As crime rises in Minneapolis, businesses are looking elsewhere

When the great Minnesota liberal Hubert Humphrey ran for Mayor of Minneapolis in 1943, the Twin Cities were notoriously crime ridden and corrupt. A major part of Humphrey’s campaign was a pledge to clean up the city. As he put it:

The gangsters of Chicago are out to take over the city and are on their way to doing so unless they are stopped. We are starting to see business move out of the city – and people are going, too, to the suburbs. This must be halted if Minneapolis is to go on as a city.

Today’s ‘liberals’ have drifted a long way from that. Following the death of George Floyd in Minneapolis police custody on Memorial Day, the city council voted to, in the words of Council member Jeremiah Ellison, “dismantle this police department,” and in the equally frank words of Council member Alondra Cano, to “abolish the Minneapolis Police system as we know it.”

As you might have expected, such antics have lead to a rise in crime in Minneapolis. And, just as in 1943, there is evidence that business are starting to recognize the city as somewhere to be avoided.

Twin Cities Business magazine reports:

The Minneapolis Downtown Council business association is trying to get a message to City Hall: the rhetoric about dismantling the police force has already killed some real estate deals and has many downtown companies now looking to move to the suburbs.

The Downtown Council has convened an informal group of downtown office brokers, developers, and dealmakers who work to attract investors to downtown Minneapolis to get on-the-ground market intelligence about the mood of the central business district. The office market was already under pressure in the Covid-19 pandemic.

Steve Cramer, president and CEO of the Minneapolis Downtown Council, noted that talk of defunding the police quickly generated national and international headlines and that there was immediate fallout.

“That had a really measurable impact on economic vitality for our city,” said Cramer. “Measured by companies that had leases that wanted to tell their broker, ‘Get me out of here.’ Measured by companies that were looking at coming into Minneapolis that put that on pause. Measured by investors who paused or canceled outright investments in new projects…It really was a pretty dramatic effect.”

According to information gathered from tenant representation firms, within less than six weeks a total of 45 companies have either canceled plans to move downtown or are actively scouting space in the suburbs. Per the real estate insiders, 13 of those companies have more than 100 employees; one has over 600 employees.

The numbers gathered by the Downtown Council show:

  • 10 suburban or out-of-state employers have canceled searches for downtown office space
  • 8 downtown companies have chosen to relocate to the suburbs, citing safety concerns
  • 27 downtown companies are either considering or are actively seeking space in the suburbs to leave downtown

A two-page summary of the anecdotal information that the Downtown Council collected to share with public officials included numerous dire stories, including:

  • “Five firms that were looking for office space in downtown (from outside of downtown) have eliminated downtown Minneapolis as an option. Two large firms (over 100 employees) that were looking to move to the Twin Cities from out of state, and had Minneapolis on their list of options, have canceled plans to do so due to the unrest.”
  • “Large institutional investors who provide the majority of the capital to both market rate and affordable housing developments have already slowed down or paused on new investments in Minneapolis.”
  • “We are hearing from our equity investors, that they are either very skittish or simply excluding investment in Minneapolis right now.”

Rising crime downtown was a problem for businesses before the death of George FloydBusinesses in Minneapolis have already been hit with the bad policy of hiking the minimum wage to $15 an hour. This week, Mayor Jacob Frey has reimposed restrictions on bars and restaurants to fight Covid-19. Mr. Cramer says:

I think we can turn this around. I’ve described it as a trickle…We just don’t want that trickle to become a flood.

We wish him the very best of luck.

John Phelan is an economist at the Center of the American Experiment.