2010 Global Market Report - NAI Commercial Real Estate

Minneapolis/St. Paul, MinnesotaKansas City, MissouriContactNAI Welsh+1 800 897 7701Metropolitan AreaEconomic Overview2009Population2014 EstimatedPopulationEmploymentPopulationHouseholdAverage IncomeMedianHousehold IncomeTotal PopulationMedian Age3,263,6893,398,2532,035,357$82,364$69,75537Minneapolis/St. Paul, the “Twin Cities,” are home to 19Fortune 500 companies in industries driven by commerce,finance, healthcare and high-tech companies. The diverse11-county metro area has an annual population growthof 2-3%, a highly educated workforce and low rates ofunemployment, producing a stable environment even duringunpredictable times.Vacancy rose steadily throughout 2009 as rental ratesdecreased slightly in all property types. Office vacancymarket-wide is 14% with the highest vacancy in Class Bspace. Industrial vacancy sits at 10% and retail vacancy isabout 5%. Tenants exercise caution when it comes toleasing or acquiring new space, renewing existing leasesrather than absorbing relocation costs. Landlords are offeringdiscounted rates to tenants renewing 12 to 18 months inadvance to ensure spaces remain filled.Leases of 10,000 SF or less are driving the industrial marketas retail spaces vacated in late 2008 and early 2009 arefilled by a host of new eateries. Major leases this yearincluded a 929,800 SF Target Corporation office renewal,the 300,000 SF Silgan Containers industrial lease and the30,000 SF Home Valu Interiors retail lease.Market activity has grown throughout 2009 and willcontinue in 2010. Movement is due to consolidation anddownsizing, as opposed to actual growth. There is a largeamount of “shadow” space in industrial and office segmentsas companies downsized but did not release unused space.That space needs to be filled before new construction demandwill return. Top construction projects under way in2009 were the Excelsior Crossings Office Park – Bldg. C,2201 W 94th Ave. in Bloomington and BMW of Minnetonka.Transaction volumes are down as are pricing and value.Looking ahead, we'll see more foreclosures, forced salesand increased transactional activity as lenders liquidateassets. The largest sales in 2009 included the 116,000 SFSyngenta Headquarters office building in Hopkins, the335,400 SF industrial building located at 13201 N WilfredLane in Rogers, and the 97,535 SF Hastings Marketplace.ContactNAI Capital RealtyKansas City+1 913 469 4600Metropolitan AreaEconomic Overview2009Population2014 EstimatedPopulationEmploymentPopulationHouseholdAverage IncomeMedianHousehold IncomeTotal PopulationMedian Age2,016,6622,095,1041,127,170$68,837$59,54137Kansas City, a bi-state community of over 2,000,000 people,ranks in the top half nationwide for growth during therecession. Bioscience, healthcare and bulk distribution havebeen key performers. The industrial sector remains healthywith 7.25% vacancy and a fairly narrow margin betweenquoted and negotiated lease rates. Coleman’s 1,100,000SF distribution center opened at year-end 2009. BNSF/AllenGroup’s intermodal project in Johnson County, Kansas isproceeding in Edgerton with support from the city, countyand state.The CenterPoint/KC Southern Railway intermodal center atthe former Richards-Gebaur Airport is advancing. Phase Iopened in spring 2008 with $30 million site grading, streets,sewers and utilities. This intermodal serves as an alternativeto the congested Los Angeles port system by shipping fromMexico’s Port of Lazaro Cardena, an increasingly significantgateway for imports from Asia.Kansas City’s office market vacancy increased throughoutmost submarkets in 2009. However, this sector is projectedto begin improving in late 2010. The south Johnson County,Kansas submarket, the metro’s most active, should reboundfirst. Large sublease offerings were a factor in increasedincentives and depressed rates.Healthcare, bioscience research and telecommunicationsimpact demand. Two of the largest transactions occurred atSprint’s headquarters with healthcare companies ApriaHealthcare and Care Centrix opening new operations.Telecommunication companies Sprint and CenturyLink(formerly Embarq) offered large blocks of space new to themarket at Sprint’s Headquarters and CenturyTel’s premisesat Glenwood Place.The Wizards soccer team is flipping its stadium developmentalong with a significant Cerner Corporation office projectfrom Missouri to Kansas. Developers are moving forward atVillage West/Kansas Speedway in Kansas City, Kansas dueto greater economic incentives available in Kansas. Cernerwill create up to 4,000 jobs in this development, the largestjobs influx in Kansas City Kansas in years.The retail sector slowed dramatically in 2009 and improvementis unlikely until at least 2011. Corbin Park in OverlandPark opened with Von Maur, but has since encounterednumerous contractors’ liens and minimal leasing. Lee’sSummit’s Summit Fair, a 395,000 SF lifestyle centeropened, anchored by Macy’s and JC Penney.Minneapolis/St. Paul At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyDOWNTOWN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILDowntownNeighborhood Service CentersCommunity Power CenterRegional Malls$$$$$$$$$$$N/A15.0014.00N/A13.002.382.502.503.0010.005.003.507.00$$$$$$$$$$$N/A24.0055.00N/A31.0060.0014.7511.0025.7125.0037.0032.0070.00$$$$$$$$$$$N/A18.4517.97N/A20.7017.795.915.767.2416.8313.8611.3214.73N/A11.0%13.4%N/A9.8%10.0%10.2%7.9%15.5%5.0%7.8%6.3%1.5%DEVELOPMENT LAND Low/Acre High/AcreOffice in CBDLand in Office ParksLand in Industrial ParksOffice/Industrial Land - Non-parkRetail/Commercial LandResidentialN/AN/AN/AN/AN/AN/AN/AN/AN/AN/AN/AN/AKansas City At A Glance(Rent/SF/YR) Low High Effective Avg. VacancyDOWNTOWN OFFICEPremium (AAA)Class A (Prime)Class B (Secondary)SUBURBAN OFFICENew Construction (AAA)Class A (Prime)Class B (Secondary)INDUSTRIALBulk WarehouseManufacturingHigh Tech/R&DRETAILDowntownNeighborhood Service CentersCommunity Power CenterRegional Malls$$$$$$$$$$$$N/A18.0014.5028.5020.5015.003.552.654.509.006.206.4512.00$$$$$$$$$$$$N/A23.5020.0028.5028.5021.005.606.4017.8526.0023.5028.2533.50$$$$$$$$$$$$N/A18.6417.1328.5020.8117.703.923.458.0017.8812.8017.0118.24N/A24.0%18.2%100.0%19.1%16.4%5.9%7.3%15.5%7.8%13.2%7.6%8.9%DEVELOPMENT LAND Low HighOffice in CBD (per square foot)Land in Office Parks (per acre)Land in Industrial Parks (per acre)Office/Industrial Land - Non-park (per acre)Retail/Commercial Land (per acre)Residential (per acre)$ 40.00 $ 75.00$ 150,000.00 $ 480,000.00$ 40,000.00 $ 200,000.00$ 35,000.00 $ 175,000.00$ 26,000.00 $ 1,050,000.00N/AN/A2010 Global Market Report ■ www.naiglobal.com 100