2005 Corporate Sponsors Adolfson & Peterson Construction The Avalon Group Bremer Bank, N.A. news The Business Journal Cambridge Commercial Realty Volume 19, Number 1 January 2005 CB Richard Ellis The Collyard Group Dalbec Roofing Feature2005 Marketwatch Exeter Realty Company Faegre & Benson LLP by Lisa Diehl, McDonald’s Corporation Great Clips, Inc. any economists and predictors have Budget deficits in the core of the European H.J. Development, LLP voiced their outlooks for this year, Union, including France and Germany, are just and you will likely continue to see a as hefty as the US, and the deficit in Japan is Heitman Financial Services LLC M variety of forecasts over the next several twice as large. Europe is slowing back into yet J.L. Sullivan Construction, Inc. weeks. The following is a snapshot of what another recession and unemployment will Jones Lang LaSalle we could see in 2005 from a world viewpoint remain stubbornly near double the rate of the down to our local level. US. They have relied on the world for growth KKE Architects, Inc. and expansion. Throughout the world, China will continue to Kraus-Anderson Companies be a top producer and is quickly becoming a Nationally, with the war and other challenges, LandAmerica Commercial Services prime consumer nation as well. Today, it is Uncle Sam is spending more than what’s Landform Fifth Avenue meets Rodeo Drive in Shanghai. coming in. But this hardly spells the end of In addition to serving the US, productive nations the US economy and markets. The message Larkin, Hoffman, Daly & Lindgren, Ltd. from India to Malaysia are also serving them- many in the financial media are spinning is M & I Bank selves, drawing companies from around the just the opposite. The US economy is still at world to expand and meet their market demands. Messerli & Kramer, P.A. Marketwatch continued on page 2 Midwest Maintenance & Mechanical, Inc. Northtown Mall/Glimcher Properties Oppidan, Inc. Snapshot Opus Northwest LLC Nicollet Plaza Park Midwest Commercial Real Estate Location: Highway 13 & Nicollet Avenue in Paster Enterprises, LLC Burnsville, MN Reliance Development Company, LLP Opening: Cub Foods projected to open July 2005 Ridgedale Center Owner/Managing Agent: H. J. Development, Anchor Tenants: Cub Foods RLK-Kuusisto Ltd. L.L.P. Robert Muir Company Market Area Served: NE Burnsville Center Managers: Elizabeth Janisch and RSM McGladrey, Inc. Kelly Lienke, Property Managers Construction Style: Modern style, brick, glass and EIFS Ryan Companies US, Inc. Leasing Agent: Jeff Carriveau, H. J. Additional Facts: Located at the “Heart of Development, L.L.P. (952) 476-9400 Target Corporation the City” of Burnsville, Nicollet Plaza is TCF National Bank Minnesota Architect: KKE Architects, Inc. anchored by Cub Foods and includes a 14,000 sf strip adjacent to Cub. In addition to Towle Financial Services Construction Contractor: Opus the Cub Foods store and retail, there will be a Northwest LLC United Properties freestanding 19,140 sf bank/retail building and GLA: 115,839 sf also an additional 250 townhomes and condos Venture Mortgage Corporation being developed. This area has strong Welsh Companies, LLC Current Occupancy: 75% demographics and is continuing to get stronger Number of Stores: 24-30 with all the other new developments happening Westwood Professional Services in the “Heart of the City.” MARKETWATCH continued jobs, personal income and home building eager to locate in healthy urban markets. across the region in 2005. Look for a Big-box retailers will continue to think the pinnacle of the world’s economy. As strong manufacturing sector this year. “outside the box” and deviate from their the economy improves, foreign investments The Fed also notes, home building permits typical prototypes in order to find desirable will continue to pour money into the US as are expected to be up 4.4% in Minnesota, locations. Lowe’s and CVS Pharmacy will well as exports form eager producers from compared with average gains in the past of be opening more stores, and Trader Joe’s abroad. The dollar is down against the 3.8%. The growth in the Minnesota will enter the market this year. Other new Euro, but is still the commercial and economy will come from the migration of entries have included: HomeGoods, financial currency of the world. new residents into the Twin Cities. Atlanta Bread Company, PeiWei and Cartridge World. The stock market has enjoyed the decline Minneapolis and St. Paul continue to see of the dollar. Since the March stock strong housing development. A lot of the The MSCA 2004 Retail Real Estate Report market’s lows since 2003, weakness in the new retail is chasing housing in the outer- noted grocery-anchored centers with US currency has meant notable gains for ring suburbs like Lakeville, Shakopee, defendable sales/location are in huge stocks. The market benefits from the cash Maple Grove, Blaine/Coon Rapids and demand from investors. Strip centers with coming in from investors looking to put Woodbury. More and more suburban cities generally good locations are receiving bonus money to work in January and make will continue to accept higher density strong demand from high-net-worth deposits into retirements accounts. This mixed housing with retail. The hot areas individuals. 