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Preliminary Market Overview [ Robert Lunz – Nicollet Partners]. 3M Community Advisory Committee 03.19.09. Wave of recent store closings (Circuit City, Linens ‘n’ Things, Wilsons Leather, etc.) Poor retail sales forecasts Focus on necessity retail uses vs. discretionary

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preliminary market overview robert lunz nicollet partners

Preliminary Market Overview[Robert Lunz – Nicollet Partners]

3M Community Advisory Committee

03.19.09

retail 1 0

Wave of recent store closings (Circuit City, Linens ‘n’ Things, Wilsons Leather, etc.)

  • Poor retail sales forecasts
  • Focus on necessity retail uses vs. discretionary
  • Many retail chains have relatively convenient proximity
  • Given current market, sizeable (>11 acres) retail development not likely feasible
Retail 1.0
retail 1 1

Large-scale retail development is the most unlikely to be supported.

  • Ability of additional retail uses to succeed is dubious given the large amount of existing storefront retail along major arterials in the area.
  • Retail could be viable as a smaller ancillary addition to a mixed-use scenario.
Retail 1.1
office 1 0

Major office development likely not supported.

  • Site would be competing against existing Downtown Class B (30.6% vacancy, NAIOP Office Report Nov 2008).
  • Adding the existing office SF, post renovation, to the Downtown Class B market would represent a +7.5% increase in the base amount of space in this class.
Office 1.0
office 1 1

No evidence of a market of the magnitude necessary to use all 350,000 SF of space available (or that one could be created).

  • Multiple adaptations and “cures” would require large capital expenditures for properties still “out of their element in attracting office space users”.
  • Large government office use one possibility to use existing space.
Office 1.1
residential 1 0

Oversupply in housing market means a three to five year period before any substantial res’l project groundbreaking.

  • Initial smaller residential project could break ground in a short time frame.
  • Last 1½ years new residential development in core cities has halted, buyers have dried up.
  • Risk of rising interest rates is significant given the size of the site and a total build out 5-10+ years into the future
Residential 1.0
residential 1 1

If mortgage rates rise substantially, a market-rate rental apartment development may be feasible.

  • Large-scale multi-family to be built all-at-once not financially feasible for at least five years.
  • Any major ‘urban village’ development would require 5-7 year holding period and associated costs.
Residential 1.1
hospitality 1 0

Saint Paul lodging market already over built, no basis to expect any growth in room nights.

  • Difficult to finance hotel deals due to special purpose design and business-operation critical nature (and the current financial crisis).
Hospitality 1.0
industrial 1 0

Industrial properties to date have maintained the best market conditions of all real estate investment types.

  • The three main industrial building types (bulk warehouse, office/warehouse, office/showroom) have had the least amount of occupancy/rental loss.
  • NE Submarket absorbed a ten-year high of 1,327,000 SF in 1999, and ten-year low of 243,000 in 2008.
  • Currently, no spec ind’l development and very little new ind’l development overall
  • Opportunity exists for well-planned industrial park.
Industrial 1.0