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Affordable Housing, Development, Home Prices, Housing, Housing Trends, Industry News, Residential Real Estate

Ten Surprising Facts: State of the Nation’s Housing Report

Since the housing bubble burst in 2008, the market has seen an increase in demand for homes, but home inventories remain stagnant. Further, either from the bank restrictions or consumer caution new home growth has been at record lows for the last 10 years. Whether this is just a trend or due to socio-economic reasons can be debated, but statistics do show Millenials are living with their parents longer and seem to be putting off buying homes due to a different economic situation than previous generations at the same age (US Census).

Further a recent housing report by Joint Center for Housing Studies of Harvard University, posit similar statistics in the market strengthening the argument that Millenials and uncertainty are holding down the housing market.

1. For-sale inventories dropped even lower over the past year.

For the fourth year in a row, the inventory of homes for sale across the US not only failed to recover, but dropped yet again. At the end of 2016 there were an historically low 1.65 million homes for sale nationwide, which at the current sales rate was just 3.6 months of supply – almost half of the 6.0 months level that is considered a balanced market.

2. Fewer homes were built over the last 10 years than any 10-year period in recent history.

Even with the recent recovery in both single-family and multifamily construction, markets nationwide are still feeling the effects of the deep and extended decline in housing construction. Over the past 10 years, just 9 million new housing units were completed and added to the housing stock. This was the lowest 10-year period on records dating back to the 1970s, and far below the 14 and 15 million units averaged over the 1980s and 1990s.

Read more of the Full Article or go straight to the full Housing Report by Joint Center for Housing Studies of Harvard University

 

Architecture & Design, Commercial Real Estate, Development, Property Management

History of the Empire State Building: A Financial Flop for Nearly 20 years

By QuickLiquidity | Date: June 13, 2017 | Category: History

In the late-1920s, New York’s economy was booming and a competition to build the world’s tallest building was heating up. One man who was at the center of it all was Walter Chrysler of the Chrysler Corporation, who wanted to build the world’s tallest building as a monument to himself and American capitalism. Chrysler began construction of his monument, the Chrysler Building in 1928 at 405 Lexington Avenue. Despite the buildings name, the Chrysler Corporation did not pay for the construction of the building and never owned it. Instead Chrysler paid for it himself, with the hope of his children one day inheriting the world’s tallest building.

The architects of a competing building, 40 Wall Street, had devised a plan to prevent the Chrysler Building from ever becoming the world’s tallest building. Seeking the title for themselves, they planned 40 Wall Street to be 925 feet tall: 85 feet taller than the Chrysler Building had originally planned to be. When Chrysler found out about 40 Wall Street’s plans he decided to add a surprise 186-foot spire to his building. 40 Wall Street finished construction first in April of 1930, and held a celebration for being the tallest building in the world, without knowing that they were about to be surpassed. Less then two months later, the construction workers at the Chrysler Building hoisted 4 parts of the secret spire to the top and riveted them together in 90 minutes. At 1,046 feet high, the Chrysler Building became the world’s tallest building¹.

John J. Raskob of General Motors, a rival of Chryslers, also aspired to build the world’s tallest building. Raskob purchased 350 Fifth Avenue and began construction of the Empire State Building in March of 1930, only a few months before the Chrysler Building was completed. Raskob hired architect William F. Lamb, who finished the original drawings for the Empire State Building in only two weeks. In one of their first meetings Raskob had taken a jumbo pencil, stood it on its end and asked Lamb, “Bill, how high can you make it so that it won’t fall down?” Using over 3,400 laborers a day, the building went up in just over a year, well ahead of schedule and under budget at $40 million, which would be nearly $600 million today. During certain periods of construction, the frame grew a remarkable four-and-a-half stories a week. Not to be bested by the Chrysler Building, Raskob put the final cherry at the top of his building – a spire, making the Empire State Building a soaring 102 stories and 1,250 feet high. The Empire State Building was completed in May of 1931 and became the world’s tallest building, a title it would hold for nearly 40 years until the World Trade Center was completed in 1970. While successful in beating the Chrysler Building in height, the Empire State Building was far from being the success Raskob had hoped.

