MINNEAPOLIS-The turnaround for the Twin Cities office and industrial markets is in the offing if the latest economic and job numbers are any indication. Demand for office and industrial space is lagging the local economy, which continues to show signs of new strength, according to a new market report from Northstar Partners, the Twin Cities affiliate of Cushman & Wakefield.

But it’s only a matter of time before demand for space catches up with the need for it. Employment growth has been accelerating since October 2003. Results of a survey conducted by the Federal Reserve Bank of Minneapolis indicate optimism is high in the region with 68% of the respondents saying they expect business investment in the Twin Cities metro area to increase in 2004 and 49% indicating employment would increase during the year.

According to the Institute for Supply Management and Creighton University, the Purchasing Managers’ Index for June was at 68.5% in Minnesota and 61.1% in the US. An index above 50% indicates that the manufacturing sector of the economy is expanding. The index has been increasing for seven consecutive months in Minnesota.

After losing over 30,000 jobs between December 2000 and December 2003, annual employment growth in the Twin Cities has been increasing at an accelerating pace, according to the Bureau of Labor Statistics. The number of jobs in the metro area increased 1.4% in June to nearly 1.8 million jobs. This was the largest annual increase since February 2001 when employment grew by 1.6%. Of the white-collar industries, the educational and health services sector has been experiencing the strongest job performance averaging 5.7% growth during the first half of 2004. Financial sector employment has averaged 1.2% growth during the year, the information sector fell 2.5% and the professional and business services industry was down 0.9%.

After 37 consecutive months of declining employment in the local manufacturing sector, manufacturing employment in the Twin Cities metro area increased by 2,900 jobs (1.4%) from April 2003 to April 2004 and 4,400 jobs (2.2%) in May, according to the bureau. Both Creighton University’s survey and the Federal Reserve survey indicate employment growth will continue over the next several months.

“Manufacturing employment is one of the primary demand drivers for industrial real estate, so the results of these surveys suggest that the local multi-tenant industrial market will experience growing demand in the upcoming quarters,” says the report from Northstar.

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