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MINNEAPOLIS-Two top Twin Cities retail brokers differed widely as to how they saw retail real testate shaping up between now and July 1, 2004, at a recent forecast breakfast.

Both agree that the Twin Cities population growth and the strong housing market, including the heavy refinancing, has buoyed the retail real estate market here. In fact, retail has been the strongest real estate sector in the 2001 recession and the 2002 jobless recovery.

“Shopping centers, particularly grocery-anchored centers, have replaced apartments as the asset of choice for risk-averse buyers in a shaky economy,” said Russ McGinty, SVP of retail services for locally based Madison Marquette.

A decline in vacancy and rapid increase in absorption will be the story for the 12 months ending July 1, 2004, said Chris Simmons, VP in Welsh Cos.‚ retail brokerage division. He predicted the retail vacancy rate will decline to 4.6% by July 1, 2004, from 5.6% on July 1, 2003. He anticipates a dramatic increase ˜2.8 million sf˜ in absorption, or from 1.2 million sf for the 12 months through July 1 to four million sf for the 12 months through next July 1. He expects that some 3.5 million sf of new retail space will be added to the market over that time. And he expects net average rental rates to increase to $18.57 per sf from $17.63 per sf.

But McGinty is significantly less optimistic. He predicted the retail vacancy rate will decline only to 5.3% July 1, 2004, from 5.6% on July 1, 2003. He anticipates a slight increase ˜1.5 million sf˜ in absorption, going from 1.2 million sf for the 12 months through July 1 to 2.7 million sf for the 12 months through next July 1. He expects that some 2.7 million sf of new retail space will be added to the market over that time. And he expects net average rental rates to dip to $17.22 per sf from $17.63 per sf.

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