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Industry Trends

MNCAR Office Market Trends – Minneapolis-St. Paul (2018-Q4)

OFFICE MARKET TRENDS | Q4 2018 | Mpls-St. Paul
Economic Overview
According to the Bureau of Labor Statistics (BLS), the unemployment rate for the Mpls-St. Paul metropolitan statistical area (MSA) decreased 50 basis points from 2.5% in November 2017 to 2.0% in November 2018. The unemployment rate for the U.S. was at 3.8% in October 2018, up from 2.8% for the State of Minnesota.  The Mpls-St. Paul MSA saw an increase in office job growth, professional, financial and information growing by 6,600 during the same period.
Market Overview
The Mpls-St.Paul office market, consisting of over 95 msf of space in seven counties across the metro posting an availability rate of 16.5% for Q4 2018.  The vacancy rate for the market stands at 14.6% to close out 2018.  The average asking lease rate for Mpls-St. Paul came in at $24.29 psf FSG. To date, there are over 12 construction projects throughout the market, totaling just over 2.2 msf.
Market Highlights
At the close of Q4 2018, the market experiences over 1.3 msf of leasing activity and the vacancy rate finished the year at 14.6% in total. Class A properties ended the year at 11.8% with the Mpls CBD Core market posting the lowest rate at 9.7% for class A properties. The top five lease transactions accounted for over 342,788 sf throughout Mpls-St. Paul with the largest leased space for Tactile Systems Technology leasing 100,000 sf in the West market.
READ ENTIRE REPORT: Q4 2018 – Office Market Trends
Written By: MNCAR/Redi Comps

MNCAR Industrial Market Trends – Minneapolis-St. Paul (2018-Q4)

INDUSTRIAL MARKET TRENDS | Q4 2018 | Mpls-St. Paul

Economic Overview
According to the Bureau of Labor Statistics (BLS), the unemployment rate for the Mpls-St. Paul metropolitan statistical area (MSA) decreased 50 basis points from 2.5% in November 2018. The unemployment rate for the U.S. was at 3.8% in October 2018, up from 2.8% for the State of Minnesota.  The Mpls-St. Paul MSA saw an increase in industrial growth in manufacturing growing by 6,900 during the same period.
Market Overview
The Mpls-St.Paul industrial market, consisting of 119 msf of space in either counties across the metro posted an availability rate of 11.4% for Q4 2018.  The vacancy rate for the market stands at 8.2% to close out 2018.  The average asking lease low rate was $5.82 and high rate was $9.00 NNN for Mpls-St. Paul.  To date, there are 17 construction projects throughout the market, totaling just over 209 msf.
Market Highlights
At the close of Q4 2018, the market experiences over 1.9 msf of leasing activity and the vacancy rate finished the year at 8.2% in total with the Southeast market posting the lowest rate at 7.0%.  The top five lease transactions accounted for over 490,797 sf throughout Mpls-St. Paul with the largest leased space for Asmodee North America leasing 130,000 sf.  Northeast warehouse distribution increased to 15.7% vacancy from 11.3% due to new deliveries totaling 468,188 sf.
READ ENTIRE REPORT: Q4 2018 – Industrial Market Trends
Written by: MNCAR/Redi Comps

NAIOP Industrial Space Demand Forecast | 3Qtr-2017

Demand for Industrial Space Will Remain Robust

Based on over 40 economic and real estate factors such as employment, GDP, exports and imports, and air, rail and shipping data, the NAIOP Research Foundation forecast suggests that net absorption of industrial space could increase slightly through 2018.   Overall, market consensus seems to be that the latter half of 2017 may benefit from a release of pent-up demand due to the election of Donald Trump.

While stories about the “death of retail” are assuredly overblown — with REIS reporting recent quarters of positive net absorption of retail space and the U.S. Census Bureau posting all-time record highs in retail sales — it is increasingly clear that more physical goods will pass through multiple distribution warehouses before reaching consumers’ hands.

New orders of goods are growing, manufacturing activity still appears to be increasing steadily in the U.S. as of the second quarter 2017 which require more industrial facilities, thus the demand for industrial real estate.

