The 78.4-million-square-foot general purpose, multi-tenant Minneapolis office market is staging a comeback according to Reis. The vacancy rate fell 20 basis points in the second quarter to 18.4% on 192,000 square feet of net absorption, which brought the half-year total to 446,000 square feet. The rate is down 110 basis points from a year earlier. The strength is in the Class A segment, with a 15.6% vacancy rate that is down 180 basis points year-over-year despite 257,000 square feet of new supply. The Class B/C rate of 20.4% is up 10 basis points during the second quarter on 65,000 square feet of negative net absorption.
Another 130,000 square feet of net absorption in July pushed the vacancy rate down another 10 basis points to 18.3%, despite the completion of the 37,200-square-foot Venture/BMG building in Bloomington. And an 18.1% rate is forecast for year-end 2012. Even stronger demand, approaching 2 million square feet per year, is expected to bring the rate down to 13.7% by 2016.
Rent gains are moderately positive. In the second quarter both the average asking rent and the average effective rent increased 0.2% to $21.95 psf and $16.84 psf. The year-over-year gain was 1.9% and 2.2%, respectively. The Class A asking average is up 2.1% year-over-year at $26.25 psf, with the Class B/C rate up 1.4% to $18.91 psf. Rents edged up a penny by each measure in July, and Reis predicts gains of 1.5% asking and 1.7% effective for all of 2012. Much stronger gains are forecast to follow. By 2015 the effective average is expected to be rising by about 6.0% per year.
Jones Lang LaSalle reports a second quarter vacancy rate of 16.7% an average asking rent of $24.06 psf. Net absorption is negative 609,493 square feet year-to-date according to this source.