The boom in demand and prices for industrial sites continued to be the leading story in land during the second half of 2015, with no signs of a looming market correction as of yet. Industrial developers continued to compete for the best sites to take advantage of the current cycle, as well as to gain long-term positions for the future.
With the first quarter behind us, Cushman & Wakefield/NorthMarq’s Luke Appert offers insight on the land market moving forward in 2016. “We continue to see large industrial distribution activity as developers attempt to gain control of the last remaining sites with hopes for landing some of the larger user driven deals. Retail developments continue to remain very strong in 2016. Retail tenants are aggressively chasing unoccupied space and driving rents to new heights.”
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Luke Appert is a Senior Director in the Land Group.
The investment sales market is back to historically high transaction volume with values that have generally recovered and are edging higher for some sectors. The active sales market is comparable to the period between 2004 and 2007, but with some important differences.
Cushman & Wakefield/NorthMarq’s Avery Ticer commented on the year ahead for investment sales. “The Twin Cities, particularly the Minneapolis CBD, is on track for an exciting year as four major office towers are being marketed for sale. The strong fundamentals of this market continue to entice capital sources from around the globe.”
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Avery Ticer is a Director in the Capital Markets Group.
As the economy continues to strengthen, more retailers are expanding, which is driving down the vacancy rate and driving up both absorption and rental rates.
Cushman & Wakefield’s Tom Martin talks about where the retail market is headed in 2016. “Demand is outpacing supply in core areas, especially in food-oriented categories. A property owner with a good grocery site can garner interest from multiple concepts, in a wide range of footprints. Well-located strip developments are often 2 to 3 times over-subscribed, with fast-casual players fighting over end-caps. Unless traditional big-box retailers decide to chase exurban sites again, core areas will continue to see a level of retail and food demand that will only be partially satisfied.”
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Tom Martin is a Senior Director with Retail Services.
The big story in medical office is that off-campus development is evolving as strategies shift. The typical medical office building of the early 2000s – individual suites in a multi-tenant property – will likely be a thing of the past.
Cushman & Wakefield/NorthMarq’s Misty Bowe expounds on this market change, “The Twin Cities medical market is going through a transition phase based on the impacts from healthcare reform. New integrated specialty center projects for hospital systems and large independent practices are a by-product of this reform. Additionally, creative re-use or repurposing of strategically located existing product is occurring to better suit the changing needs of providers today. We believe this trend will continue as providers seek to deliver greater convenience for patients.”
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Misty Bowe is an Associate Director with the Healthcare Advisory Group.
Strong fundamentals continued for the industrial market in the second half of 2015, resulting in 2.29 million square feet (msf) of absorption. That capped a stellar year in which a total of 3.7 msf was absorbed.
Cushman & Wakefield/NorthMarq’s Hudson Brothen commented on the industrial market heading into 2016, “The market will continue to thrive in 2016, but probably not as strong as last year. One thing to note is the pent up demand for existing buildings for sale. Lack of inventory is causing a dramatic rise in prices…something to keep an eye on.”
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Hudson Brothen is a Senior Associate with the Minnesota Industrial Team.