What's your market look like?

[Greg V.]

I just wanted to get the pulse of everyone's market. In our suburb markets of the Twin Cities, we seem to have hit a slow patch. Last year was really busy but this year has been really quiet with a drop off in tenants looking for office/retail space. We still haven't seen the lease rates come back to pre-recession highs. Depending on the property, the rates are still off about 30%. The slow down is making me a little nervous about our local economy. Anybody else?

[Joel Owens]

I have clients all over the country. So for retail I tend to know what cap rates are state by state and where the more affluent areas are.

For retail MTNL about 1.5 years into the recovery cycle. Within that cycle each state had recovered differently. Some states I can still find 8 plus cap rates. Other it's hard to get above a 7 for fully stabilized. Now if you build from the ground up or do a value add lease up with vacancy you can get a higher cap rate.

The ones that are already stable in great area the owners will  not let go at a really high cap they will just keep the cash flow then eliminate their equity gain from buying 4 years ago. The typical buyer is 1031 exchange, retiree, estate planning, foreign buyer, or ultra high net worth that wants cash flow but safety so will take reduced yield for quality.

We stick to strong suburban to urban locations. Rural to weak suburban is a no go unless a local investor that lives their and understand the area block by block.  

[Greg V.]

Thanks Joel Owens

What are your clients seeing in terms of tenant growth? Have applications slowed?

[Joel Owens]

New business permits are up. Tenant sign on's are up as well.

Most of my clients even if they live in a cold belt state are investing in the sun belt states. That seems to be where a ton of retirees and young demographic are moving too which is fueling big gains in population growth and job diversity.

I still have clients in cold belt states. Chicago and Ohio seem to have demand in the good areas. We tend to focus on demo's that are 75,000 median income or higher unless a college town. We do not like the low income to moderate income areas regardless of cap rate as they tend to have less expendable income in an economic downturn and are hit hardest the most.