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Commercial real-estate market declining in 2017

Although commercial real estate has been in high demand in the past, that may not be the case in the future. In fact, it appears that 2017 is going to see growth rates in the commercial sector slow down.

The Twin Cities have seen an influx of commercial real estate business over the last several years, with office tenants taking up space in around a million square feet of local commercial buildings in 2015. The retail market is currently recovering from the recession, and consumer spending is once again beginning to go back to pre-recession rates.

Commercial real estate is a business, and like many others, it's cyclical. When no more buildings are needed, then the need for growth declines. Now that many businesses have expanded and made their homes in the city, that's what's starting to happen.

While some believe the growth rates will continue on the same path as in 2016, there are signs that it is beginning to slow down. One sign is that job growth is starting to slow, which means that there are fewer new start-ups and businesses making their homes in the city.

Sometimes, companies don't need as much space, either. Where companies may have needed a huge space for super computers in the 80s or for dozens of cubicles in the 90s, today many people work remotely or have small technologies in the office that simply don't require as much room. This means that the total amount of office space needed is reduced as well.

Before you buy or lease a new building, consider speaking with a legal professional so that you can review your contract. Negotiating a better contract is often possible when there is less demand in the market.

Source: Twin Cities Business, "Caution On Commercial Real Estate," Burl Gilyard, Jan. 03, 2017

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