©2024 Real Estate Publishing Corporation
October 2024 • VOL. 41 No. 6
A slowdown in industrial real estate? Yes, but Twin Cities CRE pros say better times are on the way By Dan Rafter, Editor
Photo courtesy of Capital Partners.
I
t’s long been one of the most consistent commercial real estate sectors. But the industrial market across the country is seeing a slowdown in leasing activity, investment sales and new construction. Blame high interest rates and construction costs. But throughout the country – including in Minnesota – the industrial sector’s boom days appear over for now. The good news? The fundamentals of this real estate sector remain strong. And commercial real estate professionals working the Twin Cities region predict that leases, sales and new development will again trend
up, especially now that the Federal Reserve Board has cut its benchmark interest rate and is poised to enact future cuts. Peter Mork, founding partner with Edina-based Capital Partners, said that leasing activity has slowed, especially for industrial spaces with larger square footage. Those properties of 100,000 square feet or more? Owners are taking longer to fill them with tenants. “The market has slowed,” Mork said. “My rationale for it is that we are in an indecisive time with interest rates, inflation and the presidential election. Those
three things make larger publicly held companies pause before making major decisions.” As Mork says, it’s more difficult for larger companies, those that need more expansive industrial space, to ask for board approval today to expand their plant, shop or warehouse space. Doing so requires borrowing money at interest rates that are still high. Many of these large companies? They are waiting until the next presidential administration takes office before making expansion plans, Mork said. Slowdown to page 22
The big divide: Newer and renovated office properties still attracting clients in the Twin Cities
A
By Dan Rafter, Editor
bit of a rebound? Yes. But plenty of remaining
But in an interview with Minnesota Real Estate Jour-
said that there are plenty of opportunities for develop-
challenges, too. That’s the state of the Minne-
nal, two CRE professionals with Avison Young said
ers willing to buck the trend and add new, high-quality
apolis-St. Paul office market entering the fourth
that not all office space in the Twin Cities is performing
Class-A office space to the Twin Cities market.
quarter of the year. Avison Young recently released its third-quarter Minneapolis-St. Paul office report. And the news from the report was decidedly mixed.
equally. Newer properties filled with amenities? They are doing well. It’s why Tate Krosschell, principal and managing director with the Minneapolis office of Avison Young,
“The flight to quality is a long-term trend,” Krosschell said. “Companies are looking for ways to encourage their people to come back into the office. Giving them better office space is one strategy.” Divide to page 26