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Page 2 of 2 if space is available rather than relocating. Landlords have been fortunate in maintaining fairly strong rates with no concessions in these renewal deals, and in some cases, they have pushed rates. One major reason that landlords are able to hold their rates on these renewals is because their rates are still lower than the newer, higher-image buildings. Also, the expense and headache of moving, especially for tech companies, can be avoided by renewing. • A fair number of companies are taking a look at the Northwest submarket. While some will renew and/or grab expansion space where they are, most are considering all of their options, including relocation. There should be a handful of larger tech companies that are pushed out into the market by late 2007, simply because they are out of space and there's no room to expand at their current location. • Options for larger spaces are becoming limited, however. If a tech company needs 50,000 sq. ft. and it looks from Highway 12 up into Brooklyn Park, there are just three or four good options. Also, sticker shock is an issue with new construction, especially for high-tech users, because new construction can cost $2 to $3 per square foot more than existing space, depending on finish level. Another option for users is to split operations, and we are seeing a few examples of high-tech companies doing that. • The user-building sale market in the Northwest has been relatively strong-not like it was two or three years ago because there is less inventory-but it is still having an impact on the multi-tenant universe. There were at least six sizeable user- building sales in the past six months. The largest sale was O'Reilly Automotive (Midwest Auto Parts) purchasing the 300,000-sq.-ft. Broadway Distribution Center in Brooklyn Park from First Industrial Realty Trust. O'Reilly Automotive is relocating 300 jobs from amulti-tenant building St. Paul. • In other user sales, The Nuaire Group, a ventilation product manufacturer, purchased the 90,000-sq.-ft. former Gordon & Ferguson Company building in Plymouth for an expansion. The company will take occupancy by year end. • Graco Inc. acquired InterNet Inc.'s 207,000-sq.-ft. facility in Anoka to for $6.4 million. It is an expansion for Graco, which has a large facility in Rogers. • Minnesota Mortgage purchased the 60,000-sq.-ft. North Point Corporate Center in Plymouth. It is occupying 45,000 sq. ft. and has leased out the remaining space to users. • Also, Water Heaters Only Inc. acquired the 22,000-sq.-ft. Premier Restaurant Equipment building in Golden Valley for $2,090,000, or $95 per square foot. The Outlook The Northwest should be below 10% vacancy by the end of 2007. This submarket could see 600,000 to 800,000 sq. ft. of positive absorption by the end of next year, with the majority occurring in office warehouse product. Rates will start to tick upward, with owners probably starting to raise rates in the next six months by 25 to 50 cents across the board. There are six to eight developers in the Northwest with land and approvals. While a couple of developers will likely pull the trigger on new spec projects-including Duke in Otsego-many will wait for preleasing. There should be several larger tech companies that are pushed out into the market by late 2007 because they are out of space and have no room to expand in their current facilities. Print this Page Close Window http://outlook.uproperties.com/PagePrinter.aspx?InstanceID=1 c68b6dc-8dbc-480a-8701-19... 3/7/2007