Repositioned Office Product Driving Positive Market Change
Vacancy and Absorption Trends
At the mid-year point of 2018, we have seen a continued and steady expansion of positive absorption in the multi-tenant office market. There was a total positive 280,000 square feet of absorption in Q2 in the Twin Cities metro, which brings the total 2018 absorption figure to 407,000 square feet. This positive absorption and a lack of new multi-tenant construction deliveries, brought the direct vacancy rate down to 14.33% in Q2.
The largest changes in vacancy were in two recently renovated buildings—Baker Center in the Minneapolis CBD and West End Center in the West/Northwest office submarket. Both Class B buildings signed several new tenants after undergoing large-scale repositions. Tenants are now starting to occupy these buildings, which is impacting our multi-tenant statistics for Q2.
The Southwest and Minneapolis CBD submarkets had the highest positive absorption totals in both Q2 as well as year to date; the Minneapolis CBD has seen 240,000 square feet of positive absorption and the Southwest reached 146,000 square feet year to date. Another strong performing submarket is the West/Northwest, which is holding the lowest overall vacancy rate of our six office submarkets at 11.47%.