The Twin Cities office market experienced 178,160 square feet (sf) of positive direct absorption in the third quarter of 2013. Direct vacancy remained at 17.5%, with class A direct vacancy still the lowest of all classes at 14.1%.
Once again, the West submarket led the way with more than 95,600 sf of positive direct absorption, nearly all in class B, and direct vacancy dropped from 12.7% to 11.6%. The St. Paul CBD saw more positive direct absorption with 54,400 sf and direct vacancy decreased from 23.6% to 22.8%. After more than 104,000 sf of negative absorption in the first half of the year, the Minneapolis CBD experienced nearly 54,000 sf of positive direct absorption, all in class B, however, direct vacancy increased from 16.8% to 17.3%. The Northeast experienced 38,200 sf of positive direct absorption in the third quarter, and direct vacancy decreased from 18.6% to 17.6%. The Northwest absorbed 12,000 sf, once again in class B, and direct vacancy fell from 34.2% to 33.7%. The Southwest saw more than 48,000 sf, of negative direct absorption, mostly in class B, and direct vacancy increased significantly from 15.4% to 16.2%. Not far behind, the South/Airport saw more than 27,000 sf of negative direct absorption, mostly in class A, and the direct vacancy rate spiked to 17.7%.
ASKING RENTAL RATES
Direct weighted average asking rates across all classes and submarkets dropped slightly from $21.79 to $21.73 psf in the third quarter of 2013. Rental rates and concessions have shown minimal change since second quarter and are expected to remain flat for the remainder of 2013.
The Twin Cities office market continues to slowly improve and remains on target to achieve a total of approximately 675,000 sf of absorption in 2013. Companies are continuing their efforts to cut costs by leveraging new technologies and reducing employee square footage allocations. Some class B building owners are reporting an increase in activity due to diminishing class A opportunities.