Market Snapshot: Twin Cities Economy on the Rise
- Sep 30, 2014
Minneapolis-St.Paul—The Twin Cities economy seems to have recovered well from the financial crisis that hit the U.S. back in 2008. The Star Tribune reports that economic growth in the Twin Cities was 2.5 percent in 2013, compared to a 1.7 percent national average. Chicago is currently the only Midwestern city with a larger economy than the Twin Cities. All evidence seems to show that the Minneapolis-St. Paul area has become a popular destination for investors, developers and residents alike.
The Minneapolis-St. Paul area benefits from a wide variety of industries, attracting investors and new businesses in sectors such as healthcare, manufacturing, agriculture, education and technology. Some of the largest employers in the area include Target Corp., UnitedHealth Group, Best Buy, the Mayo Clinic, U.S. Bancorp and Cargill.
The Twin Cities’ strong economy and skilled workforce, as well as its diverse range of profitable industries are attracting investors to the metropolitan area, according to a market report by Marcus & Millichap. Major employers in the area such as UnitedHealth Group, Target and Wells Fargo have already begun expanding their corporate offices.
Furthermore, as many as 42,000 jobs are to be delivered in the area in 2014, including 8,000 new office jobs. There is a growing demand for office space in the Minneapolis-St. Paul metro area, especially in the I-494 Corridor and I-394 Corridor submarkets.
Marcus & Millichap’s report also reveals that 2.4 million square feet of office space will be delivered in the metropolitan area by the end of 2014. Strong demand in central neighborhoods will also lead to a rise in rents and surrounding property values, diverting focus toward suburban areas and Class B/C properties. Even though location is essential and investors are drawn to transit-oriented developments, there is also an increased interest in areas outside the city. Major suburban developments include the Pentagon Park in Edina and the City Place redevelopment project in Woodbury.
As far as the retail market goes, tenant demand is strong and many out-of-town retailers are looking to enter the Twin Cities market. According to Marcus & Millichap, 650,000 square feet of retail space have been delivered in the area over the past four quarters, with roughly 935,000 square feet currently underway.
The largest project in this sector is the 441,000-square-foot Paragon Outlets Twin Cities in Eagan, while the 85,000-square-foot Cabela store in Woodbury is expected to generate 185 jobs upon completion. Additionally, Woodbury is set to become home to the first Hobby Lobby in Minnesota.
The multifamily development sector is picking up steam in the Twin Cities area. The strong corporate presence and employment growth has resulted in an increased demand for apartments. Developers have about 7,150 apartment units underway, with another 6,000 in the planning stages. Most of these units are to be delivered in the downtown Minneapolis/University submarket. The strong demand for multifamily housing has kept vacancy below 4 percent since 2010, according to Marcus & Millichap.
Charts courtesy of Marcus & Millichap