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)

Market Movement

Tenant Building Size Submarket Type
Ernst & Young The Dayton’s Project30,000 SFMinneapolis CBDNew Lease
MN DEED180 5th Street E153,300 SFSt. Paul CBDNew Lease
Northrop GrumanNorman Pointe II21,000 SFSouthwest MetroNew Lease
Bolton & Menk4Front18,000 SFNortheast MetroNew Lease
Larson King 30 7th Street E21,500 SFSt. Paul CBDLease Renewal

Investment Sales

Larson Capital ManagementCrest Ridge121,000 SFSouthwest Metro$16.2 Million
Benderson DevelopmentThrivent Corporate Office365,000 SFMinneapolis CBD$130 Million
Red Door EnterprisesInterchange Office142,000 SFNortheast Metro$11.7 Million
UndisclosedEagle Point Office Center35,000 SFNortheast 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%.