Growing sectors include retail, food, health care, financial services and education, according to the market update. Over the past two years, property owners have faced a troubled market for office space that included high vacancy rates and tenants with the upper hand and numerous choices.
Vacancy rates continue to be high, but 2004, the office vacancy rate fell to 17.6% from 18.2% in 2003, according to the NAIOP update. That marked the first drop in vacancy rate in four years. Twin Cities businesses and other office users also absorbed some 281,500 sf in office space in 2004 -- the opposite of what happened the previous two years.
General Mills has outgrown its recently expanded headquarters in Golden Valley and is seeking an additional 50,000 sf of office space. Target has outgrown its Downtown Minneapolis headquarters and is considering leasing another 100,000 sf to 250,000 sf in 33 Sixth Street South, formerly the Multifoods Tower.
But while the office market is expected to keep getting better in the suburbs and in Downtown Minneapolis next year, things may get even worse in Downtown St. Paul, where vacancies could rise to 30% from 25%. Downtown Minneapolis had the second highest vacancy among the submarkets at 19.4%.
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