Minneapolis Real Estate Market Report

Minneapolis Office Market

For the first time since the first quarter of 2022, absorption turned positive, totaling 199.987 SF—only the second instance of positive absorption since the third quarter of 2020. Vacancy stands at 19.7%, well above the eight-year average of 14.3%. Suburban office markets are demonstrating relative strength, recording 371,018 SF of positive absorption. These areas continue to outperform core urban markets, with suburban vacancy at 15.7%—notably lower than the 25.6% vacancy rate in the Minneapolis CBD and 29.5% in the St. Paul CBD. Despite rising vacancy, high-quality office space with proactive ownership remains scarce. A substantial number of landlords lack the capital to compete effectively for tenants through tenant improvement allowances or building upgrades. Others are hesitant to invest without a clear path to positive cash flow.

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.