The semiannual survey was conducted just after the 2012 presidential election, and the continued decline of the overall index reflects continued uncertainty about the U S economy, employment growth, and consumer confidence.
The Minnesota Commercial Real Estate Survey continues to show a less optimistic outlook for commercial real estate. This is a continuation of a downward trend that started with the fall 2011 survey. As was done with all five of the previous surveys, the same group of 50 commercial real estate industry leaders representing development, finance and investment were polled. The survey measures their expectations for the future of the market in seven different categories including vacancy rates, rental rate growth, land prices, building material prices, new project financing criteria, and rates of return. These are the people who are making decisions today that will affect future commercial real estate conditions.
The survey indicates panel participants are becoming slightly more pessimistic about the prospects for the commercial real estate market in 2014. They continue to be confident that rents and occupancy will continue to grow in the next two years, although they are indicating that the rate of growth will be slower than previously expected. The expected increase in land prices and building materials will continue to have a negative impact on development activities. They expect that financing terms are going to continue to remain stable and there should be moderately increasing amounts of equity capital available. That being said, lenders and investors are going to continue to be very selective in their underwriting criteria and evaluation of potential deals. The bottom line for the fall 2012 survey finds our panel showing increased concern about uncertain economic conditions and their hindering effect on the commercial real estate market. The shift in the composite index from mildly optimistic to slightly pessimistic reflects the panels’ increasing uncertainty about general economic conditions in the next two years.
Read the full survey.
University of St. Thomas survey of Minnesota’s commercial real estate leaders reveals continued concerns about commercial real estate market conditions over the next two years.
According to the University of St. Thomas Opus College of Business’ fifth semiannual ‘Commercial Real Estate Survey,” Twin Cities industry leaders are somewhat more pessimistic about future commercial real estate market conditions two years from now. The survey polls 50 commercial real estate industry leaders representing development, finance and investment. It measures their expectations for the future of the market in seven different categories including vacancy rates, rental rate growth, land prices, building material prices, new project financing criteria, and rates of return. These are the people who are making decisions today that will affect future commercial real estate conditions.
The spring 2012 survey recorded its first composite score below 50, based on a 0-100 index, since the inception of the survey in 2010, indicating a more pessimistic view of the future commercial real estate market. Compared to the fall 2011 survey, the panel anticipates land values will continue to increase. There is also a strong expectation that the price of building materials will continue to rise over the next two years, shifting from a strongly negative 27.9 to a more negative reading of 26. Both of these factors make it more difficult to obtain financing and provide adequate returns for investors.
The latest Minnesota Commercial Real Estate Survey from University of St. Thomas posts first decline since inception, forecasts that land and building materials will wax while rent and occupancy rates wane.
The University of St. Thomas Shenehon Center for Real Estate’s latest Minnesota Commercial Real Estate Survey has been released, showing the first step back from positive outlook in its two-year history. Fifty supply-side commercial real estate leaders were polled about their beliefs and expectations of the local market conditions over the next two years, and their collective responses registered a decline from somewhat optimistic in the spring to neutral today.
The Minnesota Commercial Real Estate Survey, conducted earlier in November and available for review at http://www.stthomas.edu/business/centers/shenehon/pdf/MNCRE_2011Fall_Web.pdf, analyzes forecasts for future rental rate growth, vacancy rates, land development costs, building material costs, ROI and loan-to-value equity in the Twin Cities. Aggregating these measures into a 0-100 index where numbers over 50 are bullish, the composite index revealed a score of 51.2 versus 55.6 when the study was last conducted in June. While the sentiment isn’t bearish, its noticeable decline – the single largest movement observed in the composite index since inception – is a sign of eroding confidence.