Read more: Qtr3 2017-Industrial Space Demand Forecast
In 2009, the NAIOP Research Foundation awarded a research grant to Anderson and Guirguis to develop a model for forecasting net absorption of industrial space in the United States. That model led to successful forecasting two quarters out. A white paper describing the research and testing behind the model for NAIOP’s Industrial Space Demand Forecast is available at naiop.org/research.
For more info about the NAIOP Research Foundation, contact Bennett Gray at 703-674-1436 or gray@naiop.org.

TCN Worldwide Ranks in Top 10 Brokerage Firms | by H. Ross Ford III

TCN Worldwide Ranks in Top 10 Brokerage Firms in NREI’s 2016 Top Brokers Survey
Commercial real estate brokerage firms posted another strong year, growing both leasing and investment sales volumes, according to data provided to National Real Estate Investor as part of their annual ranking of top commercial real estate brokers.
We are pleased to announce TCN Worldwide was recognized as one of the industry’s top brokerages, ranking 8th (by Deal Volume at $58.6 Billion), in National Real Estate Investor’s 2016 Top Brokers Survey.
The top commercial real estate brokerage firms posted robust year-over-year gains in deal volumes in 2015. National Real Estate Investor reported that the firms that ranked in the top 20 in each of the past two years posted average transaction volume growth of 15.0 percent from 2014 to 2015.
The NREI ranking reaffirms TCN Worldwide’s position as an industry leader, and one of the top brokerages in the commercial real estate industry.
See TCN’s Top 10 Member Deals for 3rd Quarter 2016.
Read more: TCN Worldwide’s Commercial Focus Newsletter | 2016_Q3
—H. Ross Ford III
President & CEO, TCN Worldwide

High-End Amenities Not Just for Office Buildings | RE Journal.com

Industrial spaces with high-end amenities

High-End Amenities Make Employees More Productive
More and more industrial spaces are becoming “the place” to work.  The amenities offered in newer industrial buildings rival those of modern office buildings.  Natural light, shower facilities, work-out rooms, beautifully landscaped grounds are becoming more common in warehouse buildings.  Dan Rafter’s RE Journal post discusses industrial companies need to be more competitive in the labor force.  They do this by considering not only location but higher-end amenities that make warehouse employees happier and more productive.
READ MORE: High-end amenities no longer just for office buildings — Industrial Spaces Offer Perks Too
By Dan Rafter, RE Journal.com, October 6, 2016

Why Corporate America is Leaving the Suburbs | The New York Times

Companies are leaving the suburbs for downtown.
Corporate America is changing.  Companies like General Electric and McDonalds are joining a long list of companies that are leaving the suburbs and returning to the city.  Cities provide tax incentives and young people want to live and work in the city.  The structure of companies is changing as well.  The executive offices may be in the city, but various other departments of the company may be in different other states or other countries.    States compete for companies to locate there by offering tax incentives.
Where you work matters.
Employees want to work in an energetic, vibrant and diverse atmosphere. Motorola Solutions executives will be locating 1,100 employees in downtown Chicago.  The response to job postings for positions located downtown are much higher than those located in suburban areas.
Advance communication tools are making it easier for headquarters and other corporate functions to be in separate locations.  Corporations also encourage employees to use public transit because corporations with downtown locations have eliminated parking lots and security gates.
Other corporations attempt to have an urban atmosphere in a suburban location to be avoid the cost of moving.
READ MORE: Why Corporate America Is Leaving the Suburbs for the City
By NELSON D. SCHWARTZ  AUG. 1, 2016

The Ideal Office Floor Plan, According to Science | Bloomberg

The open office plan is here to stay.
Where you sit matters.  According to Harvard Business School, in an open floor plan the idea is for co-workers to sit very close to one another.  What changes, however, is who sits next to whom.
Research conducted at one technology company shows, the denser an area is with productive people, the better nearby worker’s productivity, effectiveness, and quality of work.  The study measured proximity and productivity of 2,000 workers.   The converse is also true for “toxic” workers causing disruptions.  People rub off on each other, for good and for bad.  The open office floor plan  started as a way to for employees to share creativity and productivity.  Both Google and Pixar specifically have successful work places because of a collaborative office space.
Optimize Open Office Efficiency.
Employees tend to dislike open office floor plans claiming it is disruptive, distracting and stressful.  The thought is that workers with different strengths should be grouped together, mixing high-productivity employees with lower-quality work with slower people generating high-quality work.
READ MORE:  The Ideal Office Floor Plan, According to Science
By: Rebecca Greenfield – August 1, 2016

Economic and Real Estate Market Snapshot-Q2 2016 | Shenehon Co.

