For our 2nd Quarter 2012 newsletter we focused on Vacancy Rates for the four main asset classes. The Vacancy rates in all four have improved since 2010.
data from REIS 2011 MetroTrend
The above chart illustrates this trend. Here are some explanations by our experienced agents.
The Twin Cities office market, although not fully recovered, has been finding a more consistent stride in 2011 and now into 2012. Since the downturn of the market, Class A space, in particular, has achieved higher occupancy in most sub-markets as stronger tenants who have been waiting for an opportunity to upgrade their leased space, have finally been presented with those opportunities. Class C and B space, although there has been improvement, still struggles to meet quality net effective lease rates. Older and unrenovated buildings that have not invested in their tenants and common areas are finding it difficult to keep tenants. Despite the reduction in vacancy for Class A, many of the incentives available within Class C and B space in 2010 and 2011 are still available in 2012. Still, each investor and Landlord will have their own financial objectives; it’s clear many are still aggressive, while others are beginning to hold more firm on rates and incentive packages.
– Dan Altstatt
The Twin Cities industrial market is seeing more activity as business owners are willing to make longer term commitments, along with a general increase in the demand for their products. The office warehouse sector increase is to accommodate the hiring of employees and expansion of production or warehouse space to accommodate the markets. As more products are transported, distribution space is also seeing an increase in the need for this type of space.
Retail rates are not moving upward yet but leasing traffic seems to have picked up this spring. Prospective tenants still expect hefty concessions.
– Linda Steinbaugh
The apartment vacancy rate in the Twin Cities metro market is at a 10-year low and continues to decline. There are two significant reasons for this. The first is that those people who have lost their homes to foreclosure have moved to the rental market. Secondly, at least as important, there is more risk in purchasing a home than in times past. There is no guarantee that the housing sector has hit bottom, as of yet. This risk is keeping homebuyers out of the market and keeping rental vacancy rates low.
– Robert Bayer