A tale of two markets? That’s shaping up today in the Minneapolis office market.
According to Newmark‘s second quarter Minneapolis office report, overall office vacancy rates continue to rise in the Minneapolis market. But, as in other markets across the Midwest, demand is rising for Class-A office space with high-end amenities.
Newmark reports that the Minneapolis office market registered 103,620 square feet of negative absorption in the second quarter of the year. This negative absorption came even with companies in the CBD and suburban markets making significant office moves.
The negative absorption resulted in an increase in the overall office market vacancy rate of 1 basis point. This boosted Minneapolis’ office market vacancy rate from 14.9% in the first quarter of 2022 to 15% in the second.
The amount of sublease space available rose, too, with 2.9 million square feet listed as available in the second quarter. That represented 2.4% of all vacant space in the Minneapolis metropolitan area.
A positive? The average gross asking rent showed a modest increase, with the second quarter seeing a jump to an average of $29.90 a square foot across the metropolitan area.
The story is a bit different for Class-A office space, though, which saw gains in the second quarter in some submarkets. This isn’t surprising: As companies try to get their workers back into the office, many are upgrading to higher-quality office space, using this amenity-filled space as a lure to reluctant workers.
Companies might also be able to afford higher-quality office space today while in the past it would have been outside their budget.
This flight-to-quality was noticeable in the CBD core, Southwest and West submarkets, with overall year-to-date Class-A absorption at 103,286 square feet across the entire Minneapolis market.
Big office deals in the Minneapolis CBD included Pohlad Company’s move to its 103,000-square-foot space in RBC Gateway Tower. Greenberg Taurig expanded into 22,323 square feet of the Wells Fargo Center, while Fulcrum leased 23,560 square feet in the IDS Center.