FRIDAY, FEBRUARY 05, 2010
by Midwest Real Estate News ReportsMinneapolis-St. PaulDespite Twin Cities vacancy rates reaching a 5-year high across all commercial property types in 2009, recent employment figures suggest the beginning of a shift in direction, according to the latest market report from the Minneapolis office of Cushman & Wakefield.
Mirroring the national trend, Minnesota's unemployment rate remained
unchanged for two consecutive months closing the year at 7.4 percent, according to the Minnesota Department of Employment and Economic Development. At the same time, Minnesota's employment statistics continue to improve in the professional and business services sector-a positive sign for the local office market. In fact, this critical office-using sector experienced increased employment for the third consecutive month, adding 3,900 positions in December alone.
"While we don't expect an immediate impact on commercial property fundamentals, we can now be more confident in our time horizon for the beginning of a commercial real estate recovery sometime in the middle of 2010," said Clinton Miller, executive managing director at Cushman & Wakefield.
In fact, recent employment trends support Cushman & Wakefield's projections for the Twin Cities office market, which reported overall vacancy of 19.3 percent at year-end following 643,000 square feet of negative absorption. Based on the firm's forecast, the Twin Cities office market is projected to experience a very moderate 400,000 square feet of absorption in 2010 with more substantial gains in 2011 and 2012. Positive absorption will, however, be predicated upon ongoing positive employment trends.
The Minneapolis/St. Paul combined Central Business District (CBD) office vacancy rose to 19.2 percent as of year end 2009, above the 14.7 percent national average and up slightly from 18.9 percent at the
end of third quarter 2009. In contrast, 10 of the top major metropolitan CBD markets across the United States reported a decline in vacancy quarter-over-quarter, with Manchester County, N.Y.,
experiencing the largest decline from 21.2 percent to 16.1 percent at year end 2009.
The Twin Cities' manufacturing sector also saw modest employment gains in November and December 2009. This favorable activity bodes well for the industrial market, which experienced more than 1.1 million square feet of negative absorption in 2009. Cushman & Wakefield predicts that absorption of industrial space will be restrained but will turn positive in 2010 as corporations respond to anticipated economic expansion.
The retail market experienced 274,000 square feet of negative absorption in 2009, resulting in vacancy of 8.6 percent metro-wide. Declining sales and subsequent store closings have, however, led to opportunity for some retailers electing to capitalize on current market conditions by securing new space that may have previously been
unattainable due to cost or lack of availability.
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