Office Market Report Q1 2016
Tenants seek space that fosters a collaborative environment and attracts employees with amenities, access to transit
VACANCY AND ABSORPTION TRENDS
The vacancy rate in the Minneapolis-St. Paul office market stands at 13.5 percent, down from 13.7 percent at year-end 2015. There was 112,369 square feet of absorption, with Class B space leading the way at 214,599 square feet, which is a stark contrast to the negative absorption of 26,012 and 76,218 in Class A and C space, respectively. Class B space also had a strong fourth quarter of 2015 when there was 426,702 square feet of absorption.
Areas with the synergy of restaurants and entertainment options and ease of access to amenities are seeing strong demand among office tenants. Employers are looking for places to locate their business that help to attract and retain talent. Properties along the France Avenue corridor in Edina and along Interstate 394 near the West End offer this type of environment in the suburbs. The Minneapolis CBD’s strong amenity offerings, in addition to abundant mass transit options and growing housing options, are fueling demand downtown.
In the Minneapolis CBD, many large tenants that occupy spaces of 100,000 square feet or more have made office space use decisions recently by signing leases or choosing build-to-suit options. Strong activity is now occurring among tenants in the 10,000-25,000 square foot range, some of which can be attributed to demand from vendors following larger tenants.