 

Full Article: http://www.quickliquidity.com/blog/history-of-the-empire-state-building-a-financial-flop-for-nearly-20-years.html

Commercial Real Estate, Development, Economics, Executive Insight Series, Housing, Industry News, Investment Real Estate, Real Estate Programs, Real Estate Trends, Think Outside The Box, Twin Cities Real Estate, Upcoming UST Events

Real Estate Executive Insight Speaker Series Bob Lux – Inside the Mind of A Developer

 

Real Estate Executive Insight Series

Bob Lux – Inside the Mind of A Developer 

Event Details Tuesday, March 28th 2017 5:30 p.m. University of St. Thomas, Minneapolis Campus Schulze Hall, Room 127

A candid conversation with industry leader Bob Lux, Founder Alatus LLC

Quality real estate development requires innovative thinking. Bob Lux, founder of Alatus LLC, has been in the real estate development and investment business for over 30 years. His company’s mission is to provide innovative solutions and high quality projects by wisely using his team’s talents and strengths to achieve the client’s vision and form a better community.   Lux will discuss the challenges, opportunities and trends in developing residential and commercial real estate in the Twin Cities. Lux will also share his views on the condo market and as the largest private owner of parking facilities in Minnesota Bob will outline his expectations for future parking and infrastructure needs in the downtown area.

Agenda 5:30-6 p.m. Networking 6-7 p.m. Presentation by Bob Lux

Register Today
 
Economics, Home Prices, Housing, Housing Trends, Minneapolis / St. Paul Housing, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

Twin Cities Sets Records for Median Sale Price and Number of Homes Sold

Are we seeing another bubble in the Twin Cities housingMarket Report

market? Not this time, says St. Thomas’ monthly analysis  

With median sale prices hitting a record high in June, is the Twin Cities housing market experiencing the kind of bubble we saw back in June 2006? According to a monthly analysis conducted by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business, the short answer is no. The median sale price of homes sold in the 13-county Twin Cities region reached $242,000 in June. That tops the previous high-water mark of $238,000 set in June 2006. On top of that, the 7,110 homes sold in June was another record high.

Each month the St. Thomas center tracks the median price for three types of sales: nondistressed or traditional; foreclosures; and short sales (when a home is sold for less than the outstanding mortgage balance). In addition, it looks for trends in the market and creates a monthly composite index score by tracking nine data elements for those three types of sales.

Herb Tousley, director of real estate programs at the university, said the reasons for the current run up in housing prices are much different than the conditions that led to the run up in values in the mid-2000s followed by the subsequent crash. “Before 2008, lending standards were very lax,” he said. “Little to no down payments were required since everyone believed that home prices would always keep going up. There were many low-documentation or ‘no-doc’ loans that were made to people who were not qualified, resulting in high numbers of foreclosures and short sales. “Additionally, overbuilding, speculation, and excessive flipping of homes were major contributors to the housing market crises of 2008. “Today, mortgages are only being made to qualified buyers, home flipping has returned to normal levels, and overbuilding is not a problem. The current run up in home prices can be attributed to market fundamentals. There is a shortage of homes for sale and a historically high level of demand fueled by low interest rates and an improving economy. “One concern is the affordability issue; that occurs when home prices rise faster than family income. When this occurs over an extended period of time it becomes more difficult for families to afford to purchase a home due to higher required down payments and higher monthly payments,” Tousley said.

It has taken 10 years for the median sale price of a Twin Cities home to recover to its previous peak level. Where do we go from here?

Number of sales: In 2015 there were just over 56,000 homes sold in the Twin Cities. Tousley predicts that the second half of 2016 should continue to see a high sales volume. Look for a total of about 58,000 homes sold in 2016.

