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Steady activity in the office marketRising taxes, operating expenses push up leasing costs

Research & Forecast Report

MINNEAPOLIS-ST. PAUL | OFFICEQuarter 2 2016

Vacancy and absorption trends The vacancy rate in the Minneapolis-St. Paul office market is 13.5 percent, which is unchanged since Quarter One but down from 13.7 percent at Year-End 2015. There was 90,643 square feet of positive absorption that combined with inventory adjustments, including the removal of the 60,000-square-foot Jax building and the 110,000-square-foot Degree of Honor building in the St. Paul CBD, leading to no reduction in the overall vacancy rate. Both the Jax Building and Degree of Honor building are the latest office properties in the CBD to be slated for apartments. Year-to-date absorption is 203,012 square feet.

Market Activity Tenants continue to be attracted to properties with access to amenities and transit that appeal to potential employees. Businesses are using their office space to create environments that aid in the recruitment of top talent.

Areas of strength in the market include the North Loop neighborhood of the Minneapolis CBD, the West End in St. Louis Park, and properties along France Avenue in the Southwest submarket. These areas have a concentration of restaurants, retail, and entertainment options that appeal to tenants in this market.

Wells Fargo has begun its move from various locations in the CBD into its new office towers at Downtown East. The two 550,000-square-foot towers were completed this quarter, and the bank will be vacating from multi-tenant space in the CBD. There are plans for some of that space to be converted into apartments, including the 313,000-square-foot Northstar East office building.

Lease terms continue to lengthen as they are favored by both tenants and landlords in order to spread moving costs over longer periods of time. Lease terms of 10 years or longer are becoming more common as opposed to five-to-seven-year terms.

Vacancy

20%

15%

10%

5%

0

14.9%16.8%

17.2%16.7%

Perc

ent V

acan

t

16.1%15.6% 14.2%

13.7%

2008 2009 2010 2011 2012 2013 2014 201520072006

16.3% 15.2%

2016Q2

13.5%

Net Absorption2,000,000

1,000,000

0

(1,000,000)

(2,000,000)

253,779

(1,661,963)

585,965

(312,099)SF A

bsor

bed 981,934

503,756750,841

1,025,689

2008 2009 2010 2011 2012 2013 2014 201520072006

966,371 929,169

2016Q2

203,012

Market IndicatorsRelative to prior period Q2 2016 VACANCY NET ABSORPTION RENTAL RATE

2 Minneapolis-St. Paul Research & Forecast Report | Quarter 2 | Office | Colliers International

Ever-Increasing Overall Leasing Costs Several factors are contributing to increasing leasing costs including a significant number of properties selling at premium prices. These sale prices lead to rising assessed values and higher tax bills for owners. It then influences assessors to increase values on neighboring comparable properties, and the resulting higher taxes get passed through to tenants.

In addition to rising taxes, operating costs are increasing as landlords upgrade common areas to include popular amenities. The demand for collaborative workplaces that help to attract and retain talent is driving these upgrades. The expense of building rooftop decks, fitness centers, bike-friendly spaces, fire pits, and conference rooms is charged to tenants through higher operating costs per square foot.

The significant amount of construction occurring in the Minneapolis-St. Paul area, including apartments and the new Vikings stadium, are putting a strain on both labor and materials availability, pushing up tenant improvement costs. This is on top of growing expenditures on furniture and design fees as companies implement new workplace strategies that call for open, collaborative spaces.

