Since the start of the COVID-19 pandemic, vacant office space in U.S. downtowns has increased by about 136 million square feet. To deal with this? A growing number of office building owners are converting this vacant space to other uses.
And the office-conversion trend is gaining momentum in the key Midwest market of Minneapolis-St. Paul, according to a December report on conversions from CBRE.
According to CBRE’s report, the Minneapolis/St Paul market has seen 44 office conversions or redevelopments totaling 5.4 million square feet since 2016.
The report also found that 13 office conversions or redevelopments were underway in the Twin Cities market in the third quarter of this year. These projects will remove 2.4 million square feet of office space from this market, according to CBRE.
An additional 15 conversion or redevelopment projects have been announced or are planned. These additional conversions will remove 3.4 million more square feet of office space from the Minneapolis/St. Paul market, CBRE says.
According to CBRE, the Minneapolis/St. Paul market ranks as the eighth busiest U.S. market for planned or underway office conversions as a percentage of its total office inventory.
Leading this list is Cleveland, with Cincinnati in second place. CBRE says that Cleveland had 3.8 million square feet of office conversions that were either planned or underway in the third quarter, while Cincinnati had 3.2 million.
Also on CBRE’s list is Dallas/Fort Worth, which had 4.8 million square feet of office conversions planned or underway in the third quarter; Columbus, Ohio, with 0.9 million square feet of conversions planned or underway; Houston, 5.9 million square feet; Kansas City, 1.1 million square feet; Chicago, 4.8 million square feet; and Milwaukee, 0.8 million square feet.
CBRE says that 71.4 million square feet of office conversions were either planned or underway in the United States in the third quarter of the year.
Office conversions can help reduce the amount of vacant space in markets. But they are not a cure-all. Conversions are costly, and not all office buildings make for good multifamily properties, retail centers or other uses. The building must be in the right location, and the construction work of converting the space must not soar too high.
These conversions can help reduce office vacancies in many Midwest markets, though, including in the Twin Cities. CBRE says that the Minneapolis office vacancy rate stood at nearly 24% as of the end of the third quarter.
CBRE says that Minneapolis ranked third among all U.S. markets for the number of completed and underway or planned conversions and office redevelopments in the third quarter of 2024.
