03/09/88 - Laserfiche WebLink

Home

Commercial real estate! 1 . I I ,Metr() overbuilding will slow growth, maintain high vacancy rate, Towle says . i i 1 i 1 1 I I I I I Overbuilding in nearly all segments "of the Twin Cities commercial real "estate market will mean slower growth and continued high vacancies in 1988. Towle Real Estate Co. said In its first annual industry review last week. "In the near future we will see Ie$! development." said Towle Chairman William Reiling, although he noted that there is reason for optimism l>ecause of the area's strong and di- versified economic base. He said lo- cal developers will ha ve to turn to more assertive marketing and new approaches such as redeveloping old- er industrial and retail projects. At present growth rates, tbe Twin Cities has a two-year supply of eXCe$! office space, and the retail market, although bealthy now, is in danger of oversaturation from planned pro- jects, Towle specialists said. Industri- al space also bas been overbuilt dur- ing the past two years and well-locat- ed vacant land for development is in shan supply. I "~ Office vacancies in the Twin Cities metro area. wbich were at 17 percent in 1987, are expected to climb to 22 percent by the end of the year as new buildings sucb as Norwest Center in Minneapolis and the World Trade Center in St. Paul come on line, said Larry Chevalier, a Towle senior of- fice sales associate. " He predicted that metro office vacan- cies would drop to 18 percent in 1989 and about 15 percent by 1990 since no new speculative office buildings (those without significant tenant commitments) are under construc:- tion in downtown Minneapolis or St ~aul. Tbe southwest suburban area, includ- ing Bloomington. Eden Prairie. Edi- na and pans ofadjacent suburbs. bas been the only Iota! market where absorption of new office space bas outpa<td development. Chevalier said. Ie. vacancy rate dropped slight- ly to ::.2 percent by the end of 1987 from 22.6 percent a year earlier. Development Susan E. Peterson and Richard Meryhew Chevalier noted that office tenants are continuing to be wOoed aggres- sively with concessions such as free rent, extra amenities and lease buy- outs. Lease discounts are ranging from 15 percent to 20 percent of the . stated rental rate, following a nation- al trend that ties discounts to the vacancy rate, he said. Thus, if the vacancy rate in a particular area is 20 percent, discounts" also will average 20 percent About I million square feet of retail space was added to the Twin Cities market last year, including 12 sho~ ping centers of more than 30,000 square feet. said Kathleen Nye, a Towle retail specialist. Retail vacan- cies in the metro area are at a three- year high of 7 percent, sbe said. and with nearly an additional I million square feet of space under construc:- tion, further increases are expected. Nye said large regional malls are con- tinuing to bave very low vacancy rates, currently at 3 percent, while the rate lor medium-sized community centers is 7.5 percent. Neighborbood strip centers, which amounted to 44 percent of the new relaiI construction last year, bave a 9 percent vacancy rate. , A bigger glut of retail space may be down the road, however. N ve said there are proposals for 34 ne;' Twin Cities retail centers totalling 10.8 million square feet If all those plans come to fruition. wbich is nol cer- tain, that would increa.o;e the area's retail space by more than a third. ThaI increased space would far out. strip the expected rise in consumer retail buying. Nye said projections show that the Twin Cities could sup- pon an additional 2.3 million square feet of retail by 199~ and 5 million square feet more by 11)95. . Industrial specialist Helen Brooks said that up until mid-19B? local developers contribuled loan over- built industrial space market by con- tinuing 10 build new speculative pro- jects. Warehouse and combination office-warehouse buildings had a va- cancy rate of 17.5 percent in 1987. up from 11.3 percent a year earlier. Va- cancies in those projects are expected to increase because of growing com- petition from bigber-class office showroomlbusiness center locations. Hotels have tough year wt year was a tough one for Ihe Twin Cities hotel industry. according to Pannell Kerr Forster. an account- ing fino that specializes in botel con- sulting. Occupancy rateS dropped in most areas from already low levels and continued below national aver- "" ages. the company said. Minneapolis and its surrounding sub- urbs bad an average occupancy rate of 60.9 percent in 1987, down from 62.8 percent a year earlier. The air- pon area was hardest hit, as new hotels caused the rate to drop fnur percentage points and average room rateS fell S 1.36 from 1986 levels. SI. Paul area bOlels po"sted lower rates than MinneaPolis but showed an improv"ement from a year ago, The metro area average occupancy rate was 58.5 pen:en\ in 1987, com. pared with 55.6 percent in 1986. Downtown Minneapolis hotels saw their occupancy drop to 60.8 percent in 198~,"do...n from 63.1 percent a year earlier. Last y.:ar's downtown 5L Paul rate was 51.1 percent up from .Feb. 29) 19/(;(3 50.7 percenl in 1986. Work begins on waste plant Construction crews began work last week on a S 10.5 million hazardous waste treatment plant on a 4-acre site in Roseville. The 51,QOO.square-foot project is be- ing built by Lancy International Inc., a subsidiary of Alcoa. II has been designed to collect, treat and recycle Imzardous wastes from meta) finisb- ing and electronics manufacturing in- dustries throughout the Twin Cities. The 51. Paul Port Authorit)' has fi. nanced more than half the project's cost through a' S6.2. million bond sale. The project is the Port Authori- ty's first suburban development NSP to build in Maple Grove Nonhero Slates Power Co. (NSP) is building as) 7 million, 250.000- square-foot office and. transformer service cenler in a Maple Grove in- dustrial park. The facility. which will employ 110 workers. is scheduled for completion in the summer of 1989. A Maple Grove city official said N5P bought 55 acres within the park and will have room for future expansion of the operation. Home Center renovated The Wayzata Home Center. a 40.000-square-foot bome.specialty mall, has completed a major renov'a- tion. Owner and developer Kenco Properties Inc. boughl the former furniture showroom building last summer and spent S6oo,ooo for exle- rior and interior renovation with a skylil central staircase to lower level shops. T enanlS specializing in borne furnishings, accessories and decor have leased 11 of the 16 available shops. SIaff wrilers Susan E. Peterson and Richard Mef)'he... cover commercial real estate - Peterson on tbe Minne- apolis side of Ibe metro lrea, Mery- be... on tbe St Paul side. j{plS Tr/ I blWl.L I I