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Mike Salmen knows that things could be better for the commercial real estate market in the Minneapolis/St. Paul region. He also knows that they could be far worse. Salmen is a partner with Transwestern Commercial Real Estate, and is the manager of the company’s Minneapolis office. He recently spoke with Minnesota Real Estate Journal about the ways in which the Twin Cities are surviving the commercial real estate slowdown.

Minnesota Real Estate Journal: Are the Twin Cities like so many Midwest markets in that while commercial real estate activity is down, it’s not quite as bad as it could be?
Mike Salmen: The thing about the Twin Cities is that they never quite see the highs of other markets. Similarly, when it comes to the down side of things, we don’t see the real lows in the market. We have been fortunate here in the Twin Cities to not suffer quite as much as they have in other parts of the country. We have felt the effects of the terrible economy. We are seeing vacancy rates that we haven’t seen in 15 years or so. So, yes, it has been a challenge. But we are definitely seeing some light at the end of the tunnel.

MREJ: What are some of the positive signs that you’ve seen?
Salmen: We are seeing fewer layoffs. We are seeing more activity in the marketplace. The consumer confidence of some of the companies we do business with is improving. We are seeing longer-term lease commitments. Companies are deciding to relocate to take advantage of the tenants’ market that exists. In our eyes, that is all a step in the right direction. The activity we’re seeing today is higher than what we’ve seen in the last 24 months. We expect that will continue.

MREJ: The region is still far away, though, from seeing a normal commercial real estate market, right?
Salmen: Unfortunately, we do have a ways to go from a real estate perspective to see our market get back to a stabilized level. We hope to see that happen in the next 24 months. We don’t foresee a recovery occurring in the next 18 months. It probably won’t be until 2012 that we are back to a bit of a more normal marketplace. That doesn’t mean that things aren’t improving. I think we bottomed out and are on our way back up. We are experiencing a slow move toward normalcy.

MREJ: Are there any commercial sectors doing well in the Twin Cities despite the economy?
Salmen: We are not as involved in multi-family, but I am told that multi-family has done relatively better than the rest of the marketplace. In order of how things have shaped up for us, I’d say that industrial has been the best, followed by office. Retail has been the real distant third, the laggard of the bunch. The one office market here that has been particularly hard hit is the Southwest market. Developers there overbuilt spec office space right when the economy crashed. That made for a bad combination. There is some pretty significant vacancy in that area. Overall, though, we are not really in too bad of a situation. We are just in the process of licking our wounds and recovering from what the economy has dealt us. With the exception of the Southwest office market, we didn’t overbuild in most parts of the Twin Cities.

Tags | industrial, Minneapolis, Minnesota, Office, Retail, St. Paul, Transwetern