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Market Overview

TWIN CITIES MARKET SNAPSHOT

The Minneapolis-St. Paul Real Commercial Estate Market continues to perform admirably with office and industrial sectors demonstrating excellent performance throughout 2019.  The Markets characteristics remain upbeat and include positive net absorption of vacant space, moderate to low vacancy rates and measured new speculative development.  Economic conditions remain favorable however, recent statics raise concern for the continued overall economic growth in Minnesota and the USA.   While inflation continues to remain low at about 2% (annualized), unemployment has increased from 2.5% to 2.9% and median income for Minnesota households as stagnated year over year at $70,300-both still much better numbers than the national averages of 3.4% unemployment and median household income of $63,179 respectively. The 15 month trade war with China combined with all of the uncertainty in Washington DC (impeachment and gridlock) and slowing business investment-down 1% on an annualized rate last quarter create potential headwinds to sustained future economic growth.

Industrial Market


 
Industrial has been the best performing asset class of real estate since the Great Recession in 2009.  Vacancy rates are at an all-time low (4.9%) in a Twin City universe of 248 million square feet and have decreases by 1% since the beginning of 2019.

Net Absorption of available space stands at 2.73 million square feet through the third quarter of this year with bulk (high-bay) warehouse experiencing 1.74 million square feet of net absorption. Driving the net absorption has been e-commerce related companies localizing the distribution of almost everything now available on the internet.
To date there are 27 industrial projects under construction totaling 3.6 million square feet.   1.9 million square feet has already been delivered to the market.

Collectively, what all this most likely indicates is a continuation, at least through 2020, of relatively good conditions and performance for the industrial market.  The two current deterring factors, other than an economic slowdown, are the cost of tenant improvements and finding and hiring employees.

Office Market

The office market continues its long standing recovery albeit some sub markets are stronger than others.   The overall office vacancy rate for all Twin Cities office properties is 11.8%, which is down .8% from January 2019, however within multi-tenant properties the vacancy rate is 15.4%.  The northeast office market has the lowest vacancy rate at 8.6% and St. Paul CBD has the highest vacancy rate approaching 20%. Class A multi-tenant office space has the lowest vacancy rate at 12.5%, Class B Office space is at 17.7% and Class C is 13.8%.
Net absorption Year to Date is 363,871 square feet.  Actual absorption Year to Date is 504,247 square feet, however sublease space create 128,052 square feet of negative absorption.

The office market performance has instilled enough confidence in a local developer to spec a 361,104 square foot office building in the West End mixed use development named 10 West End. Net rental rates are projected to start at $25.50/sf.

One new office market characteristic that has been gaining momentum is the demand for building amenities.  Many office buildings have completed or are planning to complete updates to building common areas, add amenities such as work out areas, coffee bars, common area meeting spaces, food service, and concierge services among other things.  Many of today’s sophisticated tenants want space that is fun, functional and will retain and attract top talent in the current tight labor market.

MNCAR Industrial Market Trends | Q2 2019 | Minneapolis-St. Paul

Written by: MNCAR/Redi Comps
Economic Overview
According to the Bureau of Labor Statistics (BLS), the unemployment rate for the Mpls-St. Paul metropolitan statistical area (MSA) increased 40 basis points from 2.7% for May 2019 from 2.3% for May 2018.  The unemployment rate for the U.S. was at 3.6% in May 2019, down from 3.8% Y-o-Y for the US.  The Mpls-St. Paul MSA saw an increase in industrial job growth in manufacturing increasing 1,200 during the same period.
Market Overview
The Mpls-St.Paul industrial market consisting of 244M SF in eight counties across the metro posted over 829,000 SF of positive absorption for Q2 201\98.  The overall vacancy rate for the market stands at 5.0% and multi-tenant vacancy was 8.0% for Q2 2019.  The average asking lease low rate was $5.67 and high rate was $9.22 NNN for Mpls-St. Paul.  To date, there are 12 construction projects throughout the market totaling over 2.4M SF and 1.8M SF was delivered year to date.
Market Highlights
At the close of Q2 2019, the market experiences over 1.6M SF of leasing activity.  The vacancy rate finished the year at 5.0% in total with the Southeast and West markets being the tightest at 4.0% for all properties.  Illume held the top spot in absorption with 277,000 SF in the Northwest market.  The Northwest market is showing the highest vacancy rate at 6.1% for all properties while Northeast is highest for multi-tenant properties at 9.4%.
READ ENTIRE REPORT: Q2-19_Mpls-St_Paul_Industrial_Market_Report
 

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