VACANCY AND ABSORPTION TRENDS
The vacancy rate in the Minneapolis-St. Paul office market is 14.5 percent, up from 13.6 percent during the third quarter. There was negative absorption of 480,032, bringing the annual absorption total to negative 421,378. The bulk of the negative absorption was due to Wells Fargo moving out of the Baker Block and Northstar Center buildings into their new property in Downtown East.
Class B properties have the highest vacancy rate at 15.0 percent. Functionally obsolete Class B and C properties in poor locations or with few amenities have struggled to attract tenants as companies’ increasingly seek access to amenities. Fewer companies are looking for a value proposition only. Some of these properties are being converted to multi-unit housing. An example of this is in the Southwest submarket, where Opus purchased Lincoln Corporate Center in Edina and will be demolishing a 96,000-square-foot office building on the property to make way for apartments.
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