The Twin Cities metro has experienced continued growth since 2010, with more than 250,000 new residents settling in the area during the past 8 years. These statistics placed the Twin Cities as the 16th largest metro in the U.S. and means business has been and will continue to be good for the commercial real estate industry in years to come.
As businesswomen in a constantly changing and growing industry, it is important for us to pay attention to forecasting trends in commercial real estate. Though 2018 brought an increase in land and construction cost as well as higher interest rates, we still saw a steady demand for apartments, offices and industrial spaces. One of the main national trends we predict for the upcoming year concerns the stock market. While the stock market may continue to have some volatility in 2019, our take is that the overall economy will remain relatively stable.
As for the local Minneapolis-St. Paul commercial real estate market, here are our main predictions for 2019.
1. Multi-family development trend plateaus
One effect of the Great Recession was a seemingly endless growth period for multi-family development projects. However, many experts predict that this trend will reach its peak in 2019 and begin to slow down. We fully agree.
2. Suburban looks attractive again
Recent years have been all about the move to urban for business and multi-family, but we think that might begin to shift in 2019 as the available space and cheaper prices in the suburbs begin to look more appealing. This goes for retail businesses, too. Retailers will continue to look for ways to re-invent and differentiate themselves in their spaces but this no longer will mean only a high priority on location within the cities. Continued planning for and development of suburban mall properties into more dense, mixed-use developments will be a trend to watch in 2019.
3. Comprehensive plan and zoning updates will create more opportunity
Perhaps most importantly, social equity will remain a focus. The Minneapolis-St. Paul metro area is at the top of so many positive lists (most bike-friendly city in the U.S., top park systems in the country, top universities to name a few). But racial disparity may be our biggest opportunity to move from the bottom of the list to the top. Early in December 2018, the Minneapolis City Council passed its Minneapolis 2040 comp plan update. The hope is that this will be a first step in tackling racial segregation in city neighborhoods that has been in place for decades. Many Twin Cities communities included comp plan updates with the hope of affecting change to benefit all residents. We hope these changes prove to be a good start to creating a better Minnesota for all people.
4. Opportunity zones will encourage investment where it’s needed
Opportunity zones will be a primary focus for many developers as they look to this new tax incentive tool aimed to encourage long-term private sector investment in low income communities.