Minneapolis Real Estate Market Report

Minneapolis Office Market

Absorption has been negative for 17 of the past 18 quarters. Absorption reached negative 789,797 SF in 3Q24 and was negative 610,861 for the final quarter of the year, increasing vacancy (including sublease space) to 19.6% from 18.7% in the 3rd quarter. Tenants are attracted to premium properties that offer state-of-the-art HVAC systems, excellent walkability, and unique, high-end amenities such as pickleball courts, golf simulators, and building-provided complimentary transportation. While still a significant factor in the market, the supply of sublease space has reached its peak as expiring leases convert to direct availabilities, tenants reclaim space for growth, and fewer businesses list new sublease options.

Minneapolis Industrial Market

Demand in the Minneapolis-St. Paul industrial market was strong in 2024 with Q4 absorption of more than 1.3 MSF. Total annual absorption for 2024 was 3.2 MSF. Rents are rising due to declining vacancy rates, limited new construction, and consistent demand. Construction activity peaked in 2023 at 9.1 MSF but declined by 45.9% in 2024, to 4.9 MSF. Developers are constrained by high interest rates despite steady demand. Future construction hinges on a favorable interest rate environment. There are pockets of softness in the market, particularly in Woodbury and Shakopee, where tenants seeking blocks of 100,000 square feet or more have many options. Asking rents increased to $9.09 per square foot in 2024, a 6.7% rise from year-end 2023. This follows a 9.2% increase in 2023 and an 8.6% rise in 2022. Since 2020, industrial asking rents have surged by 32.5%, with further growth anticipated.