NorthMarq Finds Twin Cities’ CRE Activity Improving

Posted by Orb Staff on July 26, 2010 No Comments
Categories : Commercial Mortgage

gh rental rates continue to drop and vacancy rates continue to climb in the Twin Cities' commercial real estate market, [link=http://www.northmarqcompass.com]NorthMarq[/link] reports that brokers are beginning to see an uptick in inquiries from national retailers, residential land is starting to trade and some office markets are beginning to stabilize. ‘The consensus is that the commercial real estate market fundamentals haven't quite yet hit bottom but will do so this year, and that a long, gradual recovery will begin late in the year or in early 2011,’ says Mike Ohmes, NorthMarq executive vice president in charge of brokerage services. According to NorthMarq's midyear report on the state of commercial real estate in the Minneapolis-St. Paul metro area, the overall office vacancy rate reached a 19-year high of 19.9% this year, representing a 0.03% rise from the end of last year. This rapidly slowing increase suggests the market is bottoming out from a vacancy perspective, NorthMarq says. In the retail sector, the vacancy rate grew to 10.4% in the first half of the year. Drastically reduced rental rates and increasing concessions from landlords, however, are enticing national retailers Toys R Us and Bed, Bath and Beyond, as well as ‘value concepts,’ such as Big Lots and Goodwill, that are looking for expansion opportunities. Big-box concepts like buybuy BABY and Christmas Tree Shops are also looking to enter the market. Investment capital was abundant for Class A properties with strong anchors, highly creditworthy tenants, low vacancy and no near-term lease rollovers, NorthMarq adds, noting these properties make up only a small fraction of the total market. The remaining portion remains in ‘investment limbo,’ the firm says. Few distressed buying opportunities have surfaced so far this year, NorthMarq adds, attributing the situation to banks' increased ability to negotiate with troubled loan holders, and special servicers' limited capacity to deal with the surge of defaults by commercial mortgage-backed securities. SOURCE: [link=http://www.northmarqcompass.com]NorthMarq

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