1031 tax-deferred exchange month won’t necessarily end the party. The will remain hot. buyers will bid down leveraged returns. average annual gains come in at 30.7%. Commercial real estate experts aren’t While acquisitions are expected to slow The first year of each four-year expecting any big real estate surprises in down, the results of 2004 purchases will presidential cycle tends to be the weakest; 2005 with retail. To keep values at lofty pump up results for some REIT’s in the stocks have fallen roughly half the time. levels next year, owners of retail will have coming years. Look for tenant-in-common The election results make clearer what to work hard on performance. With the deals to be competition for REIT’s. government policies are likely to be economy showing modest signs of growth, Retail in 2005 will remain the bright spot pursued during the next four years, most of smart management will make all the for commercial real estate in the Twin Cities. which should be retailer-friendly. difference. There will be a slight increase The MSCA 2004 Retail Report noted that in rents, perhaps, but no major increases. Despite an increase in people signing up real estate taxes will be the number one Moderate interest rates will continue the for unemployment benefits, economists say challenge again this year. Forecasters at appetite for new construction. that the overall level of applications points the Federal Reserve Bank in Minneapolis to a recovering job market in 2005. The pending merger of Kmart and Sears is predict that Minnesota will do better than Federal Reserve (Fed) rate hikes, actually not set to be final until March. Any capital the nation as a whole on three out of four support lower mortgage rates. A move by expenditures and building programs of the key measurements of economic health in the Fed to raise rates is designed to slow new Sears Holdings Corp. will be to 2005. This year’s outlook is optimistic. inflation, which is great news for long- convert Kmart units to Sears’s stores. term bonds and mortgage bondholders as Locally, they have announced some that will be ripe for conversion. their future buying power is preserved by What Retailers Deserve lower inflation. Lower rates of inflation Some retailers have been encouraged by make bonds more attractive, raising their their strong sales growth and are From Washington in 2005 price against their coupon, which lowers compelled to expand in 2005. Expansion • Labor laws that reflect the 21st the yield. Low yield mortgage bonds space will be tough to get, but this will be century. mean low mortgage lending rates. The the year for new retail concepts. For risk of inflation should remain low, • A resolution to the ongoing example, Abercrombie & Fitch added immigration impasse. although it fluctuates with energy prices. Ruehl to its format. Tommy Bahama • A free-trade policy that serves The Bond Market Association predicts launched Indigo Palms Denim Company, American consumers and workers. federal fund rates will be at 3.5 percent by and Apple produced a “mini” Apple store. the end of next year. Overall, if inflation Look for new prototype stores from some • A tax system that promotes growth should stay in check, expect to see 30 year retailers such as Office Depot and The without burdening retailers. mortgage interest rates gradually rise 6 to Sports Authority. Mall tenants will • An even-handed solution to the 6.5% by the end of 2005. continue to open up outside of malls. It is Internet tax dilemma. logical because there are few malls being ocally, the Minnesota Federal built. Those that have made the • A wage policy that reduces poverty, Reserve District has a reputation for conversion, like Bombay Company, have not jobs. Laccurately predicting what’s ahead seen positive results. • A breather from new, heavy-handed for the regional economy. Business government mandates. Local mall owners are looking to fill leaders are more optimistic about the vacated-anchored locations with non- As noted in Discount Store News November issue economy for 2005. Fed researchers are traditional tenants. National retailers are by guest column writer Ken Rankin. fairly upbeat, calling for steady growth in msca news 2005 2 www.msca-online.com KevinMember Krolczyk Profile Occupation: Commercial Hobbies: Snowmobiling, backpacking and Roofing Contractor playing with friends at the cabin. Company: Dalbec Job History: After college, I worked on Roofing updating Dalbec’s estimating and accounting systems.