The commercial real estate marekt in the Twin Cities remained on a hot streak in the second half of 2019, with vacancies in the office, industrial and retail sectors continuing to fall.
Cushman & Wakefield, in its recently released Minneapolis/St. Paul Compass Report, said that at the end of the fourth quarter of last year, the vacancy rate across office, industrial and retail properties stood at a low 10.4 percent.
That’s down from 10.8 percent as of the end of the first six months of 2019.
According to the report, 2.2 million square feet of commercial space was absorbed by users in the office, industrial and retail sectors in the second half of last year. The total absorption for 2019 came in at 4.2 million square feet. That is the strongest absorption in the Twin Cities market since 2015, when 5.5 million square feet of space was absorbed.
The 2019 absorption rate was more than 1 million square feet above 2018’s total, Cushman & Wakefield reported.
Much of the absorption, of course, came in the thriving industrial sector, which saw 1.5 million square feet of absorption in the second half of 2019. For the whole year, the Twin Cities market absorbed 2.9 million square feet of industrial space. That’s an improvement over the 2.78 million square feet of industrial space absorbed during all of 2018.
The office and retail sectors saw strong ends to 2019, too, with more than 200,000 square feet absorbed in each sector during the last six months of the year. Office saw 750,000 square feet of absorption for the whole year, while the retail sector broke even in absorption last year.
“Our record-setting up-cycle is still going strong in the Twin Cities,” said Mike Ohmes, managing principal of the Cushman & Wakefield Minneapolis-St. Paul office. “Most submarkets and sectors are still expecting positive absorption in 2020. In fact, our experts only projected one submarket with negative absorption.”
Absorption is expected remain strong in the first half of 2020, with 1.85 million square feet projected for the next six months. Most of that comes from the office and industrial sectors, where only one submarket is projected for a negative first half. Most of the retail sector is expected to see flat absorption in early 2020.
Construction continues at a strong pace, and an additional 2.8 million square feet of properties are expected to be complete by the end of the year. The investment sales market is also expected to be active in early 2020, with the industrial and office sectors especially busy and several trophy assets already on the market with potential first-quarter closings.