20

15

10

5

0

13.6%

Airport/Southof the River

MinneapolisCBD

Southwest St. PaulCBD

St. PaulSuburban

West Northwest

13.2%14.9% 13.4% 14.5%

10.1%

15.5%

Q2 Vacancy

Perc

ent V

acan

t

80,000

40,000

0

(40,000)

(80,000)

(14,317)

(48,312)

33,56952,549

Airport/Southof the River

MinneapolisCBD

Southwest St. PaulCBD

St. PaulSuburban

West Northwest

(33,679) (43,182)

47,571

Q2 Absorption

SF A

bsor

bed

Lease Activity

TENANT PROPERTY ADDRESS CITY SF SUBMARKET

Stinson Leonard Street LLP Fifty South Sixth 50 6th St S Minneapolis 105,000 Minneapolis CBD

Cray The Offices @ MOA 2001 Lindau Ln Bloomington 89,481 Southeast

Archdiocese of St Paul & Mpls Historic Building 21 at Beacon Bluff 777 Forest St Saint Paul 75,000 Northeast

Code42 100 Washington Square 100 S Washington Ave Minneapolis 67,700 Minneapolis CBD

Bank of America IDS Center 80 S 8th St Minneapolis 52,706 Minneapolis CBD

Clark Engineering 12755 Hwy 55 12755 Hwy 55 Plymouth 26,000 Northwest

Ascend Learning 510 Marquette Ave 510 Marquette Ave Minneapolis 24,669 Minneapolis CBD

Wiley and Sons 400 Metropoint 400 Hwy 19 S Saint Louis Park 22,295 West

Aerotek Shoreview Corporate Center 4000 Lexington Ave N Shoreview 20,712 Northeast

Pour House Lumber Exchange Building 10 S 5th St Minneapolis 17,000 Minneapolis CBD

Johnson Becker UBS Plaza 444 Cedar St Saint Paul 16,255 St Paul CBD

Liberty Mutual Crescent Ridge Corporate Center I 11100 Wayzata Blvd Minnetonka 15,626 West

Met Council 375 Jackson St 375 Jackson St Saint Paul 15,269 St Paul CBD

PRTS Common Element Carriage Station Professional Bldg 12425 55th St Lake Elmo 13,000 Northeast

Granite City 3600 Northland Center 3600 W American Blvd Bloomington 10,853 Southeast

Ambient Consulting Crescent Ridge II 10900 Wayzata Blvd Minnetonka 10,012 West

TeamQuest Kickernick Building 416 1st Ave N Minneapolis 10,000 Minneapolis CBD

Significant Lease and Sales Activity

3Minneapolis-St. Paul Research & Forecast Report | Quarter 2 | Office | Colliers International

Sales Activity

PROPERTY NAME ADDRESS CITY BUYER SELLLER PRICE PRICE PSF SF

Plaza Seven Office Tower 45 S 7th St Minneapolis Franklin Street Properties Angelo Gordon JV CCRP $82,000,000 $252 325,796

Colonial Warehouse 212 3rd Ave N Minneapolis Excelsior Group T Denny Sanford $30,000,000 $148 203,000

7500 Flying Cloud Drive 7500 Flying Cloud Dr Eden Prairie Excelsior Group Cornerstone RE Advisers $26,040,000 $128 202,780

Edina Corporate Center 4700 W 77th St Edina Western National Mutual Insurance Co Invesco RE $11,148,860 $91 122,689

Roseville West 2277 Hwy 36 W Roseville Team Properties Inc; Mark Saliterman

Life Insurance Company of the

Southwest$6,875,000 $80 86,381

Waters 1 2900 Lone Oak Pkwy Eagan Lone Oak LLC Welsh Companies $5,885,000 $64 91,595

Tamarack Hills F13 659 Bielenberg Dr Woodbury Brad Malecha KFI Commercial LLC $5,682,639 $280 20,288

Jax Building 247 4th St E Saint Paul Vor Development Carol Sundberg & Rudy Sundberg $4,100,000 $68 60,000

300 Industrial Blvd NE 300 Industrial Blvd NE Minneapolis Charter Schools Dev't Corp John Francis $3,600,000 $55 65,000

15025 Glazier Ave 15025 Glazier Ave Apple Valley Wings Financial CULighthouse

Management Group Inc

$3,450,000 $58 60,000

226 Summit Ave 226 Summit Ave Saint Paul Donald ReganArchdiocese

of St. Paul and Minneapolis

$3,283,333 $55 59,579

Hiawatha Office Center 3355 Hiawatha Ave Minneapolis Twin Cities Community Land Bank

