VOLUME 35, NUMBER 1
©2019 Real Estate Publishing Corporation
By Liz Wolf
unusually long cycle, challenges, key issues and how each sector may perform.
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How much longer can this extended cycle continue?
any Twin Cities commercial real estate experts are bullish going into 2019, as 2018 turned out to be another solid year for the market. However, there are challenges facing the industry including increasing construction costs, rising interest rates, the labor shortage and political uncertainty. MREJ asked leading local professionals what the year could bring including where we are in this
“We’ve been hearing that we’re in the last innings of this baseball game for several years now,” says Mike Ohmes, managing principal of the Minneapolis-St. Paul office of Cushman & Wakefield. “I heard five years ago, we were in the seventh inning. So what inning are we in now? Are we in extra innings?” Ohmes says 2018 finished strong.
January 2019
At year-end, the market’s multitenant properties reported a 10.9 percent vacancy rate, up slightly from 10.6 percent six months prior, according to Cushman & Wakefield’s Compass Report. Just over 1 million square feet was absorbed across office, industrial and retail properties in the second half, significantly more than what Cushman & Wakefield projected for the six-month period. The year ended with 2.78 million square feet of absorption -- the market’s best year for absorption Forecast to page 10
Everyone’s Watching the Yield Curve, Are You? By Nick Place, Chief Lending Officer, Bridgewater Bank
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ome interesting things have been happening with the yield curve lately. First, to back up and give some background about what the yield curve actually is. The yield curve is simply a line graph of the interest rates paid on treasuries with varying maturities. During most “normal” economic environments, the yield curve generally
slopes up as the maturities extend out longer. This makes basic sense as one would expect to earn a higher rate of return if you were fixing your rate for a longer period of time. The typical difference, or spread, between short-term (say 2 years) and long-term (say 10 years) treasuries is around 1%. However, this relationship where there is a wide margin between short-term and long-term rates has recently changed. First, the spread between the 2Year and 10-Year treasuries has shrunk drastically, currently sitting at 0.17%. This takes slopes out of
the yield curve, essentially flattening it out. Second, in a few points along this line graph the rates have become lower as you move out to a longer Yield Curve to page 8
INSIDE - Page 14: Southwest LRT (METRO Green Line Extension)