8325 Crossings Blvd Vacant Land 59,377 1.4 $940,000 $15.83 $691,176 11/30/2010 PRD


TABLE MA‐15

Land Size Sales Price

SOLD LAND TRANSACTIONS IN SCOTT COUNTY BY SUBMARKET

2010 to October 2011

MARKET ANALYSIS


Metro Area Land Absorption Table MA‐16 shows commercial and industrial land transactions from 2005 to 2010 across the Metro Area as listed from MNCAR. It is important to note that the table does not depict all land sales but only those listed through MNCAR Exchange. Important findings follow.

Size of Parcel No. Pct. No. Pct. No. Pct. No. Pct. No. Pct. No. Pct.

Less than 1 acre 6 17.6 7 14.9 7 18.4 9 16.7 8 34.8 6 16.71‐ 2.99 acres 18 52.9 19 40.4 16 42.1 20 37.0 6 26.1 14 38.93 ‐ 4.99 acres 1 2.9 6 12.8 5 13.2 3 5.6 1 4.3 4 11.15 ‐ 9.99 acres 6 17.6 8 17.0 5 13.2 16 29.6 3 13.0 2 5.6

10 ‐ 19.99 acres 1 2.9 4 8.5 5 13.2 3 5.6 2 8.7 2 5.620 ‐ 49.99 acres 2 5.9 1 2.1 0 0.0 1 1.9 2 8.7 3 8.3

50+ acres 0 0.0 2 4.3 0 0.0 2 3.7 1 4.3 5 13.9Total 34 100.0 47 100.0 38 100.0 54 100.0 23 100.0 36 100.0

Sources: MNCAR; Maxfield Research Inc.

2009 2010Number of Parcels

2005

TABLE MA‐16LAND ABSORPTION BY ACREAGE

METRO AREA2005 ‐ 2010

2006 2007 2008

0

5

10

15

20

25

2005 2006 2007 2008 2009 2010

Parcels

Year

Metro Area Land Absorption by Acreage2005 to 2010

Less than 1 acre 1‐ 2.99 acres 3 ‐ 4.99 acres 5 ‐ 9.99 acres

10 ‐ 19.99 acres 20 ‐ 49.99 acres 50+ acres

Parcels between one and three acres accounted about 40% of all land sales between 2005 and 2010. Together with parcels less than one acre, nearly 60% of transactions were less than three acres in size.

MARKET ANALYSIS


Approximately 15% of all sales were on parcels over 10 acres during this time. Just over 4% of sales occurred on property over 50 acres. However, 14% of sales in 2010 were over 50 acres.

Sales activity was highest in 2008 and lowest in 2009.

Commercial Broker Interviews Maxfield Research interviewed commercial brokers familiar with Scott County in order to gain a further understanding and insight into the commercial and industrial real estate sectors. Key points are summarized by topic as follows. Market Performance

Historically, demand for commercial/industrial space has been primarily in Shakopee and

Savage. Other Scott County submarkets are not positioned to see large‐scale developments until after the Shakopee and Savage markets are more fully developed.

There have been few commercial property foreclosures in Scott County in 2011. The majority of distressed real estate in Scott County has been within the office condo sector.

This past year (2011) performed better than expected as positive leasing activity was driven by tenants “trading up” and obtaining aggressive lease terms.

Older properties have continued to struggle and owners are offering rent discounts and concessions. At the same time however, newer and well‐located properties have been well‐received.

Other submarkets across the Metro Area performed better than Scott County and the Southwest Submarket this past year. Scott County continues to have a significant amount of product available, both for‐lease and for‐sale. As a result, the vacancy factor continues to be above equilibrium.

Concessions are still widely prevalent. It has been common for tenants to receive a one‐month concession per year of lease term.

The Southwest Submarket industrial property vacancy was about 17% in 2011, but was the only submarket that posted a negative absorption in the Metro Area.

Outlook

2012 is projected to be a flat year for commercial/industrial real estate across the Metro Area and in Scott County. Most interviewees agreed that although Scott County is static right now, things will likely slowly perk‐up in 2012 with increased confidence.

Scott County is slowly improving but has a long way to go to reach pre‐recessionary levels. Although Shakopee has a number of good sites that would be attractive for large employers

or a major corporation, it is unlikely they will attract these users in the short‐term given the economy.

MARKET ANALYSIS


Leasing activity is expected to be good from smaller tenants (less than 10,000 square feet) in 2012.

Nearly all leasing activity in Scott County will probably occur in Shakopee or Savage in 2012. There is some concern over two larger tenants vacating space in 2012. Combined, these

tenants will bring back over 230,000 square feet into the marketplace. This could off‐set any positive absorption gains in 2012.

Strengths

Scott County has a large labor force with more affordable wages than other Metro Area communities. Numerous brokers commented on the skilled‐labor force in the Shakopee area.

Scott County has an excellent, highly‐educated and hardworking workforce. Consequently, brokers commented that many educated employees commute to other locations in the Metro Area for higher paying jobs.

Nearly every interviewee commented on the number of pad‐ready sites and vast land availability throughout Scott County. Scott County is well‐situated for future industrial growth, especially for users seeking large sites that are unavailable in other submarkets.

After relocating to Scott County, most tenants do not leave after they have established their business here.

Try‐Star recently decided to purchase a 28‐acre site to construct a 179,000 square foot manufacturing facility. The company will be relocating from Faribault after a detailed site selection process throughout the Southwest Metro.

The Shakopee Mdewakanton Sioux Community (owners and operators of Mystic Lake) has invested in Scott County and has provided amenities that would likely not be available without their contributions.

Scott County has been able to attract tenants from Eden Prairie or Bloomington via the Highway 169 route.

Scott County posted high population and household growth numbers over the past decade. Although growth will be slower this decade, Scott County should grow faster than many other areas of the Metro Area.

Challenges

Productivity increases and technologically advances reduce demand for labor and job density. In order to create more jobs, the County should focus on industries with labor‐intensive needs such as medical technology.

The majority of industrial buildings in the County are not employment generators; they are designed to hold goods (i.e. warehouse distribution) not employees.

Shakopee and other Scott County municipalities are not viewed by corporate decision makers as a corporate headquarter location. Once Scott County is able to attract one major user, the ability to capture future growth will increase exponentially.

Most Scott County communities rely on Highway 169 as the principle roadway to move goods and services. There is concern with roadway closures and detours with spring

MARKET ANALYSIS


flooding in some of the communities that may affect distribution and access to the labor force.

The Minnesota River and the Interstate 494/Highway 169 crossing continues to be an obstacle when recruiting tenants from north of the 494‐loop. Traffic improvements at the 494/169 intersection should help alleviate some concern after all improvements have been completed. Traffic congestion has been a major concern in the past.

Many brokers commented on the challenge of attracting “north of the river” tenants from Eden Prairie, Bloomington, or Edina to relocate to Scott County.

Historically, most office users have preferred to locate north of the Minnesota River in Hennepin County, whereas warehouse industrial uses have preferred to locate south of the river in Scott County.

Scott County lacks high‐paying white collar jobs, many of which are north of the river in Hennepin County.

The Scott County office sector is a weak and immature market compared to other submarkets in the Metro Area. The largest office building in the County is only 50,000 square feet among an office inventory of just over one million square feet. There is no high‐end spec office space in the County.

Scott County lacks executive level housing and many business owners/executives want to reside near their place of employment. Brokers commented on the proximity to upper‐end and luxury housing developments that Scott County lacks.

Historically there has not been significant tenant cross‐over between Scott and Carver Counties. The Chanhassen area is generally considered to be more affluent and more dynamic with more executive‐level housing that has been attractive for corporate decision makers.

Given the state of the housing market, the retail environment in Scott County has suffered and retail demand is stagnant.

Scott County has a perception in the brokerage community as a warehouse distribution hub. Many of these uses have large building footprints but employ very few people. For example, a new lease that commences in April 2012 has 20,000 square feet and only three employees.

Existing vs. New Construction

Due to the number of active listings competitively priced in the marketplace, most tenants are seeking previously occupied construction versus new construction. New construction can command upwards of 25% or more versus purchasing an existing industrial building.

Given project development costs and today’s achievable rents, there is no speculative industrial building occurring today.

Back in the real estate boom, it was common for new commercial/industrial buildings with development costs from $75 to $100/per square foot. Today it is very difficult to sell a building much more than $50/per square foot.

MARKET ANALYSIS


Land

Land activity is expected to be very quiet in 2012. One broker expects only 12 to 15 commercial land deals in the County this year.

Most brokers feel the land market is still a few years out before demand returns. Commercial land generally is marketed from $3 to $4 per square foot, while retail

commands $8 to $10 per square foot. However, most commercial land deals today (excluding multifamily housing and retail) will likely sell from $1.00 to $2.50 per square foot (depending on acreage, location, etc.)

Opportunities

There is a need in Scott County to attract a corporate headquarters or major manufacturer. However, it will be competitive to attract one of these users and Scott County will have to be aggressive to recruit these users.

The County should create a niche or become the next “medical alley” to attract medical technologies and higher‐paying jobs attracting skilled labor.

Scott County should continue to capitalize on its “sweet spot,” those parcels ranging from two to three acres targeting 20,000 square foot users.

Multifamily housing is the preferred commercial real estate type today. Communities in Scott County should be open to rezoning other commercial properties that can attract multifamily developers.

According to one broker, the County has been stepping‐up recruitment efforts and is offering incentives to attract more job creation. The County should be “rolling out the red carpet” for companies offering quality, high‐paying jobs.

Scott County should collaborate with DEED by maintaining property listings on the DEED website. Furthermore, one broker commented on assisting property owners with obtaining “shovel ready certifications” from DEED.

Industrial/Commercial Outlook Maxfield Research Inc. attended the annual Industrial Real Estate and Economic Development Conference in late 2011. The following is a summary of industrial real estate trends in the Metro Area.

The market for land remains uncertain. Many now see land as a liability compared to when

land was “king” during the real estate boom. Construction costs have declined through the recession; however, many experts expect

construction costs to increase in 2012. Larger available contiguous spaces are harder to find, especially buildings with 60,000

square feet or more with 30’ ceilings. Many users may have to construct custom build‐to‐suit to meet their company’s space needs.

MARKET ANALYSIS


The commercial/industrial market is bifurcated for investors. Well‐located and fully‐leased properties are in demand, whereas underperforming properties and those located in sub‐par locations are suffering.

Financing new development continues to be challenging. Many lenders are requiring 30% to 40% equity and a 50% pre‐lease. Comparatively, during the boom times projects were being financed with little as 10% equity.

Cash is king in today’s environment. Some cash deals are closing in 30‐days or less. Institutional money has been following bulk warehouse and other well‐performing

industrial properties. These buyers will pay top dollar for 100% leased properties. However, institutional investors have no interest in anything less than a strong‐performing asset.

The highest user demand continues to be within the 494/694 loop, even though there is a lack of infill sites within the loop. Suburban locations in tertiary markets will be the slowest to recover from the real estate downturn.

The properties in highest demand have the following characteristics: functionally well‐designed, energy efficient, ample parking, well‐landscaped, and good lighting.

Office showroom space has suffered from the recession; whereas office warehouse is in higher demand today. According to one broker, “lease warehouse, forget office.”

In some submarkets, office showroom is competing against Class B office space in good locations.

Traditionally, most industrial spaces were designed with 24’ clear ceilings. Today’s tenants are seeking 32’ ceilings.

Manufacturing continues to decline in Minnesota as jobs are outsourced to other lower‐cost cities or moved overseas. This is a trend that is not expected to turn‐around anytime soon given Minnesota’s perception as a high‐tax state.

Medical manufacturing is the one manufacturing sector with promising growth. Most real estate activity has been driven by larger companies “trading up” real estate

holdings. Small to mid‐sized companies are paralyzed and are waiting out the economy before they make real estate decisions.

Flexibility and cost are the two major factors for company real estate decisions. However, for many companies flexibility is the key and they will pay more for it.