Hillcrest Development $3,133,272 $107 29,364

3000 Center Pointe Dr 3000 Center Pointe Dr Roseville Centerpoint Holdings LLC David L Vadis $3,000,000 $117 25,547

6400 Flying Cloud Drive 6400 Flying Cloud Dr Eden Prairie S&S Development Corp John Trefethen $2,850,000 $89 32,000

Highland Bank Court 1FL-2FL 811 Lasalle Ave Minneapolis Hempel Properties The Wall

Companies $2,625,000 $44 60,000

5095 Nathan Lane 5095 Nathan Ln Plymouth Willow Properties 7 LLC Lone Star Funds $1,395,903 $68 20,528

Franklin Street Properties purchased Plaza Seven for $82 million, which makes it the largest commercial property transaction so far this year.


“If you build it, they will come,” might justify a baseball field in the middle of Iowa, but for office space, tenants are looking for amenities, access to mass transit, and competitive economics. We are finding that there is a mix of key elements tenants are measuring as they look at office space:

> Amenities and property features that grab tenants’ interest during property tours.

> Access to mass transit.

> Price - the economics of the transaction must be on par with other properties in the market.

Locations in the Minneapolis-St. Paul office market that meet most or all criteria of on-site amenities and access to transit as well as boast a walkable, vibrant locale include the Offices @MOA, Minneapolis CBD, and the North Loop, West End and France Avenue Corridor.

Offices @MOA Lands Cray After an extensive search of office options throughout the metro area, Cray Inc. is moving from the St. Paul CBD to Offices @MOA in Bloomington, where they will lease 87,500 square feet of the 170,000 square foot building. Cray made their choice due to close proximity to the airport, free parking, two full-service hotels, access to mass transit, and a complement of retail options including numerous restaurants.

Minneapolis CBD In the core Minneapolis CBD, skyway-connected properties with upgraded amenities and easy access to transit and/or parking are in demand. Companies that have chosen to relocate from the suburbs to the CBD in recent years include Weber Shandwick, Aimia, Varde Partners, Education Credit Management, and Coyote Logistics. Amazon recently chose 100 Fifth Street Towers in the Minneapolis CBD to locate a 100-person technology-development center.

West End & France Avenue Other areas that are seeing strong demand include the West End at Park Place Boulevard and Interstate 394 in St. Louis Park, and the France Avenue Corridor in Edina. These areas feature concentrations of restaurant and retail amenities. The growing West End area features the Lifestyle Center Shops at West End. Along France Avenue, there is a major hospital and significant concentration of medical tenants in addition to Southdale Center, a regional shopping mall. While strong on the amenity front, there is limited access to mass transit at both the West End and along France Avenue.

Spotlight Trends: Identifying Tenant HotspotsProperties that offer the right mix of amenities, access to transit, and competitive rates hit the mark

Lobby waterfall feature at Crown Roller Mill in Downtown Minneapolis.


North Loop With its low vacancy and popular locale, the North Loop has drawn the notice of developers. The vacancy rate is 6.8 percent, compared to 12.7 (UPDATE FOR Q2) percent for the entire Minneapolis CBD. One of the most notable North Loop developments is T3, a 210,000-square-foot speculative office building from Hines. T3,

Offices @MOA, and Mosaic in Uptown are the only multi-tenant office properties constructed speculatively so far in this office development cycle. There is an additional 870,000 square feet of office space in four buildings planned in the North Loop. Challenges facing office properties in the neighborhood include limited parking and lack of skyway access.

