- West submarket turns into ‘Golden West’ along I-394
- Components for rental rate increases are in place in the Minneapolis CBD, but it’s not a clear path
- Southwest’s strong year turns tepid in the end
With 1 million square feet (msf) of positive absorption for the year, the Twin Cities office market is in its best shape since 2007. Overall vacancy at year end was 18% for direct space across all property types, down 1.2 percentage points from 19.2% a year ago. Most encouraging for landlords were signs of better pricing power for rental rates. In the West submarket, rental rates for class A space rose by 10% during the year to an average of $29.69 gross psf, $16.87 net psf. In the Minneapolis Central Business District (CBD), low vacancy in class A buildings has yet to translate into true pricing power for landlords, but the conditions for rental rate hikes are being established. The average rental rate across all property types and submarkets was $23.81 gross psf, $12.81 net psf, at year end—a slight downward tug from the third quarter.
Sublease space is no longer the major factor in the market that it has been in recent years. Not since 1997 has the market seen so little sublease space as is now available. That said, there are some concerns about additional space entering the market due to corporate downsizing and consolidation among some of the larger space users. Downsizing is still a significant factor, especially in the Minneapolis CBD where some larger users, including several law firms, are considering utilizing more efficient office configurations as their current leases expire over the next few years.
To read more, visit the January 2013 edition of Cushman & Wakefield/NorthMarq’s Compass report, now available online. Visit the web site: www.northmarqcompass.com