Eager for some good news about the Twin Cities office sector? The Minneapolis-St. Paul office market saw positive net absorption in the first quarter of the year. That’s the first time this has happened since the fourth quarter of 2023.
That’s the big takeaway from the first quarter 2025 Twin Cities office report released earlier this month by Colliers.
The Minneapolis-St. Paul office market saw 109,000 square feet of positive net absorption in the first quarter, Colliers reported, with smaller tenants largely driving increased demand.
According to the report, tenants seeking under 25,000 square feet of space were most active in the local office market during the first quarter.
And in further good news, Colliers said that the availability of sublease space has now dropped in the Twin Cities market for six consecutive quarters. That includes in downtown Minneapolis, a key submarket.
Not all the news is good, though. Larger corporate users are still not as active as in years past. Office sales volume continue to decline, with those transactions that do close occurring at substantial discounts, Colliers reported.
The Twin Cities office vacancy rate still remains high at 22.1%, though that is a slight decrease from the 22.3% overall vacancy rate in the fourth quarter of last year. Construction activity is also sluggish, with just 125,000 square feet of office space under construction as of the first quarter of the year.
The sector’s overall asking lease rate stood at an average of $30.78 a square foot in the first quarter of 2025, up from $26.17 in the first quarter of 2024.
Don’t expect office sales volume to increase anytime soon, though. As Colliers reported, the office capital markets struggled in the first quarter, posting less than half of the sales volume that the market saw at the same time a year earlier. And major office sales are coming at discounted prices.
An example? Ameriprise Financial Center in the Minneapolis CBD sold to Onward Investors for $6.25 million, a cost of just $6.51 a square foot.
Many of the other office sales in the area consisted of redevelopment and adaptive reuse transactions. The Thomson Reuters campus in Eagan, Minnesota, is an example, selling to Ryan Companies. Plans call for this former office campus to be redeveloped for industrial use.
The takeaway here? The Minneapolis-St. Paul office market isn’t performing too differently from most major office markets across the country. Investment sales remain low and vacancies high. New construction is down. But there is some hope here: Smaller tenants continue to seek higher-quality space and the trickle of adaptive reuse projects are taking some outdated office property off the market.
