CRE growth remains strong.

Byline: Matt M. Johnson

Tenants needing commercial space and apartments might make 2019 one of the best years for Twin Cities landlords seeking to sign more leases late in the longest running growth period ever.

The market absorbed about 2 million square feet of commercial space and 2,050 apartments in the first half of the year, according to the most recent edition of the semi-annual Compass Report produced by the Twin Cities office of Cushman & Wakefield. Highlights in the report, which was published this week, include about $750 million in closed and pending commercial real estate investment sales during the first half of 2019, 1.42 million square feet of industrial space absorption and a retail vacancy rate that is the highest in nine years despite positive first-half space absorption.

First-half numbers belie a second half of the year that could see even bigger gains, just as continuous Twin Cities commercial real estate market growth officially crossed a full decade on July 1.

"We're projecting an even stronger second half of 2019, particularly in the retail and investment sectors, and as of now we're expecting one of the best absorption years we've seen during this economic expansion," said Mike Ohmes, the managing principal of Cushman & Wakefield's Twin Cities office.

All real estate sectors saw positive developments during the first half of the year, the report shows. In particular, capital markets and investment sales showed continued interest among investors in buying in all sectors of the Twin Cities market. The rolling 12-month sales total for the Twin Cities grew in the first half by nearly $300 million to about $6.1 billion. Industrial and retail sectors showed the largest gains, while multifamily sales held steady at about $1.8 billion in sales.

Apartments production to top 5,500

Developers are expected to deliver 5,500 new Twin Cities apartments in 2019, with 1,100 of them in downtown Minneapolis, according to the Compass Report. An estimated 25,000 new apartments have been completed during the past decade.

But the vacancy rate has recently climbed to 7.6% in downtown Minneapolis, which has some building owners offering concessions including a month of free rent at leasing.

The Twin Cities apartment vacancy rate was 2.6% in the first quarter of 2019, down from 3% during the fourth quarter of 2018, according to the report. Growth in the average apartment rent flattened to 2.6% during the first part of 2019. Average rent in...