Today many companies would rather purchase their own land and hire their own contractor than work with a build‐to‐suit developer. Although they may pay higher land costs upfront, the company is able to have lower project costs in the end.

Most brokers do not anticipate much, if any, positive industrial absorption in 2012. Industrial lease‐rates have been stagnant over the past decade, even though inflation has

increased expenses. In 2003, the average lease rate was $4.23 PSF compared to $4.01 PSF in 2011.

Impact of Market Conditions Market conditions for all segments (industrial, office, and retail) have improved this past year; however, conditions for all product types are still recovering from the Great Recession.

MARKET ANALYSIS


Vacancy rates have likely hit the bottom and positive absorptions in 2011 indicate the commercial sector is slowly rebounding. Net rental rates for all sectors are at their lowest point over the past decade. However, pricing will likely start to increase with increased occupancy rates. Land values continue to stabilize after hitting the bottom. Although land is still deeply discounted from pre‐2005/2006 pricing, speculative buying is not expected in the short‐term. The majority of land purchases will be for build‐to‐suit construction with a specific end‐user. Scott County land continues to be among the most affordable in the Metro Area which will bode well during the economic recovery as consumer confidence increases and more companies seek out Scott County for commercial/industrial developement.

SCALE OVERVIEW


Introduction The Scott County Association for Leadership and Efficiency (SCALE) was formed in spring 2003 to facilitate local government efficiencies by eliminating duplicating expenses through the collaboration of services and sharing of resources. SCALE members include elected and appointed officials from all seven cities, schools, and townships within Scott County, the Shakopee Mdewakanton Sioux Community, and Scott County. The mission statement is as follows: “The Mission of SCALE is to forge new and innovative ways in which government entities can collaborate to provide superior services while making the most of limited resources.” Furthermore, the summarized goal of the Unified Economic Development, Land Use, and Transportation Plan is to provide infrastructure that can support employment that can accommodate 50% of the County’s work force. Because this work force goal will require land for commercial and industrial growth, the following section is designed to evaluate the following key components: Does Scott County have enough land (from pad‐ready to guided) to accommodate

commercial/industrial uses that will employ at least 50% of the labor force by 2030? Can the commercial/industrial land support development given market conditions? How does Scott County collaboratively market itself as an employment destination in the

Metro Area and beyond?

All of the following tables were assembled by Maxfield Research Inc. based on data compiled from the Scott County Planning Department and Scott County Assessor’s Office. The data is presented based on a classification system that identifies parcels based on the “readiness” for future commercial/industrial development. Parcels are classified as follows: Class I: Property that is already platted and “pad ready.” Interior lot improvements have been completed and development only required building permit or site plan approvals. Class II: Property is guided and zoned for commercial/industrial use within the 2030 growth boundary or MUSA boundary. Public infrastructure is readily accessible to the property and has sufficient capacity to serve the development.

Class III: Property is guided for commercial/industrial uses on locally adopted land use map.

It should be noted that the inventoried parcels and acreages differ from the 2010 Phase I Summary Report. The updated SCALE inventory is based on parcel‐level data versus polygon data in 2010. In addition, the inventory was “cleaned‐up” to gain a more accurate portrayal of properties within each submarket. Finally, all acreages are presented in a gross format.

SCALE OVERVIEW


SCALE Summary Data Table S‐1 combines SCALE data based on class of property with assessed values. The table breaks out parcels by land only and land with building(s); parcels with buildings on the property can take many forms; from a farmstead, storage shed, etc. Key points from the table follow.

Combined, there are 633 parcels with over 8,100 acres identified for commercial or

industrial development in Scott County. About 62% of the parcels are vacant, while about 48% have some type of structure on the premises.

According to the initial inventory conducted in 2010, Class I properties accounted for 9% of the total acreage, while Class II accounted for 31% and Class III for 60%. However, the 2011 revised assessment shows Class I accounting for 7%, Class II 20%, and Class III 73% of total acreage.

Although Class III properties account for nearly 50% of the parcels, they account for 73% of

the total acreage.

Combined, the median parcel size among the three categories is about 4.8 acres. However, the median parcel size ranges from 1.8 acres (Class I) to 9.8 acres (Class III).

Although Class I properties account for the least acreage, they account for 32% of the total market value ($114.5 million). Class II properties account for 33% of the total market value ($115.8 million) and Class III properties 35% ($124 million).

The market values and taxes per acre vary considerably based on the parcel’s classification. The following summarizes total market values and taxes for each classification per parcel. In addition, market values per acre are summarized.

Parcel Taxes Acre

Class I $650,760 $22,610 $212,041

Class II $782,742 $15,584 $70,328

Class III $401,533 $4,484 $20,859

Avg. Market Value

SCALE OVERVIEW


Acreage by Parcel Size and Class Table S‐2 identifies the number of parcels by acreage size for each property class in Scott County. The following are key points.

Class I properties account for nearly 50% of the parcel inventory less than three acres in

size. However, Class I inventory subsides significantly as parcel sizes increase. There are only eight Class I properties over ten acres while the largest Class I parcel is 40 acres.

Likewise, Class III properties account for nearly 70% of all parcels over five‐acres in size and

87% of all properties over 50 acres. Parcels classified as Class II comprise 23% of the total parcels, the smallest class of the

three.

14696

148

30

52

161

0

50

100

150

200

250

300

350

Class I Class II Class III

Acres

SCALE Class

Parcels by SCALE Classification Scott County

Land/Bldg

Land

SCALE OVERVIEW


0 10 20 30 40 50 60 70 80 90

0.00 to 0.99

1.00 to 2.99

3.00 to 4.99

5.00 to 9.99

10.00 to 19.99

20.00 to 49.99

50.00 +

Parcels

Acreage

Parcels by Acreage & Class

Class I

Class II

Class III

SCALE OVERVIEW


Parcels Total Avg. Median Total Avg. Median Total Avg. Median Total Avg. Median Total Avg. Median

Land Only

Class I 147 464.12 3.16 1.78 $64,188,800 $436,659 $182,700 $0 $0 $0 $64,211,800 $436,883 $182,700 $2,254,605 $15,337 $6,122

Class II 96 930.00 9.69 3.06 $62,817,300 $654,347 $255,850 $0 $0 $0 $62,817,300 $654,347 $255,850 $1,288,122 $13,418 $3,848

Class III 148 2,882.95 19.48 9.97 $45,859,200 $309,859 $157,850 $0 $0 $0 $45,859,200 $309,859 $157,850 $551,004 $3,723 $1,616

Subtotal 391 4,277.07 10.94 3.45 $172,865,300 $442,475 $191,650 $0 $0 $0 $172,888,300 $442,560 $191,650 $4,093,731 $10,394 $3,380

Land w/Building

Class I 29 76.07 2.62 1.59 $17,381,900 $599,376 $340,000 $32,940,100 $1,135,866 $490,000 $50,322,000 $1,735,241 $1,000,000 $1,724,704 $59,473 $26,162

Class II 52 717.23 13.79 4.60 $41,298,100 $794,194 $162,600 $11,730,400 $225,585 $105,100 $53,028,500 $1,019,779 $242,450 $1,018,357 $19,584 $3,200

Class III 161 3,065.23 19.04 9.85 $49,980,500 $310,438 $160,000 $25,882,900 $160,763 $137,700 $78,214,500 $485,804 $318,300 $834,468 $5,183 $2,936

Subtotal 242 3,858.53 16.25 8.33 $108,660,500 $450,990 $163,700 $70,553,400 $293,417 $132,200 $181,565,000 $754,082 $323,100 $3,577,529 $14,969 $3,228

Combined Totals

Class I 176 540.19 4.40 1.78 $81,570,700 $576,305 $190,000 $32,940,100 $190,608 $0 $114,533,800 $767,098 $249,650 $3,979,309 $22,529 $7,952

Class II 148 1647.23 10.15 3.34 $104,115,400 $573,519 $222,500 $11,730,400 $78,693 $0 $115,845,800 $652,212 $261,900 $2,306,479 $15,723 $3,406

Class III 309 5948.18 19.25 9.80 $95,839,700 $310,161 $60,000 $25,882,900 $83,763 $5,000 $124,073,700 $401,533 $284,000 $1,385,472 $4,484 $2,582

Subtotal 633 8,135.60 12.85 4.79 $281,525,800 $444,748 $182,400 $70,553,400 $111,459 $0 $354,453,300 $559,974 $270,000 $7,671,260 $12,119 $3,280

Sources: Scott County, Maxfield Research Inc.

TABLE S‐1

SCALE SUMMARY DATA

SCOTT COUNTY

November 2011

Estimated Market Values

Acres Land Building Land & Bldg. Taxes

SCALE OVERVIEW


Acres Land Land/Bldg Total Land Land/Bldg Total Land Land/Bldg Total Land Land/Bldg Total

0.00 to 0.99 39 9 48 21 7 28 18 6 24 78 22 100

1.00 to 2.99 65 12 77 27 15 42 14 24 38 106 51 157

3.00 to 4.99 19 2 21 7 5 12 13 18 31 39 25 64

5.00 to 9.99 16 6 22 13 11 24 32 37 69 61 54 115

10.00 to 19.99 6 0 6 9 4 13 26 36 62 41 40 81

20.00 to 49.99 2 0 2 18 6 24 30 21 51 50 27 77

50.00 + 0 0 0 1 4 5 15 19 34 16 23 39

Total 147 29 176 96 52 148 148 161 309 391 242 633


TABLE S‐2

SCALE ACREAGE BY PARCEL CLASS & SIZE

SCOTT COUNTY

November 2011

Class I Class II Class III Total

SCALE OVERVIEW


SCALE CLASSIFICATION BY SUBMARKET Table S‐3 shows property acreage by classification and each submarket. Key findings are as follows.

Rural Scott County (i.e. townships), contains 73% of the County’s commercial/industrial land

inventory (about 5,900 acres). Most of this land is categorized as Class III. In the seven municipal jurisdictions, there is a combined 2,220 acres available. The City of

Shakopee boasts about 750 acres, containing one‐third of the acreage within all of Scott County municipalities. Prior Lake has the second highest land holdings, encompassing 570 acres (26%).

Since New Prague is located in two counties, the majority of commercial/industrial land is

located outside of Scott County in Le Sueur County. Just less than 15 acres are vacant in the portion of New Prague located in Scott County.

Belle Plaine, New Prague, and Savage have modest Class I land availabilities compared to

other jurisdictions in the County. Total pad‐ready Class I acreage ranges from just 8 acres in New Prague to 29 acres in Savage.

Shakopee has the largest inventory of pad‐ready sites (i.e. Class I), boasting over 290 acres.

Prior Lake, Elko New Market, and Jordan all have between 50 and 60 Class I acres. Combined, these four communities account for 85% of the Class I inventory.

0

50

100

150

200

250

300

350

400

450

500

Class I Class II Class III

Acres

Acreage by Class & Submarket

Belle Plaine Elko New Market

Jordan New Prague

Prior Lake Savage

Shakopee Townships

SCALE OVERVIEW


Although Belle Plaine has less than 13‐acres of Class I property, the City has over 250 Class II acres. Excluding Jordan and New Prague, all of the submarkets have more than 100 Class II acres.

Prior Lake is the only municipality with significant Class III acreage (250 acres). Nearly all

Class III property is located outside municipal limits in the townships (93%).

4.0%

21.5%

40.7%

53.5%

10.5% 15.3%

39.0%

0.5%

80.3%54.3%

59.3%

46.5%

45.4%

80.9%

55.9%

5.8%

15.7%24.2%

44.2%

3.8% 5.2%

93.7%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

Belle Plaine Elko NewMarket

Jordan New Prague Prior Lake Savage Shakopee Townships

Pct.

