Q4 2020 Office Market Insight Report

Market Trends

1.) A majority of Minnesota’s office users have continued to hold off on bringing employees back to the office full time. Work from home protocols are expected to remain in place until the vaccine is available to the masses. We do not anticipate a drastic change in this trend until summer of 2021.

2.) Short term lease extensions continue to be the temporary solution of choice for many companies looking to buy time, as they continue to evaluate their long-term real estate plans.

3.) The Twin Cities’ sublease inventory rose significantly during Q2 and that trend continued throughout Q3. However, this number began to level off in Q4. As more research is being conducted regarding employees work preferences, new studies are being published suggesting that for many office workers, the allure of working from home is beginning to wear off and employees are ready to return to the office in some compacity.

4.) As companies begin to bring their employees back to the office, we anticipate the work environment will be modified to offer much more flexibility. Many believe that offices will be used as more of a collaboration space going forward giving employees the choice to work how/where they see fit. It is expected that more and more companies will abandon dedicated office spaces in exchange for more touchdown/flexible workspace.

5.) Though the need for office space varies from company to company, it’s hard to argue the fact that having employees together and collaborating helps create a sense of culture and encourages innovation. Companies have been able to get by with remote working, however, for many, this is not the preference. We anticipate office space to continue playing a significant role in attracting and retaining top talent post pandemic.

Rental and Vacancy Rates

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Market Movement

Fredrickson & ByronRBC Plaza178,191 SFMinneapolis, CBDNew Lease
AVI Systems9675 W 76th St46,648 SFSouthwest MetroLease Renewal
SPS CommerceSPS Tower118,039 SFMinneapolis, CBDLease Renewal
One 10 MarketingButler Square30,533 SFMinneapolis, CBDLease Renewal
Hanson EfronCapella Tower18,000 SFMinneapolis, CBDNew Lease
Deluxe Corporation121 S 8th Street23,207 SFMinneapolis, CBDNew Lease

Investment Sales

Eagle Ridge Partners/Long Wharf CapitalOne Southwest Crossing233,000 SFSouthwest Metro$16.5 Million
DavisCornerstone Medical Building53,000 SFNortheast Metro$25 Million
Northpark CC LLCNorthpark Corporate Center146,000 SFNortheast Metro$12.2 Million
Juniper City Center Plymouth LLC15700 37th Ave N50,000 SFNorthwest Metro$15.5 Million
3960 Coon Rapids LLCMercy Healthcare Center76,000 SFNortheast Metro$16.6 Million

Minneapolis/St. Paul, collectively referred to as the Twin Cities, is the 16th largest MSA with approximately 3.6 million residents and home to 17 fortune 500 public companies’ headquarters. The Twin Cities is also ranked highly for quality of life, labor force participation, health care, and workforce quality. The Minneapolis/St. Paul Office Market started the year off stable with an unemployment rate of 3.1% and projected GDP growth that was expected to continue to outperform the national economy. Minnesota’s job market has improved significantly over the past two quarters as the nation continues to recover from the negative impacts brought on by COVID-19. In November of 2020 Minnesota’s unemployment rate had improved to 4.4%, roughly 2 percentage points below the national average of 6.7%.