> Of the new multi-tenant office construction we are tracking in the North Loop, T3 will have the advantage of being the first to be completed. Hines began construction in November of 2015 on the 210,000-square-foot building that is expected to be completed this fall. The property features wooden construction materials, rather than steel or concrete, to create a historic vibe that fits in with the centuries-old neighborhood. Modern amenities such as collaborative, open floor plans, a rooftop deck, and a fitness center will provide the modern amenities tenants are looking for.

How to Compete? Owners can add amenities including upgraded common areas, restaurants, bike storage and repair, and communal gathering spaces. Prepared suites and common areas that tenants can walk through will help potential tenants to visualize adaptable, engaging workspaces.

The planned Southwest Light Rail Transit project, which will run from downtown Minneapolis through St. Louis Park, Hopkins, Minnetonka, and Eden Prairie and pass in close proximity to Edina, will bolster the ability of some suburban office areas to provide transit access. Preliminary approvals have occurred for the project with construction scheduled to take place between 2017 and 2019 and service to begin in 2020.

The importance of being open to lease rates that are in line with rates that tenants see as they look throughout the market cannot be overlooked.

> Schafer Richardson is developing a Class A office property a short distance from Target Field Station. They are planning a 11–story, 200,000 square foot building with 4,500 square feet of retail space. The property, located at 700 North 5th Street, will be called @mosphere, and currently has a warehouse building on it, which Schafer Richardson plans to tear down. Weather-Rite, an HVAC company, is the only tenant, and their lease expires in 2017.

> Local developers Ned Adbul and CPM have proposed a 10-story office building on a parking lot immediately south of the Internet Exchange Building they purchased at 419 Washington Avenue North.

> United Properties has a 0.67-acre site located at 753 Washington Avenue North, and is planning an office building up to 10 stories and 200,000 square feet. The site is just west of the Loose-Wiles building, which United Properties renovated in 2013. United Properties has also been working with Greco, LLC, on potential multifamily developments in the area.

> United Properties has another office building in the works in the North Loop with NoLo, a 10-story, 240,000-square-foot planned project near Target Field Station.

WELLNESS TECHNOLOGY COMMUNITY URBAN

ADAPTABLE WALKABLE BIKEABLE ENGAGING

FLEXIBLE MIXED-USE SKYWAY ACCESS

Spotlight Trends: Identifying Tenant Hotspots (continued)

Key Tenant Requirements:


Minneapolis CBD

> The vacancy rate in the Minneapolis CBD is 13.2 percent, up from 12.7 percent at the first quarter. Absorption was a negative 33,679 square feet. There was no large movement of any tenants during the quarter, but we expect that to change during the third quarter as Wells Fargo moves workers from multi-tenant office space into their new, 1.1 million-square-foot office towers during the third quarter.

> Capella Education Co., with its lease expiring in 2018, is considering a move from its namesake tower at 225 South Sixth, where it leases 371,000 square feet.

> It was recently announced that Amazon will add office space to its presence in the Minneapolis-St. Paul market by opening a 100-employee “technology and development center” at Fifth Street Towers. Amazon already has a significant presence in the industrial market here, including an 820,000-square-foot distribution facility that is under construction in Shakopee, a 142,000-square-foot delivery station in Eagan, a 150,000-square-foot sorting center in Shakopee, and a 50,000-square-foot distribution center in Minneapolis.

> Minneapolis law firm Stinson Leonard Street signed a 105,000-square-foot lease at 50 South Sixth where it will relocate from 140,000 square feet at Fifth Street Towers. The company plans a more open, flexible, and digital environment that reflects overall office space use trends in a legal environment.

> Shorenstein Properties is selling 33 South Sixth, a 1.6 million-square-foot office tower anchored by Target.

Southwest

> The vacancy rate in the Southwest submarket is 14.9 percent, up from 14.7 percent in the first quarter. There was negative absorption of 43,182 square feet. Bluestem Brands Inc. moved out of 93,000 square feet at Superior Office Center in Eden Prairie into the single-tenant Golden Triangle Innovation Center, also in Eden Prairie.