Pct. by Class & Submarket

Class III

Class II

Class I

SCALE OVERVIEW


Land Land/Bldg. Total Land Land/Bldg. Total Land Land/Bldg. Total Land Land/Bldg. Total

Belle Plaine 11.64 1.06 12.70 243.89 8.51 252.40 9.89 39.35 49.24 265.42 48.92 314.34

Elko New Market 47.17 3.41 50.58 41.55 86.31 127.86 0.00 56.93 56.93 88.72 146.65 235.37

Jordan 57.90 0.00 57.90 18.48 65.84 84.32 0.00 0.00 0.00 76.38 65.84 142.22

New Prague 7.40 0.58 7.98 1.48 5.46 6.94 0.00 0.00 0.00 8.88 6.04 14.92

Prior Lake 50.63 9.15 59.78 74.62 184.33 258.95 204.16 48.07 252.23 329.41 241.55 570.96

Savage 25.23 4.20 29.43 121.99 34.09 156.08 7.41 0.00 7.41 154.63 38.29 192.92

Shakopee 243.99 48.53 292.52 303.96 115.65 419.61 38.82 0.00 38.82 586.77 164.18 750.95

Townships 20.17 9.14 29.31 124.03 217.05 341.08 2,622.67 2,920.88 5,543.55 2,766.87 3,147.07 5,913.94

Total 464.13 76.07 540.20 930.00 717.24 1,647.24 2,882.95 3,065.23 5,948.18 4,277.08 3,858.54 8,135.62


TABLE S‐3

SCALE CLASSIFICATION BY SUBMARKET & ACREAGE

November 2011

Class I Class II Class III Total

SCALE OVERVIEW


SCALE Submarket Breakdown The previous table illustrated total acreage by each jurisdiction within each property classification. Table S‐4 presents the inventory of vacant parcels for each jurisdiction by classification and property size. The following summarizes important findings from the table.

Excluding the townships, Shakopee has the most parcels of all the communities in Scott

County (85 parcels, or 27% of total). Likewise, Shakopee also boasts the most Class I properties less than 50 acres in the County.

Savage features the most Class II properties among the communities (33 parcels, or 26% of

total). About 75% of these properties are five acres or less. Approximately half of Elko New Market’s inventory is classified as Class I. However, 65% of

these parcels are under one‐acre. Among the seven municipalities, 53% of the parcels are Class I. There are only 24 properties

in these communities (7.5%) inventoried as Class III. The townships contain 50% of the vacant commercial/industrial property inventory in Scott

County. About 30% of the township inventory consists of parcel’s less than five acres, while another 42% are between 5 and 20 acres. About 10% of parcels are over 50 acres.

0

10

20

30

40

50

60


Jordan New Prague Prior Lake Savage Shakopee

No. o

f Parcels

Community

Parcels by Community & Acreage0 ‐ 4.99

5.0 ‐ 19.9

20.0 ‐ 49.9

50.0+

SCALE OVERVIEW


0.00 ‐ 1.00 ‐ 3.00 ‐ 5.00 ‐ 10.00 ‐ 20.00 ‐

Submarket/Class 0.99 2.99 4.99 9.99 19.99 49.99

Belle Plaine

Class I 2 4 2 0 0 0 0 8

Class II 3 5 0 7 2 5 0 22

Class III 1 0 0 1 0 1 0 3

Subtotal 6 9 2 8 2 6 0 33

Elko New Market

Class I 21 5 4 1 1 0 0 32

Class II 0 2 2 2 0 3 0 9

Class III 0 1 0 0 0 0 1 2

Subtotal 21 8 6 3 1 3 1 43

Jordan

Class I 5 15 2 3 0 0 0 25

Class II 1 4 1 4 0 1 0 11

Class III 0 0 0 0 0 0 0 0

Subtotal 6 19 3 7 0 1 0 36

New Prague

Class I 4 4 0 0 0 0 0 8

Class II 3 0 1 0 0 0 0 4

Class III 0 0 0 0 0 0 0 0

Subtotal 7 4 1 0 0 0 0 12

Prior Lake

Class I 4 17 2 3 0 0 0 26

Class II 4 10 3 2 2 1 2 24

Class III 0 2 1 6 3 0 1 13

Subtotal 8 29 6 11 5 1 3 63

Savage

Class I 2 4 2 0 1 0 0 9

Class II 10 13 2 3 3 2 0 33

Class III 3 1 1 0 0 0 0 5

Subtotal 15 18 5 3 4 2 0 47

Shakopee

Class I 10 24 7 13 4 2 0 60

Class II 4 5 3 2 2 6 2 24

Class III 0 0 0 0 0 1 0 1

Subtotal 14 29 10 15 6 9 2 85

Townships

Class I 0 4 2 2 0 0 0 8

Class II 3 3 0 4 4 6 1 21

Class III 20 34 29 62 59 49 32 285

Subtotal 23 41 31 68 63 55 33 314

Total

Class I 48 77 21 22 6 2 0 176

Class II 28 42 12 24 13 24 5 148

Class III 24 38 31 69 62 51 34 309

Subtotal 100 157 64 115 81 77 39 633


TABLE S‐4

PARCELS BY ACREAGE, SUBMARKET, & CLASS

November 2011

50.00 + Total

SCALE OVERVIEW


SCALE Summary by Parcel Size and Market Value Table S‐5 summarizes SCALE data based on submarket, parcel size, and assessed values. Key points from the table follow The average and median parcel sizes increase with each higher property class. Class I

properties have a median property size of 1.75 acres, compared to Class II and Class III property’s (3.69 and 9.8 acres respectively).

Class II posted the average market value per parcel ($782,742). Class I posted an average per parcel value of $658,640, while Class III was $401,533.

Total

Parcels Acreage Average Median Average Median Total

Class I

Belle Plaine 8 12.70 1.59 1.36 $173,850 $147,500 $1,390,800

Elko New Market 32 50.57 1.58 0.45 $121,191 $40,000 $3,878,100

Jordan 25 57.90 2.32 1.32 $185,376 $160,000 $4,634,400

New Prague 8 7.98 1.00 0.98 $100,912 $79,600 $807,300

Prior Lake 26 59.78 2.30 1.78 $339,803 $260,000 $8,834,900

Savage 9 29.44 3.27 2.06 $1,007,777 $700,000 $9,070,000

Shakopee 60 292.52 4.88 2.63 $1,387,430 $645,000 $83,245,800

Townships 8 29.31 3.66 3.22 $335,312 $209,150 $2,682,500

Subtotal 176 540.20 3.71 1.75 $658,640 $244,350 $114,543,800

Class II

Belle Plaine 22 252.40 11.47 7.27 $866,345 $300,500 $19,059,600

Elko New Market 9 127.86 14.21 5.38 $638,855 $307,800 $5,749,700

Jordan 11 84.31 7.66 3.39 $558,927 $330,000 $6,148,200

New Prague 4 6.94 1.73 0.83 $121,450 $101,900 $485,800

Prior Lake 24 258.95 10.79 2.30 $1,338,683 $200,000 $32,128,400

Savage 33 156.08 4.73 1.44 $410,630 $227,100 $13,550,800

Shakopee 24 419.61 17.48 5.14 $1,292,975 $396,750 $31,031,400

Townships 21 341.08 16.24 13.43 $366,280 $239,400 $7,691,900

Subtotal 148 1,647.23 11.13 3.69 $782,742 $266,050 $115,845,800

Class III

Belle Plaine 3 49.25 16.25 9.20 $234,033 $144,100 $702,100

Elko New Market 2 56.93 28.47 28.47 $628,850 $628,850 $1,257,700

Jordan ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐

New Prague ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐ ‐‐

Prior Lake 13 252.23 19.40 9.22 $1,131,146 $495,700 $14,704,900

Savage 5 7.41 1.48 0.24 $167,420 $3,100 $837,100

Shakopee 1 38.81 38.81 38.81 $1,500,000 $1,500,000 $1,500,000

Townships 285 5,543.55 19.45 9.95 $368,673 $278,000 $105,071,900

Subtotal 309 5,948.18 19.25 9.80 $401,533 $284,000 $124,073,700

Source: Scott County, Maxfield Research Inc.

TABLE S‐5

SCALE SUMMARY BY PARCEL SIZE & MARKET VALUE

November 2011

Parcel Size Total ‐ Market Value

SCALE OVERVIEW


The average market value per acre among Class I properties ranged from $76,688 in New Market Elko up to $308,084 in Savage. Overall, Class I properties in the County average a market value of $212,039 per acre ($4.87 per square foot).

SCALE properties in Shakopee account for nearly 50% of the combined market value of the

seven communities. The rural township properties account for one‐third of the County’s market value.

Acreage by Land Use Table S‐6 presents the amount of land by zoning classification in Scott County as of November 2011. The data was compiled by the Scott County Planning Department. Key findings follow.

Overall, over 80% of the County’s acreage is located outside municipal limits in townships.

Approximately 70% of the property in rural Scott County is zoned for agricultural purposes, with the remaining being mostly residential.

Excluding the townships, residential land uses make‐up about 52% of zoned land within the seven municipalities. Commercial and industrially zoned acreage accounts for 16% of land inventory in these municipalities.

New Prague has the highest percentage of residentially zoned land (71%), whereas Belle Plain has the lowest percentage (33.5%).

Farm/Agricultural land accounts for over 40% of zoned land in both Belle Plaine and Elko New Market.

Among the seven municipalities, Shakopee contains 40% of the total acreage. Combined with Prior Lake and Savage, these three communities have 82% of the acreage within municipal limits.

MCD Residential Commercial Industrial Farm/Ag Other PUD Total Acres

Belle Plaine 978.6 127.4 141.6 1,230.3 443.0 ‐‐ 2,920.8

Elko New Market 531.7 41.0 ‐‐ 483.1 101.0 ‐‐ 1,156.8

Jordan 940.5 154.1 375.1 169.9 15.7 11.8 1,667.0

New Prague 845.9 58.4 105.2 156.2 30.1 ‐‐ 1,195.7

Prior Lake 5,125.8 365.6 88.6 1,776.5 167.8 586.1 8,110.4

Savage 4,532.7 572.9 1,452.5 ‐‐ 1,742.8 442.7 8,743.6

Shakopee 7,544.2 979.7 2,047.2 4,388.9 886.0 ‐‐ 15,846.1

Remainder 49,868.0 349.7 2,452.0 120,642.5 259.1 ‐‐ 173,571.3

Total 70,367.3 2,648.8 6,662.0 128,847.4 3,645.5 1,040.7 213,211.7


TABLE S‐6

ACREAGE BY LAND USE

NOVEMBER 2011

SCALE OVERVIEW


0% 20% 40% 60% 80% 100%

Belle Plaine

Elko New Market

Jordan

New Prague

Prior Lake

Savage

Shakopee

Remainder

Geograp

hy

Land Use by Submarket (in Acres)

Residential

Commercial

Industrial

Farm/Ag

Other

PUD

SCALE Summary

Class I pad‐ready site’s make‐up 7% of the County’s total acreage, yet account for 32% of total market value. Only eight Class I properties are larger than 10 acres, the median Class I size is just 1.8 acres.

Shakopee has the largest inventory of pad‐ready sites (i.e. Class I) in the County, accounting for 54 % of the Class I total acreage.

Class III properties account for over 73% of total acreage, but comprise 35% of the total market value. The median size of Class III properties is just under 10‐acres.

Within the seven municipalities, 53% of parcels are Class I. Only 7.5% of properties in municipal limits are Class III.

INFRASTUCTURE ANALYSIS


Introduction The following section discusses Scott County transportation improvements over the next decade. Transportation improvements can reshape local and regional economies by increasing access to labor and markets. Transportation improvements also better connect businesses to buyers and suppliers, thereby increasing the trade area a business can reach. The right location is one of the key ingredients in the success of most businesses. Location strategies allow companies to choose a site that will best serve their needs and achieve their goals. Site selection is more than just the cost of real estate, it’s a business decision that requires thoughtful analysis and due diligence. In today’s global economy, transportation connections enable a business to locate in any region with the right combination of land, labor, taxes, incentives, etc. Table IA‐1 on the following page summarizes key factors business decision makers must take into account when analyzing a real estate strategy aligned with their business plans and goals. As the table illustrates, there are numerous and complex factors decision makers weigh when analyzing real estate needs. Transportation and infrastructure related elements are key considerations. According to Site Selection Magazine, a recent survey of corporate real estate executives identified transportation infrastructure as the most important factor in site selection. According to the survey, the following criteria are most important during the location decision making process:

Transportation infrastructure Existing work force skills State and local tax scheme

Utility infrastructure Land/building price and supply Ease of permitting and regulatory procedures

Flexibility of incentive programs

Access to higher education resources Availability of incentives State economic development strategy



Factor Key Attributes

Labor Force

Property Taxation

Corporate Income Taxation

Other forms of Taxation

Fees, Charges and Special Assessments

Regulations and Development Controls

Utilities and Public Infrastructure

Public Services

Transportation Services

Cost of Living Considerations

Quality of Life Considerations

Community Factors

Community Attitudes

Source: Corporate Real Estate Site Selection, Maxfield Research Inc.

