VOLUME 33, NUMBER 3
©2017 Real Estate Publishing Corporation
March 2017
Downtown Minneapolis office market responds to shift in office dynamics, changing tenant needs By Liz Wolf
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hen monitoring the health of the downtown Minneapolis office market, industry experts say you have to look beyond the vacancy and absorption numbers to get the whole story. Although Cushman & Wakefield/NorthMarq, for example, reports that the downtown vacancy rate increased to 19.4 percent – and 746,430 square feet of negative absorption was tracked in the second half of 2016-- these negative numbers were highly anticipated and primarily due to large build-to-suit corporate moves. Most recently, Wells Fargo moved out of the Baker Center and Northstar Center into its new corporate headquarters in Minneapolis’ “East Downtown” near U.S. Bank Stadium. The company and its 5,000 employees stayed downtown. Most research tracking the office market, however, doesn’t include such singletenant space. “This Wells Fargo thing has happened to us a number of times,” says Jim Montez, senior director of brokerage services for Cushman & Wakefield/NorthMarq. “It happened when Target built their buildings and Ameriprise built their buildings, and you have this huge negative absorption number that occurs and everyDowntown to page 12
Finance pros: Multifamily market still booming, overbuilding not yet a concern in Midwest by Dan Rafter
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inneapolis’ Dougherty Mortgage has been busy, fielding plenty of financing requests from investors who want to acquire and developers who want to build apartment complexes in the markets this commercial lender serves. Dougherty Mortgage isn’t alone, either. The multifamily market continues to boom across the Midwest, with investors sinking their dollars into existing properties and developers rushing to build new apartment towers in urban downtowns. Tim Larkin, senior vice president in the Minneapolis office of Dougherty Mortgage, says that the apartment
market continues to keep him and his fellow lenders active. And he doesn’t see any slowdown in multifamily financing requests in the near future. “Rents have been rising and will continue to rise. The economy is in good shape. Payroll is up and unemployment is down,” Larkin said. “The country’s median income is up. All of those strong factors are still in place, so there doesn’t seem to be any reason for a slowdown in the multifamily market.” That is good news for the brokers, developers and investors who continue to flock to this busiest of commercial sectors. National factors fueling local multifamily markets Why has the multifamily market been so strong for
so long? Larkin points to larger trends within the residential market. As Larkin points out, the national homeownership rate has fallen in recent years, ever since the housing bust that started in 2007. More consumers chose to rent as housing prices fell. Many of these consumers have continued to choose rental housing over owning. There is also a lack of single-family homes available on the market. This lack of inventory is forcing some consumers who might have chosen to own into renting. “The Millennials are out there renting for longer periods of time,” Larkin said. “We didn’t anticipate that or expect that. But that has been the case, and it’s provided a boost to the multifamily market. At the Multifamily to page 18