MINNEAPOLIS, July 21, 2016 /PRNewswire/ -- The Minneapolis-St. Paul commercial real estate market achieved its first sub-10-percent combined multi-tenant vacancy rate in more than 15 years during the first half of 2016, as construction slowed down and more users of space settled in long-term to plans hatched over the past several years.
With the multi-tenant vacancy rate currently at 9.9 percent across all product types (office, industrial and retail), the market is tighter in multiple sectors than it has been in years. Tenants absorbed a combined 1.76 million square feet over the first six months of the year and just 463,000 square feet of new multi-tenant space was delivered, but much of it was pre-leased or found tenants quickly.
"The Twin Cities multi-tenant market fundamentals continued to improve throughout the first half of 2016," said Mike Ohmes, Executive Vice President-Transaction & Advisory Services. "Every sector reported positive results, and except for a few pockets of softness, every sector should see continued improvement throughout the balance of the year."
The full Compass Report is available online at www.northmarqcompass.com, and Cushman & Wakefield/NorthMarq will announce a new multimedia companion project to the report later this month.
In the first six months of 2016:
Investment sales hurtled toward new sales volume records. Sales of multifamily properties moved quicker than the market has ever seen in early 2016, with $780 million in sales (nearly 80 percent of the market's record) already completed. Likewise in the office sector, where the pace is set for about $1 billion in sales over the course of the year.
Land continued to draw interest as developers looked for the next big project. Retail land sites emerged as a hot commodity in early 2016, with developers looking for first-ring suburban sites capable of supporting new neighborhood centers. Industrial sites also draw significant interest, especially now that several developers have used up their inventories.
Hotel development slowed down, but existing product performed consistently well. Average Daily Revenue and Revenue Per Available Room continued their rise in the first half of 2016. Although construction of new product will slow a bit in the coming months, a rush to be ready for the 2018 Super Bowl and other coming national events is still ongoing.
Medical Office tenants continued expansion into off-campus locations. Medical office activity in the first half of 2016 continued to be made up primarily of moves away from hospital campuses and to convenient, off-campus locations. Medical users such as TRIA Orthopaedic, Fairview and Summit Orthopedics are making such moves.
Office stayed the course in a changing world. Even as many corporate tenants relocate into single-tenant projects or "right-size" to smaller footprints per employee, the office sector saw positive absorption in the first half of the year. Negative absorption is expected this year in downtown Minneapolis as tenants leave the multi-tenant universe for larger single-tenant properties, to accommodate their growth.
The industrial boom reached other markets. Many industrial tenants shifted their attention to the east metro in the first half of 2016, with the northeast and southeast metro submarkets combining for 1 million of the overall market's 1.35 million square feet of absorption. At 8.2 percent, the overall market is exceedingly tight, and many tenants seeking big spaces have found their new homes.
The retail market became even more space-constrained. Vacancies have reached pre-recession levels in retail, with just 6.7 percent of all spaces vacant. That number may shrink even more throughout the rest of the year, with nearly 1 million square feet of absorption project.
Multifamily stayed busy. New development may have shifted for the most part to the suburbs, but renters continue to meet new units head-on, keeping the metro's vacancy rate a low 3.2 percent. Nearly 4,000 new units will hit the market in all this year, up from last year's 3,100.
Cushman & Wakefield/NorthMarq commercial real estate segment experts are available to offer additional insight, including:
About the Compass report Cushman & Wakefield/NorthMarq's bi-annual Compass Report compiles comprehensive market data and analysis for all commercial property types, including office, retail, industrial, multi-family and medical office. The report also features an overview of the Twin Cities economy and an analysis of the market's commercial real estate investment trends. For more information, visit www.northmarqcompass.com.
About Cushman & Wakefield/NorthMarq Cushman & Wakefield/NorthMarq operates the Minnesota business of Cushman & Wakefield, a leading global real estate services firm that helps clients transform the way people work, shop, and live. As the Twin Cities market-leading commercial real estate firm and a Star Tribune "Top Workplace," the company manages more than 46 million sq. ft. of retail, industrial and office assets, completes more than $2.3 billion in transactions annually, employs nearly 500 professionals and offers innovative solutions to its occupier and investor clients within the Minneapolis/St. Paul region and around the world. A recognized leader in real estate research, the firm publishes a broad array of proprietary reports available at www.cushwakenm.com.