Just when you thought things were looking up in the commercial real estate market. . .

A survey released Monday by the University of St. Thomas Opus School of Business indicates real estate professionals are less optimistic about the market in 2013 than they were six months ago. They went from “mildly optimistic” to “neutral.”

The semi-annual Minnesota Commercial Real Estate Survey, designed as a forecasting tool for the Twin Cities commercial real estate market, poses questions to local experts in the field about their expectations for future vacancy rates, rental rate growth, development costs and new project financing structures.

The survey found professionals are less confident that rents and occupancy will continue to show solid growth in the next two years due to an uncertain economy. An expected increase in land prices and building materials will continue to be a drag on the market. And lenders and investors are going to continue to be very selective in their underwriting criteria and evaluation of potential deals, the survey states.

"There's a lot of uncertainty in the economy right now and everyone is stepping back to see what happens," said Herb Tousley, director of real estate programs at the St. Thomas business school.

On a more upbeat note, the survey indicates financing terms are expected to remain stable, and there should be “moderately increasing amounts of equity capital available.”

The bottom line? Panel members are increasingly concerned about conditions in the commercial real estate market in the next two years.

Janet Moore covers commercial real estate for the Star Tribune.


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