 Median sale price: In most years, the peak median sale price occurs in June. Maybe not this year. With the low number of homes for sale and continued low interest rates, Tousley feels that median sales prices should be at or above record levels in July and possibly August before tapering off in September. At the end of the year, look for an annual increase in the median sale price of 5 percent to 6 percent, with the median sale price settling in the low $230,000 range.

One reason for the higher median selling price recently is because the percentage of distressed sales – foreclosures and short sales – has finally returned to pre-crash levels. In June, only 5 percent of home sales were distressed. Before 2007, the level of distressed sales was in the 3 percent to five percent range. But during the recession, and especially from 2008 to 2013, the level of distressed sales was in the 40 percent to 60 percent range. Since the median price of distressed homes is considerably lower than nondistressed homes, when there are fewer distressed homes sold the overall median selling price goes up.

In addition to robust home sales, the Twin Cities is seeing more remodeling and more new homes being built. In 2015, the Twin Cities saw the construction of 4,680 new single-family homes. So far this year single-family “starts” are up about 15 percent. “Look for a 2016 year-end total of 5,300 to 5,500,” Tousley said. That would make 2016 the best year for new-home construction since before the recession.

Meanwhile, the Leading Indicator of Remodeling Activity, calculated by the Harvard Joint Center for Housing Studies, estimates that this year the growth in home improvement and repair spending will reach 8 percent, well above the average of 4.9 percent. Tousley said there are two main reasons for the increase.

First, because of the shortage of homes for sale, many potential homeowners are opting to stay where they are and enlarge or remodel their existing homes.

Second, rising home prices and the current “seller’s market” is encouraging some homeowners to upgrade or remodel their home in anticipation of listing it for sale.

“In either case,” Tousley said, “it is good news for remodeling contractors in our area. Many are booked ahead with work well into the fall.”

The St. Thomas indexes.

Here are the Shenehon Center’s monthly composite index scores for June 2016. The index, which tracks nine data elements for the three types of sales (traditional, short sales and foreclosures), started in January 2005. For that month, the center gave each of the three indexes a value of 1,000.

The June 2016 index score for traditional sales was 1,188, up 2.1 percent from May 2016 and up 6.3 percent from June 2015.

The June 2016 index score for short sales was 1,010, up 2.8 percent from May 2016 and up 4.2 percent from June 2015.

The June 2016 index score for foreclosures was 875, up 1.86 from May 2016 and up 7.86 from June 2015.

The score for traditional sales hit record highs in May and June. “It is a result of a continuing tight supply situation and high sales activity indicating the ongoing health a resurgence of the Twin Cities housing market,” Tousley said in Shenehon Center’s June report.

Index Chart June 2016

Affordable Housing, Economics, Home Prices, Housing, Housing Trends, Industry News, Minneapolis / St. Paul Housing, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

St. Thomas Real Estate Analysis: Super-tight Housing Market Drives Metro Area Median Sale Price to Near Record Levels

High demand and low supply helped drive the median price of a Twin Cities home in

May 2016 to within $1,000 of the record set back in the bubble days of June 2006.

mortgagesIt has taken a full decade, but the median sale price of a home in the Twin Cities in May 2016 almost reached the all-time record high set back in the housing-bubble days of 2006, according to a monthly analysis conducted by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business. Fueled by low supply and brisk demand, the median sale price of a home in the 13-county Twin Cities region reached $237,000 in May. That’s just shy of the highest median price on record, which was $238,000 back in June 2006. While the selling prices are similar, there are many differences in the 2016 market when compared to 2006. Each month the St. Thomas center tracks the median price for three types of sales: non-distressed or traditional; foreclosures; and short sales (when a home is sold for less than the outstanding mortgage balance). In addition, it looks for trends in the market and creates a monthly composite index score by tracking nine data elements for those three types of sales.

Herb Tousley, director of real estate programs at the university, observed that the supply of homes on the market dropped to its current low level in early 2013 and has remained historically low since then. He said possible reasons include difficulty in finding and purchasing a replacement home at a reasonable price; higher standards to qualify for a new mortgage; lackluster wage growth over the last several years; and homebuilders not building as many single-family homes as they used to. Meanwhile, on the demand side, Tousley said low interest rates, an improving economy, and a tight rental market are key reasons why the number of sales has steadily been increasing to near pre-recession levels.

