The next two years could be looking up for a commercial real estate market hobbled by frozen financing and concern over rising land prices.
According to a new survey conducted by researchers at the University of St. Thomas, industry leaders are looking toward 2012 with cautious optimism. Fifty commercial real estate professionals, mostly
principals and senior
officers, were asked to rate their optimism over the next two years in seven categories, ranging from occupancy levels to rates of return, on a scale of 0 to 100.
The twice-a-year survey, launched just last spring, is expected to become a new forecasting tool for the commercial real estate industry.
The result? A barely positive composite index of 54.1. That was a slight uptick from the 53.5 number of last spring, when the survey was conducted for the very first time.
“[It’s] not a big gain, but it shows a little bit more optimism in terms of what the world’s going to look like two years from now,” said Herb Tousley, director of real estate programs at the University of St. Thomas. Tousley conducted the survey’s research along with his colleague Dr. Thomas Hamilton.
Tousley singled out a belief that land prices would remain historically low as a reason for the improved overall index. Last spring, respondents fretted that today’s low land prices would rise, but now they’re not so sure. If prices stay low, new projects will become much more feasible. Another prevailing belief is that financing is becoming easier to obtain.
The slightly rosy survey results came on the heels of a stark increase citywide in residential property taxes. The city had cited dipping commercial property values — and hence a reduced tax capacity — as one of the reasons why homeowners must now shoulder more of a burden.
Asked about the often hollow optimism of the real estate industry, Tousley said attitudes were jibing with the more objective perceptions within his department. “These people, they’re making investment plays, they’re talking about putting a lot of their own money or their investors money on the line. They have to be pretty realistic.”
Target buys former church space, United Properties eyes Nicollet site
NICOLLET MALL — In one of the biggest commercial real estate moves in recent Nicollet Mall history, Downtown-based retailer Target Corp. has bought the former Church of Scientology space at 1013 Nicollet Mall.
The Star Tribune reported that Target Corp. paid $3 million for the space, producing a fine profit for the church, which had bought it in 1996 for only $630,000. The site’s 2010 property value is estimated at $1.9 million. The church’s Minneapolis branch has decamped to St. Paul, where it occupies a temporary space while it waits renovation on its future home, the former Science Museum of Minnesota building,
505 Wabasha St. N.
The 9,000-square-foot space is located across the street from Target’s headquarters and just one block from Target Commercial Interiors, which opened in 2008 at 9th & Nicollet.
The retailer has not discussed plans for the building, and some have suggested that Target simply wants to control its surrounding real estate.
Meanwhile, a block away, several long-languishing buildings from the abandoned Nicollet project, have attracted some interest and activity.
Untied Properties, owned by the Pohlad family, has engaged in talks with the Nicollet’s developers, Pratt Ordway Properties. United has expressed interest in three of four parcels: the former Let it Be record store, 1001 Nicollet Mall; 81 S. 10th St. and 87 S. 10th St.
No specific plans are being discussed, and Pratt Ordway has stressed that no contracts have been drawn up yet.
‘Curiosity shop’ in Gaviidae
NICOLLET MALL — O’Day Cache, Nicollet Mall’s wonderland of tasteful eclecticism, selling fine Asian antiques, French perfume burners, fine art, handmade jewelry and women’s apparel, has just opened an outpost in Gaviidae Common.
The new shop is called Jeromeo — borrowing the name of O’Day owner Scott Johnson’s line of jewelry designs. It’s tucked into a small corner space in the skyway level of 6th & Nicollet, on the Neiman Marcus side, just opposite the Style Laboratory.
According to store manager Joshua Carter, Johnson chose the space because he wanted a more intimate showcase for his and Carter’s personal creations. Carter, a photography and painting grad from Minneapolis College of Art and Design, designs jewelry and “fashion scarves” — repurposed from thrift store fabrics — under the name JJC Arts. Carter will sell his paintings at Jeromeo, as well.
And much of O’Day’s Asian finery will make the move, too. On a recent visit, the store was well stocked with hand-painted Mongolian boxes.
“It’s going to be a curiosity shop,” said Carter. “People may not know right away exactly what we sell, but they’ll come in and see.”
EAST HENNEPIN — Hearts broke across the Twin Cities when Kristoffer Knutson announced, via Facebook post, the impending closure of his store ROBOTlove.
Originally opened on Lyndale Avenue in 2004, Knutson’s beloved geek design clubhouse moved across town this summer, settling into the former storefront gallery space at Pink Hobo, 507 E. Hennepin Ave. The move coincided with Knutson’s hiring as managing director at PUNY, the interactive agency literally and symbolically behind Pink Hobo. At the time, Knutson spoke of a bumpy 2009 for his retail store.
ROBOTlove will remain open throughout the holidays. A special “Black Markey” pop-up shop occupies the space right now, featuring a curated selection of retail from Twin Cities designers, including Burlesque Design, Aesthetic Apparatus, Calpurnia Peach and many more.
Knutson says he’ll stay on staff at Puny going into 2011 and that he’ll collaborate with his PUNY cohorts on “event-based retail” in the old ROBOTlove space.
Future in question for historic NE barbershop
SHERIDAN — The owner of a Northeast barbershop whose history goes back to the 1920s is ready to retire, and the fate of his business — and the building in which it’s located — is now up in the air.
After 52 years of cutting hair, Arthur Boike, who operates the barbershop at 1308 2nd St. Northeast, has said that he will retire on Dec. 22. Boike took over the shop from his father Roman, who bought the place in 1958 from another barber. The space has been used for men’s haircuts since the 1920s.
Kelly Sharp, a 48-year-old former real estate professional who relocated to Northeast from Stillwater last year to embark upon a barbering career, was planning to buy the business from Boike. Sharp, who says she fell in love with “the good ole fashion barbershop,” had been working as Boike’s apprentice.
Then the building’s owner decided to sell the whole property, which is also home to the Matchbox coffee co-op and Becky’s Hair on 2nd. According to Sharp, developer Michael Lander approached Sharp about buying the place, but property taxes proved too high for her to make a commitment. Sharp says she would have to raise all tenants’ rents by a third to “make the numbers work.”
Now it seems new buyers have expressed interest. And the way Sharp talks, the small-business tenants are worried about their futures in the building. All tenants’ leases are month-to-month.
Sharp says she’s in discussions with Lander and the other tenants about buying the property herself and keeping the barbershop — and Matchbox and Becky’s — going. A collaboration between her and the Matchbox owners could be a possibility. However, the group would need to raise more funds to make the purchase.
As of this writing, no sale had been made, but the property is listed for sale. A spokesperson for Matchbox confirmed that both the coffee shop and Becky’s on 2nd have agreed to take the rent increase, if it means they can stay put.
The listing price is $189,000.
New café opens in Tower Lofts
NORTH LOOP — The North Washington Café has opened in the space formerly occupied by Java J’s at 700 Washington Ave. N.
The café, owned by Joe Grunnet of the Downtown Resource Group, has undergone a makeover designed to make it a friendly neighborhood coffee shop and lunch spot by day and a cozy beer and wine bar at night.
The menu features house-made sandwiches and soups the ever-popular Salty Tart baked goods.
For more information go to northwashingtoncafe.com.
— Sarah McKenzie contributed to this report.