It’s not surprising, but the latest research on the Minneapolis-St. Paul office market paints a sector that remains largely in limbo as companies struggle to determine how much office space they’ll need in today’s era of hybrid work.
The numbers from Colliers‘ third quarter Minneapolis-St. Paul office market report don’t leave much hope that the office sector here will rebound anytime soon. An example? Colliers reported that the Twin Cities office market posted 1 million square feet of negative absorption in the third quarter.
Last year during the same quarter, the Twin Cities office market saw negative net absorption of 482,800 square feet. It saw negative net absorption of 236,100 square feet in the second quarter of this year.
That led to an increase in office vacancy. According to Colliers, the Minneapolis-St. Paul office market ended the quarter with a direct vacancy rate of 13.8%, up from 11.5% one year earlier and 13.2% in the second quarter of this year.
In a bit of good news, asking rents were higher in the third quarter of this year than in the same quarter last year. According to Colliers, overall asking lease rates averaged $31.93 a square foot in the third quarter of this year, up from $28.04 a year earlier.
Colliers says that today’s Minneapolis-St. Paul office sector is increasingly a tenants’ market, with deals closing at 5% to 15% below asking price.
There were notable office deals in the third quarter, though, including the 308,000-square-foot lease at 2900 Ames Crossing Road in Eagan, Minnesota, and the 68,000-square-foot lease at 2340 Energy Park Drive in Midway, Minnesota.
There were some sales, too, including 30 S. 3rd St. in the Minneapolis CBD which sold for $424 a square foot and 3451 Burnsville Parkway which sold for $92 a square foot.
