Commercial Real Estate in Minnesota - Survey Shows Cautious Optimisim

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The second-ever Minnesota Commercial Real Estate Survey, released today from the University of St. Thomas Opus College of Business, reflects cautious optimism and the belief for continued recovery. The study polled 50 commercial real estate industry leaders with the results serving as a forecasting tool for Twin Cities’ commercial real estate prospects. Research was conducted by Herb Tousley, director of real estate programs at the University of St. Thomas, and Dr. Thomas Hamilton, associate professor of real estate at the University of St. Thomas.

The survey was based on a 0-100 index determining values over 50 as optimistic, at 50 as neutral and below 50 as pessimistic, analyzing seven categories including rent, occupancy, land price, building materials, rate of return, equity/LTV and composite. Results for the spring and fall polling were similar, though four of the seven areas lightly increased in optimism with only three areas declining yet remaining optimistic for 2012 and 2013. Tousley stated, “Markets may continue to be slow in the coming days; however, participants can see the light at the end of the tunnel.”

Similar to the Spring 2010 survey, all categories fell within the optimistic range except those relating to land price and building materials; however, the two sections both came closer to neutral than in the inaugural survey. Hamilton said, “In May, price increases for land were expected. Today, we are more optimistic – a sign that those in the industry may believe that the worst is behind us.”

The composite index (54.1) is a slight increase from the previous survey (53.5), whereas the index for rental rates dropped by 4.2 points and the occupancy level went down 4.4 points, both still optimistic and showing a lower participant belief in rental and occupancy increases. The land price index (51) remained fairly neutral. “This is a significant difference from the spring survey, when the panel expected a major price increase,” said Tousley. “Building materials are thought to increase over the next few years; however, the industry is perceived to be on the mend with financing more obtainable than in the past.”

About the UST Opus College of Business

With a vision to educate highly principled global business leaders, the University of St. Thomas Opus College of Business offers undergraduate majors in 12 fields and master’s degrees in seven programs, including day and evening M.B.A. programs.  The school enrolls another 4,300 participants annually in executive-education classes. Its Shenehon Center for Real Estate, one of 12 centers and institutes, provides research and develops programs impacting the real estate industry, and has been the academic voice involved in several local and national real estate industry organizations.

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