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Twin Cities Office Market Gains Momentum

MINNEAPOLIS-Office vacancy declines slightly to 18.3% as the market reverses two years of negative absorption. Downtown office markets continue to struggle, though, according to a United Properties market report.

By Jim McCartney | Updated on December 26, 2004

MINNEAPOLIS-Although it is lagging the industrial market, the Twin Cities office market is showing signs of strength, according to a new report on the market. The office market finished 2004 with positive 522,000 sf of absorption, according to United Properties’ year-end 2004 Outlook market study.

Any level of positive absorption is a strong indicator of returning demand–particularly following a two-year period of negative 2.7 million sf of office absorption, according to the Bloomington-based commercial real estate firm. The office market posted its first declining vacancy rates since 1997 with year-end 2004 levels of 18.3% direct vacancy or 20.7% vacancy with subleased space included, compared to year-end 2003 vacancy rates of 18.9% or 21.6% with subleased space.

Four of seven Twin Cities office submarkets reported declines in direct and sublease vacancy numbers during the second half of 2004, further signaling a broad-based recovery in demand. Only the Minneapolis and St. Paul central business districts reported year-end 2004 vacancy rates above 20%. The Northeast office submarket reported the lowest vacancy rate at 14%.

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