The latest report, just published today by the Shenehon Center for Real Estate is not a significant shocker. Current trends of single family housing supply shortages continue. Herb Tousley, Director of the University of St. Thomas’ Shenehon Center for Real Estate, gave interesting insights this month. Many people have attributed the shortages to simple reasons such as increased demand due to millennials and generation X’ers beginning to settle down which are true, but Mr. Tousley brings up a point seemingly looked over, the recent actions of investment vehicles.
The CRE Cycle – Are we headed over the top?
Working in the new consolidated CRE environment
Mike Ohmes, Cushman & Wakefield
Executive Vice President, Brokerage
Earning an undergraduate Bachelor of Arts degree in economics and speech communications from Macalester College in St. Paul and an MBA from the Carlson School of Business at the University of Minnesota, Mike Ohmes has a wealth of commercial real estate experience from a broker to a manager.
Today as Executive Vice President Mike Ohmes is responsible for leading Cushman & Wakefield’s Transaction and Advisory Services business. This group includes the company’s Brokerage, Capital Markets and Real Estate Advisory.
Since joining the Cushman & Wakefield in 1991 as a broker in the office division, Ohmes consistently was among the top producers. He has received the company’s Offshore Club designation for his performance a total of 7 times (each year from 1993-1999). In 2000, Ohmes earned the company’s President’s Award for his outstanding contributions to the company, and in 2003, he was recognized by The Minneapolis/St. Paul Business Journal as one of their “40 Under Forty.”
The Shenehon Center for Real Estate is proud to present this opportunity to gain insights into the commercial real estate industry. Founded in 2000, the Shenehon Center for Real Estate looks to provide both resources and a public forum for real estate industry professionals and the public.
Tuesday, November 28th, 5:30PM
University of St Thomas, Minneapolis Campus
Shulze Hall, Room 127
The September Residential Index report from the Shenehon Center for Real Estate came out last week. Mr. Tousley, director of the Shenehon Center, was not surprised by the continuation of the supply glut, but in this latest report, he pointed out that the housing market is now being driven by the Millennial generation and Generation Z. Some key takeaways,
- Over half of home sales this year have been to people 36 years old or younger
- Home price appreciation continues to outpace income growth
- Inventory remains significantly below demand
- Price and inventory are affecting the “typical” renter
As seen in Minneapolis, many major cities are being pressed by a combination of decreased household sizes, sociocultural trends for “more” space, and an influx of people coming to live in the cities not seen since the 1940’s. The report states, Millenials and Generation Z’ers while interested in buying
According to Minnesota Compass, 48.4 percent of Minneapolis households are overburdened by housing costs. To explain, these households pay more than 30% of their gross income towards housing. Just for reference, a house in Minneapolis is averaging around $200,000 which for a first time home buyer with 10 percent down payment amounts to a monthly mortgage around $1,400 including an estimates for coverages and taxes.
There are many factors affecting this overburdened number. According to a Minneapolis City Council housing report, the city’s current population [approx. 412,000] has not been this high since the 1970’s which is still lower than the peak seen in 1950 [reported 521,718]. Further exacerbating the issue is the fact that there are about the same amount of units today as in 1950 in conjunction with a decrease in average household size. In 1950, it was roughly 3.3 persons per household compared to today’s 2.3 persons per household.
The most recent residential housing report from the University of St. Thomas and the 2017 Housing Market Comprehensive Analysis by HUD, give evidence that the cost burden is a result of the simple economic principle of supply and demand. The influx of demand for housing within Minneapolis has increased the risk of displacement. Housing prices are up year over year and there remains record low vacancy levels of 4 percent. Talks with a political liaison, Mark Stenglein, and local developer and founder Bob Lux of Atalus, LLC, reinforced the challenges to affordable housing
A recent post by the New York Times blog, shows Minneapolis is among the leaders in urban development. One may ask, why and how does Minneapolis keep attracting people to the city? Simple, the city’s diverse population allows for vibrant restaurants and events, and municipal transportation creates accessibility to and from these destinations. Looking deeper, destinations and even housing were only possible through recent Minneapolis commercial development. You can see from almost any point in the city a construction crane or sign saying, “Opening Soon.”
