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Office Vacancy on Rise in Twin Cities

MINNEAPOLIS-Office development has slowed to a halt in every submarket but Downtown Minneapolis, where a number of major projects are in the pipeline. The overall vacancy rate there is unchanged at 9.2%.

By Jim McCartney | Updated on July 20, 2001

MINNEAPOLIS-Office vacancy rates in the Twin Cities edged upward during the first half of 2001, reflecting a national economic slowdown, according to a new report fromUnited Properties. The Bloomington, MN-based commercial real estate services firm expects the metro area’s overall office vacancy rate will have a chance to recover during the next year or so now that new development has slowed to a crawl–with the exception of Downtown Minneapolis, which will have more than one million sf of new space opening this fall.

In Minneapolis, overall vacancy rates remained unchanged at 9.2%. Class A space vacancies are even lower at 8%. But vacancy rates increase to 11% if sublease space is added back. Much of that modest increase is attributable to a 175,000-sf block of space at US Bank Place being offered by American Express Financial Advisors. The company, which recently announced significant layoffs, may return substantially more sublease space to the market in the future, up to a total of 360,000 sf. Its new building is designed to accommodate future expansion, United notes.

Rental rates in the Downtown MInneapolis market showed a slight overall decline, with the most pressure on class C properties.

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