Record breaking years for Minneapolis CBD multi-tenant office sales
Minneapolis is transforming to encourage people to live, work and play in downtown. Nicollet Mall is undergoing redevelopment to increase its vibrancy by adding pedestrian-friendly features. Target Field, U.S. Bank Stadium and Target Center are attracting sports and entertainment after hours. Many new residential properties have sprung up to make living downtown easier. It’s no different in commercial real estate as more and more companies are looking to the CBD for office space to attract and retain talent.
In 2016, CBD sales activity reached $600M, making it the highest 12-month multi-tenant office sales volume since 2007. This is largely due to the acquisition of 33 South 6th Street for $315 million by HNA Group, a Chinese conglomerate. Although this was just one of ten total transactions in the CBD, this transaction alone accounted for 46 percent of both the dollar volume and square footage sold in 2016.
The market doesn’t show signs of slowing. Here are the trends we are watching:
New owners – Multiple large Minneapolis CBD core owners weathered the recession and are now exiting the market. The IDS Center, Oracle and International Centre, RBC Plaza and PwC plaza (formerly Plaza Seven) all found new owners.
Renovating vs. new construction – To remain competitive among aging stock, developers are thinking differently about their properties. Minneapolis CBD has experienced significant increases in the renovations of existing space in conjunction with the development of new construction. Of all sales in 2016, the popular loft-style buildings accounted for seven out of ten CBD transactions.
Low inventory – Despite low inventory of large Class A blocks in the CBD, owners have been successful at landing sizeable extensions and stabilizing rent rolls. This will drive more well-capitalized and near fully-occupied buildings to be hitting the market.
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