The commercial real estate firm's first-quarter survey said that 483,018 sf of Twin Cities office space were absorbed in the first quarter, lowering the vacancy rate by 1.3 points to 18.3%. Class A buildings absorbed 209,582 sf, class B sopped up an additional 392,866 sf, but that was offset by rising empty space in class C buildings, which are losing tenants as business upgrade to take advantage of lower rents in nicer facilities.

"These positive signs are giving optimistic developers reason to begin investing in new construction projects which have been nearly absent for the past two to three years," says research analyst and report author Matt Boehlke.

There is about 319,112 sf of new construction underway--most of which is heavily pre-leased, as the market is not ready for speculative projects, according to the report. Much of the new construction is in the western suburbs of the Twin Cities.