Agenda - Economic Development Authority - 08/13/2015

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CBRE MARKETVI EW MINNEAPOLIS/ST. PAUL OFFICE LEASING ACTIVITY STEADILY CONTINUES Overall metro absorption was positive this quarter at 369,148 sq. ft. The I-494 submarket led the market with 102,659 sq. ft. of total absorption. This was due in large part to tenants taking occupancy on deals completed in prior quarters. The North Loop was the next strongest submarket with 64,221 sq. ft. of absorption, primarily due to AIMIA moving into Butler Square. The Minneapolis CBD was a close third at 40,187 sq. ft. of positive absorption. All markets saw positive overall absorption, except the Midway submarket which lost 9,806 sq. ft. overall. The largest lease of Q2 2015 was Children's Hospital located at Lincoln Corporate Center in Edina. The new 203,214 -sq. -ft. space will bring in employees from several other offices and consolidate into one location. The space will be ready for occupancy Q2 2016. JAMF Software made local headlines with their announcement of relocation to 100 Washington in Downtown Minneapolis. Their new space is nearly double what they previously occupied at the Grain Exchange Building. The company is up from 160 employees in 2012 to 450 in 2015. This growth trend is expected to continue in their new space. Another CBD relocation and 2nd largest lease was Green Tree Servicing. They signed a lease at 180 E. 5t" St., a historic building constructed by Minnesota tycoon James J. Hill. Green Tree will relocate 600 employees from Landmark Towers and another 200 from Lawson Commons, both buildings are located in the St. Paul CBD. A renovation of approximately $7 million will begin in the space and employees should start moving in Q4 2015. Figure 2: Notable Lease Transactions Rounding out the CBD relocations was the Social Security Administration. They had previously been located in Sibley Square at Mears Park in Downtown St. Paul. They moved to the First National Bank Building, a Class B office building just a few blocks away. Sibley Square at Mears Park is being redeveloped into a multi -family property following many such trends in the Lowertown neighborhood of St. Paul. The final lease marking the top five for Q2 2015 was Pine River Domestic Management. A global investment management firm, they expanded their current 28,860 -sq. -ft. space by 45% at the Class A 601 Tower building off of Carlson Parkway in Minnetonka. CONSTRUCTION BRINGING NEW SUPPLY Construction around the metro remains highly focused on single tenant buildings. The only multi - tenant construction project underway (Offices ® MOA) isn't expected to open to tenants until Q4 2015. Figure 3: Notable Twin Cities Office Construction Projects Project/Tenant Sq. Ft. Submarket Wells Fargo 1,100,000 Minneapolis CBD UHG/Optum 505,900 1-494 Be The Match 240,000 Minneapolis CBD Xcel Energy 222,000 Minneapolis CBD Offices @ MOA 180,000 1-494 Minnesota Senate 167,000 St. Paul CBD OATI, Inc 110,023 1-494 Source: CBRE Research, 02 2015 * Gray shading denotes multi tenant construction Tenant Property Address City Size (sq. ft.) Children's Hospital Lincoln Corporate Center 5901 Lincoln Drive Edina 203,134 Green Tree Servicing 180 E. 5th St. 180 E. 5th St. St. Paul 141,109 JAMF Software 100 Washington 100 Washington Ave S Minneapolis 52,084 Pine River Domestic Management* 601 Tower 601 Carlson Parkway Minnetonka 41,860 Social Security Administration First National Bank 332 Minnesota St St. Paul 24,000 *Renewal Source: CBRE Research, 02 2015. Q2 2015 CBRE Research © 2015 CBRE, Inc. 2