Minneapolis-St. Paul Office Market Report

Central St. Paul resilient in wake of national uncertainty. Unlike downtown Minneapolis, where demand for centralized office space continued to ease, St. Paul fundamentals strengthened substantially entering 2023. Having noted a single-digit vacancy rate for the first time since 2018, minimal supply additions since the onset of the pandemic supported Class A office leasing in St. Paul’s CBD, further aiding the submarket’s recovery. In turn, the area has reported solid rent growth in each of the last three years. Significant improvements in performance metrics here, however, could temper during the year ahead as pre-existing lease commitments are more prominent in western submarkets, including the I-494 Corridor and Central Minneapolis. Looking beyond downtown St. Paul, the marketwide construction pipeline is set to deliver the least amount of supply in 10 years. Less competition will put a lid on the magnitude of vacancy increase and sustain positive metrowide rent growth for a 12th consecutive year.