INFORMATION #1 08-14-2006 - Laserfiche WebLink

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Page 1 of 2 Print this Page Vacancy Dropping Absorption Hefty Rental Rates Slight drop Highlights • Community centers are still the "big ticket" in 2006. They continued their shining pertormance in the first half of 2006 with 655,564 sq. ft. of positive absorption, resulting in more than 1.2 million square feet of absorption in the past 12 months. This strong activity helped to further push down the vacancy rate to 2.8% (3.2% with sublease space), a drop from 3.7% at year end. This may be the lowest historical vacancy ever; it is the lowest in at least the past decade. • Net rental rates dropped slightly to $17.87 from $18.05. • With 102 properties totaling nearly 25.5 million square feet, community centers are by far the largest retail product type in the Twin Cities. They are very desirable for retail tenants, primarily due to the powertul draw of their two or more anchors, which often include a general merchandiser, grocer, drugstore, electronics store, home improvement store or sporting goods retailer. • Demand continues to outpace supply, and construction continues at a vigorous pace. Seven community centers totaling 1,645,000 sq. ft. are under construction; all but one is set to open in 2006. The largest center underway is the 700,000- sq.-ft. Fountains at Arbor Lakes in Maple Grove, anchored by Lowe's Home Improvement Center, Costco, Marshall's and Dick's Sporting Goods. Developed by OPUS, it is scheduled to open in fourth-quarter 2006. • In addition to these centers under construction, the future pipeline is extremely strong. An unprecedented 3,187,000 sq. ft. is planned with groundbreakings scheduled in 2006 and 2007. • Anchors Target and Wal-Mart are fueling [his growth, as [hey compete for market share and continue to open new locations as well as expand existing stores to "super" formatr, which include full grocers. Target remains a powerhouse anchor as it continues to expand its presence. New SuperTargetr are planned or under construction in Monticello, Maple Grove and Richfield. • The retailer also is undertaking a number of "scrapes" where it razes smaller Target stores and builds its larger SuperTarget format. Scrapes already occurred in West St. Paul, Edina, Fridley and Roseville and stores are open. Target Corp. just received approval to raze the St. Paul Midway Target and build a SuperTarget, which will be the retailer's first urban SuperTarget. The 186,000-sq.-ft. store will be developed on the former Four Pointr Sheraton site next door to the existing Target at University and Hamline avenues. The current store will be demolished and turned into a parking lot connecting to the proposed central corridor. The SuperTarget should open in 2008. These redevelopmentr are a testament to Target's very attractive real estate. • Wal-Mart also is expanding. It has new stores that have opened in the past six months in West St. Paul, Inver Grove Heights, and Woodbury. The giant retailer also is starting to go "super" where it has available land. Stores in Vadnais Heightr and Oak Park Heights both will be converted to Wal-Mart Supercenters. • Both Target and Wal-Mart also continue to look for highly sought-after, inner-ring locations, which typically require redevelopment. Anything within the I-494/I-694 loop will likely require atear-down. Wal-Mart, for example, is looking at a proposed redevelopment of the former Best Buy headquarters in Eden Prairie. The building has a prime location in the city's "Golden Triangle"-a valuable triangle of land between I-494 and Highways 212 and 169. • Additional community center anchor tenants also are in expansion mode. Lowe's has stores planned or under construction in Maple Grove, Shakopee, Rogers and Oak Park Heights. Home Depot is expanding with new stores planned in Monticello, http://outlook.uproperties.com/PagePrinter.aspx?InstanceID=e8b69470-Oe4e-4c39-8061-90... 8/8/2006