Demand for office space in Minneapolis remains so strong that the average asking rent for this sector rose to $15.30 in the first quarter of the year. That’s 15.9 percent higher than the 10-year average, according to the latest research from CBRE.
That’s not the only good news from the report. CBRE also said that leasing activity remains strong, with the Minneapolis office sector seeing a jump of 31.3 percent in leasing activity during the first quarter.
This isn’t to say that the office market here doesn’t face its own challenges. CBRE reported that the Minneapolis office market saw 279,015 square feet of negative net absorption during the first quarter and its overall vacancy rate increased slightly to 18.3 percent.
A number of large tenants contracted their real estate during the quarter, which was the major factor in this negative absorption. CBRE officials, though, predicted that increased demand for office space in Minneapolis means that the market should see positive absorption throughout the rest of 2019.
Jim Freytag, senior vice president with CBRE, said that Class-A office vacancy rates were lower than other classes at 14 percent.
“While vacancy rates did increase overall, leasing demand continues to surge, especially for Class-A space,” Freytag said.
The majority of office leases in the quarter were new rather than renewals, with the Minnapolis CBD accounting for 32 percent of overall leasing activity. The I-394 submarket accounted for 20 percent and the I-494 17 percent.
The two largest sales recorded during the quarter were recorded in the Minneapolis CBD, with Japan-based Sumitomo Corporation purchasing the 650,000-square-foot SPS Tower and DRA Advisors purchasing the 622,173-square-foot Oracle and International Centre.
