T W I N C I T I E S C O M M E R C I A L R E A L E S TAT E N E W SB Y F R A N K J E R M U S E K

• The Twin Cities have become an increasingly popular location for commercial real estate investors, especially for those from out-of-state.

• Though many REITs, pension funds, private equity firms, high-net-worth individuals, and institutional groups are known for buying properties on the coastlines throughout the economic recovery, the twin cities are seen as a great alternative that can result in large profits for investors.

• According to a recent article published by the Star Tribune, “commercial real estate investors who come here are realizing higher yields than more expensive top-tier markets like New York or Los Angeles,” (Twin Cities Commercial Real Estate Draws Out-of-State, Foreign Dollars).

• In addition, the ratio between the net operating income produced by an asset and the original purchase price is significantly higher in the Twin Cities (6%) in comparison to coastal properties rates for cities like San Francisco (3.5%), for example.

• Although the Twin Cities are marked as second-tier investment cities, the ability to earn returns from properties purchases in the Twin Cities is far greater than those coastal markets.

• According to the Star Tribune:

• “Groups with capital ‘first prefer the gateway cities, but when they’re priced out of those markets, and their ability to earn appropriate returns goes away, they’ll check into markets in second tier-cities, and we would fall into that category,’ said Scott Pollock, executive director of Cushman & Wakefield/NorthMarq’s Capital Markets Group. ‘You have to be patient in this market, and capital is not always in abundance, but you can see better returns in the heartland than on the coasts,’” (Twin Cities Commercial Real Estate Draws Out-of-State, Foreign Dollars).

• That being said, many corporate companies have been seen investing in commercial properties in the Twin-Cities area.

• In recent news, an office deal was made between New York-based Goldman Sachs and the TractorWorks Building and parking ramp, which sold for $54.8 million.

• Goldman Sachs is one of the country’s largest and most well-known institutional investors, who bought the property.

• Because of Goldman Sachs’ recent investment, many smaller-scale companies will likely follow their lead in investing commercially in the Twin Cities, particularly in the downtown Minneapolis central business district.

• For more information about recent commercial investment deals within the Twin Cities, read this article published by the Star Tribune.