Housing availability and occupancy costs including property tax and utility charges; state and local income tax; price level for necessities

Recreational amenities; cultural amenities; quality of public services such as schools and parks; quality and quantity of entertainment

amenities such as restaurants and theatres, climate and weather

Name recognition of community and/or industrial area or business park; age and condition of industrial area/business park; compatibility of

neighborhood land uses; absence of negative factors such as litter, noise, odor, dust and air pollution; safety of the area for both employees

and property

Receptivity of political and community leaders and the business community in general toward the firm and staff; policy and practice regarding

the enhancement of existing, provision of expanded public services and facilities

Unemployment premiums; workman's Comp premiums; inventory tax

Impact fees; water and sewer hook‐up fees; applications and permit charges, special assessments

Zoning requirements; subdivision regulations; construction codes; occupancy codes and licensing requirements; growth management

restrictions (i.e. utility extensions, sewer moratorium, development or population caps, timing controls), and policies and practices regarding

zoning, variances, and special use permits

Street system; mass transit; public utilities such as power and natural gas, water, sewerage, waste management; and other public or private

facilities and systems

Fire and police services; education facilities for both employees and families; medical facilities; parks and recreational facilities; public cultural

facilities

Trucking; railroad and air cargo services; air transport; port or barge facilities; mass transit; congestion; condition and plans for regional

thoroughfares; rate structure

TABLE IA‐1

SITE SELECTION

KEY LOCATION FACTORS AND ATTRIBUTES

Wage rates; productivity; occupational composition; educational level; availability of required skills and training availability; unionization

Tax rates and assessment practices; tax abatements; concessions and other incentives; personal property tax; special tax districts; tax

increment financing (TIF)

Tax rates; allowable deductions; credits and concessions



Infrastructure Analysis

Investment in transportation infrastructure can mitigate traffic congestion and catalyze commercial and industrial development. In general, industrial businesses seek sites with uninterrupted access to metropolitan arterial routes in order to efficiently ship supplies in and finished products out. Office users require easy and direct access for employees and visitors. Retail operators look for locations with visible access to major roadways in order attract customers. As such, areas adjacent to and in close proximity to improved highways and roadways are likely to capture more demand and attract a greater share of development. Table IA‐2 and the following map illustrate key transportation improvements in Scott County through 2021. The data was compiled from the Scott County Public Works Division and Minnesota Department of Transportation. Key findings follow.

Just north of Scott County, the reconfiguration of the Interstate 494 and Highway 169 interchange system in Hennepin County will improve access to Scott County. The $125 million interchange project will relieve congestion at one of the most congested bottlenecks in the Metro Area. The elimination of stop lights will reduce the travel time to the southwest Metro Area and benefit Scott County. According to commercial broker interviews, this transportation improvement will vastly improve the marketability of land in Scott County.

The most significant project under construction in Scott County currently is the State Trunk Highway 13 and Highway 101 interchange in Savage. Highway 13 is a major route that connects Highway 169 and Interstate 35W and is estimated to serve over 4,000 commercial vehicles per day. The construction of a fly‐over bridge will allow for the free flow of east‐west traffic and double the capacity of the intersection. Construction is anticipated to be complete in 2012. Brokers noted that this connection along Highway 13 provides an important connection to I‐35. Maintaining mobility on this corridor for the movement of freight and goods is an important element in marketing properties in Scott County.

Presently there is over $32 million dollars of transportation improvements under construction in Scott County. Over the next seven years, over $66 million of investment has been allocated for future roadway improvements.

A new Highway 101 bridge, which will be elevated to above the 100 year flood elevation between Shakopee and Chanhassen, is expected to be funded through state flood mitigation programs and under construction on or before 2015. The river crossing routinely closes due to spring flooding, resulting in the rerouting of traffic and economic losses for area businesses. With over 21,000 vehicle crossings daily, the new bridge will enhance the marketability of property in Scott County. According to broker interviews, the fear of road closures plays a part in site selection among business decision makers. However, the



completion of this bridge will enhance the marketability of property and growth in Scott County.

ID Location/Intersection Description Cost

1 US 169 at Belle Plaine Interchange Project $20,000,0002 CH 82 ‐ from CH 21 to CH 17 Add two lanes (2‐4) in Prior Lake $14,400,0003 Southbridge Park and Ride Park and Ride $1,500,0004 CH 83 from CH 16 to CH 42 Add two lanes (2‐4) in Prior Lake/Shakopee $7,000,0005 CH 21 ‐ from CH 42 to CH 18 New four‐lane expressway $25,000,0006 CH 17 and CH 42 Intersection Grade Separation $5,500,0007 CH 101 from Spencer to CH 17 Five Lane Reconstruct and sidewalk in Shakopee $4,330,0008 CH 68 and CH 91 Roundabout $1,300,000

Subtotal $79,030,000

1 Hwy. 169/I‐494 Interchange Reconstruction1 Interchange reconstruction, roundabout $125,000,0002 Hwy. 101 & Hwy. 13 Interchange Interchange Project $19,400,0003 Eagle Creek Park and Ride Park and Ride $1,400,0004 CH 69 from 155th St to Atwood Reconstruction and RR Bridge Rehab $11,500,000

Subtotal $157,300,000

1 Marschall Road Transit Station Park and Ride $1,170,0002 US 169 and CH 69 Interchange Construction $15,200,000 2013 ‐ 20143 CH 17 from CH 16 to CH 42 Add two lanes (2‐4) in Shakopee $14,170,000 2013 ‐ 20144 CH 2 from CH 46 to Dakota Co Line Reconstruction and Roundabout at CH 46 $2,190,0005 CH 29 and CH 46 Intersection Construction of a Roundabout in New Market Twp $1,600,0006 CH 44 ‐ from Prior Lake to CH 27 Add two lanes (2‐4) in Savage and Credit River Twp. $3,250,0007 CH 15 Realignment Realign CH 15 from Th 19 to 270th in New Prague $2,000,000 2014 ‐ 20168 CH 56 from CH 23 to CH 87 Reconstruct and Pave $3,000,0009 CH 42 from Boone to Louisiana Add turn lanes and trails $7,000,00010 CH 16 from CH 15 to CH 69 Road Extension $750,00011 CH 16 from CH 83 to CH 18 Add two lanes (2‐4) in Shakopee $11,000,00012 CH 42 from CH 83 to CH 17 Add two lanes (2‐4) in Shakopee and Prior Lake $5,000,000

Subtotal $65,160,000

1 101 River Crossing Four Lane Bridge $40,000,0002 US Hwy 169 and TH 41 Interchange Project $35M to $45M 2015 ‐ 20253 US Hwy 169 and Hwy 282 Interchange Project and Bridge Replacement $25M to $35M 2020 ‐ 20304 TH 41 River Crossing New Alignment Freeway Crossing $305 to $355M

Subtotal $405M to $470M

Total $707.6M to $772.6 M 2007 ‐ 2040+

1 Improvement outside of Scott County

Source: Minnesota Department of Transportation, Scott County Community Services Division, Maxfield Research

2040+

2017201720192021

Planned Investments Without Full Funding

2015

2013

20142014

2016

20112011

20132012

Planned Investments With Funding

2014

Under Construction20122012

Key Completed Investments

2007

2011

2007

2010

2011

2007

CompletionYear

TABLE IA‐2INFRASTRUCTURE INVESTMENTS

SCOTT COUNTY2012‐2021



Both Highway 101 and Highway 41 bridge crossings connecting Chaska and Scott County routinely close due to seasonal flooding. A second flood mitigation project was identified for the TH 41 crossing as well; however, this potential project will still be prone to closures during major flooding events. Long term, a new freeway‐to‐freeway river crossing corridor is being preserved to the west of the TH 41 crossing. This potential new alignment is likely decades away under current transportation funding levels. The estimated cost for a bridge replacement is over $350 million; however, no funding is in place at this time. The high cost of this bridge is attributed to a freeway standard facility connecting TH212 and TH 169 that will elevate the bridge to well about the 100 year flood elevation level and provide system‐to‐system interchanges at both end points. The bridge is not planned for construction until after 2030, but the corridor effects over the next two decades will focus on preserving the right of way corridor.

As illustrated in Table IA‐2 and on the map, the majority of completed and proposed infrastructure improvements are occurring in northern Scott County. Most roadway improvements are clustered in the Cities of Shakopee, Savage, and Prior Lake. These communities also encompass the majority of commercial/industrial development in the County.

Traffic counts are also highest in the northern part of Scott County. Highway 169 traffic volumes range from about 14,100 vehicles per day just south of Belle Plaine up to 63,000 vehicles per day in Shakopee just west of the CH 21. Over 50,000 vehicles per day use T.H. 13 through Savage. Interstate 35 through Elko New Market averages over 40,000 vehicles per day.

Mass Transit The BlueXpress, operated by the Prior Lake Laker Lines and Shakopee Transit, is the primary commuter service from Prior Lake and Shakopee to Downtown Minneapolis. In addition, the BlueXpress offers service to Southbridge Crossings and Dakotah Parkway. There are a total of four Park and Rides operating and two other transit stations under construction. The operational Park and Rides include:

Southbridge Crossings Transit Station: County Road 18 and Crossings Boulevard in Shakopee

Safe Haven for Youth: 13780 McKenna Road NW in Prior Lake

Seagate Technologies: County Road 83 and Highway 169 in Shakopee (shuttle buses only)

Cedar Grove Transit Station: Cedar Avenue near Highway 13 in Eagan – operated by the Minnesota Valley Transit Authority (MVTA). This station will be implementing bus rapid transit in 2012.



The two transit stations under construction are located at Highway 169 and Marschall Road in Shakopee and Eagle Creek Boulevard and County Road 21 in Shakopee. The Marschall Road Transit Station will be located on a former car dealership that is expected to be fully operational by 2014. The former car dealership showroom will be converted to a waiting room and office space, while the surface parking lot boasts more than 400 parking spaces. A new transit‐only ramp will be constructed to provide direct access to Highway 169. Scott County and the Shakopee Mdewakanton Sioux Community recently entered into a long‐term lease for land where the 545‐space Eagle Creek Transit Station is located. The new transit station is a component of the overall goal to build a four‐lane extension of County Road 21 from Southbridge Parkway in Shakopee south to County Road 42 (140th Street NE) in Prior Lake. In addition to the Park and Rides, Scott County Transit also operates a Dial‐A‐Ride service that provides door‐to‐door service by reservation. Finally, a free shuttle service provides community circulation and summer shuttles within the Shakopee.

CONCLUSIONS AND RECOMMENDATIONS


Introduction The previous sections examined the employment trends driving industrial and commercial development, market trends, commercial and industrial land supply, and compiled SCALE data by jurisdiction in Scott County. Based on these findings, this section projects commercial and industrial land demand in Scott County for the period of 2010 to 2030. Maxfield Research presents several methods and scenarios for calculating future commercial and industrial demand.

