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2011 NAIOP Industrial Update « CGC Commercial
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2011 NAIOP Industrial Update

by Chris Garcia, 8:52 PM on June 9th, 2011, No Comments

The 2011 Minneapolis NAIOP Industrial Update was held June 9 at The West End in St. Louis Park.  The West End was a great venue that allows for a theatre atmosphere.  Former Gopher Hockey player Casey Hankinson now with Ryan Companies was moderator while the panel consisted of three Landlord Brokers, a Tenant Rep Broker, Property Manager, REIT executive,  and Investment Sales Broker.  Here was the opening video http://bit.ly/o6vUHE.

The overall message from the panelists was that the market has bottomed out and has begun the upward trend.  Twin Cities market vacancy according to NAIOP is 12.2% while absorption is positive for the first time since 2007.  The panelists predicted that we will see around 700,000 square feet of positive absorption from now until 2012. In the good years absorption was over 700,000 square feet in 1 quadrant of the Twin Cities.

Some very positive things have happened recently, including the largest sale transaction in Minnesota history. This was the Artis acquisition of the AMB portfolio, which was over $100M in price.  It was all warehouse property that touched the entire Twin Cities.  Artis is a Canadian based real estate investment trust (REIT).

The biggest surprise was investment sales broker Steve Buss stating that high end investment property is selling in the low 7 cap range. This pricing is what we saw at the peek of the market in 2007.  That is absolutely staggering considering just recently in 2010 most investment property was being traded closer to a 10 cap, which is about 3 basis points higher.  Steve did state this is the most desirable property with great credit Tenants.  Speaking with several investors after it sounded like most properties are trading in the mid to low 9 cap range.

One other interesting item was Tad Jellison’s prediction of how the market will change over the next few years from a Tenants market to Landlord.  Here is what was stated:

2011- Tenants Market

2012- Neutral Market

2013- Landlord Market

By 2013, the Landlord will be in a much better position to negotiate leases.  That means Tenants should expect to see lease rates climb in 2012.  The more aggressive Landlords will start to push rates this year.

Finally, another sign the market has bottomed is several Developers are positioning for the next cycle.  John Allen has begun construction on a 70,000 square foot building in Minneapolis and Liberty Property Trust has bought land in Rogers.  It is rumoured Liberty has a few larger users that are negotiating new buildings for their Rogers Land.

The NAIOP update was very entertaining with the best panel in years.  The format was was loose and fun but also informative.  Several movie clips and skits were used, which proved to be a nice change of pace and humorous.  Some parts seemed to be staged; however, other parts were improvised.  Once again, very entertaining and informative.

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