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Minneapolis/St.
Paul
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Collin Barr,
Vice President-Development,
Ryan Companies |
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The office market in the Minneapolis/St. Paul area has experienced
little to no growth recently. Supply is flat while demand is
static to slightly decreasing. Although rental rates are not
fluctuating, especially for Class A space, pressure on landlords
for concessions, such as more tenant improvement, allowances
and moving incentives, is increasing. Developers and owners
with long-term perspectives are holding their rates as they
expect a future recovery in the market. “Very few are
panicking and dropping rates dramatically,” says Collin
Barr, vice president-development with Ryan Companies.
The Minneapolis central business district is being impacted
by the relocations of large corporate headquarters from downtown
Minneapolis Class A office space to new suburban facilities
throughout the area and other markets. American Express, Target
Corporation, Wells Fargo Bank and US Bank are some vacating
tenants. These moves have left increased vacancy in the market,
along with decreased demand in those multi-tenant buildings
because a major corporation is no longer renting there.
With more vacancy and a static market, virtually no new office
developments are under construction. There are select office
build-to-suits being developed. Best Buy is building a 1.7 million-square-foot
corporate headquarters in the southwest suburban market. Active
developers in the market are Ryan Companies, Opus Corporation,
Hines, United Properties, Duke Realty Corporation and Liberty
Property Trust.
Some recent major lease signings, with average rental rates
ranging between $13 and $19.50, include the law firms of Gray
Plant Mooty Mooty & Bennett and Leonard Street Dinard in
Minneapolis’ IDS Center. Fredrikson & Byron Law Firm
has signed a lease in the Pillsbury Center. The Class A vacancy
rate in this area is 9.75 percent, and with subleases added
in, the overall office vacancy rate is at 15.25 percent.
Look for the downtown Minneapolis central business district
to tighten up as businesses begin to hire once the economy turns.
“Class A space will be snapped up first with good availability
of Class B and C space for several years,” Barr says.
Overall, the markets are in a holding pattern. Tenants are waiting
for the economy to turn around to decide how to further their
businesses growth, while landlords are holding firm on rents
as they steal tenants from one another in the static vacancy
and demand situation of the market.
©2002 France Publications, Inc. Duplication
or reproduction of this article not permitted without authorization
from France Publications, Inc. For information on reprints of
this article contact Barbara
Sherer at (630) 554-6054.
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