Estimates of Employment per Acre Table CR‐1 shows the estimated number of employees per acre in industrially zoned industries. The data is organized by industry and shows the estimates based on previous research. The number of employees per acre is a key metric in understanding how industrial employment projections translate to demand for industrial real estate. While this information is important, it is difficult to estimate. Maxfield Research Inc. used previous research to determine appropriate estimates for employment per acre. We use employment density studies conducted in Minneapolis, Washington State, Portland, Southern California, and Rhode Island. Information and Professional and Technical Services have the highest employment density,

estimated at 60 workers per acre. Transportation and Warehousing has the lowest employment density at about 15 workers per acre.

Employment densities vary across studies. Factors that can effect these estimates are average building sizes, average number of stories, floor area ratios (land densities), and specific employers within industries.

The estimates in Table CR‐1 represent the Metro Area average employment densities. It is likely that industrial developments in Scott County are less dense than developments within the Interstate 494/694 strip. As such, these estimates may represent higher employment densities than are likely to be developed in Scott County.



Assessor/ So. Rhode

InfoUSA Portland California Island Final

Data Mpls1 Round 1 Round 2 Study3 Study4 Study Estimate

Utilities 42 28 22 35 20 30 40

Construction 30 32 36 27 18 5 30

Manufacturing 27 27 30 23 15 20 30

Wholesale Trade 20 27 33 11 17 6 20

Trans. & Wharehousing 14 28 22 5 20 10 15

Information 64 28 22 35 20 40 60

Real Estate, Rental, Leasing 7 26 28 43 33 125 20

Prof. & Tech Svcs. 64 27 26 21 33 62 60

Other Services 50 27 26 21 25 62 50

1. Because of small sample sizes and large outliers, median values were used. Industries do not match exactly;

all other studies used SIC coded industries, where this data is NAICS industry coded.

2. Published as square foot per employee; adjusted to employee per acre by Maxfield Research Inc.

3. Published as building square foot per employee; adjusted to employee per acre by Maxfield Research Inc.

based on published FARs.

4. Published by land use type; adjusted by Maxfield Research Inc., based on published tables

showing land use by industry.

Sources: Pflum; Yee and Bradford; Natelson Company Inc.; Rhode Island Statewide Planning Program;

Maxfield Research Inc.

Puget

Sound Study2

COMMERCIAL/INDUSTRIAL ZONED INDUSTRIES

TABLE CR‐1

ESTIMATED EMPLOYMENT PER ACRE

Employment Density Table CR‐2 illustrates employment density averages used to calculate the floorspace requirements to accommodate projected employment growth. The average densities were summarized from the following publication: Employment Densities, 1st and 2nd Editions. The employment density ratios incorporate broad assumptions and are intended to assist economic development officials with an estimation of employment generated by property development. Employment density ratios are expressed by the number of square feet per employee. Lower numbers imply a higher density of employment. Key findings follow.

As illustrated in Table CR‐2, office real estate types have become increasingly denser between 2001 and 2010 as companies have decreased the amount of space per employee. Maxfield Research typically utilizes a 200 square foot per employee ratio, however many commercial brokers believe this is decreasing today.

Industrial, Warehouse, and Distribution real estate types have witnessed an increase in square footage to employee. The result of this increase is fewer employees per square foot.



2001 2010

Office

General Offices 204 129

IT Data Center ‐‐ 505

Business Park 172 107

Business Center 215 107

Call Center 139 86

Industrial

General Industrial 365 387

Light Industrial (Business Park) 344 505

Warehouse & Distribution

General Warehouse 538 753

Large Scale/High Bay 861 861

Source: Deloitte, Maxfield Research Inc.

Sq. Ft./Employee

TABLE CR‐2

AVERAGE EMPLOYMENT DENSITY

SQUARE FOOT/EMPLOYEE

Jobs to Labor Force As previously discussed in the SCALE Section of the report, Scott County has established a goal to employ 50% of the County’s total labor force. Table CR‐3 portrays commercial/industrial acreage needs based on the ability for Scott County to retain 50% of the labor force. The following table shows a snapshot of acreage needs based on 2010 employment figures as a baseline scenario. Key points follow:

As depicted in the Employment Section of the report, Scott County has a labor force of approximately 75,300, however after adjusting for a 4% unemployment rate the labor force is 72,280. The labor force includes all employed and unemployed residents of Scott County, regardless if they actually work in Scott County.

Scott County has a total of approximately 42,300 jobs. As a result, the County does not have enough jobs to employ the total labor force. Scott County can only employ 56% of the County’s labor force, and this assumes all residents would work in the County.

According to commuter pattern data, only 23.7% of Scott County residents work in the County. Therefore, Scott County’s labor force attracts less than 18,000 residents, while nearly 58,000 workers commute to jobs outside the County.

In order to achieve a 50% capture from Scott County’s labor force, the County would need to add approximately 19,000 jobs in 2010. Based on this deficit, Maxfield Research calculated the acreage needed to accommodate this employment growth.



Scott County Employment

Labor Force1

Labor Force @ Equlibrium (assuming 4% unemployment) =

Jobs2

Pct. of labor force working in County3 xScott County Labor force working in County =

Goal: 50% labor force working in County =Job deficit needed to reach goal (2010 | 2030) =

Job Density ‐ Scenario 1Avg. Sq. Feet/employee (blended average)* 250 ‐ 400 250 ‐ 400Total commercial space sq. ft. deficit to reach goal = 4,752,431 ‐ 7,603,890 7,763,760 ‐ 12,422,016

Floor‐to‐Area (FAR) Ratio (blended average)* x 20% ‐ 20% 20% ‐ 20%Acreage needed to meet 50% goal = 546 ‐ 873 891 ‐ 1,426

Job Density ‐ Scenario 2Employees per Acre (blended average)* x 25 ‐ 40 25 ‐ 40Acreage needed to meet 50% goal = 760 ‐ 475 1,242 ‐ 776

SCALE Inventory (2011)Acreage

Class IClass IIClass III

* Blended averages account for a range of commerical/industrial uses


TABLE CR‐3EMPLOYMENT GOALS BY JOB DENSITY

2010 to 2030

2010 2030

75,292 123,00072,280 118,080

42,311 64,960

23.7% 23.7%17,130 27,985

36,140 59,040

5,948

19,010 31,055

Acreage540

1 Labor force data is based on resident employment (DEED) & includes all employed persons who reside in Scott County,

regardless of the place they work. Assumes a 4% unemployment rate. 2030 projection adjusted downward by Maxfield

Research. The Minnesota State Demographic Center projected a labor force of 156,400 in 2030 (2007 projection).

2 Jobs in County, regardless of where employee lives (Metropolitan Council in 2010 and adusted by Maxfield Research in 2030)

3 U.S. Census Local Employment Dynamics (2009). Maxfield Research projected 2030 figure to reflect an increasing proportion

of residents working in Scott County.

1,647

Based on an average of 250 to 400 square feet to employee and accounting for the floor‐to‐area ratio of 20%, Scott County would require from 546 to 873 acres accommodating this growth. The second scenario estimates acreage based on employees‐to‐acre calculation (from 25 to 40 employees/acre). This scenario results in a need for about 475 to 760 acres. Combined, the two scenarios depict a need for 663 acres in 2010.

A review of SCALE data indicates there is 540 acres classified as Class I (pad‐ready). Based on this inventory there is a deficit of Class I acreage in the County to achieve the County’s goal of a 50% labor force capture rate. However, we caveat that this calculation is a base‐line methodology and does not account for specific sites, property size, and projected employment growth.



We also forecast acreage need based on 2030 employment projections and a 30% labor force capture rate. Based on labor force and job growth projections, there will be an even greater need for acreage in order to meet the 50% goal. In 2030, the job density average shows a deficit of over 420 acres.

Projected Demand for Office Space Table CR‐4 presents total employment growth trends and projections in Scott County from 2000 to 2030, including the estimated percentage of total employment among jobs that typically occupy office space. The figures were compiled by Maxfield Research, based on data from the Census Bureau and Metropolitan Council.

During this past decade, Scott County added over 6,600 jobs, posting an 18.5% growth rate. Employment growth over the next two decades is projected to surpass last decade. During the current decade, employment is projected to grow by about 9,900 jobs (+23.4%) while growing by another 12,750 jobs (+19.6%) between 2020 and 2030.

Office jobs accounted for about 15% of all jobs in 2000, increasing to 17.8% in 2010. We expect that the presence of office jobs in Scott County will gradually increase over the next two decades. This increase takes into account slower job growth due to the recent recession. Through 2020, we project an increase of about 2,360 office jobs and another 3,720 between 2020 and 2030.

Not all office jobs will be located in traditional office buildings. The actual amount of office space needed will be less however, because this figure includes people working from home offices; some professional businesses may seek retail space and some others may locate in office warehouse or office showroom space depending on their business operations. Hence, we reduce demand by 10% to account for users who will seek traditional office space alternatives.

An industry standard is that an average of 200 square feet of space is required for every office job. Therefore, with the addition of 2,359 office jobs between 2010 and 2020, it can be roughly estimated that approximately 424,600 square feet of office space would be needed to accommodate these new employees by 2020. Between 2020 and 2030, the addition of over 3,300 office jobs results in additional demand for about 669,900 square feet of office space.

Finally, we adjust square footage office demand to account for floor‐to‐area ratios. Since most office buildings are designed vertical for economies of scale, we have applied a ratio of 0.50 for suburban office products based on the City of Shakopee zoning code. As a result, office demand will require approximately 50 acres of land through 2030.



2010

Projected number of jobs in Scott County 42,311(times) % of jobs in industry types that typically require office space x 17.9%(equals) Projected number of office‐type jobs in Scott County = 7,561

(times) % of office‐type jobs seeking/needing office space* x 90%(equals) Projected # of employees in office space in Scott County = 6,805

(times) Square feet of office space per employee x 200

(equals) Projected demand for office space in Scott County (sq. ft.) = 1,360,976

Growth in office demand sq. ft. (2010 to 2020 | 2020 to 2030)

(times) Projected land absorption (at 90% FAR2) x

(equals) Total acres required to accommodate office growth =

1 Percent of office‐type jobs seeking office space versus home offices or retail spaces.


2020

52,210

1,785,582

200

2,455,488

TABLE CR‐4PROJECTED DEMAND FOR OFFICE SPACE

SCOTT COUNTY2010 to 2030

2030

64,96021.0%13,642

90%12,277

19.0%9,920

90%8,928

19.5 30.8

0.5 0.5

2 Floor to Area Ratio. Office building FARs vary considerably based on building height, parking structures, and lot

coverage. 50% based on City of Shakopee zoning code

424,606 669,906

200

Projected Demand for Retail Space Demand for additional retail space, measured in gross leasable space in square feet, is calculated in Table CR‐5 which combines demand information with supply to calculate the amount of retail space supportable in Scott County over this decade. Sources of data used in the calculations include the Metropolitan Council and Maxfield Research Inc. (household growth trends), and ESRI (consumer expenditure). Also shown in the table is a calculation for “net leakage.” Net leakage is the amount of consumer spending for convenience goods and services that is likely to be spent outside of Scott County. This calculation is based on the proportion of consumer expenditures that can be captured by retail space in the area. Based on consumer expenditure data, retail space in Scott County is currently capturing only about 63% of the total retail expenditures by residents. The net leakage figures for 2015 and 2020 in the demand table is based on the estimated leakage after new space would be added in the Scott County. We estimate that leakage would decrease in the future as new retailers move into Scott County and offer different types of goods. The demand calculation begins with an estimation of the total expenditures for retail goods and services by Scott County residents, excluding expenditures for automobiles, homes, finance and insurance, education, and travel. The following points summarize the retail demand methodology.



Based on data shown in Table A‐3, the estimated number of households in Scott County is approximately 46,200 in 2010. Based on our analysis of consumer expenditure data, we estimate that consumer expenditures for the types of neighborhood and specialty goods and services that could be purchased in Scott County are about $31,900 per household.

Multiplying the consumer expenditure figure by the number of households results in total retail sales of $1.4 billion in 2010. Because of growth in the household base and accounting for inflation, Scott County residents are expected to increase their overall retail expenditures over $2.2.billion in 2020 and $3.4 billion in 2030.

