Published January 1, 1997 | January 1997 issue
Recent announcements of plans for new office buildings in downtown Minneapolis confirm what vacancy rates show: Downtown office space is once again in great demand, after a spate of building in the 1980s depressed rents and property values.
In fourth quarter 1996, the vacancy rate for class A space was down to 3.4 percent from 22.4 percent in second quarter 1992, according to Towle Real Estate Co. Class A space is office space in newer buildings in first class condition, design and decor, large and/or tall in size and with mostly multiple skyway linkages. Excluded are owner-user, single tenant, medical or government structures.
The overall fourth quarter downtown vacancy rate was 8.1 percent. According to Cindy Bagaus, director of research for Towle, that tightness in the downtown office market has generated interest in six potential downtown development sites. The demand, especially for class A contiguous space, has also pushed up rents, Bagaus says. Over the past two years class A rents have increased 52 percent, spawning a rise in property valuations. The accompanying increase in property taxes may slow things down a little and prevent overbuilding, Bagaus says.
With plans for new office construction under way and the fact that over 41 percent of the metro area's office space is in the Minneapolis central business district, it is not surprising that the recently completed Minneapolis Downtown 2010 plan calls for maintaining downtown as the economic center for the Twin Cities metro area and the Upper Midwest region. Prepared under the auspices of the Minneapolis City Planning Department and the Minneapolis Downtown Council, the plan presents a vision of what the city's downtown should be in the year 2010 and looks at all aspects of downtown life.
Specific recommendations to encourage businesses to locate downtown include: maintaining a compact downtown by concentrating office development that supports retail and encourages the use of mass transit; locating office space development in designated districts determined by density and compatibility with other uses; encouraging street-level retail; providing necessary transportation infrastructure to serve projected downtown employment growth; and providing a physical environment that will attract continued investment by ensuring that downtown remains attractive, clean and safe.