2004 MSCA Report Final Ver

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2004 MSCA Report Final Ver 2004 MSCA RESEARCH COMMITTEE MEMBERS 2004 MSCA RESEARCH COMMITTEE MEMBERS Molly Bird, United Properties Eric Bjelland, United Properties Jerry Ciardelli, Erdahl Aerial Photos Gregg Erickson, CB Richard Ellis Elizabeth (Betty) Ewens, Kraus-Anderson Companies Jim Mayland, MnCAR Jan Goossens, Kraus-Anderson Companies Tricia Pitchford, United Properties Bob Pounds, Welsh Companies, LLC Holly Rome, Jones Lang LaSalle Paul Sevenich, Kraus-Anderson Companies Ken Vinje, Kraus-Anderson Companies *A special thanks to: Kathy Anderson, Architectural Consortium L.L.C; Bruce Carlson, United Properties; Darcy Eigen, River Hills Mall Manager; Lisa Kinowski, Fisher Group; Faegre & Benson LLP; Frank Holappa, Holappa Commercial Real Estate; Joe Kleiman, Kleiman Realty; Howard Paster, Paster Enterprises; Chris Simmons, Welsh Companies, LLC; Terry Smith, TRS Commercial Real Estate, Inc. Property information was provided by members of MSCA, as well as the MnCAR “Xceligent” database. Data contained in this report is the property of the Minnesota Shopping Center Association and may not be copied without prior consent. The 2004 MSCA Research Committee conducted the surveys and performed statistical analysis. Additional copies of this report are available by contacting the Minnesota Shopping Center Association at (952) 888-3491. ©2004 Minnesota Shopping Center Association 8120 Penn Avenue South, Suite 555 Bloomington, MN 55431 www.msca-online.com TABLE OF CONTENTS Introduction . 2 Executive Summary . 3 Glossary of Definitions . 3 OPINION SECTION Opportunities and Challenges . 4 Real Estate Taxes . 5 Investment Market . 5 Trends . 6 Development/Redevelopment . 6 Legislative . 7 Municipalities/Challenges . 8 Grocery-Anchored Centers . 8 New Retailers/Bankruptcies/ Acquisitions/Mergers . 9 Urban Clusters/Boutique Nodes . 9 OVERVIEW OF TWIN CITIES PROPERTIES Market Size . 10 Vacancy . 11 Expense Analysis – Rental Rates . 12 – CAM Expenses . 12 – Real Estate Taxes . 13 – Comparisons of All Expenses . 14 PROPERTY SECTION Regional Centers . 15 Property Listing of Regional Centers Community Centers . 20 Property Listing of Community Centers Neighborhood Centers . 22 Property Listing of Neighborhood Centers Minneapolis CBD . 28 Property Listing of Minneapolis CBD Saint Paul CBD . 29 Outlet Malls. 30 OUTSTATE SECTION Introduction to Outstate Properties . 31 Duluth . 32 Property Listing of Duluth Mankato . 34 Property Listing of Mankato Rochester . 36 Property Listing of Rochester Saint Cloud . 38 Property Listing of Saint Cloud Brainerd/Baxter . 40 Bemidji . 41 APPENDIX: PROPERTY LISTINGS Alphabetical, by City . 42 2004 MSCA Corporate Sponsors . 60 1 INTRODUCTION Welcome to the Minnesota Shopping (regardless of ownership or marketing Center Association (MSCA) 2004 Retail Real differences) it has been included in this year’s Estate Report. Minnesota is fortunate to have a report. Likewise, if there is a group of individual strong real estate community infused with buildings under the 30,000-square-foot successful industry leaders, a presence of many threshold and, due to their proximity to each retailer headquarters, and a large array of other, they are perceived as a larger complex, they shopping centers and retail venues. The are also included in the report. Minnesota marketplace offers the latest This year, the MSCA Research Committee concepts in shopping centers, such as the state’s redesigned the retail report’s survey format and first lifestyle center, The Shoppes at Arbor the data-collection process. In the past several Lakes, to the everyday essential neighborhood years, a few key industry brokers were selected center. For the past 15 years, the MSCA Retail to complete the survey. This year, the questions Real Estate Report has tracked Minnesota’s were changed to reflect opinions of all retail real shopping center market as it has expanded estate professionals, and administered online to and evolved, providing a market overview of poll MSCA’s entire membership. The response the industry. was fairly strong, with 128 completed Information for the report is generated by surveys, reflecting a 21% return rate. The three means: the “Xceligent” database, MSCA survey results are presented in the Opinion membership survey and input from industry Section of the report. real estate professionals. The statistical data is The same challenges continually arise in generated by an alliance between MSCA and the retail real estate industry. Real estate taxes the Minnesota Commercial Association of will be a constant battle in Minnesota, and no Realtors (MnCAR), working closely together to relief is expected soon. This past legislative update and filter the information in MnCAR’s session will be remembered for its lack of “Xceligent” database. Committee members accomplishments, as most items on the 2004 spent several hours reviewing and analyzing agenda will be addressed again in 2005. At a data, and making site visits to ensure that the minimum, the 2001 property tax reforms information is as accurate as possible. remain in place. In 2003, MnCAR facilitated a sweep of the Several new retailers have entered the Twin Cities area to identify any missing market in 2004: IKEA, CVS Pharmacy and commercial properties from their database. The Aldi, to name a few. With the bankruptcy of result of the effort increased our retail market Frank’s Nursery & Crafts, Paper Warehouse and data by approximately 63 properties and nearly 7 Kmart, there are several large retail spaces million square feet. More properties have been available for lease, a recurring challenge for the identified, which alone may not qualify for the past several years. While the concerns in our report but truly are considered part of an market are generally the same, the way our adjacent center. For example, Woodbury Village industry adapts continues to evolve. is an 84,899-square-foot Neighborhood Center Special thanks to Paul Sevenich, Ken Vinje and adjacent to the property is the Shoppes of and Tricia Pitchford for their dedication to Woodbury Village at 23,000 square feet. Since MSCA and their efforts to make this data as the Shoppes of Woodbury Village is below the accurate as possible. We hope that each reader 30,000-square-foot threshold amount for will find this report informative and useful. Neighborhood Centers, it would not typically be Janet L. Goossens included in the report. However, since it is a Holly Rome perceived extension of Woodbury Village 2004 MSCA Research Co-Chairs 2 EXECUTIVE SUMMARY AND DEFINITIONS EXECUTIVE SUMMARY GLOSSARY OF DEFINITIONS •Survey respondents identified new • The overall market average vacancy development as the number one decreased to 6.2% from 7.3% in 2003. Property Classifications opportunity in 2004. One respondent This is the lowest average rate in at least For the purpose of this indicated that vacancy has remained steady seven years and shows that a majority of report, a shopping center’s throughout the development process, and stable centers continue to attract retailers. classification is based solely new spaces are being absorbed as soon as •Average rental rates for all segments are on square footage. All centers are built. Also, opportunities lie in significantly lower than in 2003. The statistical inferences are based redevelopment of existing sites or creating a average high rates are approximately 41% on the following definitions: multitenant center from a former big box or less than 2003 and the low rates are single-tenant-type use. With Snyders’ down 37%. • (R) Regional Center— bankruptcy proceedings, several leases were 400,000 square feet rejected. With Paper Warehouse, bankruptcy and up leases were rejected, which left landlords with large vacant spaces. It becomes an • (C) Community opportunity as well as a challenge to fill Center—150,000 to these spaces. 399,999 square feet • This is the third consecutive year that real estate taxes have been identified as the top • (N) Neighborhood challenge in our industry. In 2003, retailers Center—30,000 to in Minnesota paid on an average 68%– 149,999 square feet 170% more in property taxes than in other comparable markets. As noted in the •(CBD) Central Business survey, smaller tenants are very sensitive to District of Minneapolis any change in operating costs that are —regardless of square passed on to them, and real estate taxes are footage the biggest expense. • OUT Outlet Mall— •Saint Louis-based May Companies acquired regardless of square the Marshall Field’s chain and nine Twin footage City Mervyn’s stores. May Companies will continue the operation of the Marshall Field’s brand; however, all nine Mervyn’s stores were closed. Landlords are working with May Companies for a replacement or redevelopment of the Mervyn’s locations. •Several new retail concepts entered the market in 2004, including IKEA, Tiffany & Company, Steve & Barry’s University Sportswear, and Jared Jewelers. CVS Pharmacy and Lowe’s are also now entering the Minnesota market. 3 OPINION SECTION Respondents indicate OPPORTUNITIES suburbs,” and “changing demographics present that new development AND CHALLENGES—2004 opportunities for new retail locations.” Property disposition, a new category, ranks is the number one Annually, our survey respondents are asked fourth this year, creating more opportunities. opportunity in 2004. to forecast the opportunities and challenges that Comments ranged from, “low cost financing will face the shopping center industry in the and lower cap rates have moved the ownership coming year. The Research Committee
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