However, factoring in leakage of retail dollars spent by Scott County residents to centers outside of the Trade Area at 37%, the total demand in the Trade Area is reduced to $929 million in 2010. (We estimate that leakage will decline between 2010 and 2030 as new retail options move into Scott County.)

2010 2020 2030

Scott County Households 46,201 58,605 71,378

(times) Annual Household Expenditures 1

x $31,920 $38,910 $47,431

(equals) Total Scott County Expenditures = $1,474,735,920 $2,280,338,242 $3,385,561,387

(plus) Approx. % Leakage Outside Scott County 2

+ 37% 36% 32%

(equals) Leakage Outside of Scott County = $545,652,290 $820,921,767 $1,083,379,644

(equals) Total Purchasing Power $929,083,630 $1,459,416,475 $2,302,181,743

(divided by) Average sales per Sq. Ft. / $273 $332 $405

(equals) Total Retail Space Demand (Sq. Ft.) = 3,406,600 4,389,791 5,680,709

2010 to 2020 2020 to 2030

Growth in Scott County retail demand 983,191 1,290,917

(times) % of demand growth capturable in Scott County3

x 75% 80%

(equals) Retail space supportable in Scott County (sq. ft.) = 737,393 1,032,734

(times) Projected land absorption (at 30% FAR4) x 0.3 0.3

(equals) Total acres required to accommodate retail demand = 56.4 79.0

2 Leakage is the estimated amount of retail dollars spent outside Scott County

3 Assumes not all retail potential will be capturable in Scott County

4 Floor to Area Ratio.

Sources: ESRI; Maxfield Research, Inc.

TABLE CR‐5

DEMAND FOR RETAIL SPACE

SCOTT COUNTY

2010 to 2030

1 Excluding expenditures for home buying, finance & insurance, travel, vehicle sales.

Note: The 2010 leakage factor is derived from subtracting the estimated retail sales in Scott County from the total retail

expenditures by Scott County residents.



Accounting for inflation along with the decline in consumer spending activity that resulted from the economic recession, we project that the average retail sales per square foot will increase from $273 in 2010 to $405 in 2030. The 2010 retail sales per square foot number reflects an average across all shopping center types in the Midwest and is based on information published in the “Dollars & Cents of Shopping Centers” prepared by the International Council of Shopping Centers and the Urban Land Institute.

Dividing purchasing power by average retail sales per square foot equates to total demand for about 4.4 million square feet of retail space in Scott County by 2020, increasing to about 5.6 million square feet in 2030 or a net gain of over 2.2 million square feet between 2010 and 2030.

Because of the number of Scott County residents that commute outside the County (i.e. lower day time population), we do not believe Scott County can capture all future retail expenditures. After adjusting, Scott County has demand for about 737,400 square feet through 2020 and an additional one million square feet between 2020 and 2030.

Next, we estimate retail land uses will have a floor area ratio of 30%, resulting in retail acreage of about 56 acres through 2020 and an additional 79 acres through 2030. Therefore, between 2010 and 2030 we find demand for approximately 135 acres.

Additional household and employment growth, extra traffic generated by area workers, and general increases in traffic counts could stimulate demand for more retail space. Spin‐off retail demand will ensue as a result of the County’s 50% jobs‐to‐labor force goal.

Projected Demand for Industrial Space Table CR‐6 presents Scott County industrial demand based strictly on projected employment growth by industry over the next two decades. Demand is based on employment classifications utilizing the Bureau of Labor Statistics North American Industry Classification System (NAICS). These employment sectors are the primary industries that would utilize industrial real estate uses. Our demand calculations are presented in Table CR‐5 and are summarized in the following bullet points.

Scott County is projected to add about 3,800 jobs that will require industrial space between 2010 and 2020 (see Figure 1). This includes about 980 manufacturing jobs, 1,900 wholesale trade jobs, 400 construction jobs, and 540 jobs classified as Other. It should be noted that we included only 75% of the projected overall growth in Construction Sector jobs and 10% of Other Sector jobs. This is our estimation of the percentage of jobs in these Sectors that would occupy industrial space based solely on employment projections. Between 2020 and 2030, Scott County is projected to add another 4,900 jobs that would require industrial space. After accounting for adjustments, we find 8,740 new industrial jobs through 2030.



Employment Sector 2000 2005 2010 2020 2030 00'‐10' 10'‐20' 20'‐30'

Construction 3,272 4,368 2,573 2,980 3,700 ‐699 407 720Manufacturing 5,502 4,257 4,688 5,672 7,040 ‐814 984 1,368Trade, Transportation, Utilities 5,823 7,611 7,498 9,397 11,584 1,675 1,899 2,187

Other Services1 1,583 1,383 1,576 2,116 2,751 ‐7 540 635Total 16,180 17,619 16,335 20,165 25,075 155 3,830 4,910

1 Other Services includes self‐employed, contractors, temporary, unclassified. We assume a 10% capture rate from this sector

Note: Based on covered employment (i.e. jobs in the County).

Sources: DEED, Maxfield Research Inc.

Figure 1EMPLOYMENT DRIVERS FOR INDUSTRIAL DEMAND

2000 to 2020

Year Change

Using an estimate of between 500 and 750 square feet of industrial space per employee, on average, we project demand for 1.6 to 2.4 million square feet of industrial space in Scott County between 2010 and 2020 to accommodate industrial employment growth. This figure assumes that a variety of industrial spaces (including single‐tenant and multi‐tenant buildings, and office showroom, office warehouse, and bulk warehouse buildings) in a variety of locations will be available to meet the needs of prospective tenants.

Projected increase in employment in Scott County1

Construction (75% of total projected growth) Employees Manufacturing Employees Trade, Transportation, Utilities Employees Other Services (10% of total projected growth) + Employees Total industrial employment growth = Employees

(times) Avg. space required per employee x 500 ‐ 750 500 ‐ 750 Square Feet(equals) Total industrial building space required = 1,621,025 ‐ 2,431,538 2,079,250 ‐ 3,118,875 Square Feet

(minus) Existing available industrial space in Scott County2 ‐ Square Feet(equals) Demand for new industrial space in Scott County = 807,724 ‐ 1,618,237 2,079,250 ‐ 3,118,875 Square Feet

(times) Projected land absorption (at 20% FAR3) x 0.2 ‐ 0.2 0.2 ‐ 0.2 FAR(equals) Total acres required to accommodate industrial demand = 93 ‐ 186 239 ‐ 358 Acres

1 Covered employment projections.2 Actively marketing industrial square footage as of Fall 2011. Assumes 75% of inventory and a 10% vacancy factor3 Floor Area Ratio


54 643,242 4,159

813,301 0

305 540984 1,368

1,899 2,187

TABLE CR‐6PROJECTED DEMAND FOR ADDITIONAL INDUSTRIAL SPACE


2010 to 2020 2020 to 2030

Currently, Scott County has an above average industrial vacancy rate and has a total of over 1.2 million square feet of available industrial space actively marketing. We account for 75% of this supply to account for older, less‐functional industrial spaces and a 10% vacancy factor. After subtracting the industrial supply with vacancy factor, demand remains for approximately 807,700 to 1,618,000 square feet through 2020. Between 2020 and 2030 we forecast demand for an additional 2.0 million to 3.1 million square feet.



Based on a floor area ratio of 20%, project growth in industrial space this decade would range from about 90 to 185 acres. Between 2020 and 2030, industrial demand is estimated from about 240 to 360 acres.

Projected Demand for Commercial/Industrial Land Table CR‐7 estimates commercial and industrial land demand in Scott County by submarket through 2020. Like the previous study, demand is based on historic building permit and land absorption trends. As such, projected demand establishes a “base line or snap shot” of future land need based on historic performance. Our methodology begins with an analysis of the average annual building permits over the past decade and average acreage per permit.

The average number of commercial/industrial permits (new construction only) issued over this past decade varied considerably by submarket. New Prague granted 1.7 permits per year on average, while Shakopee issued the most permits per year (23.7) in Scott County.

The average acreage per permit ranged from 1.6 acres in Elko New Market and Jordan to 5.2 acres in the townships. The majority of communities average less than 2.0 acres per permit, however Shakopee averaged 4.8 acres.

Multiplying the average annual permits issued and the average acreage per permit yields the average annual acreage consumed between 2001 and 2011.

As discussed earlier, all of the submarkets show a decrease in the average number of permits issued per year during the second‐half of last decade, a consequence of the Great Recession. As a result, commercial and industrial land absorption has slowed substantially over the past five years.

Next, the demand calculations adjust for phased development patterns by applying a percentage for 2012‐2015 and 2016‐2020. Given the continued economic recovery and depressed real estate markets, the majority of demand will be for later part of this decade (2016+). Submarkets closer to the Metro core and with premium sites for commercial and industrial products will likely experience more development in the short‐term. Other submarkets further from the Metro core may contain sites with less desirable attributes or are still waiting for significant transportation investment.

Deducting the acreage currently marketing (leasing or for‐sale) and for projects under construction, pending, or planned in Scott County, we reach the projected excess demand for commercial and industrial land generated in Scott County.



Demand

Avg. Annual Permits Issued (2001‐2011) =

(times) Avg. Acres per Permit (2001‐2011) x(equals) Avg. Annual Acreage Cons. (2001‐2011) =

2012‐2015 2016‐2020 2012‐2015 2016‐2020 2012‐2015 2016‐2020 2012‐2015 2016‐2020

(times) Adjustment for Development Phasing x 30% 70% 30% 70% 30% 70% 25% 75%(equals) Baseline Annual Demand for Acreage = 1.8 4.2 1.4 3.2 1.6 3.8 0.9 2.6

(equals) Projected Demand for Acreage (2012‐2020) = 14.5 33.9 10.8 25.2 13.0 30.4 6.9 20.7

(minus) Building Space Marketing in Scott County (Acres) ‐ 2.1 0.0 0.0 0.0 1.1 0.0 0.2 0.0

(minus) Land U/C or in Pending Developments ‐ 0.4 0.0 0.0 0.0 0.7 0.0 0.0 0.0

(equals) Projected Excess Demand for Commercial = 12.0 33.9 10.8 25.2 11.2 30.4 6.7 20.7/Industrial Land (2012‐2020)


2.4 1.6 1.6 2.06.1 4.5 5.4 3.5

2.5 2.8 3.5 1.7

TABLE CR‐7PROJECTED DEMAND FOR COMMERCIAL/INDUSTRIAL LAND


Belle Plaine Elko/New Market Jordan New Prague1



Demand

Avg. Annual Permits Issued (2001‐2011) =

(times) Avg. Acres per Permit (2001‐2011) x(equals) Avg. Annual Acreage Cons. (2001‐2011) =

2012‐2015 2016‐2020 2012‐2015 2016‐2020 2012‐2015 2016‐2020 2012‐2015 2016‐2020

(times) Adjustment for Development Phasing x 35% 65% 35% 65% 40% 60% 15% 85%(equals) Baseline Annual Demand for Acreage = 6.5 12.0 4.5 8.3 45.4 68.1 8.8 49.8

(equals) Projected Demand for Acreage (2012‐2020) = 51.9 96.3 35.7 66.3 363.3 544.9 70.4 398.8

(minus) Building Space Marketing in Scott County (Acres) ‐ 12.2 0.0 31.5 0.0 99.2 0.0 0.0 0.0

(minus) Land U/C or in Pending Developments ‐ 0.5 0.0 4.9 0.0 124.2 0.0 0.0 0.0

(equals) Projected Excess Demand for Commercial = 39.2 96.3 ‐0.8 66.3 139.9 544.9 70.4 398.8/Industrial Land (2012‐2020)



2.0 1.8 4.8 5.218.5 12.7 113.5 58.6

9.5 7.2 23.7 11.3


High & LowPrior Lake Savage Shakopee Growth Twps.

TABLE CR‐7 (cont.)PROJECTED DEMAND FOR COMMERCIAL/INDUSTRIAL LAND



The projected excess demand is the amount of additional commercial and industrial land that could potentially be absorbed in each submarket. Each submarket can capture a portion of this demand, depending on a multitude of factors such as site characteristics (e.g. land price, contiguous parcels, environmental contamination, etc.), location and amount of commercial/ industrial zoned acreage, completion of infrastructure investments, and available public subsidies or financial incentives.

