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Office Vacancies May Rise in Twin Cities

MINNEAPOLIS-One office broker sees vacancy rates climbing to 13.2% -- up from 10.5% -- with new construction coming in line while another expert is slightly more optimistic about the sector, foreseeing 12.4%.

By Jim McCartney | Updated on October 05, 2001

MINNEAPOLIS-Despite major challenges facing the Downtown Minneapolis market, the Twin Cities office market will experience slow, positive growth over the next year,according to office market experts. Meanwhile, landlords will take longer to lease uptheir buildings due to a lack of competition and caution about expansion and spending among corporations, says Gordon Hampson, vice president in the office services group in the Minneapolis office of Grubb & Ellis.

Overall, Hampson expects vacancy rates will rise to 13.2% from their present levels at10.5% and leasing rates to dip to an average of $12.59 per sf from its current level of $12.69 per sf. Jim Freitag, vice president of office properties with Coldwell Banker Commercial, is slightly more optimistic, expecting vacancy rates to climb to 12.4% and leasing rates to rise to $12.93 per sf.

Reduced employment growth due to economic uncertainty and layoffs has resulted in huge chunks of office space being put back on the market for sublease, Hampson says. Freitag sees this sublease space as filling the role previously filled by “new product.” Continuing layoffs will likely not be felt in the market until the middle of next year, he says.

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