Minneapolis–St. Paul office market report

Q2 2023

For the most part, trends from the previous quarter persisted in the Twin Cities office market. Companies continued to sublease major headquarters and decrease space. In the latest major example of this, Thompson Reuters committed to sublease roughly 300,000 square feet at the Prime Therapeutics building in Eagan – a reduction of about 800,000 square feet of office space from their previous campus. Other companies renewed their commitment to the central business district, like the Buyers Support Group with their move to the Dayton’s Project, but the North Loop is still proving to be the most attractive urban submarket. And investors are beginning to take advantage of office properties that were given back to their lenders, as Hempel reportedly purchased LaSalle Plaza from Northwestern Mutual for less than a third of what was paid for the property in 2011. 

But ultimately, this appears to be a moment for new opportunities to open up in the market. Some office buildings will be purchased at a discount while others are repurposed or demolished. The increase of sublet space in Class A buildings could attract new companies looking to upgrade their offices. Brokerage firms are getting more creative with attracting tenants, as shown by the increasing popularity of spec suites, and more major, institutional companies appear to be driving their employees back to the office. This gives us reason to be optimistic that the downtown markets will begin to experience some growth by the end of the year. 


Class A sublet space kept rising

Available Class A sublet space increased 7%, or 230 ksf, in the second quarter. All other classes saw a decrease of 74 ksf. Class A properties currently account for 83.7% of all available sublet space. This trend of shedding office space has been ongoing since before the pandemic, but it is creating an opportunity for companies that wish to upgrade their space to do so at a discount.

137 ksf

The North Loop led leasing activity

There was 138 ksf of space leased in the Southwest submarket and 137 ksf leased in the North Loop – the two most active submarkets in the second quarter. However, the North Loop’s leasing activity accounted for 3.8% of its total inventory, which was the most for any submarket. The North Loop will continue to serve as a bright spot in the Twin Cities urban market, as much of the leasing activity has been driven to the suburbs in recent years.

10 bps

Climbing vacancy rates slowed

The overall vacancy rate reached 17.7%, but the increase was nominal. Direct vacancy remained flat and sublet vacancy increased 10 basis points. It’s the smallest increase in the vacancy rate since the third quarter of 2021. While an additional 147 ksf of vacant space in the market is far from ideal, it’s preferable to the previous quarter’s increase of 50 basis points (518 ksf).
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Get in-depth office market reporting and insights from commercial real estate experts in the Greater Minneapolis–St. Paul (Twin Cities) area. Avison Young advisors look at Minneapolis–St. Paul commercial real estate activities and the latest Minneapolis–St. Paul statistics to provide you expert market research on Minneapolis–St. Paul's office properties.

Explore different topics like the latest office market pricing trends and analysis of Minneapolis–St. Paul's current office real estate market conditions. Gain a better understanding of Minneapolis–St. Paul’s office real estate outlook and stay ahead of current office space trends. Make smart decisions when it comes to investing in office properties in Minneapolis–St. Paul's competitive office real estate market. Avison Young is your trusted source for commercial real estate office market insights in Minneapolis–St. Paul.

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