> The France Avenue Corridor in the Southwest office submarket is experiencing strong demand, especially compared to areas in the submarket west of Highway 169 along Interstate 494 to Eden Prairie. The vacancy rate along the France Avenue Corridor is 12.2 percent, while west of Highway 169 the vacancy rate is 25.1 percent. Tenants prefer locations with close proximity to amenities such as the abundant restaurants and shopping options available along France Avenue.

> Large users looking for space in the market include Prime Therapeutics and Willis Towers Watson. Both have multiple locations throughout the West and Southwest submarkets.

> Franklin Street Properties will redevelop the four-story former TCF Building at 801 Marquette. The company had previously discussed building a 50-story tower on the site, but put aside those plans in favor of working on the existing structure. TCF moved its employees from this location and the TCF Tower next door to Plymouth. Franklin Street is upgrading the TCF Tower with modern amenities including adding a fitness center and lobby.

> The Northstar Center, a complex of buildings that includes Northstar East and West office buildings, the former Pillsbury office building, a parking ramp, and a Crowne Plaza hotel will also experience the exit of Wells Fargo workers to the Downtown East towers. Renovations are planned, and include converting the 313,000-square-foot East building into apartments.

> Western National Insurance purchased the Edina Corporate Center for use as their corporate headquarters. The property is 122,000 square feet, three stories tall, and located at 4700 77th Street West near Pentagon Park. The company will be vacating its current headquarters property at 5350 78th Street West, which is 71,000 square feet. Barr Engineering was the former anchor tenant at Edina Corporate Center, but moved its office to One MarketPointe.

> The two-building Norman Pointe Office Complex in Bloomington is for sale. Owned by Gramercy Property Trust, the properties total 537,296 square feet and have a visible location along Interstate 494.

Submarket Summaries

> Franklin Street Properties purchased Plaza Seven Office Tower from City Center Realty Partners and Angelo, Gordon & Co. for $82 million, or $251 per square foot, which makes it the largest commercial property transaction so far this year.

> This high water mark for the year could be increased with the future sale of the IDS Center. Accesso Partners of Florida has the iconic 1.43 million-square-foot building for sale.

The France Avenue Corridor in the Southwest office submarket is experiencing strong demand, especially compared to areas in the submarket west of Highway 169 along Interstate 494.

Peak Pricing


St. Paul Suburban

> The vacancy rate in the St. Paul Suburban market is 14.5 percent, down from 14.8 percent at Quarter One. There was 60,860 square feet of positive absorption, which includes Nystrom & Associates leasing 20,000 square feet at Northpark Corporate Center in Arden Hills.

> Land O’Lakes is seeking Arden Hills city approval to expand its headquarters at 4001 Lexington Avenue North where it plans to consolidate its 1,800 Minneapolis-St. Paul employees and have room to grow. The existing campus has two buildings totaling 263,000 square feet, and will add a 155,000-square-foot building.

> Smiths Medical’s former headquarters at 1265 Grey Fox Road in Arden Hills is available for lease or sale. They vacated the 164,888-square-foot building to move into a new headquarters property in Plymouth.

West/NW

> The vacancy rate in the West submarket is 10.1 percent which is flat since Quarter One when vacancy was also 10.1 percent. There was 52,549 square feet of absorption.

> In the Northwest submarket, vacancy was 15.5 percent, down from 15.6 percent at Quarter One, and absorption was positive 47,571 square feet.

> Highlight Center leased 7,500 square feet to a co-working space devoted to sports-related tech companies. Website management software firm Sport Ngin, already a tenant at the property, is teaming up with Rally Ventures to open “The Pitch.”

> Target has its 371,289-square-foot building along Interstate 394 at 3701 Wayzata Boulevard for sale or lease as it moves workers to its Brooklyn Park campus.

> Select Comfort, maker of the Sleep Number Bed, is looking at other suburban office buildings for its headquarters. It currently leases 159,000 square feet at 9800 98th Avenue North in Plymouth where its lease expires in 2017.

