West submarket now the most expensive
The first quarter of 2015 was the first time that the average rental rate in the West surpassed any other submarket, notably including the Minneapolis CBD. This quarter has seen a marked cost increase in the West as more premium space is being listed for lease. Over 50,000 square feet of Class A space has re-entered the market in recent quarters, drastically raising average asking rates in an already tight market. For instance, the 601 Tower at Carlson Center with 19% vacancy now has gross lease rates nearing $40 PSF. The economic moment is right for new office construction in the I-394 corridor, and in October it was announced that Ryan Cos. and Artis REIT plan to build a 14-story office tower at 801 Carlson Parkway.
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Minneapolis–St. Paul Office Insight Q4 2015
1. West rental rates have been increasing at a rapid clip
Source: JLL Research
Population growth year-over-year by city
Source: JLL Research
2015 annual absorption in Northeast by class
Source: JLL Research
West submarket now the most expensive
The first quarter of 2015 was the first time that the average rental rate in the
West surpassed any other submarket, notably including the Minneapolis CBD.
This quarter has seen a marked cost increase in the West as more premium
space is being listed for lease. Over 50,000 square feet of Class A space has re-
entered the market in recent quarters, drastically raising average asking rates in
an already tight market. For instance, the 601 Tower at Carlson Center with 19%
vacancy now has gross lease rates nearing $40 PSF. The economic moment is
right for new office construction in the I-394 corridor, and in October it was
announced that Ryan Cos. and Artis REIT plan to build a 14-story office tower at
801 Carlson Parkway.
Minneapolis & St. Paul CBDs: a tale of two cities
It is unusual for the St. Paul CBD to experience more activity than the
Minneapolis CBD but large employer moves within St. Paul, including Pioneer
Press and financial services firm Green Tree, have created significant churn.
Absorption of high quality space drove down the average Class A rental rate this
quarter, while a number of less-attractive Class B spaces continually sit vacant
The St. Paul CBD currently has the smallest difference in class asking rates
(only an 11% premium for Class A) out of all the office submarkets. Meanwhile,
the Minneapolis CBD is accommodating more rightsizing and cost-aware moves,
especially among law firms.
Plenty of Class A space in Northeast despite a growing demand for Class B
This was a challenging quarter for the Northeast submarket as it saw
exceptionally large negative absorption totals. Be the Match finally relocated to
their new build-to-suit headquarters in the North Loop and opened up substantial
contiguous Class A space. Unfortunately, Class B space moves much more
quickly in the Northeast submarket and is even highly prized in the Arts District
with its renovated warehouses that host creative agencies, boutique retailers,
and expanding breweries. To capitalize on the shift towards more aesthetic and
historic office space, Ackerberg is redeveloping the 48,500 square foot Miller
Textile Building at 861 Hennepin Ave in the heart of Northeast Minneapolis.
Suburban submarkets heating up faster than CBDs
2,257
$26.29
$27.89 $27.25 $27.93 $28.04 $28.80
$32.48
$22.15
$25.27 $25.50
$22.42 $22.79 $23.59
$24.90
$20
$25
$30
$35
2009 2010 2011 2012 2013 2014 2015
Class A rental rate Class B rental rate
Office Insight
Minneapolis-St. Paul | Q4 2015
69,299,256
Total inventory (s.f.)
365,061
Q4 2015 net absorption (s.f.)
$25.16
Direct average asking rent
464,236
Total under construction (s.f.)
14.6%
Total vacancy
809,898
YTD net absorption (s.f.)
2.0%
12-month rent growth
45.7%
Total preleased
-0.9% -1.1%
1.4% 1.1%
2.3%
1.6%
-0.2%
-0.8%
0.5%
1.0%
2.5%
0.4%
-2.0%
0.0%
2.0%
2009 2010 2011 2012 2013 2014
Minneapolis
St. Paul
-144,266
110,394
-150,000
-50,000
50,000
150,000
Class A Class B