Category Archives: Leasing

What does Q4 2011 tell us about the 2012 Minneapolis / St. Paul area office market?

Posted on January 16, 2012 by Dan Peterson| Leave a comment

Moving into 2012, the signs continue to show our commercial real estate market is headed in a positive direction. The office market, while still muted in overall demand and challenged by unemployment, has its bright spots. Many companies are gaining confidence and their workplace strategies are evolving.

A few highlights in the market from the forthcoming Colliers 2011 Q4 Office Report:

The vacancy rate in the Twin Cities office market stands at 16.0% down from 16.6% in Q3. The strongest occupancy is along the 394 Corridor with Class A at 7.2%. Class A tenants in the Corridor with expirations coming up may want to analyze space utilization before resigning.

The Southwest office market vacancy rate stands at 16.6% with big investment sales at Two MarketPointe and the sale, sale/leaseback of the United Health former ADC Campus. Despite an uptick in small to mid-size groups looking, large blocks of vacancy still exist and will make SW a tenant’s market into near future.

The Minneapolis CBD’s vacancy rate is 13.1% with Nicollet Mall at near 5% compared to 17% for the rest of the Class A Office Market. Tower vacancy above the 25th floor is under 3%. Slow and steady is predicted here but opportunities can still be found, especially with Class A subleases.

The St. Paul CBD’s vacancy stands at 20.9% and had negative absorption of 119,543 for 2011. 61% of the CBD inventory is Class B and much of it is older and functionally obsolete. Landlords will need to seek more progressive ideas and new adaptive reuse strategies to compete in attracting a new generation of tenants.

Airport-South of the River vacancy rate is 18.9% and the positive news in the submarket includes the announcement of a new 138,000 square foot data center that could create 100 technology jobs.

As companies renew and reshape their office space, places like third party retail or wholesale data centers are becoming an integral part of the real estate strategy. The traditional IT footprint is outsourced to an environment that better serves the enterprise and balance sheet.

Here at Colliers we are fortunate to have great leadership like Tim Huffman, Global Director of the Technology Solutions Group, advising on mission critical and disaster recovery facilities and assisting in establishing, assessing and locating data center or co-location requirements.  As a member of the Colliers TSG team, I am working with Tim to help bridge the gap between IT and real estate for our clients.

Please contact us if you have any questions or if we can assist you with any strategic real estate analysis.

All the best for a prosperous 2012!

Flickr photo cred: jfpalmer

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Posted in Leasing, Market Trends, Office, Technology

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Lease Accounting Changes: Update

Posted on April 27, 2011 by Dan Peterson| Leave a comment

The way we account for leases on the balance sheet is about to change, but not as quickly as previously thought and not as harsh. While not finalized, the Financial Accounting Standards Board’s new regulations are expected to shift real estate and other leases from the balance sheet’s “operating lease” categorization to capital-lease status, where they are recognized as a liability. The FASB update party has had plenty of push-back. The options-to-renew previously captured on the “Exposure Draft on Leases” are now gone. The date in which these will take affect is now proposed to be 2015 but companies will need to prepare before this date. The standards are projected to be published in July, 2011. Once they are, it will be good time for you to meet with your accountant to see how these changes will affect your situation going forward. The bottom line is that owning and leasing your commercial real estate may look very similar so shorter leases or purchasing maybe the better alternative to longer terms. Talk with your commercial real estate advisor to examine what options might be out there for you.

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Posted in Finance, Leasing

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New opportunities in Old Nordeast Minneapolis

Posted on January 4, 2011 by Dan Peterson| 3 Comments

Adam Commercial is fortunate to have been given the assignment of representing the landlord of 1300 Second Street NE. For those who do not know, 13th Ave and 2nd St is home to a four-corner commercial district in the midst of the Northeast Art District of Minneapolis. This area has been gaining national attention for its hip factor in restaurants, music and retail… not to mention the namesake, ARTS. Hear of a thing called Art-a-whirl?

We Minneapolitans know all about this but what you might not know is the Northeast Bank Building has a couple options for budding businesses to set up shop with a new lease. If your taste is slightly different and ownership is more your meal, we have a property for sale next door. Check out the NE goodies at Northeast Bank Building or just give us a call or email. We’d be happy to help get you acquainted, or reacquainted with this new opportunity in old nordeast.