> The 59,100-square-foot Ridgeview Office Center in Minnetonka along Interstate 394 is for sale. The Jewish Community Building Corporation purchased the property in 1999. Tenants include the Jewish Family & Children’s Service, Hadassah Upper Midwest, the Minneapolis Jewish Federation, Levin Family Board Room, New Beginnings, and the Minnesota Jewelry Buyers.

> Mortenson Construction is planning to expand at its campus in Golden Valley. The company would like to raze a two-story parking lot and build a new, four-story lot. In addition, they are planning a new 98,000-square-foot office building, adding to the two existing properties they occupy on the site that total 175,000 square feet.

> The Excelsior Group and Ryan Companies have plans for a 11-story, 315,000-square-foot office building new parking ramp in the growing West End mixed-use area. Ten West End will be marketed both for lease and for investment, and plans are to begin construction in the spring of 2017.

> Artis Group and Ryan Cos. are also planning an office development along Interstate 394, and have proposed a 14-story building next to the Carlson Towers in Minnetonka.

> Direct mail and digital marketing firm Streamworks is moving out of several buildings in Arden Hills to a new 88,000-square-foot building in Blaine.

Land O’Lakes is seeking city approvals to expand its corporate headquarters and consolidate Minneapolis-St. Paul offices while adding another 200 employees.

Target’s 371,289-square-foot building is for sale or lease with plans to move the workers to its Brooklyn Park campus.

Peak Pricing


St. Paul CBD

> The vacancy rate in the St. Paul CBD submarket is 13.4 percent, down from 13.9 percent at Quarter One. There was 48,132 square feet of absorption for the quarter, with Securian Center, 375 Jackson Street, and Lawson Commons all absorbing space.

> The current plan for the former St. Paul Macy’s building includes a rooftop Minnesota Wild practice arena, a street-level Walgreens, and space for a brewery and a medical clinic. The rest of the 540,000-square-foot building will become parking.

> The Minnesota Department of Human Services is looking for 70,000 to 100,000 square feet, adding to the 407,000-square-foot office building it occupies at 540 Cedar Street.

> The 110,000-square-foot Degree of Honor Building at 325 Cedar Street is going to be redeveloped into apartments by owner Madison Equities the Stencil Group.

> After buying the Jax Building in Lowertown for $4.1 million, VoR Development is planning 32 apartments at the 60,000-square-foot building at 247 East Fourth Street.

Airport/South of River

> The vacancy rate in the Airport/South of the River submarket is 13.6 percent, up from 13.4 percent at Quarter Two, with absorption negative at 14,317 square feet. Activity was low, and the negative absorption was due to North American High Speed Rail Group vacating 14,287 square feet at Riverview Office Tower.

> A highlight for the submarket was the announcement that Cray Inc. will be the lead tenant at Offices @MOA. After an extensive search of office options throughout the metro area, the company decided to move from the St. Paul CBD, and will lease 87,500 square feet of the 170,000-square-foot building. Cray made their choice due to close proximity to the airport, free parking, two full-service hotels, access to mass transit, and a complement of retail options including numerous restaurants.

New owners VoR Development are planning renovation that will include 32-market rate apartments in the 60,000-square-foot building, which was once a haven for nonprofits and artists.

The Offices @MOA landed Cray as its lead tenant in the 170,000 square foot speculative building.


The above table is summarized data on multi-tenant office buildings greater than 20,000 square feet. Not included are single-tenant, owner-occupied, medical or government buildings.