“In spite of all of the new apartments that have been built over the last few years we remain in a very tight rental market,” he said. “The area has been absorbing all of the new units and vacancies continue to remain historically very low. The result of a low vacancy and a tight rental market is high rent growth. In 2015 the average rent in the Twin Cities increased by 5 percent. Repeated large rent increases over the last several years have many renters considering the idea of homeownership as an alternative, creating additional potential homebuyers.”

Comparing 2016 to 2006

The Shenehon Center for Real Estate compared May 2016 housing-market statistics with those of 2006. While the selling prices are very similar, some characteristics are quite different. A few examples: in May 2006 there were 5,079 closed sales and in May 2016 there were 6,234; in May 2006 there was a 6.7-month supply of homes for sale and in May 2016 there was a 2.8-month supply; in May 2006 there were 11,458 new listings and in May 2016 there were 8,676; and in May 2006 there were 30,235 homes for sale and in May 2016 there were 13,501.

10 yrs after- then & now

Another way of looking at the impact of low inventory on sale prices is to create a ratio for the number of homes available for sale divided by the number of homes sold that month. For example, if the ratio was 5, it means there were 5 homes available on the market for each buyer. A lower number indicates a tighter market. There were months back in 2007 to 2010 when the ratio was 10 to 14; it has dropped significantly. Tousley said that for most of the previous 14 months the ratio in the Twin Cities market has been less than 4, and in May 2016 the ratio hit an all-time low of 2.17. “When the ratio gets lower and the market gets tighter, the median sale price increases,” he said.

 

Sales Pressure - May 16

The St. Thomas indexes.

Here are the Shenehon Center’s monthly composite index scores for May 2016. The index, which tracks nine data elements for the three types of sales (traditional, short sales and foreclosures), started in January 2005. For that month, the center gave each of the three indexes a value of 1,000.

The May 2016 index score for traditional sales was 1,163, up 3.7 percent from April 2016 and up 8.6 percent from May 2015.

The May 2016 index score for short sales was 980, up 1.6 percent from April 2016 and up 7.7 percent from May 2015.

The May 2016 index score for foreclosures was 859, up 3.2 percent from April 2016 and up 9.4 percent from May 2015.

The May 2016 score was the highest ever for the traditional sale index. “It is the result of a very tight supply situation and continuing high sales activity, indicating the continued health and resurgence of the Twin Cities housing market,” Tousley said. There are far fewer distressed sales now than there were during the height of the Great Recession. In May, the 79 short sales represented 1.3 percent of total sales and the 341 foreclosure sales represented 5.5 percent of total sales. “As the number of distressed sales continue to return to pre-crash levels, the foreclosure index will continue to diminish in importance,” Tousley said.

Index Chart June 2016

Data - May 2016

 

 

 

 

 

 

 

 

The Shenehon Center’s complete online report for May can be found at: http://www.stthomas.edu/business/centers/shenehon/research/default.html.

The report is available free via email from Tousley at hwtousley1@stthomas.edu.

 

 

Best of Real Estate Matters, Commercial Real Estate, Development, Green Building, Historic Tax Credits, Housing Trends, Investment Real Estate, Minneapolis / St. Paul Housing, Minnesota Real Estate Hall of Fame, Minnesota Real Estate Journal, Real Estate Programs, Real Estate Trends, Think Outside The Box, Twin Cities Real Estate, Urban Planning, UST Real Estate in the News

New Members of Minnesota Real Estate Hall of Fame Announced

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

Dan DolanWells Fargo

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.

Larry Laukka  

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.