Shenehon Company has released the 2nd Quarter 2016 Economic and Real Estate Market Snapshot.  The report highlights the following topics:

U.S. economy continued to expand in the first half of 2016
The energy industry continues to be hamstrung by a glut of supply and tepid demand
Leading indicators suggest economic growth at a modest pace through at least the immediate future
Tighter unemployment rates are putting upward pressure on wages
Home sales in the Twin Cities increased by 6.2% through May and sale prices rose by 5.6%
Twin Cities multifamily permitting activity is down

READ ENTIRE MARKET REPORT—Shenehon Twin Cities Market Report – Q2 2016

NAIOP Office Space Demand Forecast

New Report by the Research Foundation
Office Space Demand Forecast:
Second Quarter 2016
Key report findings:

The national office market is forecast to absorb approximately 34.6 million square feet of space in 2016, down from 62.1 million square feet in 2015, as economic growth flattens in the U.S.
GDP growth, which slowed to 0.5 percent in the first quarter of 2016, is forecast to remain low, near 1 to 2 percent annualized growth, with the lower boundary of the GDP forecast dipping into slightly negative territory.
The current forecast projects net absorption of office space to regain some strength in 2017, totaling approximately 46.2 million square feet. However, this figure could change, depending on how the economy fares throughout the rest of 2016.

 
Economic Flattening Points to Declining Demand for U.S. Office Space Through 2017 

The national office market is forecast to absorb approximately 34.6 million square feet of space in 2016, down from 62.1 million square feet in 2015, as economic growth flattens in the U.S., according to Dr. Hany Guirguis, Manhattan College, and Dr. Joshua Harris, University of Central Florida. Gross domestic product (GDP) growth, which slowed to 0.5 percent in the first quarter of 2016, is forecast by the model to remain low, near 1 to 2 percent annualized growth, with the lower boundary of the GDP forecast dipping into slightly negative territory. The current forecast projects net absorption of office space to regain some strength in 2017, totaling approximately 46.2 million square feet. However, this figure could change, depending on how the economy fares throughout the rest of 2016.
“Employment, both overall and in the office-using sectors, had maintained fairly steady growth until the most recent reading for April 2016, which registered only 160,000 net new jobs. This was well below the 200,000 jobs-per month threshold considered the minimum necessary for sustained economic growth,” says Harris.  “We expect the overall declines in macroeconomic output to continue to result in lower employment gains for the rest of 2016.
Read more:  Office Space Demand 2Q16
By: Dr. Joshua Harris, University of Central Florida and Dr. Hany Guirguis, Manhattan College

New Mandatory Lighting Codes May Contain Hidden Costs | NAIOP Development Magazine

New lighting code standards could have unforeseen consequences for both tenants and building owners.

OPERATING COMMERCIAL  real estate is such a complex process that it can sometimes be overwhelming. Building owners and operators need to keep track of demand, interest rates, management, attracting and retaining tenants, lease negotiations and so many other things that it is easy for some things to fall through the cracks. Often, those things that are overlooked can result in very expensive consequences.
One such event recently occurred. At the beginning of July 2015, new standards were released, which took effect that same month. These codes deal with energy efficiency standards that are mandatory for residential and commercial building owners to follow. One aspect of the code changes that could have unforeseen consequences for both tenants and owners of commercial space is new mandates associated with lighting fixtures and switches.

Read more: New Mandatory Lighting Codes

By: Robert Hartley, director of research for Colliers International in the Greater Washington D.C. area.
This article is adapted from one that originally appeared in “Colliers Insights.” Winter 2015 2016