The office sector continues to struggle. But that doesn’t mean that all office properties face high vacancies and low levels of leasing activity. High-quality, Class-A space with full amenities packages? They continue to attract tenants.
Just look at SPS Tower, a 655,070-square-foot Class-A office building in downtown Minneapolis.
This tower notched 52,540 square feet of leasing activity recently, with three existing tenants either renewing or expanding their leases. The tower, owned by Sumitomo Corporation, now boasts an occupancy rate of 72%. This ranks among the highest occupancy rates for a downtown Minneapolis office building.
What’s behind the success? It starts with quality.
The flight to quality is real, as tenants increasingly seek space in higher-end, Class-A office properties. Many of these tenants are leasing smaller amounts of space but paying more per square foot for it.
SPS Tower fits in that definition of higher-quality, Class-A space. It also boasts amenities that make the building attractive to tenants who are trying to bring their employees back to the office on at least a part-time basis.
Jim Montez, vice president of agency leasing with Transwestern’s Minneapolis office, handles leasing for SPS Tower. He said that the property is benefitting from the flight-to-quality movement.
“The success starts with a great team,” Montez said. “It always starts there. That includes the ownership group. The building has an amazing owner, one of the best I’ve worked for in a long career. The property management team has been in place for many years. The general manager, too. The staff is fantastic. Then you add in the building’s great design and architecture and the strength of the marketing partners, and you build this whole ecosystem that leads to success.”
It’s helped, too, that SPS Tower went through a significant renovation in 2024. That $8 million project included five spec suites with an adjoining two-story tenant lounge on the building’s 19th floor. The renovation also included new furniture, skyway space for new tenant FGMNT Coffee and updates to the lighting on the first floor and skyway levels.
One of the more popular additions to SPS Tower is the Turf Club, which ranks as the largest lawn in downtown Minneapolis. This 6,000-square-foot putting green and adjacent entertainment space is a busy gathering place for both building tenants and professional groups. This space also features two bocce ball courts.
“The goal was to transform this building into a workplace for all seasons and all people,” Montez said. “During this renovation, we tried to be mindful of what the building is and what it has been.”
The all-seasons approach is what spurred the addition of the large green space outside the tower. In addition, SPS Tower features a variety of programming and activities year round, including live music and regular visits from food trucks.
The focus on quality has paid off. Montez said that SPS Tower boasts six tenants that have been in the building for more than three decades. Tenants stay in SPS Tower an average of 17 years, Montez said.
“We are doing something right,” he said. “People don’t want to leave. We are not giving them any reason to leave.”
The amenities of SPS Tower play a key role in the building’s success in attracting and retaining clients. With many employees still working from home at least on a part-time basis, such amenities are a key tool for companies that want to encourage their workers to return to the office at least two or three days a week.
And once more employees start returning to the office? That could start a chain reaction in which other workers return to their office spaces, too.
“We still haven’t quite figured out this new workstyle,” Montez said. “Some people are back in the office on a regular basis. Some are reluctant to come back. How do you provide something for everyone so that everyone feels welcome and accommodated in the office?”
As Montez says, companies are trying to “earn the commute,” make it worthwhile for their employees to return to the office.
This is especially important for downtowns, including downtown Minneapolis and St. Paul. Before COVID, a growing number of employers were moving to office space in the downtown hubs of the Twin Cities. Five years ago, when COVID hit, that flow of companies to the urban core turned off.
“The spigot turned off and it turned off hard,” Montez said.
Montez, though, says that companies will again seek office space downtown as they search out the highest-quality office properties, many of which stand in the Twin Cities’ urban core.
SPS Tower isn’t the only office building downtown receiving investment and upgrades. As Montez says, several building owners are investing in their properties and updating their buildings’ amenities packages.
“It seems to be working,” he said. “I see more traffic heading into downtown and more people in the Skyway System. I think downtown has turned a corner. I am seeing the office market improving downtown.”
An example of this investment is the money that SPS Tower’s owners have invested in creating individual spec suites ranging in size from 3,000 to 12,000 square feet on two floors that were originally occupied by a law firm. The spec-suite area also boasts tenant lounges and media rooms.
This floor has become a hive of activity in the building. Montez says that he knows of at least three podcasts that are produced out of the area’s media rooms.
“Smaller businesses have a hard time justifying the types of spaces that we can provide in this area,” Montez said. “They don’t need these spaces every day. They might need it when they have clients visiting or to use as a space to where people can blow off steam. It gives building occupants access to a space that they otherwise would not have access to. When you have a shared space like that, it creates human interaction. People are social. They strive for that human connection. A space like this gives them that opportunity.”