James Solem

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

 

Affordable Housing, Economics, Home Prices, Housing, Housing Trends, Minneapolis / St. Paul Housing, Real Estate Trends, Residential Real Estate, Residential Real Estate Index, Twin Cities Real Estate

St. Thomas Real Estate Analysis: Twin Cities Remains One of the Most Affordable Housing Markets in the Nation

The 13-county Twin Cities region compares favorably to other metro areas thanks to wages and strong housing-market fundamentals.

The Twin Cities remains near the top of the list of affordable housing markets in the United States, according to an analysis conducted by the Shenehon Center for Real Estate at the University of St. Thomas’ Opus College of Business. Each month the center tracks the median price for three types of sales in the 13-county Twin Cities region: nondistressed or traditional; foreclosures; and short sales (when a home is sold for less than the outstanding mortgage balance). In addition, it looks for trends in the market and creates a monthly composite index score by tracking nine data elements for those three types of sales. Herb Tousley, director of real estate programs at the university, credits “continuing strong housing-market fundamentals and above-average wage growth thus far in 2015” for keeping the Twin Cities near the top of affordable-housing lists “According to Forbes, household income growth in the Twin Cities in 2014 was 1.9 percent. Based on our improving local economy and low unemployment rate, we are expecting household income to grow 2 percent to 2.5 percent in 2015,” Tousley said. “That means that household incomes and median home sale prices are increasing at nearly the same rate so in terms of real dollars home prices are keeping up with inflation.

Aug Housing Report - Image 3

“This is not the case in many major metro areas around the country. In May 2015 the average apartment rent in the Twin Cities market had increased to just over $1,200. Home ownership in the Twin Cities remains an affordable option for many since a household that is earning the median annual household income can afford to purchase a home selling at the median sale price in our market.” Here are five examples of single-family-home affordability from around the country (details are available on the Shenehon Center website):

Single Family Home Affordability

Twin Cities Denver San Francisco Chicago Atlanta
Median Sale Price $224,900 $329,000 $656,000 $242,600 $157,700
10% Down Payment $22,490 $32,900 $65,600 $24,260 $15,770
Finance Amount – 30 years @ 4% $202,410 $296,100 $590,400 $218,340 $141,930
Monthly Payment $966 $1,414 $2,819 $1,042 $678
Monthly Property Taxes $375 $548 $1,093 $404 $263
Monthly Insurance $100 $125 $200 $100 $100
Monthly Total Payment $1,441 $2,087 $4,112 $1,547 $1,040
Annual Total Payment $17,294 $25,044 $49,344 $18,561 $12,485
Area Median Household Income $66,940 $62,760 $79,624 $60,564 $55,733
% of Household Income Required 25.84% 39.90% 61.97% 30.65% 22.40%

 

Key numbers for August.

The median sale price of traditional-sale home in August 2015 was $229,900; that’s down .48 percent from July 2015’s $231,000 and up .83 percent from August 2014’s $228,000. The median sale price of a short-sale home in August 2015 was $163,500; that’s up 6.2 percent from July 2015’s $153,950 and up 2.19 percent from August 2014’s $160,000. The median sale price of foreclosure-sale home in August 2015 was $149,900; that’s up 8.62 percent from July 2015’s $138,000 and down 1.07 percent from August 2014’s $151,525. In August 2015, 7.68 percent of sales were “distressed” (foreclosures or short sales). That compares to 10.57 percent in August 2014.

Closed sales and low inventory.

The number of closed sales in August was 5,836, down from July’s 6,363. “This decrease is part of normal market seasonality as sales activity slows down as we move into fall,” Tousley said. “The encouraging part of this is that despite the decrease it represents an 8.1 percent increase over the August 2014 closed-sales volume.” The number of homes for sale remains historically low. In August 2015 there were 2.8 homes available for sale for every home sold. In August of 2014 there were 3.5 homes available for sale for every home sold. And in August 2006 there were 6.3 homes for sale for every home sold. There were 6,923 new listings in August 2015, down 13 percent from July and unchanged from the level recorded in August 2014. “That tells us that low levels of homes available for sale will persist in the short run. In the meantime, the low number of homes for sale and the higher volume of closed sales are being reflected in lower time on the market, a higher number of multiple offers and sale prices at more than the original asking price,” Tousley said.

