Minneapolis-St. Paul Retail Market Report

Local economic conditions bolster the Twin Cities’ retail outlook. Property fundamentals improved substantially entering 2023, marking the second consecutive year of positive net absorption and subsequent vacancy compression, helping accelerate the metro’s pace of rent growth. This performance was partially supported by first-ring suburbs, such as the Ridgedale submarket, where recent renovations to the area’s main shopping center have encouraged heightened leasing activity in the vicinity. This year, the market boasts median household income growth on par with its 10-year average, while net in-migration sets a five-year high — a boon for the long-term outlook as employment in high-skilled industries persists. An increasingly challenging lending environment, however, could affect retailer expansions, putting downward pressure on fundamentals. Nevertheless, Minneapolis-St. Paul retains its claim on the lowest vacancy in the Midwest and also strongest regional rent growth metric, a new distinction for this year.