Local Real Estate Leaders Show Cautious Optimism

A new survey from the University of St. Thomas Opus College of Business asked a pool of leaders from the commercial real estate market what they expect in the near future-and the respondees foresee gradual improvement.

Minnesota's commercial real estate industry leaders are optimistic about a gradual, continued recovery, according to a new study released Tuesday.

The Minnesota Commercial Real Estate Survey was released by the University of St. Thomas Opus College of Business and is meant to serve as a forecasting tool for the Twin Cities market.

Its conclusions are derived from 50 local commercial real estate industry leaders who were polled this fall regarding a variety of issues and where they expect the market to be in two to three years. The results are based on an index of zero to 100-with values greater than 50 indicating “optimistic”; at 50 meaning “neutral”; and below 50 representing “pessimistic.”

The study focused on seven categories: rent, occupancy, land price, building materials, rate of return, equity, and composite.

The University of St. Thomas released its inaugural study this spring. Results from the spring and fall polls were similar, and the same industry leaders were surveyed for each report.

The composite index for the study released Tuesday totaled 54.1-up slightly from 53.5 from the spring polling results.

The indexes for rental rates and occupancy level declined slightly between spring and fall-4.2 points and 4.4 points, respectively. Still, all categories from the fall poll were within the optimistic range except the one pertaining to building materials.

Industry leaders expect occupancy to increase and financing to be more obtainable at better terms in the coming two years. Regarding land price, the index was relatively neutral at 51-a positive indicator following the spring survey, when many of those polled anticipated a price increase.

The report warned that leaders anticipate an increase in building material costs, but overall, “there are good reasons for continued cautious optimism that there are better days ahead for commercial real estate in the Twin Cities.”

Research for the study was conducted by the University of St. Thomas' Herb Tousley, director of real estate programs, and Thomas Hamilton, associate professor of real estate.