Q1 2021 Office Market Insight Report
Market Trends
1.) While some companies are still planning their return to the office, others have opened their offices to allow employees a choice of working from home or the office, and still other companies have fully reopened, bringing their entire workforce back to the office. Though it will likely be at limited capacity, it is anticipated that most companies will begin to bring employees back in some fashion by Q4 2021.
2.) Spec suites are continuing to rise in popularity as companies look for flexible and move in ready solutions for their businesses, while they continue to evaluate how they will utilize their office space post-pandemic.
3.) Construction costs and lead time have increased due to a global shortage of materials.
4.) Sublease availability has continued to increase as companies look for ways to offload underutilized space. Target became the largest sub landlord in the country when it vacated approximately 1 million square feet at 33 South 6th.
5.) Short term lease extensions continue to be the temporary solution of choice for many companies as they continue to evaluate their post-pandemic office needs.
Gross Rental and Vacancy Rates – Class A & B
(Click to enlarge)
Class A 
Class B
Market Movement
| Tenant | Building | Size | Submarket | Type |
|---|---|---|---|---|
| Ernst & Young | The Dayton’s Project | 30,000 SF | Minneapolis CBD | New Lease |
| MN DEED | 180 5th Street E | 153,300 SF | St. Paul CBD | New Lease |
| Northrop Gruman | Norman Pointe II | 21,000 SF | Southwest Metro | New Lease |
| Bolton & Menk | 4Front | 18,000 SF | Northeast Metro | New Lease |
| Larson King | 30 7th Street E | 21,500 SF | St. Paul CBD | Lease Renewal |
Investment Sales
| Buyer | Building | Size | Submarket | Price |
|---|---|---|---|---|
| Larson Capital Management | Crest Ridge | 121,000 SF | Southwest Metro | $16.2 Million |
| Benderson Development | Thrivent Corporate Office | 365,000 SF | Minneapolis CBD | $130 Million |
| Red Door Enterprises | Interchange Office | 142,000 SF | Northeast Metro | $11.7 Million |
| Undisclosed | Eagle Point Office Center | 35,000 SF | Northeast Metro | $4.4 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 consists of over 129 million SF. As of February 2021, Minnesota’s unemployment rate had improved to 4.3%, outperforming the US unemployment rate of 6.2%.