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CBRE <br />MARKETVI EW <br />Minneapolis/St. Paul Office, Ql 2016 <br />Owner and occupier favorability <br />consistent year -over -year <br />OVacancy Rate O Net Asking Rate <br />15.9% $14.27 <br />Figure 1: Owner -Favourable vs. Occupier -Favourable Submarkets <br />Owner Favorable <br />Market conditions where one or more of the <br />following exist: positive net absorption, stable or <br />declining vacancy rate, strong leasing activity, <br />increasing rents, a lack of rent concessions or limited <br />new supply. <br />SUBURBAN <br />-North Loop <br />-Minneapolis CBD <br />-394 Corridor <br />Source: CBRE Research, Q1 2016. <br />-Midway <br />ONet Absorption <br />191,038 Sq. Ft. <br />Under Construction <br />234,000 Sq. Ft. <br />*Arrows indicate change from previous quarter. <br />Occupier Favorable <br />Market conditions where one or more of the following <br />exist: negative net absorption, flat or increasing <br />vacancy rate, sluggish leasing activity, flat or declining <br />rents, rent concessions or an imbalance created by a <br />large increase in new supply. <br />-494 Corridor <br />• Owner favourable markets remain for the <br />Minneapolis CBD and 394 submarkets <br />compared to Q1 2015 while occupier <br />favourable markets strongest in the St. Paul CBD <br />and BEA submarkets (Figure 1). <br />• Strong leasing in both the suburban and <br />downtown submarkets show that tenants are <br />relocating but not completely forgoing the <br />suburbs. <br />• The St. Paul CBD submarket has had <br />approximately 1 .8 million sq. ft. removed from <br />its tracked base over the last ten years. Of this <br />total, almost a million sq. ft. has been renovated <br />into residential properties in the Lowertown area <br />(Figure 4). <br />-St. Paul CBD <br />Moderate <br />-Northwest -B/E/A <br />-Suburban St. Paul <br />MARKET OVERVIEW <br />Q1 2016 was a steady quarter by all metrics. The direct <br />vacancy rate was flat compared to year -over -year figures <br />and from the beginning of the year. Asking rates are up <br />7.4% year -over -year and net absorption was positive. <br />The Midway submarket regained some of the negative <br />absorption lost Q4 2015 from Be the Match when Blue <br />Cross Blue Shield occupied approximately 30,000 sq. ft. <br />at Broadway Place East. Otherwise, most submarkets <br />saw marginal absorption. <br />When considering the outlook for the market overall, <br />the favorability factors from Q1 2015 are largely <br />unchanged. For occupiers, the St. Paul CBD and BEA <br />submarkets are the most attractive. Owners are seeing <br />favorable times in the 394 and North Loop submarkets <br />as limited supply and low vacancy is leading to higher <br />asking rates. <br />Q1 2016 CBRE Research © 2016 CBRE, Inc. I 1 <br />