Through 2020, excess demand within municipalities ranges from about 27 acres in New Prague (Scott County portion) to 685 acres in Shakopee. Combined, 1,037 acres are in demand within municipalities. Commercial and industrial land demand in the townships shows the potential to absorb 469 acres this decade. However, we find this projection to be unattainable due to the current economy and land availability in the municipalities.

6.1

4.5

5.4

3.5

18.5

12.7

113.5

58.6

0.0 20.0 40.0 60.0 80.0 100.0 120.0

Belle Plaine

Elko New Market

Jordan

New Prague

Prior Lake

Savage

Shakopee

Townships

Acres

Submarket

Avg. Annual Acres Absorbed2001 to 2011

Demand Summary vs. SCALE Supply Table CR‐8 displays a summary of the excess amount of land absorbable through 2020 in Scott County and within each submarket. In addition, the SCALE data land supply is presented to ascertain whether each submarket has ample land supply to reach projected demand. Key points follow.

In the short‐term, there is demand for approximately 290 acres through 2015. Currently there are 540 acres classified as Class I sites (pad‐ready), therefore there is ample shovel‐



ready sites in the short‐term. Additionally, each municipality has enough Class I acreage to meet demand. However, the given the townships inventory on only 29 Class I acres, this submarket shows the lack of ample Class I sites in the short‐term.

However, the majority of growth is projected to occur in the second‐half of the decade (+1,200 acres). Through 2020 there is demand for about 1,500 acres. Given this demand and the current Class I acreage, there is not enough pad‐ready land to meet this need. Submarkets that will be deficient include Belle Plaine, Prior Lake, Savage, Shakopee, and the townships.

Combined, there is enough Class I and Class II land (2,187 acres) to accommodate demand between 2012 and 2020 (1,506 acres). All of the communities have enough Class I and Class II land supply to meet this demand through 2020. However, the rural townships show a deficit of about 100 acres of Class I and Class II land.

2012‐ 2016‐ 2012‐Submarket 2015 2020 2020 Class I Class II Class III

Belle Plaine 12.0 33.9 45.9 12.7 252.4 49.2Elko New Market 10.8 25.2 36.1 50.6 127.9 56.9Jordan 11.2 30.4 41.6 57.9 84.3 0.0New Prague 6.7 20.7 27.4 8.0 6.9 0.0Prior Lake 39.2 96.3 135.6 59.8 259.0 252.2Savage ‐0.8 66.3 65.5 29.4 156.1 7.4Shakopee 139.9 544.9 684.8 292.5 419.6 38.8Townships 70.4 398.8 469.2 29.3 341.1 5,543.6Total 289.4 1,216.5 1,506.0 540.2 1,647.2 5,948.2



SCALE ACREAGE

TABLE CR‐8DEMAND SUMMARY w/SCALE ACREAGE




0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0

Belle Plaine

Elko New Market

Jordan

New Prague

Prior Lake

Savage

Shakopee

Townships

Acres

Submarket

Demand Summary: 2012 to 2020

2012‐2015

2016‐2020

‐500.0

‐400.0

‐300.0

‐200.0

‐100.0

0.0

100.0

200.0


Jordan New Prague Prior Lake Savage Shakopee Townships

Acreage

Submarket

Class I Supply & Demand: 2012 to 2020

2012‐2015

2012‐2020



Demand Comparison Table CR‐9 summarizes demand for retail, office, and industrial uses based solely on projected household growth and employment trends after applying industry averages. As illustrated in the table, there is demand for about 170 to 260 acres through 2020 and another 350 to 470 acres through 2030. We caveat, however, that the amount of demand capturable is contingent on a number of factors and does not include a review of site specific commercial industrial parcels in each city and township.

Retail

Office

Industrial 93 ‐ 186 239 ‐ 358 332 ‐ 544Total 169 ‐ 262 349 ‐ 468 518 ‐ 730


2010 ‐ 2020 2020 ‐ 2030

79

31

Note: Demand projects based solely on household growth and employment

projections.

2010 ‐ 2030

135

50

TABLE CR‐9SUMMARY OF COMMERCIAL/INDUSTRIAL DEMAND (ACRES)


56

20

At the same time, Tables CR‐7 and CR‐8 project land absorption by submarket based on historic building permit trends over the last decade. Although the last decade was bifurcated (pre‐ and post‐ housing bust and Great Recession), overall we find this methodology is a better indicator of future land absorption. Table CR‐8 found a commercial/industrial land need of just over 1,500 acres this decade which is in‐line with previous performance.

Commercial/Industrial Recommendations Job producing acreage is a critical component to maintain a healthy prosperous County. Commercial and industrial zoned areas offer employment opportunities, create and support jobs in multiple other business sectors, and generate taxes that sustain the quality of life elsewhere in the County. Furthermore, the industrial sector provides a ripple effect to many non‐industrial sectors through shipping, wholesaling, and manufacturing products used by other businesses and industries. An adequate land supply includes a wide variety of commercial and industrial parcels, including vacant and redevelopment areas. Properties of assorted acreages and locations are necessary to accommodate a range of potential small to large land uses, in accordance with economic



development objectives. Equally important is the provision of access, infrastructure improvements, and traffic congestion. Without an adequate supply of readily serviceable sites, job growth and expansion will be slower, local start‐ups will find real estate too expensive, and firms will simply go elsewhere to where serviceable land is available and less expensive.

The following recommendations are intended to guide Scott County, cities, and townships in assessing commercial and industrial development while guiding economic development initiatives concerning the creation, attraction, expansion, and retention of jobs. Jobs to Labor Force Goal As previously presented in Table CR‐3, in 2010 Scott County jobs are only capturing about 23% of the labor force in the County. In order to meet a 50% jobs to labor force by 2030, a substantial number of jobs will be needed to reach this goal. Apply the current ratio of Scott County employees actually working in the County would require the formation of 31,000 jobs by 2030. Job creation of this magnitude would require from 750 to 1,425 acres to meet this demand. Although the County has the Class I and Class II supply to meet this need, this goal is aggressive and will require the doubling of jobs in Scott County over the next two decades. As land continues to be absorbed throughout the Metro Area Scott County’s capture rate will increase with time. In order to reach this goal, an aggressive economic development recruitment and retention and marketing program must be initiated. Target Industries Based on our research and broker interviews, we recommend Scott County develop a cluster‐based strategy in business recruitment efforts. Cluster development is a tool for improving regional competiveness by actively pursuing industry sectors where Scott County has a distinct competitive advantage. Companies that locate in a cluster benefit from collaboration and innovation, a skilled labor force, and coordinated efforts that can reduce overhead through economics of scale. These advantages often result in greater potential for employment growth and wealth creation. In summary, a central theme for the County will set you apart from the competition. The following two charts depict annual change employment forecasts by industry in the U.S. by industry sector. The data was compiled from the U.S. Bureau of Labor Statistics and represents job growth between 2010 and 2020. Collectively total employment is projected to grow over 14% this decade resulting in over 20 million new jobs. As illustrated in the chart, industries and occupations related to health care and construction are projected to have the fastest job growth this decade.



0

5,000

10,000

15,000

20,000

Thousands of Jobs

Industry

Employment by Major Industry Sector ‐ U.S.2000, 2010, & 2020

2000

2010

2020



Table CR‐10 shows growth in high growth/high wage jobs in the Metro Area between 2009 and 2019. As illustrated in the table, health‐care related industries are expected to grow rapidly over this period. The construction sector is also projected to see rapid growth, however it is unlikely this sector will return to its pre‐recession peak employment level. Both of these sectors mirror national growth projections as illustrated in the previous chart.

NAICS 2009 2019 Median Code Title Employment Pct. Change Salary

5416 Management & Technical Consulting Svc 11,799 63.6 $78,7286214 Outpatient Care Centers 6,687 55.1 $68,0686219 Other Ambulatory Health Care Services 4,617 32.9 $51,7926211 Offices of Physicians 26,286 32.2 $93,0282389 Other Specialty Trade Contractors 4,564 30.7 $47,0085419 Other Professional & Technical Services 8,661 29.8 $47,1645415 Computer Systems Design and Rel Services 25,003 24.1 $92,0922381 Building Foundation/Exterior Contractors 6,717 23.3 $51,4282361 Residential Building Construction 4,802 23.1 $47,2686212 Offices of Dentists 9,528 22.5 $53,2485182 Data Processing and Related Services 6,165 20.2 $75,8685313 Activities Related to Real Estate 8,958 19.5 $43,1082383 Building Finishing Contractors 7,570 19.2 $44,9805112 Software Publishers 5,132 18.9 $95,5245312 Offices of Real Estate Agents & Brokers 3,608 18.2 $52,5725242 Insurance Agencies, Brokerages & Support 13,495 18 $68,6405417 Scientific Research and Development Svc 5,737 17.5 $93,4442382 Building Equipment Contractors 15,895 16.4 $62,6603391 Medical Equipment and Supplies Mfg 14,301 16.1 $67,6005611 Office Administrative Services 3,441 15.7 $71,7085221 Depository Credit Intermediation 24,894 15.2 $60,5286113 Colleges and Universities 31,271 15.1 $55,7442362 Nonresidential Building Construction 7,130 14.3 $76,0765412 Accounting and Bookkeeping Services 10,852 13.8 $65,2605619 Other Support Services 5,608 13.4 $43,0045311 Lessors of Real Estate 9,306 13.3 $53,1965239 Other Financial Investment Activities 4,623 13 $145,5485413 Architectural and Engineering Services 14,731 12 $72,0204251 Electronic Markets and Agents/Brokers 19,796 11.2 $83,5124841 General Freight Trucking 8,152 10.4 $47,7364244 Grocery Product Merchant Wholesalers 9,046 9.4 $70,824

Source: DEED, Maxfield Research Inc.

TABLE CR‐10LONG TERM HIGH GROWTH/HIGH PAY JOBS

METRO AREA2009 to 2019



Maxfield Research Inc. recommends targeting emerging industries in order to maintain a competitive edge in today’s global competition for jobs and industry. At the same time however, we do not recommend revamping current economic development efforts but a gradual implementation process. Clusters should be pursued in five to ten growth industries while also planning for alternative real estate types and businesses that support a given industry. Examples of potential industry clusters may include (not in any particular order):

Healthcare and life sciences (brokers stressed a “medical ally”)

Diversified manufacturing and services

Corporate headquarters Biotechnology Business and professional services Information and communication

Sustainable/Green manufacturing and services

Transportation and logistics (i.e. warehousing, freight hauling, and wholesalers).

