Absorption numbers shake out due to relocations, but we’ll see healthy vacancy
declines in coming quarters
The year started out with churn and movement between submarkets, especially in the usually calm St. Paul CBD. Cray relocated from their namesake building Cray Plaza in St. Paul to become the first tenant at the speculative development Offices @ MOA in Bloomington. Ditech signed the largest lease of the quarter, finally closing out its deal for 150,000 square feet at 180 E Fifth Street in downtown St. Paul. In the suburbs, the Southwest submarket experienced negative net absorption as eight different tenants vacated the Normandale Lake Office Park.
New office product coming online is trending more eclectic. T3, which finished construction in late 2016, was America’s first modern all-wood building—a
concept so popular that Hines is working on similar developments in Atlanta
and Chicago. Just delivered: the Microgrid Technology Center (largely
occupied by software firm OATI) is a “Net-Zero” office building featuring
multiple renewable energy sources and an onsite data center. The
Washington, formerly an adult store, offers brick and timber office space as of
Q1. The market now has two Macy’s conversions underway – one in the St.
Paul CBD and one in the Minneapolis CBD.
A number of firms that have been in more traditional downtown Class A space
are reevaluating the tradeoff of downsizing in order to afford pricier digs in a
hipper, more “creative” building. There are currently at least five buildings
planned or proposed in the Warehouse District and North Loop, yet
construction will not begin until there is significant preleasing. The same
trend holds true for planned spec developments in amenity-rich suburban
micromarkets like the West End. Expect to see the suburban submarkets fare
well throughout 2017. Currently large corporate occupiers are looking for over
one million square feet of new space in the Southwest.
Source: JLL Research
Click to download Minneapolis Office Insight | Q1 2017