Minneapolis–St. Paul office market report

Q1 2025

The Minneapolis – St. Paul office market has shown signs of stabilization through the first period of 2025. The market’s total vacancy rate saw its first decline, albeit a small one, since the end of 2023. Total availability dipped slightly this period to 22.1% but remains largely in line with the levels observed over the past several periods. Leasing activity remains slow, with smaller occupiers accounting for most of the demand. The development pipeline remains conservative, with the one new project breaking ground this period, The Craftsman building in Edina, already seeing interest in the pre-leasing market. Overall, Q1 provides optimism for MSP – but a return to pre-pandemic market fundamentals will likely take additional time, with leases trending smaller and less than desirable or large footprint spaces remaining available, as well as low sales volume and plummeting property values.

0.3%

Availability declined in Q1 2025

Sublet availability’s % share of total available SF has declined by 5.2% since peaking at 17.5% in Q2 2023, dropping from over 4.3 msf to just over 3.1 msf. Many sublease availabilities have become direct spaces, and fewer tenants are putting sublet space on the market. Large block sublease spaces are expected to remain vacant until they revert to direct availability, as demand is higher for smaller spaces as occupiers continue to emphasize space needs.

4,143 sf

Average lease size in Q1

Average lease size through Q1 2025 in the MSP office market has declined from the 2024 average of 4,539, driven largely by smaller deals signed by small occupiers. Through the first quarter of 2025, smaller occupiers (under 25 ksf) have accounted for 72.0% of all leased square feet, the largest proportion since the year 2022 (72.8%). With smaller tenants most drawn to the smaller sized spaces in the market coupled with limited activity amongst larger space users, the average lease size YTD in 2025 has declined.

+110,900 sf

Absorption turns positive

Following several periods of negative annual net absorption, the MSP office market showed 110,900 sf of positive net absorption through Q1 2025.

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