MINNEAPOLIS—The winter cold snap endured by most of the US hit Minneapolis particularly hard, forcing its economy to contract 2.9% during the first quarter. But with the coming of spring, the metro area rebounded and activity in its office market accelerated, according to a report on the second quarter by Cassidy Turley.
The local unemployment rate, for example, already far below the national average, continued to drop and hit just 4.39%, the lowest rate since 2007. And the multi-tenant office market absorbed 385,000-square-feet in the second quarter, bringing the overall metro office vacancy rate to 15.7%, lower than the historical average of 17.9% and the first time it has been below 16% since the fourth quarter of 2007.
“The gains in office space this past quarter were primarily realized in the Southwest and West/ Northwest submarkets,” according to the report, and “class A office space led the way with nearly 290,000-square-feet absorbed this quarter.”
Furthermore, the decline in vacancies was mirrored by rising rental rates. The metro average is now nearly $1-per-square-foot higher than at this time last year. But the big story in the local office market, according to Cassidy Turley researchers, “was undoubtedly the uptick in office sales, and the price they are trading at.”
As reported in GlobeSt.com, for example, KBS REIT II, Inc. sold 601 Tower at Carlson Center in suburban Minnetonka to Artis REIT for $75 million, a 39% increase over the price KBS paid for the 288,458-square-foot property in 2011. This was one of the highest prices ever paid in terms of per-square-foot value in the Twin Cities, according to Cassidy Turley. And several weeks later, 50 S. 10th St. in the Minneapolis CBD sold for a price of $164.5 million. Its buyer paid more than $365-per-square-foot, by far the most ever in the state.
And these sales were just the continuation of a 2013 trend, when major office properties traded at a pace not seen since before the recession. For example, Florida-based Beacon Investment Properties LLC bought the iconic IDS Center for $253 million. Other major sales included the Oracle Centre, a 20-story building at 900 Second Ave. South, which was sold to a joint venture between Investcorp International and Wildamere Properties, and the 40-story RBC Plaza.
“As we look ahead,” the researchers concluded, “we expect to see more office buildings trade hands at historically high rates.”
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Brian J. Rogal
Brian J. Rogal is a Chicago-based freelance writer with years of experience as an investigative reporter and editor, most notably at The Chicago Reporter, where he concentrated on housing issues. He also has written extensively on alternative energy and the payments card industry for national trade publications.