Setting aside apartment and condo developments, the last 15 years has seen revitalization of major Minneapolis buildings. The old Sears building on Lake Street is now the Midtown Global Market which hosts over 1.5 million visitors a year, and the Foshay Tower is now the W-Hotel. Recently, the Minneapolis Armory, also on the national landmark registrar, looks to be renovated into a venue hosting large crowds as an event center. The Armory was recently sold for $6 million dollars to Nedal Yusuf Abul-Hajj who has submitted plans to convert the 80 year old building.
The Minnesota Real Estate Hall of Fame, established in 2010 by the Shenehon Center for Real Estate at the University of St. Thomas Opus College of Business, will add three new members in a morning ceremony Thursday, Nov. 5th, at the Golden Valley Golf and Country Club.
Members of the Minnesota Real Estate Hall of Fame are chosen for their outstanding business performance, high standards of ethics and community activities. The three new members
For more than 50 years, Dan Dolan has pursued a career in real estate. He was a leader in improving the professional and ethical standards in real estate and was an early promoter and employer of women in real estate sales. His real estate developments include the Evergreen Community, an upscale residential development in Woodbury; and the Oakdale Crossing Business Park.
Throughout his career, Dolan has been actively involved in boards and fundraising, including the merger of Cretin and Durham high schools, fund raising for the University of St. Thomas, and serving as King Boreas XLII in the 1978 St. Paul Winter Carnival. He may be eligible for retirement, but Dolan is just as passionate as ever about real estate development and continues to receive offers of employment in the industry.
Since 1962, Larry Laukka has actively served in all aspects of the real estate industry, but primarily in the building and development business. Laukka’s experience has included the design, development, financing, construction and marketing of more than 6,000 dwelling units and home sites throughout the greater Twin Cities community, and the management of approximately 3,000 owner-occupied townhomes and condominiums. His leadership roles include president and director of the Minneapolis Builders Association (MBA), senior life director of the National Association of Home Builders (NAHB) and founder of the Minnesota Housing Institute (MHI), which served the real estate industry’s state-wide needs to commercially promote home ownership and legislative action.
In the 1960s, Laukka worked with The Near Northside Re-Development Agency, a community based organization established to guide the redevelopment of the near north side of Minneapolis. The agency focused on the growing need for market rate housing and led to the development of single-family housing, hailed as “The Suburb in the City.” After being approached by Governer Wendell Anderson, Laukka helped develop the State Housing Finance Agency and chaired the Minnesota State Housing Code Advisory Board until a state-wide building code was in place. Most recently, he served on the Fairview Southdale Hospital board of trustees and chaired the development of its new Carl N. Platou Emergency Center opened August 2015.
For more than 40 years, James Solem provided outstanding leadership and tireless work in real estate finance and public policy, supporting the development of rental and ownership housing for low and moderate income households. He was the executive director of the Minnesota State Planning Agency from 1970 to 1978, and served as commissioner of the Minnesota Housing Finance Agency from 1978 to 1994 – a position he was appointed to five times by three Minnesota governors. From 1994 to 2000, Solem was the regional administrator for the Metropolitan Council, leading the long-range planning for transit, wastewater, parks and community development in the seven-county metropolitan area. From 2000 – 2006, at the University of Minnesota’s Center for Urban and Regional Affairs (CURA), he led a project to bring new ideas to the issues of affordable housing and regional growth.
Now retired from the Metropolitan Council, Solem is active with consulting and volunteer service. He is chairman of the board of the Community Reinvestment Fund and of the boards of Common Bond Housing Corporation and the Greater Minnesota Housing Fund. Throughout his career, Solem demonstrated an exceptional knowledge of operations and governmental polices, brought a high level of ethical standards to the real estate industry and championed those most in need.
The program is open to the public and the cost is $60. More information is available at http://www.stthomas.edu/centers/shenehon/minnesota-real-estate-hall-of-fame/
To register use the following link: https://webapp.stthomas.edu/eventregistration/ust/register.jsp?eventcrn=B1973
The Minnesota Real Estate Hall of Fame now has 30 members. Previously named were:
- 2010: Tony Bernardi, Lloyd Engelsma, Gerald Rauenhorst, William Reiling, Jim Ryan and Sam Thorpe Sr.
- 2011: Robert Hoffman, Darrel Holt, Bernard Rice, Emma Rovick and five members of the Dayton family: Bruce and the late Douglas, Donald, Kenneth and Wallace.
