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Twin Cities' Retail Sector Stays Strong

MINNEAPOLIS-Chasing fast-paced residential growth, retail development and absorption continued to be strong in the first half of 2004, according to a new United Properties report. A new 330,000-sf Ikea store near Mall of America will dominate second-half retail openings.

By Jim McCartney | Updated on August 05, 2004

MINNEAPOLIS-Fueled by strong demand, a recovering economy and healthy population growth, the Twin Cities retail market had a good first half of the year with flat vacancy rates remaining tight at 5.2%, or 5.5% with subleased space. Absorption in the first six months was just under 570,000 sf, according to United Properties.

Absorption by the end of this year is projected to be less than one million sf based on projected 2004 new construction of 1.4 million sf, according to the Bloomington-based commercial real estate company’s recent market survey. Last year, the Twin Cities retail market reported positive absorption of 1.9 million sf driven largely by the completion of a record-high 2.2 million sf of new retail construction. In the second half, about 393,000 sf of multi-tenant space, plus the 330,000 sf Ikea store near the Mall of America, should open.

“The drop-off in new retail construction this year is due to the complex retail development process, not slowing demand by consumers or retailers,” says Tricia Pitchford, senior associate in retail brokerage at United Properties. New retail also is chasing housing in fast-growing, outer-ring suburbs and developers are ramping up now to complete a projected 2.2 million sf of new retail construction in 2005, Pitchford adds.

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