There's more pain ahead for the Twin Cities commercial real estate market, judging from a sober new report out Thursday.

Rents generally fell in the second quarter while vacancies steadied or rose, meaning more trouble for landlords trying to fill stores, offices and warehouses in a fragile economy.

Companies eyeing a move, of course, will spy opportunity in the numbers.

The second-quarter market report, by Cassidy Turley, held few surprises. It shows vacancies in the hard-hit Twin Cities office market holding at 20.4 percent from the first quarter. The 10-year average is 16.6 percent. However, it's the second quarter in a row that office vacancies have at least stayed flat and not worsened. In the current market, that's an improvement, Cassidy Turley managing partner Dennis Panzer said in an interview. Panzer summed up the second-quarter snapshot as a picture of lessening badness.

The rents landlords asked for the best, or Class A, space averaged $15.62 per square foot, down from $16.14 in the first quarter. Tenants continue to press for upgrades. Class B and C rents slid, too.

Industrial vacancies in the metro area edged up to 13.1 percent from 12.8 percent, with asking average rents ticking down a bit. The retail vacancy rate rose to 8.1 percent from 7.7 percent, edging up when Brookdale closed in April. Average asking rents fell to $21.36 from $23.83.

The newly invigorated for sale market, highlighted by the June 30 sale of TCF Tower and TCF Bank Building in downtown Minneapolis for $40.5 million, was a glimmer in a relatively glum snapshot. There were nearly two dozen buildings priced $2 million or higher listed for sale in the Twin Cities at the end of the second quarter, about double the number that were for sale in the first quarter, Panzer said. Few of them were bank-owned properties.

"I think it's a bit of a leading indicator in that it's showing people are getting used to what the value of their property is going to be," he said. "I think people have gotten over the shock."

The report notes that there's so much money chasing distressed properties for potentially big yields that fund sponsors are returning money to investors because they can't get the returns they want.

Panzer said he thinks commercial real estate has hit bottom in the Twin Cities, but he's cautious because of the possibility of some type of double-dip recession. There is simply more uncertainty coming out of this cycle of high vacancy rates than in the past because of questions about where economic growth will come from.

"It's like trying to nail Jell-O to the wall," Panzer said.

Jennifer Bjorhus • 612-673-4683