Not all office assets are performing equally in the Minneapolis-St. Paul market. Marcus & Millichap in its latest research says that office leasing and investment sales are stronger in the Twin Cities suburbs, while this activity remains muted in the downtown areas of Minneapolis-St. Paul.
In its 2026 Office Investment Forecast, Marcus & Millichap said that the Twin Cities’ suburban office markets are entering this year with more momentum, with office vacancy rates outside core urban areas falling below 12% for the first time since early 2023.
In fact, the office vacancy rates in many suburban Twin Cities markets rank among the lowest in the United States as 2026 begins.
Marcus & Millichap said that leasing demand has been especially strong among office properties built after 2010.
But in downtown Minneapolis and St. Paul? Leasing demand remains sluggish, Marcus & Millichap reported. According to the company’s forecast, these downtown areas saw vacancy rates that kept rising throughout 2025. This trend, along with expected limited corporate growth, points to another year of waning demand for office space in the Twin Cities’ urban cores, Marcus & Millichap said.
Vacancy rates might not rise too quickly in 2026, though, even in downtown areas. That’s because Marcus & Millichap is forecasting little new office construction throughout the Minneapolis-St. Paul region this year. At the same time, a growing number of developers are converting outdated office space to other uses. Both of these trends might help limit vacancy increases in downtown St. Paul and Minneapolis.
Marcus & Millichap predicts that the market’s overall office vacancy rate will fall by 30 basis points to 14.5% in 2026. That falling vacancy rate is good news, but 14.5% would still be above the Minneapolis-St. Paul office market’s five-year average.
The forecast report predicts that the average asking rent in the Minneapolis-St. Paul office market will increase by 1.5% in 2026 to $19.85 a square foot. That would put Minneapolis-St. Paul’s rent change among the highest in the Midwest and would also extend a four-year streak of rent gains in this region’s office sector.
Don’t expect much new supply to hit the market, though. Marcus & Millichap predicts that inventory expansion in the Twin Cities market will slow to its lowest level in a decade. The company is predicting only 430,000 square feet of new office construction in the Twin Cities market this year, with the I-494 corridor in Hennepin County accounting for roughly half of all deliveries.
The I-394 corridor is a strong one, too. Marcus & Millichap said that this submarket captured an outsize share of investor activity in 2025. Office asking rents here are among the highest in the Twin Cities market and many of the office properties here offer the high-quality amenities that companies are increasingly seeking. The corridor, then, appears positioned to remain a key target for capital in 2026.
Those investors looking for a smaller office footprint might look at properties in suburban St. Paul, which Marcus & Millichap ranked as the most active submarket for trading last year.
