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Archive for July, 2011

Northmarq Compass Market Report July 2011- Summary

by Chris Garcia, 7:33 PM on July 27th, 2011, No Comments

On July 26, 2011 Northmarq’s Minneapolis office released their market report.   The report discusses office, industrial, retail, investment, multi family, and now hotels.  We focused only on Office, Industrial, and Investment Properties.  Here is the summary:

Office

The viewpoint from the report is bullish, especially when you consider that the vacancy rate is high by any standard at 19.2%.  That is 7 percentage points off the 2001 level of 12%.  The absorption for the first half of 2011 was 324K SF.  All of that absorption can be attributed to Class A leasing.  Class A leased over 500K SF alone.

They predict an additional 950,000 SF of absorption for the 2nd half of 2011 which would equate to over 1.25M SF of positive absorption for all of 2011.  That would be a great year.  Here is the summary:

  • No new office buildings under construction at this point
  • Mpls CBD is healthy for Class A office at 10-5% vacant
  • 500,000 SF of leases are signed and not included in their numbers
  • Class B and C are extremely competitive for Tenants.  Both posted negative absorption thus far in 2011
  • Class A posted 500,000 SF of positive absorption alone in 1st half

Industiral

The outlook for industrial is generally positive.  With 500K SF of positive absorption and a prediction of another 500K SF for the 2nd half, the feeling is that the market is turning the corner.  The northwest lead the way in activity as it did in the last recession with some large deals including Great Northern (100K SF), General Mills (65SF), Medline (300K SF),  and ATK (300K SF).  885,000 SF total was completed in the northwest alone.

  • 540,000 SF positive absorption for 1st half
  • 16.9% vacancy rate
  • Large Users in the market including RR Donnely (300K SF), Sanmar (500K SF), FedEx (100K SF)
  • Bulk Warehouse is at 14% vacancy, close to being a healthy rate
  • Rates predicted to tighten in 2012
  • New construction is not mentioned

Investment

More investors are looking at the Twin Cities as a good place to own real estate.  Cap rates are moving downward as the market becomes healthier and liquidity is starting to return.

  • More institutions have focused on the TC Metro area
  • The properties of choice are Class A office, Bulk Warehouse, Grocery Anchored Retail
  • Mpls CBD gets a 100 basis point premium over suburbs 7-8 Cap
  • CMBS market is on the rebound which is helping liquidity
  • Cap Rates are 6.6 for Multi-Family, 8.2 for Retail, 8.6 Industrial, and 8.3 Office

Check out the full report at http://bit.ly/pv7wJR.

Thinking of Buying Property? Here is a Checklist of Items to Consider

by Chris Garcia, 2:11 PM on July 13th, 2011, No Comments

Thinking of taking advantage of the weak real estate market and depressed prices?  Here are some things to think about as you go through the purchase process:

  • Expand your search criteria. Too many companies pick their ideal location and miss some of the best deals around.  Expand your criteria to know everything that is out there.
  • Know who your sellers are and what their debt is on the property. Is it an investor that needs out?  Or is a business that is currently in the building and could lease back? Know who they are and why they are selling.  Also, know their debt situation.  This should be public record, and will tell you what they need to get for a price.
  • Find out if there are any environmental issues on or around the property.  A Phase 1 will help you understand the history of the site.  They usually cost less than $5K.
  • Give yourself at least 12 months for the search process. You need enough time to see the entire market.  Also, it is not uncommon to walk away from a negotiation or even get outbid.  We currently have 2 clients that have been outbid on buildings in the last 6 months.
  • Meet with your banker first. Get a budget and know what you can afford, no sense in looking at property that is out of the price range.
  • Talk to multiple banks.  Different banks offer different deals, talk to a few different groups.
  • Connect with the city to see if any incentives are available. Some cities are more aggressive on attracting business than others, lob in a call to the city where you are looking to see if anything is available.
  • Find out if non-recourse debt is an option.  Non-recourse debt protects your assets should you default on the loan.  Bank debt is normally recourse however life insurance companies offer non-recourse.  Know the difference between the two.
  • Know what it would cost to build the ideal property. It should not cost anything to have your contractor provide a soft bid as to what it would cost to build the ideal property.
  • Have patience but act quick once a deal is agreed to. If you’re getting a good deal, chances are the Agents know that and will try to bring in other offers.  Once the deal is agreed to, have the seller take it off the market!

There are many factors that impact your purchase price.  Knowing the entire situation could save you time and money but also help you avoid a compromising situation.  Get prepared and know all your options!

Plymouth Commercial Real Estate

by Chris Garcia, 11:32 AM on July 10th, 2011, No Comments

The Business Journal recently published a report on why Plymouth is such an attractive location for businesses.  The report talks about factors that contribute to Plymouth being attractive, which include a quality work force, convenient location, and access to major highways.  Here is the article http://bit.ly/nnX3Dp.

From a real estate perspective, the Plymouth market has been relatively healthy through the last 2 recessions.  Since there have been some very good developments over the last twenty years that include Plymouth Ponds, Plymouth Business Center, and Carlson Business Center companies are able to find good real estate coupled with a quality work force and easy highway access.  As a matter of fact, what the Plymouth market could use is a few more 24′ clear and 32′ clear height warehouse buildings.  The amount of quality space with 24′ clear height is becoming more scarce and in a year or so could be become difficult to find.

One of the issues for Plymouth is that there is little land available to build more office and industrial.  Developers would love to find a 10-20 acre parcel to build industrial.  Duke Realty has one of the few office sites that is ready to build.  That location is off 169 and Highway 55.

Through the recession, Plymouth was able to add General Mills, Thrifty White Drug, Auer Steel, Brady Corporation, Egan Mechanical, and AECOM.

Here are some companies that have a presence in Plymouth:

  • Mosiac Company
  • Christopher and Banks
  • General Mills
  • Ecolab
  • US Foods
  • Nuaire
  • Nilfisk Advance
  • Olympic Steel
  • Thrify White Drug
  • Auer Steel
  • Select Comfort
  • Cardinal Health
  • Advanced Duplication Services
  • Boston Scientific
  • Hutchinson Technology