Minneapolis Real Estate Market Report

Minneapolis Office Market

For the first time since the first quarter of 2022, absorption turned positive, totaling 199.987 SF—only the second instance of positive absorption since the third quarter of 2020. Vacancy stands at 19.7%, well above the eight-year average of 14.3%. Suburban office markets are demonstrating relative strength, recording 371,018 SF of positive absorption. These areas continue to outperform core urban markets, with suburban vacancy at 15.7%—notably lower than the 25.6% vacancy rate in the Minneapolis CBD and 29.5% in the St. Paul CBD. Despite rising vacancy, high-quality office space with proactive ownership remains scarce. A substantial number of landlords lack the capital to compete effectively for tenants through tenant improvement allowances or building upgrades. Others are hesitant to invest without a clear path to positive cash flow.

Minneapolis Industrial Market

First-quarter 2025 absorption was strong at nearly 1.0 MSF, following 3.2 MSF of total absorption in 2024. Vacancy declined to 4.9% from 5.2% at year-end 2024. Despite elevated interest rates, property values have remained stable; however, extended sale timelines are beginning to put downward pressure on pricing. Rents continue to rise, driven by falling vacancy, limited new development and steady tenant demand. Asking rents climbed to $9.20/SF in the first quarter of 2025—a 7.5% increase from year-end 2023. This builds on annual gains of 9.2% in 2023 and 8.6% in 2022. Since 2020, industrial rents have risen 32.9%, with additional growth anticipated. Construction activity remains constrained. After peaking at 9.1 MSF in 2023, it fell 45.9% to 4.9 MSF in 2024 and continues to slow. Just 389,821 SF was delivered in the first quarter of 2025, with fewer than 3.0 MSF currently under construction.