In the Twin Cities, it never really got going. Telecoms initially focused on major metropolitan areas such as Chicago, New York, and Los Angeles. When they finally got around to the Twin Cities, they had trouble finding good sites. That's because the Twin Cities lack big old manufacturing buildings, says Jim Gearen, a partner in Chicago-based Zeller Realty, who manages its Twin Cities office.
Telecommunications providers need high ceilings and large floorplates for their equipment, and they need to be constructed of steel and concrete not wood, to safeguard against fire hazards, he says. Given that the Twin Cities has not had a lot of manufacturing companies based here, there's a lack of old plants or warehouses that fit the telecom bill, Gearen notes.
Most industry experts view the slump as temporary. The need for these facilities will keep growing as long as companies and consumers still transact business on the Internet or over the telephone. In fact, these telecomhotels are expected to be a $55.8-billion market by 2005, according to Ovum, a United Kingdom-based consultant.
Another factor working against the telecom hotel phenomenon in the Twin Cities can be found in other areas of the country--public resistance.
Some cities, such as Boston and Sacramento, have adopted restrictive zoning ordinances to keep telecom hotels from gobbling up their core business district--or, at least to make them pay a heavier tax load if they do.
In Minneapolis, city officials objected that a proposed telecom hotel would provide far fewer jobs than they had desired in a project that required heavy public subsidies. The Minneapolis Community Development Agency recently objected to a developer's plans to create a telecom hotel at the Great Lakes Center in the old Sears warehouse in the Powderhorn Park neighborhood of Minneapolis. The city ended up foreclosing on the property, and earlier this month agreed to buy it back from Minneapolis developers Ray Harris and David Jasper.
The project was not as "job intensive" as the publicly subsidized project was expected to be, says Steve Cramer, executive director of the Minneapolis Community Development Agency. As a result, some telecommunications providers have had to resort to taking on smaller sites on their own. For instance, Gearen helped McLean, VA-based Nextlink Communications find a 62,000-sf Minneapolis warehouse to house its switches and routers. But since Nextlink is not sharing the space, it can't be called a "hotel," Gearen says.
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