1404 Central Ave | Minneapolis, MN
12,595 SF | 0.62 Acres
The Pipe Fitters Union called on CRE Partners to assist them with selling 1404 Central Ave in Minneapolis, MN. The main goal was to maximize the value of the current site and additional, find a new home for the Union.
1404 Central Ave was a great site in a hot neighborhood. The challenge was the sale and purchase of a new location had to happen simultaneously. With the wide range of potential uses, closing timeframes were potentially very long.
CRE Partners worked with the owners on a marketing plan to focus on a wide range of buyers to achieve the highest and best use for the site (and highest selling price). After reviewing 10 offers, we moved forward with a user that had a short closing timeframe. CRE Partners helped navigate the multiple offer process, building inspection, and risk involved with the corresponding relocation. Ultimately, the building sold for $1.6M. Ultimately, the owners sold and purchased a new home on the same day. Even better, they doubled their space with very limited additional cost. With a brief leaseback, they were able to smoothly transition into their new building.
Commercial Real Estate Market Update Q4 2017
The industrial market as a whole finished the year strong with just over 2.1M SF of net absorption. Though the twin cities metro is not a hub for national distribution, the growing need for last-mile delivery brought about by the rise of e-commerce has spurred most of the activity.
The health of the office market is very mixed. The market is very fragmented with certain locations and property types doing very well, and others not so much. Employment is the driving force behind the office market trends. With the cost of replacing employees so high, office space is viewed not just as a place to work but as a recruiting tool designed to attract and retain high-caliber employees in this very tight labor market.
Commercial Real Estate Tax Reform
How the tax reform plan will affect commercial real estate – From INMAN
“The tax plan’s authors left an array of tax subsidies in place for commercial real estate developers and owners, who fared far better than individual homeowners. Unlike homeowners, those in the commercial real estate market didn’t suffer a repeal of a longtime tax subsidy or get slapped with something new.
“Commercial real estate really dodged several bullets here,” John Pickering, a partner in the real estate practice of Balch & Bingham, a Birmingham, Alabama firm focused on the Southeast, said in a phone interview. “There’s nothing in here that cries out ‘tremendous new opportunities that didn’t exist before.’ It’s more like let things continue.”
And that’s great news for the commercial real estate industry.
The new tax law leaves unchanged the provision known as the 1031 Exchanges. Sellers of commercial properties will still be able to defer paying capital gains taxes on such sales if they use the proceeds to purchase another similar property.
Tax-free exchanges of “like-kind” property have long-fueled transactions, and are likely to continue to do so.
Though earlier versions of the Republican tax plan had eliminated the 1031 provision, the subsidy ultimately survived.
The same can’t be said for personal property, which will no longer be given a deferral on capital gains.
“That was huge because a very large percentage of commercial real estate and sales are done through 1031s,” Pickering said. “If that had gone away, people would try to structure deals around that, but you’d probably end up with a lot of people unwilling or unable to sell buildings because they’re fully depreciated and can’t afford the tax hit.”
Another plus for commercial developers is that the historic tax credit also survived the Republican’s rule-writing process.
Renovations of buildings listed on the national registry will continue to receive a 20 percent deduction.
In Birmingham, Alabama, for example, more than two-dozen older, historic buildings have been renovated in its downtown over the past 10 years, Pickering said. Normally, renovating such structures is prohibitively expensive. But with a combination of local, state and federal historic tax credits, such projects are possible. It’s a scenario that’s been replayed throughout urban centers, large and small, in recent years. “That’s really brought our downtown back in a way that wouldn’t have happened without those credits,” he said.
Other credits were also maintained. Among them, the New Markets Tax Credit Program that offers subsidies for development projects that bring jobs to low-income areas. Private activity bonds were also sustained, a possible precursor to an expansive federal infrastructure bill.
As a group, real estate developers came out ahead. Like real estate agents, developers will be able to more easily establish themselves as a “pass-through” business thereby having 20 percent of their income taxed at a business rate rather than a much higher business rate.” From INMAN. Follow link to see full article.
212 3rd St | Minneapolis, MN
5,285 SF | Office
Punch Through Design called on CRE Partners to assist them with finding new office space. The main goal was to accommodate growth, but limit lease term risk.
The Punch Through office space project had numerous challenges. First, they wanted to be located in one of the most competitive office markets in Minneapolis, the North Loop or NE. Second, the company was growing at a rapid pace, but taking on the extra burden of additional rent for space they may not be needed for a couple of years was worrisome. In addition, if the space was too small, would they be stuck in a long-term lease?
CRE Partners worked with the owners on a plan to focus on office space that would allow for growth, but also be flexible with lease terms and relocations. After viewing many spaces, we moved forward with a sublease option in the North Loop. Ultimately, CRE Partners helped negotiate favorable terms for the sublease that met their budget and limited lease term. In addition, furniture was included!
Commercial Real Estate Market Update Q3 2017
The industrial market as a whole had a strong quarter with an absorption of just under 1,200,000 square feet. Vacancy rates continue their downward trajectory and have fallen to under 9% in the metro area. Currently, there is over 3,000,000 SF under construction throughout the metro.
The outlook for office market is very mixed. Office employment (office using jobs) added 7,000 jobs in the past year. However, because companies are changing how they use space, vacancy in the office market actually increased to almost 18%. There are a few exceptions, but we expect this trend to continue.
Commercial Real Estate Market Update Q2 2017
As spring arrives, the market for commercial real estate continues to do well. The downside is that we may be nearing the peak of the current cycle in both the office & industrial market.
The industrial market as a whole absorbed a little over 2.600,000 SF of space in 2016. Vacancy rates continue their downward trajectory and have fallen to approximately 7% in the metro area. However, a quick look at development trends suggests a peak may have been reached. Developers have clearly shifted from ‘spec’ development to ‘build-to-suit’ projects as demand has leveled off. What does this mean for Landlords & Sellers? Landlords are having increased activity, see increasing rents/prices, and are limiting concessions for new tenants.
The outlook for office market is following the same path. Office space in the North Loop & West End areas remain hot and rents are increasing across the metro. Employers are continuing to re-evaluate their space to attract top talent. The trend is towards collaborative workspaces that include fewer private offices, more open space and buildings with worker-friendly amenities.