What's your market look like?

[Greg V.]

As the summer winds down and we look for strategies going into next year, I thought I'd post some local anecdotes that will inform our investing for next year. From a macro standpoint, it looks like interest rates are going to rise slowly and the economy may continue to improve even if the stock market makes a correction. Here are some thoughts on our markets:

Washington, D.C.:

I posted a couple weeks back about Washington, D.C. issues with commercial office buildings. The article from the Washington Post had a lot of statistics. Anecdotally, I don't see much absorption of those large vacant buildings in Northern Virginia near Dulles Airport, Crystal City, Alexandria, and Springfield, VA. A lot of government leases are coming to a close over the next 3 years. Some floors in Crystal City I tour currently leased to the government are almost completely vacant, and the government will not be releasing many. I'm still not sure when the office market will turn around. At some point, someone will make a lot of money buying vacant office buildings, but I don't think it's anytime soon.

Minneapolis/St. Paul, MN:

The suburbs of the Twin Cities are seeing a good pick up in tenant demand, and I’m amazed that demand has remained robust late into summer. For the past 6 years around this time, it has been fairly quiet until the next spring. We’re seeing demand for everything from retail clothing to office to restaurants. Lease rates are still about where they have been for the last 5 years, but vacancies are falling. Increasing rents may only be a season away…