NorthMarq’s Eaton finding signs of hope
April 30, 2010 | Dan Rafter | Print Article | Email this Article
Jeff Eaton, president of Minneapolis-based NorthMarq Real Estate Services, sees signs of hope in the commercial real estate market, both in Minnesota and across the country. He told Minnesota Real Estate Journal what they are.
Minnesota Real Estate Journal: All of us in publishing, especially in real estate publishing, are looking for signs of hope in the commercial real estate market. Do you see any reasons for optimism right now?
Jeff Eaton: I certainly do, and they’re not limited to the Midwest. The clear consensus is that we are at the beginning of a recovery. There is just a difference of opinion in how fast that recovery will come. Many people are cautious, which is prudent. Some are more bullish. But it’s hard to deny that
there are some encouraging signs.
MREJ: What are these signs?
Eaton: The credit markets are better . Cap rates are coming down for quality real estate. What has not yet happened, though, are improvements in some of the real estate fundamentals. Vacancy rates and rental rates are still deteriorating. The pace of decline, though, has slowed significantly. That is the first step toward recovery in the space markets.
MREJ: Are you seeing optimism from investors?
Eaton: Attitudes are changing among investors. You see a much smaller gap between buyers and sellers. Things are starting to happen. We are of the opinion that things are beginning to improve.
MREJ: How about in Minnesota?
Eaton: In the Midwest markets, and Minnesota is no exception, we are not as subject to wide swings. We may never reach the same highs as in the Sunbelt and coastal markets, but we won’t experience the same painful lows. Our unemployment rate is a couple of points better than the national average here in Minnesota. That’s a real positive. Our market was clearly not overbuilt. That’s an argument that would suggest that when the market begins to recover, we may come back quicker.
MREJ: What are some of the reasons why Minnesota has fared relatively well – relatively being the key word here – during the recession?
Eaton: We benefit from having a diversified economy in the state, in the metropolitan Minneapolis/St. Paul area in particular. There are job growth drivers in a number of sectors. Some cities don’t have as diverse an economy as we do. We are not reliant on any one sector to carry us. We also have a disproportionally large number of fortune 500 headquarters here. There is definitely a benefit from that. They spin off other companies. They certainly hire. Also, some of our largest employers are in the healthier sectors, sectors such as the life sciences, biotech firms, companies that are doing work related to medical devices. We have some very strong corporate anchors, too. That has always been a benefit to us.
MREJ: Has NorthMarq done anything differently during the recession and immediately afterward to keep the business coming?
Eaton: We are being prudent with our expenses. Over the years, though, our company has grown and found success during market downturns. That’s because of our service businesses. Our service business grew during our last downturn, and it is doing it again now.
Tags | Jeff Eaton, Minneapolis, Minnesota, NorthMarq, St. Paul
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Jeff is correct. The market is improving and the Twin Cities has an edge up on most of the rest of the nation as far as recovery. Not only do you have a diverse employment base, but the education level of your population is above average.
A significant drag in the market is lenders not being ready to lend and very strict underwriting criteria. I am not blaming the lenders. They have every right to be cautious. However, the fact is that commercial real estate is a market that historically has depended on leverage. As the market improves, lenders will become more aggressive and this will help.