Q3 2020: OFFICE MARKET UPDATE

         

Economic Overview

According to the Bureau of Labor Statistics (BLS), the unemployment rate for the Mpls-St Paul metropolitan statistical area (MSA) increased 500 basis points.  To 7.9% for August 2020 from 2.9% for August 2019.  The unemployment rate for the US was 8.4% in August 2020 up from 3.7% last year.  State of Minnesota unemployment rate was 7.4%.  The Mpls-St Paul MSA saw a decrease in job growth.  As well as a decrease in office job growth in professional, financial and information dropping 21,300 during the same period.

Market Overview

The Mpls-St Paul office market, consisting of over 128 msf of space in seven counties across the metro topping 95,000 sf negative absorption for Q3 2020.  The vacancy rate for the market stands at 12.5% for all properties.  Multi-tenant properties posted 16.4% vacancy with over 64,000 sf negative absorption.  The average asking lease rate for Mpls-St Paul came in at $25.02 psf FSG.  During Q3 2020 there were 9 construction projects throughout the market totaling just over 1.3 msf.

Market Highlights

During the Q3 2020 the market experienced over 1.1 msf of leasing activity in 251 transactions. Class A properties vacancy rate dropped for all properties this quarter to 10.3% compared to 8.8%.  It also dropped to 15% for multi-tenant properties compared to 12.7% Q2 2020.  For multi-tenant properties the Northwest market posted the lowest vacancy rate at 10.6%, Mpls CBD vacancy was 18.7%, St Paul CBD was 18.4% and suburban markets was 14.6%.  Southwest market posted the most positive absorption of 137,000 sf with The Nerdery leasing 60,000 sf and new delivery of Bridgewater Corp.  The West market posted the largest negative absorption of 125,000 sf for all property types led by Dominium space available for lease with 53,000 sf.

Methodology

The Mpls-St Paul market consists of single and multi-tenant office buildings 20,000 sf or larger or part of a complex larger than 20,000 sf.  The geographic area includes Anoka, Carver, Dakota, Hennepin, Ramsey, Scott and Washington counties.  The tracked set does not include medical or government properties.  All tracked properties are existing.  Statistically, net absorption will be calculated based on occupancy change during the current quarter.  Asking lease rates are based on an average asking rate and noted on a FSG terms with Net type leases grossed up.

View Full Report: Q3 2020 MNCAR Office Market Report

Source: Minnesota Association of Realtors (MNCAR)