These haven’t been the best of times for the office and retail commercial real estate sectors across the Midwest.
But there is hope. Commercial real estate pros in markets from Detroit to Louisville, Chicago and St. Louis are reporting at least slight improvements in both sectors.
Of course, both retail and office have a long way to go before they’re back to their bustling pre-Great Recession days. And there’s no guarantee that these sectors will ever be as busy as they were before the nation’s economic crash.
But what Mike Lee, a vice president with the Madison, Wis., office of national real estate finance company Walker & Dunlop has seen in his market, seems to be typical when it comes to office and retail: Things are getting better, just not as quickly as anyone would like.
For instance, one of the bigger recent office announcements in the Madison area came from Spectrum Brands, a company with products that include the Rayovac and Remington names. That company was considering moving its headquarters from Madison to Florida. Instead, the company will now move to a new headquarters building in the Madison suburb of Middleton later this year.
That’s good news for Madison. But in general, the Madison-area office market remains sluggish, Lee said.
“There has been very little general office construction since the crash of 2007,” Lee siad. “Companies have been unwilling to commit resources to physical growth. They are trying to get by with what they have versus expanding. Rents and vacancies have remained relatively stagnant. There has been slight improvement, but not much change.”
Retail, though, has shown stronger signs of recovery, Lee said.
“In retail, there has been a little more willingness on the part of tenants to expand,” he said. “There has been more willingness on their part to seek growth opportunities in the market on a selective basis.”
Many retailers had tabled expansion plans three or four years ago. Now they are reconsidering those plans, causing some movement in the Madison retail market. Many retailers are considering urban infill projects.
“I think we’ll continue to see the retail sector improve,” Lee said. “We will continue to see retailers selectively seek out and look for the best locations that they believe will remain solid spots for the next 10, 15 or 20 years.”
And in other markets, such as Topeka, Omaha and Cincinnati? The news is the same. Office and retail are recovering. It’d just be nice if they were recovering at a faster pace.