Continued Lag in New-Home Construction

A source of additional single-family housing is the construction of new homes, but so far this year, Tousley said, “the number of single-family housing starts has failed to live up to many homebuilder’s expectations.” Based on the number of construction permits issued through August (3,202), the Twin Cities is on track to have about 5,000 new homes built or under construction in 2015. That’s about the level of new construction in 2014, but less than in 2013. That compares to the early 2000s, when the number of building permits was running at 8,000 to 10,000 per year. “The level of new-housing starts is going to have to increase considerably to make a significant contribution toward increasing the number of homes available for sale in our market,” Tousley said. The cost of new single-family homes is clearly on the rise in the Twin Cities. In the late 1990s and early 2000s, before the market crash, nearly half the new homes sold for less than $250,000. In the last two years, less than 20 percent of the new homes sold for less than $250,000. Much of this increase, Tousley said, is due to higher land prices, development costs and building materials. The average price of a new home is running about $100,000 more than the median price of an existing home. For example, in 2012 the median price of an existing Twin Cities home was $177,900, while the average price of a new home was $287,352. So far this year, the median price of an existing home has been $224,900 and the average price of a new home is $330,466.

The St. Thomas indexes.

Here are the Shenehon Center’s monthly composite index scores for August 2015. The index, which tracks nine data elements for the three types of sales (traditional, short sales and foreclosures), started in January 2005. For that month, the center gave each of the three indexes a value of 1,000. The August 2015 index score for traditional sales was 1,129, up one point from July 2015. The August score is the highest since the index began in 2005 and is up 4.06 percent from August 2014. The August 2015 index score for short sales was 979, up five points from July 2015 and up 4.71 percent since August 2014. The August 2015 index score for foreclosures was 820. That’s unchanged from July 2015 and up 1.23 percent since August 2014.

More information online

The full report and additional charts for August can be found at http://www.stthomas.edu/business/centers/shenehon/research/default.html.

 

 

 

Commercial Real Estate, Office Real Estate, Real Estate Trends, Twin Cities Real Estate

North Loop Among Top 10 Tech Submarkets for Rent Growth Nationwide

The North Loop neighborhood of Minneapolis is among the top ten tech office submarkets for rent growth in the nation, according to a recent report by CBRE. Office rents in the area have shot up by more than 20% in just two years, which is double the rate for the overall Minneapolis office market. The North Loop also ranked fifth nationally for net absorption growth, which was at 8.2 percent during the same period. These numbers put the North Loop among an elite class of tech office submarkets in the nation, posting similar numbers to San Francisco’s SOMA and Austin’s Northwest submarkets.

Source: CBRE

Source: CBRE

The growth is driven by demand among tech firms for non-traditional office space with features such as brick-and-timber construction and exposed ceilings, features common to the North Loop’s many historic warehouse and light industrial buildings. The demand has led to low vacancy rates and created an environment ripe for new development, something developer Hines Interests hopes to capitalize on with its T3 project which will incorporate many of the design features that tech firms want and which are typically only found in historic buildings, such as exposed wood ceilings.

Hines hopes to capture some of the North Loop tech office demand with its new construction T3 building.

 The trend is also likely to drive additional conversions of historic buildings to office space. One example of this is the recent announcement that Artic Cat will move its corporate headquarters to a renovated warehouse in the North Loop in order to help attract new employees.

Recreational vehicle manufacturer Artic Cat recently announced it would move its corporate headquarters to the renovated Western Container building in the North Loop.

It remains to be seen whether the North Loop can sustain continued growth in absorption and rents for tech office space. A recent Start Trib article on the CBRE report quoted Tyler Kollodge, a Minneapolis-based CBRE broker: “The high demand and low vacancy rate has allowed landlords to push rental rates; however, most of the tenants in the area have been there for several years and are facing sticker shock when they see the new proposed rental rates on a potential lease renewal.”

