John Solberg, president and CEO of Minnetonka-based Opus Northwest, was mostly upbeat about the commercial real estate industry. For multifamily properties, "Minnesota isn't as bad off as some other parts of the country" where condos were drastically overbuilt, he said. Vacancy rates for multifamily housing have declined over the past two years, which Solberg said is connected to the supply and demand for apartments. Many apartments were converted into condos in recent years. But as lenders have tightened the availability of mortgages, more people are renting their homes. In other markets, this has led to more apartment construction, a trend that likely will come to the Twin Cities, he said.
In the industrial real estate sector, vacancy rates have edged up slightly since 2006, but the market is relatively stable and in balance, Solberg said.
The outlook for retail space is not as strong, with sales in the sector not meeting predictions. "We're definitely going to see some slowing in 2008 and 2009," he said, though vacancy rates have actually dropped since 2006.
For the office market, "the three most important things are job growth, job growth and job growth," he said. With employment growth slowing in Minnesota, the outlook doesn't look good. But that may be tempered by the trend of companies moving their operations to new campuses with large floorplates. "Even though the rent per square foot may be higher, the cost per employee is less because of the efficiencies that the new buildings provide," he said.
The trend of environmentally friendly LEED (Leadership in Energy and Environmental Design) building will continue this year, as employees overwhelmingly want it, he said. "We're seeing this as a feature that matters to people and businesses are using it to attract the best and brightest."
Source: BizJournals.com