Q3-2022 Office Market Update

The Twin Cities Office Market continued a trend of negative absorption in all classes of space through the 3rd quarter, 2022. While there was less negative absorption in Q3 compared to Q2, the trend is expected to continue as companies search to find the right balance between employees working from the office, home, or a hybrid solution. It is expected that the market will see further consolidation in occupied space from Twin Cities corporate users. This will likely result in more sublease space being brought to the market raising the already high overall vacancy rate in the Twin Cities Office Market even higher.
ECONOMIC OVERVIEW:
According to the Bureau of Labor Statistics (BLS), the unemployment rate for the Mpls-St Paul metropolitan statistical area (MSA) decreased 110 basis points to 2.1% for August 2022 from 3.2% for August 2021. The unemployment rate for the US in August 2022 was the same compared to last year at 3.6%. State of Minnesota unemployment rate was 1.9%. The Mpls-St Paul MSA saw an increase in job growth as well as an increase in office job growth in professional, financial and information with 16,700 during the same period.
MARKET OVERVIEW:

The Mpls-St Paul office market, consisting of 130 msf of space in seven counties across the metro saw (341,300) sf negative absorption for Q3 2022 and shows an overall vacancy rate of 15.9% for all properties. This quarter shows (198,600) sf of direct negative absorption while subleases accounted for (145,000) sf negative absorption. Multi-tenant only properties posted 20.8% vacancy with (221,800) sf negative absorption during Q3 2022 of which (79,000) sf negative absorption was for direct space and (145,000) sf negative absorption was for subleases. During Q3 2022 there were 15 construction projects throughout the market totaling just shy of 1.0 msf. Ten properties have been delivered YTD with 810,000 sf.

 

MPLS-ST. PAUL AREA EMPLOYMENT STATS:
Q3-2022 Office Employment Stats
MARKET HIGHLIGHTS:
During Q3 2022 the market experienced over 1.1 msf of leasing activity in 358 transactions. Year over Year the vacancy rate for multi-tenant direct Class A properties has increased from 15.7% Q3 2021 to 17.0% Q3 2022. For direct leasing Mpls CBD markets posted (81,000) sf negative absorption, the suburban markets posted (200,000) sf negative absorption and St Paul CBD gained 82,000 sf positive absorption.
ABSORPTION & VACANCY RATE:
Q3-2022 Office Absorption & Vacancy Rate

Office Advisory Experts

Jim Jetland, SIOR

Jim Jetland, SIOR

Principal

Nancy Powell

Nancy Powell

Vice President

Katie Trevena

Katie Trevena

Vice President

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