The Minneapolis office market got off to a strong start in 2020. What happens in this market now, though, is anyone’s guess, as the United States continues to battle the COVID-19 pandemic.
In its latest report, CBRE tracked 38 office leases — 25 new and 13 renewals — totaling nearly 1.2 million square feet during the first quarter of 2020. That ranked among the highest quarterly totals in the past two years in the Twin Cities office market.
What type of office space was in demand? CBRE said that tenants and investors continued to choose office spaces with modern amenities in the more desirable parts of the Minneapolis/St. Paul market.
Healthcare accounted for 27 percent of all leasing activity, driven largely by companies such as Minnetronix and Tactile Technology, both of which closed large leases during the first quarter. The finance and insurance industries accounted for 25 percent of all office leases, while technology firms accounted for 16 percent.
“While we still see much of the leasing activity driven by an ever-increasing demand for specific, high-end amenities, much of the increased leasing is also a result of the diverse economy in the Twin Cities,” said CBRE’s Emily Nicoll, senior vice president in Minneapolis. “Certain sectors, including healthcare, insurance and tech have significantly increased their presence in recent years and we are seeing this reflect in today’s office market.”
The largest office sale in the first quarter was Bridge Investment Group’s purchase of the 567,889-square-foot West End Office Park for $130 million in St. Louis Park, Minnesota, followed by Syndicated Equities’ purchase of the 173,364-square-foot Trimble Transportation Mobility Headquarters for $39 million in Minnetonka.
CBRE reported, too, that the Twin Cities market as of the end of the first quarter had 874,280 square feet of office space under construction. The market saw 78,661 square feet of positive net absorption, while overall net askng office rates rose to $15.67 a square foot, a jump of 2.4 percent from a year earlier.
The office market’s overall vacancy rate increased slightly to 18.7 percent in the first quarter, a 20-basis point increase from the fourth quarter of 2019.
These are all solid numbers. But they were all recorded before governors issued shelter-in-place orders in an effort to halt the spread of COVID-19. What happens now in the Minneapolis/St. Paul office market? That’s uncertain.
