The Opus College of Business released its inaugural Minnesota Commercial Real Estate Survey in May. The survey was designed to better predict future Minnesota commercial rental and vacancy rates. The survey reflects the perceptions of supply-side participants, commercial developers and financiers of commercial development, providing a measure of the commercial real estate supply-side participants’ view of current and future conditions. Since participants make investment actions based upon these views, it provides a leading indicator of changing supply conditions. Herb Tousley and Dr. Thomas Hamilton conducted the research for the first survey.
The results for the first survey indicate some optimism by participants that general conditions will improve slightly over the next two years. Respondents were most optimistic about rental rates and occupancy rates. “Both of these numbers contribute to a higher net operating income, which suggests an increase in property values over the next two years,” said Tousley.
In addition, respondents were optimistic that financing should be easier to obtain; however, respondents were pessimistic that land values and building costs would increase. “Though respondents were not predicting boom times ahead,” Tousley said, “there is an overall consensus that commercial real estate is starting to turn the corner toward better times in the Twin Cities.”
The survey will be done twice a year in the spring and fall. As time goes on, the information will be used to develop an index that will be a tool to provide a forecast of the Minnesota commercial real estate market. Through an analysis of the index and the incorporation of the index into other economic forecasting models, the survey is designed to provide more accurate information on future office and retail trends in the Twin Cities area.
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