"Cautious optimism" led to a slight increase in activity in the local retail market during the first quarter of 2011, according to a report recently released by the Minneapolis office of Cassidy Turley. But economic conditions prevented significant growth from occurring.
Cassidy Turley tracks about 68 million square feet of retail space in the Twin Cities market. According to the company's Retail Market Snapshot report, the local market saw positive absorption of 17,432 square feet during the first quarter and a vacancy rate of 7.9 percent, unchanged from the previous quarter.
The vacancy rates of most submarkets tracked by Cassidy Turley also remained steady, fluctuating within about 0.5 percent of their fourth-quarter 2010 rates.
"Tenants continue to search for quality space at lower rates while trying to adjust to the highs and lows of consumer demand that the economic turnaround has created," the report states. "With the rumor of a double-dip recession lingering, tenants practice both caution and concern before entering into long-term deals."
But there are several positive indicators for the market.
The report points to a handful of retailers that are entering the Twin Cities, including Charming Charlie, Chick Fill-A, and Rusty Taco. And some franchise restaurants that are already present in the metro area-like Noodles & Company, Jimmy John's, and Toppers Pizza-have plans to expand.
Wal-Mart is reportedly seeking new spaces to increase its local presence, and "interest" from other businesses like Whole Foods, Big Lots, and Savers represents a positive sign for the market.
"A" locations-properties with high foot traffic, often driven by big-box retailers-are becoming harder to find in the central metro area and in certain suburbs, thus allowing landlords to maintain rates, according to the report.
And new development may be picking up steam.
"New retail development is no longer a lost business, as a few different projects around town are gearing up to break ground," according to the report, which points to plans for a new Wal-Mart at the former Brookdale Mall property as an important indicator.
The report predicts that there will be several small retail developments popping up in suburban submarkets, and new residential developments in downtown Minneapolis could lead to more retail growth.
"We are at the doorstep for retail growth," Cassidy Turley reported. "Major national companies are in the market researching the metro as a potential market for expansion, and we are optimistic about the opportunities ahead."
Read Cassidy Turley's entire report here.
Founded in 1909, Cassidy Turley has 60 offices nationwide and provides a variety of commercial real estate services. It has 430 million square feet of managed space and completed $17 billion worth of real estate transactions last year.