SubmarketTotal SF

Direct Vacant SF

% Vacant Direct

Sublease Vacant SF

% Vacant W/Sublease

Asking Rate

Q2 2016 Absorption

YTD Absorption

Airport/South of the RiverA 1,883,357 305,667 16.2% 15,602 17.1% $14.99 6,857 (2,837)

B 3,570,547 466,259 13.1% 82,133 15.4% $11.66 (28,294) (4,515)C 1,273,707 142,156 11.2% 52,274 15.3% $9.18 7,120 17,103

Totals: 6,727,611 914,082 13.6% 150,009 15.8% $11.90 (14,317) 9,751

Minneapolis CBDA 13,262,102 1,615,510 12.2% 161,173 13.4% $17.61 16,758 68,550 B 10,655,936 1,450,772 13.6% 266,615 16.1% $13.92 (10,972) 15,723 C 3,602,630 553,131 15.4% 23,130 16.0% $13.49 (39,465) (70,686)

Totals: 27,520,668 3,619,413 13.2% 450,918 14.8% $14.72 (33,679) 13,587

SouthwestA 9,380,521 1,187,733 12.7% 274,345 15.6% $16.22 (105,630) (179,445)B 6,162,426 1,186,440 19.3% 114,551 21.1% $12.56 48,975 42,193 C 851,675 73,597 8.6% 0 8.6% $10.00 13,473 7,674

Totals: 16,394,622 2,447,770 14.9% 388,896 17.3% $14.44 (43,182) (129,578)

St. Paul CBDA 2,128,667 213,337 10.0% 12,095 10.6% $11.19 30,022 78,895 B 4,592,014 745,541 16.2% 20,176 16.7% $11.28 18,110 70,799 C 639,936 25,423 4.0% 0 4.0% $8.00 0 (8,468)Totals: 7,360,617 984,301 13.4% 32,271 13.8% $11.02 48,132 141,226

St. Paul SuburbanA 2,875,487 612,072 21.3% 68,541 23.7% $14.24 16,831 70,408 B 6,294,608 806,229 12.8% 178,394 15.6% $11.77 (5,434) 34,347 C 2,165,179 222,133 10.3% 2,405 10.4% $9.04 22,172 4,555 Totals: 11,335,274 1,640,434 14.5% 249,340 16.7% $12.69 33,569 109,310

West/NorthwestA 5,066,479 545,093 10.8% 41,656 11.6% $17.42 (1,652) (98,397)

B 6,627,205 900,712 13.6% 10,014 13.7% $13.45 107,694 186,131

C 2,046,520 183,732 9.0% 4,334 9.2% $8.26 (5,922) (29,018)

Totals: 13,740,204 1,629,537 11.9% 56,004 12.3% $14.10 100,120 58,716

West A 4,038,190 402,018 10.0% 21,796 10.5% $19.13 (5,286) (92,686)

B 4,543,243 494,622 10.9% 8,628 11.1% $14.28 56,378 73,396

C 730,893 47,832 6.5% 4,334 7.1% $8.80 1,457 4,031

Totals: 9,312,326 944,472 10.1% 34,758 10.5% $15.40 52,549 (15,259)

Northwest A 1,028,289 143,075 13.9% 19,860 15.8% $13.28 3,634 (5,711)

B 2,083,962 406,090 19.5% 1,386 19.6% $11.96 51,316 112,735

C 1,315,627 135,900 10.3% 0 10.3% $7.59 (7,379) (33,049)

Totals: 4,427,878 685,065 15.5% 21,246 16.0% $11.64 47,571 73,975

Total All MarketsA 34,596,613 4,479,412 12.9% 573,412 14.6% $15.98 (36,814) (62,826)

B 37,902,736 5,555,953 14.7% 671,883 16.4% $12.71 130,079 344,678

C 10,579,647 1,200,172 11.3% 82,143 12.1% $10.45 (2,622) (78,840)

Totals: 83,078,996 11,235,537 13.5% 1,327,438 15.1% $13.64 90,643 203,012

Market Statistics


SubmarketTotal SF

Direct Vacant SF

% Vacant Direct

Sublease Vacant SF

% Vacant W/Sublease

Asking Rate

Q2 2016 Absorption

YTD Absorption

Airport/South of the RiverA 2,538,092 369,742 14.6% 15,602 15.2% $14.33 5,370 (2,738)

