MINNEAPOLIS-The year 2005 was great for Minneapolis-St. Paul commercial real estate absorption; the 8.5 million square feet recorded was four times greater than the previous three years. However, the Twin Cities recorded almost five million square feet of negative absorption in 2009-10 – and is just now getting back on its feet.
The region this year has seen about 1.2 million square feet of positive absorption across office, retail, multifamily and industrial, according to a NorthMarq first half 2011 report. Mike Ohmes, EVP of brokerage services, tells GlobeSt.com that the region is on track to absorb about three million square feet, which would be the best showing since 2007 and the fourth-best absorption rate in 10 years. “We started finding the bottom last year,” Ohmes says. “There’s still a number of abundant space options.”
For example, he says the office market is responding to tepid gains in employment, absorbing 324,000 square feet this year. However, the vacancy rate remains high, at 19.2%, just slightly lower than the 19.9% rate in December.
“We still have a lot of people we need to put back to work,” Ohmes says. “However, the growth is only partially tied to the economic recovery, it’s more about the pent-up demand by corporations that delayed decisions the past couple of years.”
Retail in the Twin Cities is doing better as well, recording an 8.8% vacancy rate, the lowest showing since 2008. Multifamily rents in the region are trending upward, and medical firms are evaluating medical office options. Combined with the 10-year low of only about 338,000 square feet of planned construction, it’s clear the commercial markets are ready for optimism, Ohmes says. “There’s clearly a reversal now, we’re moving in the right direction.”
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