- 2012: David Bell, Robert Boblett Sr., Philip Smaby and Boyd Stofer.
- 2013: Leonard Bisanz, Helen Brooks, Thomas Crowley, M.A. Mortenson Sr. and Kenneth Stensby.
- 2014: George Karvel Ph.D., Cyril “Cy” Kuefler Sr., Jim Stanton
“Big Box” Discount Retailers Downsize Stores In Bid to Seize Market Share
The latest growth strategy at Wal-Mart stores is to get bigger by getting smaller. After building the world’s largest retail platform by opening superstores in every major U.S. market, Wal-Mart is doubling down on a strategy of opening new stores that are a fraction of the chain’s traditional size, targeting densly populated urban areas where demographics increasingly show more people prefer to work and live.
The Bentonville, AR-based retailer is aggressively expanding its Neighborhood Market stores, which average 38,000 to 40,000 square feet — a fraction the size of Wal-Mart’s traditional 180,000-square-foot “Supercenters.”
Bill Simons, president and CEO of Wal-Mart, said the company plans to open more than 200 more Neighborhood Market stores in the U.S. over the next 18 months, bringing the total to more than 500.
“We continue to roll out this format aggressively throughout the country, opening more sites in the second quarter than in any other quarter in our history,” Simon said. “In fact, we opened 12 stores in just one day this (past) quarter.”
Moreover, the retailer has signaled it may green light an even smaller format called Walmart Express, with stores that range in size from 10,000 square feet to 12,000 square feet. Wal-Mart has built 20 Express stores in a pilot phase that has “performed very, very well for us,” Simon said, adding that the retailers plans to share more details about its plans for the smaller format at its Oct. 15 meeting for the investment community.
Both concepts compete directly against a rising number of grocery stores, drug stores and dollar discount stores that have added groceries to their offerings to reach shoppers looking for value and convenience.
The giant retailer’s smaller formats are part of a multichannel strategy to stock products purchased at its bricks-and-mortar stores as well as quickly deliver products ordered online.
In part to support that rapid product delivery strategy, Wal-Mart this week announced plans to open two new online fulfillment centers, an 800,000-square-foot facility in Fort Worth, TX, and a 1 million-square-foot center scheduled to open in early 2014 in Bethlehem, PA, that will be its largest ever.
“Increasingly, access is becoming more important to customers. And we believe we have an opportunity today through multiple formats to take our brand closer to the customers,” Simon told investors at the recent Goldman Sachs Global Retail Conference.
Express stores sized as high as 15,000 square feet have tested and delivered very well against competing formats, offering shoppers groceries, pharmacy items and fuel at competitive prices against dollar store, drug store and grocery rivals, he said.
While not a new concept – Wal-Mart has been opening typical grocery store sized markets since 1998 – Neighborhood Markets is now one of the fastest-growing formats in retail, with 60% growth and mid-single-digit comparable sales over the last couple of years, Simon said.
Target: Also Testing Smaller Format, But Proceeding Cautiously
Fellow discount retailer Target has been more deliberate in the national rollout of its smaller-format CityTarget stores. Although only two have opened so far in 2013, for a total of seven, the company sees immense promise in the new smaller format.
Read the entire article: http://www.costar.com/News/Article/Wal-Mart-Target-Roll-Out-Smaller-Urban-Store-Formats-to-Do-Battle-with-Dollar-Drug-Store-Rivals/152876?ref=100&iid=357&cid=FC4C5ECBFF14BCA42CFC3FCF0353A739
Nicollet Mall demands the highest office rents in Minneapolis, but it’s cheap compared to some streets in bigger cities.
Here is an interesting article that was recently written by Burl Gilyard from Twin Cities Business
October 1, 2013
But the metro area ranks nowhere near the top in a new survey from Chicago-based Jones Lang LaSalle, a commercial real estate services firm, which tallies the “most expensive streets” across the United States based on the cost of leasing office space. Nicollet Mall in downtown Minneapolis ranked as the 25th-most expensive street in America in 2013, according to Jones Lang LaSalle.
The most expensive street in the country is Sand Hill Road in Menlo Park, California. The gross rent per square foot along Sand Hill Road, an area known as the home of many venture capital companies, is $110.76 per square foot. Fifth Avenue in New York City ranks as the second-most expensive with an average rate of $102.02 per square foot.
