Overall, the metro area's office market absorbed 350,157 sf during the first quarter, dropping the vacancy rate to 18.1%--down a bit from 18.2% in the previous quarter. Subleased space was up 200,000 sf in the quarter, but much of that had short terms left on their lease.

Dakota County's office market posted the strongest gains, dropping its vacancy rate to 7.6%, down from 12.6% in the fourth quarter. Dakota absorbed some 119,000 sf so far this year.

Rents have stayed stable, although some of the better Downtown Minneapolis and southwest suburban properties have seen increases, according to the Colliers report.

The Downtown Minneapolis vacancy rate is 20.7%, down slightly from last quarter's rate of 21.2%. Vendors have a "very high interest" in leasing space near Target Corp.'s headquarters on Nicollet Mall and 10th Street.

Downtown St. Paul's office market improved slightly, its vacancy rate dropping to 23.1% compared from 24.6% last quarter.

The Twin Cities industrial market saw its overall vacancy rate drop to 14.4% compared from 14.8% in the last quarter of 2004, as the market absorbed some 543,000 sf. Significant tenant losses in the northeast sector, which saw its vacancy shoot to 15.8% from 11.5% were somewhat offset by gains in the northwest sector (vacancy rate declined to 13.7% from 16.2% and in Dakota County vacancy was down to 20.5% from 24.4%).

The industrial market saw new developments in the northwest suburbs, including the second phase of Diamond Lake Industrial Center, Marfield Belgarde & Yaffe's 260,000 sf development in Rogers; Crosstown X, Duke Realty's 187,000-sf building in Brooklyn Park; and the Lexington Preserve Business Center, CSM Corp.'s 850,000 sf facility in Blaine.

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