Q3 2023 Minneapolis Office Market Report

The Minneapolis/St. Paul office market continues to be slow-moving with negative absorption. Similar to previous quarters, the most absorption is taking place in class A properties while tenants continue to right-size their space. This trend follows national trends in a flight-to-quality as occupiers desire more amenity-filled space in good locations to draw employees back to the office. The exodus of the CBD has slowed down with more tenants taking advantage of the stalled office market and renewing in their downtown spaces.

The Twin Cities office market has yet to attain pre-pandemic leasing levels in any quarter since the start of the pandemic, with leasing volume in the third quarter 30 percent below the five-year pre-pandemic level. The market has historically benefited from strong HQ locations uplifting the office market, but it has also led to drastic drops as occupiers like Target have embraced remote and hybrid work scenarios. Much of the negative absorption has taken place in the more suburban submarkets which has been influenced by large corporate users vacating large chunks of space across the Twin Cities. Office rates have remained at similar levels over the past 3-5 years, despite the pandemic, due to rising construction costs.

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