The Minneapolis/St. Paul Business Journal recently hosted their Commercial Real Estate Forum, discussing the outlook for 2016 and beyond. Many topics were discussed – from the space per employee decreasing in the office market, to the big users in the industrial and healthcare markets. Our own John Johannson discussed the retail sector, emphasizing the hybrid of offline and online retail that’s becoming more of the norm.

Offline and online retail: bricks vs. clicks

“Retail always absorbs way more than you think – it’s just re-purposed space.”

John Johannson, Senior Vice President with Welsh & Colliers International | Minneapolis-St. Paul, discussed the ramifications of online retail stores to commercial real estate. While online retail has certainly changed the way we purchase things, it hasn’t necessarily been at the detriment of brick-and-mortar retail locations. “The best retailers use the internet as a tool,” explains Johannson. “If you don’t have a good online presence, you’re behind the curve.”

Other thoughts on the current retail market:

  • MALLS:
    • Regional malls have lost their lustre. It’s not about department or anchor stores anymore.
    • The Mall of America will be fighting the Galleria for high-end tenants. Most likely, local retailers will stay at the Galleria, with national retailers heading to the MOA.
    • In the Grocery Wars, the real winner is the consumer, who now has more choices and better products.
    • People used to visit one grocery store for everything. Now, we make trips to multiple stores based on our needs.

What’s happening around the Twin Cities

In addition to the discussion about offline vs. online retail, other commercial real estate experts discussed their thoughts and predictions for 2016 and beyond.

Here are a few highlights:

  • In the office market, the focus is on finding a balance between increasing efficiency and decreasing productivity.
  • Current office spaces include about 175-200 square feet per employee now, down from 225+ in the past.
  • The popularity of the North Loop is real, and many users can’t find expansion space there. The success of Hines’ new building, T3, will be telling.
  • Coworking space is in a race to be capitalized – and the winner will probably be one of the lone survivors.
  • Generally, there’s a trend toward longer-term leases right now, to take advantage of low rates.
  • In the industrial market, there’s been tremendous activity over the past few years, with large users joining the market each year.
  • In the medical market, existing tenants want to remain on medical campuses, while others want to be in retail areas closer to the consumer.
  • The affordability of more energy-efficient equipment and materials has made sustainability a no-brainer for many companies.

With many unknowns coming in 2016 (*cough* election year *cough*), most commercial real estate experts are watching the markets with cautious optimism and realism. It’ll be interesting to see how some of these trends, especially the offline vs. online retail trend, will manifest themselves in the coming years.