Metro-wide average vacancy rates declined slightly to 18.3%, or 20.8% with sublease space. Class A rental rates for the overall Twin Cities office market are at an eight-year low, averaging $13.60 per sf, according to the report.

There was no new office construction in the Twin Cities office market in the first half of 2004, which has not happened in any six-month period since 1996, according to United Properties. The survey projects about 250,000 sf of new construction to come online the second half of the year. This will represent the lowest annual rate of new office construction since 1995 and 1996 when no new office development occurred.

Overall, the market recorded positive absorption of 344,864 sf in the first half, compared to negative absorption of 194,551 sf in the second half of last year. Six of the seven office submarkets reported positive absorption, with the West submarket leading the way at 224,136 sf. Only the South/Airport office submarket reported negative absorption of 46,961 sf.