For the second quarter in a row, the Minneapolis-St. Paul office market saw positive absorption for the three months ending on June 30. That’s the big positive from Newmark‘s second quarter Minneapolis-St. Paul office report.
According to Newmark’s report, the Twin Cities office market recorded 26,337 square feet of positive absorption during the second quarter of this year. This follows a first quarter in which the Minneapolis-St. Paul office market saw 199,987 square feet of positive absorption. The office sector’s vacancy rate hit 19.7% as of the end of June.
That first quarter number was the first time that this office market notched positive absorption for a quarter since early 2022.
This might an early sign that momentum is slowly building in the local office market. Newmark points to the growing number of companies in 2025 that have announced mandates requiring that their employees return to the office. These companies include General Mills, 3M, Ameriprise, UnitedHealth and the State of Minnesota.
And in maybe the most important example, Target, which ranks as downtown Minneapolis’ second-largest employer, expanded its required in-office days for select divisions. Newmark says that this has resulted in increased foot traffic in the city’s CBD.
Not all office submarkets are showing the same momentum, though. Newmark said that year-to-date, suburban office submarkets have posted 425,764 square feet of positive absorption while the CBD recorded negative 121,664 square feet of absorption.
Tenants are looking for different things from their office space, too, depending on whether they are seeking space in downtown or suburban markets. Newmark says that downtown tenants continue to prioritize quality and prefer Class-A space. Many suburban tenants are driven more by value, favoring lower-cost Class-B space, Newmark reported.
Conversions are playing a role, too, in lowering the market’s overall office vacancy rate, Newmark said. In its report, Newmark pointed to the repurposing of major suburban office campuses for non-office uses, such as Deluxe’s headquarters in Shoreview, Minnesota; the Thomson Reuters and Blue Cross Blue Shield campuses in Eagan; and the Prudential campus in Plymouth. These conversions have reduced the overall office space available in the Twin Cities market.
The Twin Cities office market saw some major transactions in the second quarter. Newmark pointed to Boston Scientific, which has listed its 24-acre, 225,900-square-foot Minnetonka campus for sale, with plans to cease its operations at the site by June of 2026. And MidWestOne Bank has filed to foreclose on the 8300 Tower in Bloomington’s Normandale Lake Office Park after owner Opal Holdings defaulted on $34 million in loans and failed to pay its property taxes. This is the fourth office tower in the five-building complex to face distress.
The St. Paul Downtown Development Corp. has acquired the bank note for the vacant 16-story Alliance Bank Center, with the goal of moving the property into receivership as part of St. Paul’s downtown revitalization efforts.
In other big news, the 226,000-square-foot Lumber Exchange building in downtown Minneapolis is for sale and being marketed as a candidate for office use or residential conversion. And Crecera Brands is relocating its local headquarters to the Offices at MOA, leasing 24,000 square feet on the ninth floor.