However, national and local trends point to continued growth in the tech office market. The CBRE report noted that the high-tech software/services industry has created over  700,000 new jobs nationally since 2009 (at a growth rate of 34%), which accounts for one-fifth of all new office-using jobs. And in a recent Bureau of Labor Statistics report, Minnesota ranked number one for tech job growth in 2015, growing 8.3 percent in the first six months of this year.

The full CBRE “Tech-Thirty 2015” report is available here.

Architecture & Design, Commercial Real Estate, Green Building, Office Real Estate, Real Estate Trends, Think Outside The Box, Twin Cities Real Estate

Shipping Container Building Proposed for Minneapolis North Loop

A unique office building to be constructed of shipping containers has been proposed for a small site in Minneapolis’ North Loop neighborhood. The project is being developed by Akquracy, a Minneapolis-based marketing firm that will be the primary tenant for the office space. Its located just blocks from Target Field, near two other recent creative office developments in the Ford Center and the new Be The Match headquarters building.

Steelcase

The building will be about 18,000 square feet, consisting of office space and a small café/restaurant space with outdoor seating. The design involves fifty shipping containers, each 75 feet in length. The containers will be stacked three levels high, with a portion of the building elevated over a public plaza. To minimize foundation piling due soil conditions on site, one triangular half of the building will sit on top of an existing underground parking structure, while the other half is shifted one level upwards. The lifting of half the building allows for the creation of covered plaza space and opens up the street corner.

The developer for this project commissioned New York-based architectural firm LOT-EK to design the building. The firm is known for its use of “up-cycling,” or repurposing unique materials in order to create unique designs and build sustainably. Shipping containers have become an increasing popular building material in recent years, having been used for everything from small homes to multifamily and office buildings.

Office Real Estate, Twin Cities Real Estate

Jones Lang Lassalle Releases 2014 Skyline Review

Jones Lang LaSalle recently released its 2014 Skyline Review, a report on CBD office markets in major cities across the country. The review offers an inside look at occupancy in urban office centers across the country. As the “Skyline” term indicates, the review focuses on Trophy and Class A buildings in office districts known for high-quality assets, market-leading rents and high demand from institutional investors.

The Minneapolis Skyline building set includes 22 buildings and currently has an overall vacancy of 11%, down from 12% in last year’s report. However, absorption has been slow despite increases in office-using employment. This is mainly attributable to tenants “right-sizing” their space to use less square feet per employee.

2014 Minneapolis Skyline Review (Source: Jones Lang Lasalle)

Six Minneapolis Skyline buildings sold in 2013, as the market saw increased interest from institutional investors. Total sales volume was approximately $600 million on transactions for 3.4 million square feet of space. Skyline buildings sold for an average of just above $150 per square foot, which was higher 2012 levels but still below historical peaks above $250 psf in 2007 and 2010. One of the buildings sold was the IDS Center, which was acquired by joint venture of Beacon Investment Properties LLC and two Israeli companies for $253 million.

The IDS Center, Minnesota’s tallest building, was one of six Skyline buildlings in Minneapolis that was sold in 2013. Inland American Real Estate Trust sold it for $253 million after buying it for $277 million in 2006.

Capella Tower currently has vacancy of 15% on 1.4 million square feet, but that will change when the Star Tribune moves in next year.

 

 

 

 

Occupancy and rents continue to vary widely among the Skyline buildings. As in 2013, the lowest vacancy can be found at 33 South Sixth Street, with occupancy at 99.4% on 1.1 million s.f. of rentable area. On the other end of the spectrum is Fight Street Towers, which continues to struggle with vacancy of over 35% on about 1 million square feet. Minneapolis’ three tallest buildings continue to perform well, although vacancy has increased slightly at the IDS Center at 9%, up from 5% last year. Wells Fargo Center maintains 98% occupancy and the highest direct rents of the Skyline at $37.56 per square foot.  Capella Tower has had higher vacancy than its two tall peers, but that will be helped somewhat by the recent news that the Star Tribune will soon call the building home.