Minnesota is a thriving state with a diverse economy and a strong real estate market. Commercial property loans are available for various types of properties, including multifamily, office, industrial, retail, self-storage, and hospitality. This article will provide an overview of the economy and real estate markets in Minnesota, as well as financing options for each property type.

With data from the Bureau of Labor Statistics and the U.S. Census Bureau, we will explore the current state of the economy and real estate market in Minnesota, helping potential investors make informed decisions about commercial property loans in the state.

Economy in Review

Minnesota's economy is diverse and robust, with key industries such as agriculture, manufacturing, healthcare, and technology driving growth. According to the Bureau of Labor Statistics, the state's unemployment rate is consistently below the national average, indicating a healthy job market. The U.S. Census Bureau reports that Minnesota has a higher median household income than the national average, contributing to a strong consumer base for businesses.

As the economy continues to grow, so does the demand for commercial real estate. This growth presents opportunities for investors to secure commercial property loans in Minnesota and capitalize on the expanding market.

Multifamily Market

The multifamily market in Minnesota is strong, with increasing demand for rental properties due to population growth and urbanization. Financing options for multifamily properties include traditional bank loans, government-backed loans from Fannie Mae and Freddie Mac, and FHA loans for qualifying properties.

Office Market

Minnesota's office market is driven by the state's thriving business environment. Investors can secure financing for office properties through traditional bank loans, SBA 504 loans for owner-occupied properties, and commercial mortgage-backed securities (CMBS) loans for larger transactions.

Industrial Market

The industrial market in Minnesota is supported by the state's strong manufacturing and distribution sectors. Financing options for industrial properties include traditional bank loans, SBA 504 loans, and CMBS loans for larger transactions.

Retail Market

Minnesota's retail market benefits from the state's high median household income and growing population. Investors can secure financing for retail properties through traditional bank loans, SBA 7(a) loans for owner-occupied properties, and CMBS loans for larger transactions.

Self-Storage Market

The self-storage market in Minnesota is experiencing growth due to increasing demand for storage solutions. Financing options for self-storage properties include traditional bank loans, SBA 7(a) loans, and CMBS loans for larger transactions.

Hospitality Market

Minnesota's hospitality market is supported by the state's thriving tourism industry. Investors can secure financing for hospitality properties through traditional bank loans, SBA 7(a) loans for owner-occupied properties, and CMBS loans for larger transactions.

Commercial Real Estate Loans by Purpose

There are many types of loans available for commercial properties in Minnesota, and the best fit for you depends on your investment strategy. Here are some broad categories of financing available.

Permanent Financing

Permanent financing is a type of loan that remains in place for an extended period of time. It's commonly used to finance the acquisition of commercial properties or to refinance existing debt. Types of permanent financing include bank loans, loans from government-sponsored entities like Fannie Mae and Freddie Mac, HUD loans, credit union loans, loans from life insurance companies, commercial mortgage backed securities (CMBS) loans, and other types of loans depending on the specifics of the commercial property.

Refinancing a Commercial Real Estate Property in Minnesota

I wouldn't quite call this a separate type of loan, but I have to mention refinancing in here. These are typically permanent loans (but not always) used to pay down an existing, partially amortizing or interest-only loan.

Often you may be able to time a refinance to happen after an interest rate drop — an ideal solution — but if your loan is maturing during a period of higher rates, you shouldn't stress too much about this. We'll work with you to find the best loan terms for your commercial property by reaching out to potentially thousands of lenders. Just complete the form below, and we'll get to it.

Construction Financing

Construction financing, also known as interim financing, is used to finance the cost of construction for commercial properties. It is usually a short-term loan that covers the cost of land development and building construction. Once construction is completed, the borrower can typically convert this into a permanent loan or pay it off with a new loan.

Bridge Loans

Bridge loans are a type of short-term loan that can be used to cover costs in the interim period between the end of one loan and the beginning of another. They are typically used in commercial real estate to finance the transition between construction financing and permanent financing. Bridge loans generally have higher costs than most other financing options and are often interest-only and non-recourse.

Commercial Real Estate Loans by Type

Depending on the purpose of your loan, you will have several financing options available to meet your investment goals. Read below to learn more about specific loan types.

Bank Loans

Bank loans are a common financing option for commercial real estate in Minnesota. They can offer competitive interest rates and flexible terms, but the specifics can vary greatly from bank to bank. While they may not always be the best fit for larger, more complex projects, they can be an excellent option for smaller, simpler properties.

Life Company Loans

Life company loans are typically used to finance high-quality assets in major markets. They generally have lower loan-to-value ratios than most other loan types but offer competitive interest rates and long terms. However, they may not be suitable for riskier projects or properties in less established markets.

Agency Loans

Agency loans, offered by government-sponsored entities like Fannie Mae and Freddie Mac, are typically used for properties that are mostly multifamily. They offer attractive loan terms, low, fixed interest rates, and are non-recourse. However, there are restrictions on the amount of income that can come from other commercial uses.

HUD Loans

HUD multifamily loans are government-backed loans that are primarily used for the construction, substantial rehabilitation, purchase, and refinancing of multifamily properties. These loans offer long-term, non-recourse financing with competitive interest rates but have extensive requirements for qualification.

CMBS Loans

Commercial Mortgage Backed Securities (CMBS) loans are a type of mortgage-backed security backed by commercial real estate loans. Lenders focus more on the strength of the property than the borrower's credit, making them a good option for properties with strong cash flow.

SBA Loans

Small Business Administration (SBA) loans, such as the SBA 7(a) and SBA 504, offer attractive financing options for small businesses. However, the maximum amount for an SBA 7(a) loan is $5 million, while SBA 504 loans can go up to $20 million. They cannot be used for multifamily properties and are only available for properties that the business owner occupies.

Mezzanine Loans

Mezzanine financing is a hybrid form of financing that combines elements of debt financing and equity investment. It is typically used in commercial real estate to fill a funding gap between the primary loan and the total cost of a project.

Commercial Property Insurance in Minnesota

This part isn't about loans, but it's just as important to your investment's success. Let's talk (quickly) about insurance.

Insurance premiums have skyrocketed in the past few years, as I'm sure you know. While multifamily gets a lot of the attention, rates for insuring anything from office buildings to shopping centers have jumped significantly.

Janover Insurance Group is dedicated to finding the best insurance solutions for your commercial real estate assets in Minnesota. Click to get a free insurance quote for your property — no obligation.

By City

• Minneapolis
• Saint Paul