Minneapolis-St. Paul Office Investment Forecast
Challenges Arise in the Minneapolis CBD, Obscuring the Near-Term Outlook and Repositioning Buyer Demand
Hurdles surface in Minneapolis' urban core after initial resilience. The central business district in Minneapolis, which contains roughly one-fourth of the entire metro's office stock, witnessed fundamental fluctuation during the pandemic. Office performance downtown bucked national trends in 2020, when vacancy tapered by 30 basis points compared to a national CBD rise exceeding 300 basis points. Nonetheless, the tides shifted last year when pandemic-induced challenges caught up with the market. Availability in the Minneapolis urban core soared 360 basis points in just the first three quarters of last year, with vacant stock growing by 1.7 million square feet over that frame. Moving into 2022, headwinds persist as the omicron variant led firms to push back return-to-office plans in dense corridors at the start of the year. The outlook is more favorable in the suburbs, however, as vacancy late last year was only 200 basis points above the pre-pandemic level and average asking rents grew on an annual basis. Suburban areas with the tightest availability entering 2022 include Anoka, Scott and Washington counties.