MINNEAPOLIS-The Twin Cities market has seen tremendous growth in the first half of the year, according to a recent Cushman & Wakefield/NorthMarq report. Vacancy has declined to 15.3% across all property types, with 1.7 million square feet of positive absorption,
According to the report, industrial has posted its highest positive absorption since 2007 in the first half, the office market posted almost 500,000 square feet of absorption, and demand for multifamily has drawn intense interests from large institutional investors. The 2.8% vacancy rate for apartments is the third lowest in the country, and up to 3,000 new units expected by 2013.
Scott Pollock with the Cushman & Wakefield/NorthMarq office says investors are seeking out properties in the secondary cities of the Midwest, including the Twin Cities area. “In the search for yield, investors want to get into the gateway cities, but are clobbering each other in New York City, San Francisco and Los Angeles, where yields are being driven way down,” Pollock says. “Many are finding more attractive yields in the Midwest, though they are more limited on growth potential.”
His firm is the property management and leasing firm for the 1.7-million-square-foot Normandale Lakes Office Park in Bloomington, MN, a property reportedly being purchased by Chicago-based Sam Zell through one of his Equity companies. The deal should close in the next 30 days, Pollock tells GlobeSt.com.
Also, Inland American Real Estate Trust has hired HFF to market the 1.4-million-square-foot IDS Center downtown.“For office, at the end of the year we’ll look back and see about three to four large office deals in this market,” Pollock says. “That’s not a lot for big cities, but that’s a lot for this market, and it sends a message that sellers have recognized the strength of the Twin Cities.”
Tenants have taken notice, according to a second quarter report by Colliers International. Large corporations, such as Target, UnitedHealth Group, Xcel Energy, and Ecolab are expanding into big, new spaces. Jim Damiani, a Colliers SVP, said in a statement that tenants are signing longer-term deals in the Twin Cities, showing an increased confidence in the office market. “We anticipate that they’ll continue to sign these longer-term leases, but rental rates will hold steady as landlords fight for deals,” he said. “I also think build-to-suit development is gaining strength, as we see the vacancy for quality office space continue to decrease, but spec development will most likely grow at a slower pace.”
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