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Posted in Creative Culture, Leasing, Retail

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Commercial Real Estate..know more for later to do something now.

Posted on August 23, 2010 by Dan Peterson| 1 Comment

 

Balance the risks and rewards for today and tomorrow.

Companies currently in the market to lease commercial space will find what are considered favorable conditions for those willing to bite. But knowing what may develop a few years down the road, thoroughly consider before singing off on the terms to avoid getting bitten. The financial issues involved in a lease obligation are complex. All the pros and cons are not always fully understood or analyzed in the beginning.

A popular thought now is many landlords have their hat in hand and a tenant, certain of their business revenue, is wise to lock-in a long term lease at low rates before inflation kicks in and/or the market comes back. But wait. This may not always be the best course of action.

Incentives

Undoubtedly the current high number of vacancies and stagnate growth in the economy have tipped the market in the tenant’s favor. Landlords are back to offering incentives such as free rent and tenant improvement allowances to entice deals. However, regardless of the incentives offered, they probably will increase your lease obligation. More than likely free rent on the front end is compensated by an equally extended term on the back end. Also, the tenant improvements are paid back, with interest, by the tenant one way or another.

Rates

Base or Net rates have less flexibility than most renters realize but some creative structuring such as step-up rates and rent credit programs can allow a tenant and landlord to find common ground. The best deals are the ones that come closest to achieving the financial goals of both parties. Most landlords understand that it’s worse to do a bad deal than no deal at all. Tenants need to understand this is also true for them and if a deal is too good to be true, do more due diligence on the landlord.

Finances

Whether it’s for tenant improvements, maintenance budgets or property financing, the landlord’s finances need to be adequate and sound. Many properties have an unsustainable debt commitment and are a greater risk of default or deferred maintenance issues. Tenants need to know the status of the landlord’s credit and have lease provisions if the landlord does not perform on their obligations. Healthy balance sheets on both sides are important now more than ever.

Accounting

If your company uses generally accepted accounting principles, or GAAP, you may be soon faced with a change that effects how your lease is booked. To adhere with International Standards as soon as 2013, your active lease, options included, will need to be recorded as an asset and liability on the balance sheet. This may trigger debt covenants with lenders or otherwise affect your credit rating. The result would suggest that for companies already heavily leveraged, a shorter term leases might be desirable. Or, if the right financing is available, buying may make more sense.

Purchasing

The market for attractive buying opportunities will continue to improve. As long as lenders release their troubled assets and job recovery shows minor movement, the market will act as though it has found the bottom. We may not be there yet.  But with low lending rates and what many expect is a future of more regulation and high inflation, the case for purchasing an asset is pretty attractive now.  

With ownership comes more control of your space, beneficial tax considerations and access to government financing programs. Its worth checking with your accountant to see how different scenarios such as buying the building personally and then leasing to your company can be advantageous to you at tax time.

With the creation of more energy efficiency improvement programs such as Property Assessment Clean Energy (PACE), smart property owners have access to financing to help make their commercial properties run more efficiently. Energy improvements can improve the bottom line and promote more motivated employees. 

Conclusion

If property ownership is not in the cards now, leasing is still a very attractive route but you need to examine all the facts and potential scenarios. Listening to all the media chatter, you can find a contrarian view to any real estate opinion. It’s all about shutting out the noise and doing what makes sense for you and your company’s goals. Today’s changing market is bringing out many opinions and exposing many opportunities. With the counsel of a commercial real estate advisor, you can balance the risks and rewards to make strategic decisions that are the best fit for your business today and tomorrow.

Contact Adam to get more in the know to be in the now before tomorrow comes. info@adamcommercial.com

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Posted in Leasing

So what’cha want?

Posted on July 21, 2010 by Dan Peterson| 1 Comment

Your work spaces and places of business to be like?

What is missing in the current environment? What is not in your current building, lease, deal that would make things better, cheaper, faster, cooler, more inspiring? What can’t you find, figure or create on your own. What do we need to put out there so you can get more done?

So What’cha Want? from Patrick Kenny on Vimeo.

We want to hear from you. Please comment or reply privately at info@adamcommercial.com

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Posted in Leasing