B 5,983,620 537,364 9.0% 82,133 10.4% $11.25 (32,929) (720)

C 2,600,726 163,935 6.3% 52,274 8.3% $9.18 4,911 13,124

Totals: 11,122,438 1,772,836 15.9% 150,009 11.0% $12.05 (22,648) 9,666

Minneapolis CBDA 16,512,916 1,744,608 10.6% 161,173 11.5% $17.61 1,336,758 1,388,550

B 14,044,460 1,472,435 10.5% 273,615 12.4% $13.92 (11,446) 4,831

C 5,525,970 553,131 10.0% 23,130 10.4% $13.49 (39,465) (68,015)

Totals: 36,083,346 3,770,174 10.4% 457,918 11.7% $14.70 1,285,847 1,325,366

SouthwestA 13,162,541 1,478,416 11.2% 312,345 13.6% $16.20 (106,914) (167,151)

B 8,937,324 1,349,562 15.1% 115,963 16.4% $12.64 55,085 58,030

C 3,007,409 158,088 5.3% 8,718 5.5% $10.93 17,804 (45,739)

Totals: 25,107,274 2,986,066 11.9% 437,026 13.6% $14.06 (34,025) (154,860)

St. Paul CBDA 2,773,960 215,987 7.8% 12,095 8.2% $13.65 29,924 78,549

B 5,510,958 745,541 13.5% 20,176 13.9% $11.28 18,110 70,799

C 2,810,535 48,123 1.7% - 1.7% $8.00 0 (8,468)

Totals: 11,095,453 1,009,651 9.1% 32,271 9.4% $11.89 48,034 140,880

St. Paul SuburbanA 3,727,549 675,322 18.1% 68,541 20.0% $14.32 22,819 59,611

B 10,648,921 1,020,611 9.6% 178,394 11.3% $12.63 15,381 22,906

C 7,342,686 256,739 3.5% 8,169 3.6% $7.80 11,893 4,127

Totals: 21,719,156 1,952,672 9.0% 255,104 10.2% $12.43 50,093 86,644

West/NorthwestA 9,427,341 642,839 6.8% 296,571 10.0% $16.43 16,414 (81,514)

B 9,842,380 1,092,101 11.1% 10,014 11.2% $13.24 104,273 21,901

C 4,837,875 221,958 4.6% 4,334 4.7% $9.84 (13,205) (39,897)

Totals: 24,107,596 1,956,898 8.1% 310,919 9.4% $13.60 107,482 (99,510)

Total All MarketsA 48,142,399 5,126,914 10.6% 866,327 12.4% $12.74 1,304,371 1,275,307

B 54,967,663 6,217,614 11.3% 680,295 12.5% $12.71 148,474 177,747

C 26,125,201 1,401,974 5.4% 96,625 5.7% $10.48 (18,062) (144,868)

Totals: 129,235,263 12,746,502 9.9% 1,643,247 11.1% $13.53 1,434,783 1,308,186

Market Statistics (Expanded Market)

The above table is summarized data on multi- and single-tenant office buildings greater than 10,000 square feet. Owner-occupied properties are also included. Not included are government or medical buildings.

BROKERAGE SERVICES CONTACT:William M. Wardwell SIOR

Executive Vice President | Brokerage Minneapolis-St. Paul+1 952 897 [email protected]

FOR MORE INFORMATION:Maura Carland Director of ResearchMinneapolis-St. Paul+1 952 828 [email protected]

Copyright © 2016 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

554 offices in 66 countries on 6 continentsUnited States: 153 Canada: 34 Latin America: 24 Asia Pacific: 231 EMEA: 112

$2.5billion in annual revenue

2billion square feet under management

16,000professionals and staff

Colliers International | Minneapolis-St. Paul4350 Baker Road, Suite 400Minnetonka, MN 55343

www.colliers.com/msp

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