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Landlord Confidence- Still Low « CGC Commercial
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Landlord Confidence- Still Low

by Chris Garcia, 9:53 AM on May 6th, 2011, No Comments

Generally the real estate market trails the stock market by 6-12 months. If that holds correct which it appears to be, the real estate market will have seen a rebound starting somewhere in 2010. According to the report published by MNCAR (Minnesota Commercial Association of Realtors) that appears to hold true. There was negative absorption* of 1.4M in 2009 while positive absorption in 2010. While the absorption was only 140K, that represents a swing of nearly 1.6M from 2009. The industrial sector also saw negative absorption of nearly 3M in 2009 and positive absorption of 300K in 2010. That is a 3.3M SF swing to the good.

What this says is that rental rates will start to increase soon. So from the Tenants perspective… this is bad. Your negotiating position will start to become weaker, your rental rates will start to increase, and as values return, your taxes will increase. Everything is working against you moving forward.

There are some good things that are still on your side however, in a recent property survey for a client looking for 6-8,000 square feet in the West Metro we found an astounding 78 available properties that fit their size criteria. When you start whittling down to what could actually work for their use, the number decreases to around 20. This is still a lot of properties and certainly enough to find a motivated Landlord for a great deal.

So as I see it, there is a good 6-12 month window right now before a correction happens. In 2011 there will be a good amount of positive absorption, which will impact many Landlords decision making in 2012. Remember, Landlord confidence is key. If they believe another Tenant is around the corner they will be less motivated. Positive absorption gives them that confidence. Expect to still get great deals in 2011 and take advantage of the last window of opportunity. Sign a longer term lease if you know what your space needs will be. Take advantage of the Great Recession if you have the opportunity as there really are some great deals still available!

CGC Commercial is a Wayzata based commercial real estate company that specializes in helping Tenants with their real estate. They are constantly touring the market and negotiating with Landlords.

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