The Jones Lang LaSalle survey noted: “Midwestern markets remain the most affordable.”
The numbers are based on asking rents, which might differ from the actual rent received, as of the second quarter of 2013. Gross rent per square foot includes the net rental rate, plus operating costs and taxes.
Abel Balwierz, a senior research analyst with Jones Lang LaSalle, said that Nicollet Mall is home to some high-profile trophy office properties. But another key factor is the corporate headquarters of retailer Target Corporation at the south end of the Nicollet Mall. Balwierz said that Target likes to have vendors located within just a few minutes walking distance from its corporate offices.
“Target vendors are the main type of tenant that’s interested in space along Nicollet Mall,” Balwierz said, noting that other tenants include law firms and financial services groups.
“Target, I think, has a big influence on the downtown market,” said Jim Vos, a principal with Cresa Minneapolis, a tenant representation firm.
The top-tier office space in downtown Minneapolis is performing better than the overall market, which remains a mixed bag.
A mid-year survey from Bloomington-based commercial real estate services firm Cushman & Wakefield/NorthMarq found the Class A office vacancy rate was 10.7 percent in downtown Minneapolis at the end of the second quarter, the lowest office rate for any class of office space across the metro. At the same time, Cushman & Wakefield/NorthMarq reported that the overall office vacancy rate across the Twin Cities remained high at 17.5 percent.
Twin Cities coworking and collaborative work center CoCo is adding a location in Minneapolis’ Uptown neighborhood. CoCo offers space for independent workers and small businesses to work, share ideas, and collaborate on projects. The company offers individual, small business, and corporate memberships. Individual memberships range from $50/month for 1 day/week access to $350/month for full access and a dedicated desk. The business started in downtown St. Paul in 2010 and added a second location in downtown Minneapolis location the following year. The Uptown location will be CoCo’s third site.
Coworking spaces are gaining popularity nationally and are particularly popular among technology and creative workers. Approximately 90% of the members of CoCo’s downtown Minneapolis location are in one of those fields. Coworking sites are often an alternative to working from home or at a coffee shop for independent or home-based workers. They have flexible pricing and hours while offering services one might have in a typical office, such as copier and printing services and meeting rooms.
CoCo’s Uptown location will fill 15,000 s.f. formerly occupied by an auto-repair shop. It will have numerous amenities, including a tap room with craft beers, a small movie theater for presentations and pitches, a walkout patio with green space, and a billiards room that doubles as a meeting room. CoCo Uptown will have 160 coworking seats as well as 24 “campsites” (dedicated desks) and 9 group campsites for 4 to 6 people. With the new location, the CoCo founders hope to relieve pressure on the downtown Minneapolis location, which is frequently at capacity. They also want to tap into a new market of customers in the rapidly growing Uptown neighborhood, which is popular among young professionals.
Jones Lang LaSalle recently released its 2013 Skyline Review, a report on CBD office markets in major cities across the country. The review offers an inside look at occupancy in Trophy and Class A buildings in downtown Minneapolis. That “Minneapolis Skyline” building set currently has an overall vacancy of 12%, compared to about 15% in the overall Minneapolis CBD office market. Tenants pay a premium to be in “Skyline” buildings, with rents about 16% higher than comparable office rents in non-Skyline buildings.
Skyline buildings located along Nicollet Mall perform especially well, with an average vacancy of just 6%. Space on high-rise floors also performs well, with vacancy currently at about 9.5%. The report noted the draw of the Target Corporation headquarters (at 10th & Nicollet) which many vendors want to be close to, creating high demand for office space in the vicinity.
The performance of individual Skyline buildings varies widely. Buildings with the lowest vacancy are 33 South Sixth, the IDS Center, and Wells Fargo Center, all of which have less than 5% vacancy on over 1 million square feet of rentable area. On the other end of the spectrum is Fifth Street Towers, with vacancy hovering at about 35% on just over 1 million square feet combined in the property’s two towers. The highest current asking rent for office space in Skyline buildings can be found in the Wells Fargo Center, at $37 psf for a full service lease. However, asking rents in the range of $25-$28 are common for many of the less high-profile Skyline buildings.