Minneapolis-St. Paul commercial construction expected to grow at a slower
pace in 2001
Reports from commercial real estate firms indicate continued growth
in building construction in Minneapolis-St. Paul, especially among
large discount stores in the retail market. However, higher vacancy
rates in office and industrial construction markets, and higher
land, materials and labor costs may slow overall growth in 2001
compared with 2000.
In the retail market development of all-in-one discount stores,
such as Target, Kmart and Wal-Mart, has grown faster over the past
decade than multitenant shopping centers. Since 1990, discount stores
have grown 300 percent in the Minneapolis-St. Paul area, compared
with 21 percent for multitenant shopping centers, according to Colliers
Towle Real Estate in Minneapolis. Overall retail vacancy rates are
at 5 percent, indicating a tight retail market, which is expected
to continue into 2001, according to CB Richard Ellis, headquartered
in El Segundo, Calif. However, despite low vacancy rates, higher
land and labor costs will likely keep growth in retail construction
In 2000, about 4 million square feet of space in office buildings
were opened in the Minneapolis-St. Paul area, the largest single-year
increase in new office space in more than 15 years, according to
Grubb & Ellis Co., based in London. Absorption of office space doubled
in 2000 compared with 1999. Two projects under construction in downtown
Minneapolis will bring 1.1 million square feet of new available
office space in 2001. Vacancy rates in downtown Minneapolis are
expected to increase but remain below 10 percent, according to CB
Industrial building construction, which includes warehouses, distribution
centers and office business centers, was 50 percent higher in 2000
compared with 1999. Nevertheless, CB Richard Ellis reports low vacancy
rates for industrial properties. Ellis also reports that in 2001
a lack of suitable land sites, higher material and labor costs,
and flat demand will offset overall low vacancy rates, bringing
industrial construction levels closer to 1999 levels. Among the
multitenant sector of industrial properties, Colliers Towle Real
Estate reports higher vacancy rates and a slower absorption of open
space in contrast to single-tenant properties.
Sioux Falls commercial construction breaks record in 2000
Commercial construction in Sioux Falls, S.D., reached record levels
in 2000, led by the building of a $30 million heart hospital. New
commercial construction in Sioux Falls finished at $118.2 million
in 2000, with additions and remodeling projects totaling $85 million,
up 61 percent and 14 percent, respectively, compared with 1999.
"Last year was a gigantic year," said Ron Nelson of Bender Commercial
Real Estate Services in Sioux Falls.
However, following a record year may make it difficult for commercial
construction to post an increase this year; in fact, 2001 will likely
finish closer to levels seen in 1998 and 1999, according to Stephen
Metli, director of Planning and Building Services in Sioux Falls.
Office building is approaching overbuilt and industrial construction
is a little soft, Nelson said. While 2001 will probably fall from
last year, construction will remain at high levels. "Construction
could be down 10 percent to 15 percent and it would still be a good
year," Nelson said.
During 2001, "significant construction is expected in medical
facilities and retail," Metli said. A wide variety of retail projects
include a couple of super stores and a number of restaurants and
smaller box retail stores.
While retail construction is expected to remain dynamic, "the
challenge will be the available sights; retail is more sight specific
than industrial and office construction," Nelson said. Sioux Falls
has a strong retail sector, which draws shoppers from as far as
150 miles away.
When asked if the slowing national economy will affect Sioux Falls
construction activity, Metli pointed out that since November the
economy has wrestled with one of the coldest winters on record.
"We talk with local contractors and architects and they are busy,"
Contracts awarded for building projects grew in 2000
In 2000, construction contracts awarded for public and private
buildings in Minnesota, North Dakota and South Dakota reached $3.5
billion, 5 percent more than a year earlier, according to the Construction
Bulletin. The total value of construction contracts awarded for
public and private buildings was larger than contracts awarded for
heavy construction projects, such as roads, bridges and sewers.