Locations

Demand for commercial/industrial land will be spread throughout the County over the next two decades. Shakopee, Prior Lake, and Savage have the most commercial and industrial‐zoned land, building permit activity, and are forecasted to account for the majority of demand through 2020. In fact, Shakopee is projected to account for nearly 70% of all land absorption among the seven cities this decade (685 acres). Belle Plaine, Jordan, Elko New Market, and New Prague are projected to absorb from 27 to 46 acres during this time. New Prague, most of which is located outside of Scott County, will likely absorb more commercial/industrial land in LeSuer County than Scott County. Outside of the municipalities, Credit River, New Market, and Spring Lake Townships have had the most new development among the townships. Although we project land absorption for each submarket, there are a combination of factors that contribute to site selection, with land being just one of them. The current economy and market reality will impact site selection decisions in the short‐term. Because of this, our demand projections are provided only as a baseline and could be surpassed based on the end‐user and their individual needs. The following bullet points outline key factors that will be considered in evaluating future locations. The right mix of factors may allow firms in one location to produce goods and services more economically than in other locations. Key factors include (among others):

Land use policy Infrastructure and utilities Transportation corridors and proximity to transit

Access and visibility



Existing uses and scale of development

Parcel characteristics Local and Regional economic impact

Market trends and performance

Demographics

Labor force Economic Development Incentives

Financial Capital

Incentives Although a detailed review of all of the incentive programs was beyond the scope of this study, we have outlined key incentive programs throughout Scott County by municipality. As illustrated, there is wide‐range of incentive programs that varies considerably between communities. Scott County faces increased competition in cities and states that have greater financial incentives and lower tax rates. We recommend further collaboration between Scott County and municipalities to identify best‐in‐class and creative incentive policies that are being used in other regions and markets in the U.S. A unified “one stop shop” website and county resources should be explored. Belle Plaine

Revolving Loan Fund Façade Improvement Loan Program

Member of TCCCF

Tax Increment Financing (TIF)

Tax Abatement

City website for marketing property/vacant building & land inventories

Ongoing business retention visits Elko New Market

None currently

Jordan

Economic Development Authority (marketing, strategic planning)

Downtown Building Façade Improvement Program

Tax Increment Financing (TIF) – entire city is a TIF area

Tax Abatement Program

City website for marketing properties

New Prague

Economic Development Authority (marketing, strategic planning)

Low interest loans City website for marketing properties



City annual inventory of commercial land and building vacancy

Tax Abatement

JOBZ Tax Increment Financing (TIF)

Prior Lake


Low interest development loans

Downtown Building Façade Improvement Program

City Website and Marketing Brochures

Business Retention Surveys

Savage

Business Retention Surveys Tax Increment Financing (TIF)

Tax Abatement

Hwy 13 Corridor Business Façade Screening and Trash Enclosure Grant Program.

Shakopee

Economic Development Authority

Economic Development Advisory Committee


Tax Abatement

Downtown and First Avenue Façade Improvement Loan Program

City inventory and map of vacant commercial and industrial buildings and land

City website for marketing properties

Scott County

Tax Abatement

Tax Increment Financing support

Workforce Development Center through Dakota Scott Workforce Investment Board (job training)

State and Federal Loan Grants Bonding Programs

Countywide Fiber Ring GreaterMSP.org

Scott County CDA



Online Marketing Maxfield Research Inc. reviewed Scott County websites and individual community websites to gauge how commercial/industrial property is currently marketed in each community. After reviewing each website, the level of online marketing varies significantly from community‐to‐community. Furthermore, Scott County does not promote a central repository that assembles community data. Maxfield Research recommends the following: Scott County Website Maxfield Research recommends exploring a centralized economic development website where individual cities may upload data. This amenity could be coordinated in conjunction with SCALE as all communities would benefit. We recommend a dedicated website that showcases available Scott County properties that would be more encompassing than GreaterMSP (formerly MetroMSP). Although we find great value in the GreaterMSP website, offering additional information that sets Scott County apart from the competition could be beneficial. We recommend incorporating a site that links (if possible) to GreaterMSP and MNCAR so data will not have to be replicated for each property. At a minimum, the following information should be showcased for each property:

Property location Type of property (i.e. industrial, commercial, retail, land, etc.)

Size of property For‐sale vs. for‐lease Photographs & the ability to view thumbnails

Contact information

Ability to sort properties, view additional data, and export data via custom reports

Interactive maps/dynamic GIS functionality

In order to differentiate from GreaterMSP, we recommend incorporating the following:

Detailed incentives and business tax information

Key contacts in business and local government

Networking opportunities and educational events targeted to increasing skill set of workforce

Demographic, economic, wage, utility, and tax data

Navigation of local government zoning codes/requirements

Access to workforce training and recruitment resources

Social Media/Web 2.0 interface

Search engine marketing to attract businesses

Promotion of local business through press releases and other relevant news

Mobile websites tailored to smartphone users and Apps

SCALE land inventory by Class



Individual City Websites Should a decision to not move forward with a centralized County website ensue, we recommend individual communities to update and upgrade their economic development pages to include many of the features as previously outlined. At a minimum, each city should provide the following:

A map of marketing and vacant buildings and land (the existing Shakopee site is a good example)

A map of projects in the development pipeline (planned, proposed, & under construction)

Property highlights (i.e. availability, terms, type of use, etc.)

Photographs/thumbnails

Contact information

Financial incentives Residential lot supply (including total lots by subdivision, remaining lots, and contact). This

data could be presented in a different location on the City’s website.

Minnesota Department of Employment and Economic Development (DEED) According to our broker interviewees and with our past experience with industrial development, the importance of “shovel ready” status is increasing. As the competition for economic development has become global, it is important to maintain a competitive advantage in today’s business climate. The ability to respond quickly to business needs will better enable communities to attract business growth. Some companies are unwilling to wait for a community to develop a site and will seek site locations in communities that are shovel‐ready.

Shovel‐ready sites are a benefit to companies and site selectors because they reduce time, expense, and some risk out of the real estate development process. Furthermore, these sites tend to reduce overall development costs for cost‐conscious companies. DEED has implemented a Certified Shovel‐Ready site program that markets these properties at a national‐level.

After reviewing sites across Minnesota that are certified, there are only 16 communities in the State of Minnesota that have received certification. As of January 2012, Scott County does not have any communities with sites that meet these criteria. Therefore, we recommend individual communities consider promoting sites under this program to increase market exposure Finally, we recommend marketing Scott County regionally, nationally, and globally through recruitment trade shows.

ACRONYMS AND DEFINITIONS


Employment Terms Total Employment Forecast – Forecasts from the Metropolitan Council in which they projected the Metro Area’s share of national forecasted growth from the Bureau of Economic Analysis. Covered Employment – A count of employed persons whose employment is covered by the Minnesota Employment Services Law. Excluded from coverage in the State of Minnesota are: (a) the self‐employed; (b) farms with less than four employees in 20 weeks; (c) all railroad transportation employment; (d) insurance and real estate salesmen who work only on a commission basis; (e) those employed by a church for religious work; (f) minor children, spouse and parents working for the owner of a business; (g) elected public officials at the Federal, State, or Local levels of government; and (h) the Red Lake Chippewa Tribe. Employed Persons – All those who, during the mid‐week of the month, did any work as paid employees in their own business, profession or farm, those who worked unpaid 15 hours or more in a family enterprise, or those who had jobs but were not working because of illness, bad weather, vacation, strike or personal reasons ‐ regardless of whether they were paid or were seeking other employment. Unemployed Persons – All persons who did not work during the survey week who made specific efforts to find a job within the past four weeks, and who were available for work during the mid‐week (except for temporary illness). Also included are those who did not work, were available, and were waiting to be called back from a layoff or were waiting to start a new job with in 30 days. Not all person 16 years and older are unemployed if not working. Labor Force – Represents the employment status of persons residing within a specific area, regardless of where they work. It counts persons not jobs so that a person holding more than one job is counted only once. Both employed and unemployed persons are included in the labor force count. Resident Employment – The number of employed people living based on the place of residence.

Lease Terms Common Area – The area used in common by the tenants of an office building. Common areas typically include building and elevator lobbies, restrooms and the corridor leading from an elevator lobby to a tenant space. Common Area Maintenance (CAM) – Those charges levied on or the expenses incurred in maintaining the common areas of a building.



Floor to Area Ratio (FAR) – The total square feet of a building divided by the total square feet of the lot the building is situated on. Higher FAR values indicate more dense development. Gross Lease – A lease in which the stated rent includes the operating expenses of the building. Opposite of a net lease. Ground Lease – A land lease. Typically structured as a net lease on a long‐term basis (30 years plus). Landlord (Lessor) – The party (usually the owner) who gives the lease (right of possession) in return for consideration (rent). Modified Gross Lease – The landlord covers base year taxes and insurance, any increases over base year are passed through to the tenant. Multi‐Tenant – A building which there are multiple lease obligations and less than 90% of which may be owner occupied. Net Rent – Generally refers to a lease where the stated rent excludes the insurance, utilities, operating expenses and real estate taxes for the building. The tenant is responsible for payment of these costs either directly or as additional rent. Net Net (Double Net) – Landlord pays roof and structure and taxes. Net Net Net (Triple Net) – A lease requiring the tenant to pay in addition to the fixed rent, the expenses of the property leases, such as taxes, insurance, utilities, cleaning, etc. Operating Expenses – The cost of operating an office building; such as janitorial, management fees, utilities, and similar day‐to‐day expenses, as well as taxes, insurance, and a replacement reserve. Should not include capital expenses such as roof replacement or expenses associated with the production of income such as leasing commissions and legal fees. Rent – Consideration paid for the occupancy and use of real property. Rental Rate – The amount of rent paid for the occupancy and use of real property. Typically stated on a per square foot per month or per year basis.

Single‐Tenant – A building for which there is a single lease obligation or is 100% owner occupied. Sublease Space – Space that is controlled by a lease executed by a tenant (the sublessor) to another lessee (the sub lessee) for a term equal to or shorter than that held by the tenant under is original lease with the landlord.



Tenant (Lessee) – The party to whom a lease (the right of possession) is given in return for a consideration (rent). Tenant Improvements (TI’s) – Improvements to land or buildings to meet the needs of tenants. May be new improvements or remodeling, and be paid for by the landlord, tenant, or a portion by each. Building Class/Type of Space Class A – Typically constructed after 1980 with high quality finishes and business/support amenities in well‐located locations. In CBD locations, Class A buildings are typically skyway connected. In smaller submarkets, Class A properties are defined as such because they are the highest‐quality buildings in the area in terms of finish, location, and amenities. Class B – Older Class B properties are in average to good locations relative to the needs to major tenant sectors in the marketplace. Older Class B properties may be renovated in and in good locations. Newer Class B buildings are smaller in size and in non‐prime locations. Many Class properties are skyway connected in a CBD. Class C – Class C buildings are typically located in less desirable locations and are in average to poor condition. Some Class C properties may be skyway connected in a CBD. Bulk Warehouse – Primary focus is the storage and handling of materials. Easy access is critical and generally located near major transportation corridors. These facilities typically have ceilings with 24’ or more and few windows. Office Warehouse – Combination of offices, warehouse, and/or laboratories that varies based on user’s needs (can also be called R&D). Buildings tend to have more amenities on site and have a higher employee density than warehouses. The percentage of office use will differ between individual needs of the user. Office Showroom – Quasi‐Commercial Buildings that typically have customer access in front and truck access in rear. Typical clear heights are about 14’ to 18’. Building’s feature higher‐levels of finishes and landscaping.



TYPICAL INDUSTRIAL BUILDING CHARACTERISTICS (NAIOP TERMS & DEFINITIONS)

Primary Type Manufacturing

Sub‐Type/ General Purpose General Purpose/ General Purpose/ Truck Terminal General Purpose/ Service Center/

Special Purpose Warehouse Distribution Flex Showroom

Size (Sq. Ft.) Any 50k+ 50k+ 20k+ 20k+ <150k

Clear Height (ft) 10+ 16+ 16+ 12‐16 10‐18 15‐25

Loading Docks Yes Yes Yes Cross‐dock Yes Yes

Door‐to‐Sq. Ft. Ratio Varies 1.5k:15k 1.3k‐15k 1:500‐5k 1.5k:15k 1:10k

Office Pct. <20% <15% <20% <10% 25%‐100% 30%‐40%

Divisibility Varies 15k+ 50k+ 10k+ 5k+ 2k+

(Smallest suite ‐ sq. ft.)

Curb Appeal Low Low Low Low High High

Auto Parking Ratio Varies Low Low Varies High High

Primary Use Manufacturing Storage Distribution Truck/Transp.

Distribution Shipment

Sub‐Sets

Sources: NAIOP, Maxfield Research Inc.

Distribution

Warehouse Flex

BUILDING TYPE

R&D, Storage,

Office, Lab, Retail,

Light Manufact.

Showroom,

Storage, Light

Manufacturing

Heavy & Light

Manufacturing

Overnight Delivery

Services, Air Cargo

Garden Office,

Incubator, Tech

Shallow‐BayBulk Warehouse,

Cold/Refrigeration

Storage, Freezer

Storage, High Cube,

Self Storage, Bonded

commercial/industrial market analysis for scott county, minnesota

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