Q1 2019 Office Market Insight Report

Office Markets Trends

  1. As landlords look to compete with the popularity of co-working spaces, speculation suites are increasing in popularity and becoming evermore common across the metro. These suites offer move move-in ready spaces that
    allow tenants to limit build-out costs and furniture costs and provides more flexible lease terms. Occupiers also find the search-to-lease process is much faster.
  2. The open office concept craze, popularized by Google and Facebook may be coming to an end. Companies are moving to more functional work spaces that offer a wide range of ways to work. This diverse work environment allows employees to select spaces like huddle rooms, workstations, private offices, and conference rooms that best align with their tasks for the day.
  3. Construction costs remain high and furniture lead time increases due high demand and low supply. Metal tariffs have also played a role in the cost of materials and their availability.
  4. As parking lots and ramps are redeveloped into commercial spaces, parking in urban areas like Minneapolis is becoming increasingly sparse and more expensive.

Rental and Vacancy Rates

(click to enlarge)

Market Movement

CompanyTrans. TypeSizeSubmarketBuilding
WeWorkNew Location102,000 SFSouthwestMozaic East
AlulaRelocation68,000 SFNortheastMidway Innovation Ctr
Digi InternationalRelocation72,000 SFWestExcelsior Crossings
Tactile MedicalRelocation100,000 SFWest3701 Wayzata
Common GroundNew Location25,500 SFMinneapolis801 Marquette

Investment Sales

Target Plaza310,000 SFMenlo EquitiesMinneapolis$171M
SPS Tower620,000 SFSumitomo Corp.Minneapolis$144M
Excelsior Crossings268,000 SFAcesso PartnersWest$115.5M
180 East 5th672,000 SFGamma Real EstateSt Paul$52M
Minnesota Center277,044 SFAltusSouthwest$48.6M
3701 Wayzata310,000 SFOpusWest$22.1M

The Minneapolis/St. Paul Office Market is a diverse, stable market with an unemployment rate of 2.2% and projected GDP growth that is expected to continue to outperform the national economy. Minneapolis/St. Paul, collectively referred to as the Twin Cities, is the 16th largest MSA with approximately 3.6 million residents and home to 19 Fortune 500 public companies’ headquarters. The Twin Cities is also ranked highly for quality of life, labor force participation, health care and workforce quality.