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J MOW 46 acancres5 n v �sgyy most ee e a win- °ifies' taghtest ever office market is polsea for new,development. MARKET Rents are on the rise after six years OFFICE MARKET HIGHLIGHTS of declining rates. The average quoted OVERVIEW OFFICE rent rose 9.6% to$8.76,due primari- Overall vacancy rates dropped to ly to a combination of fewer landlord The comeback continues for the an M-year low of 11.6% after concessions and rising base rental rates. Minneapolis-St.Paul metropolitan office peaking three years ago at 20.4% Class A average rents saw the biggest market as the absorption of the oversup- increase.The West Sector jumped 29.9% ply of space reduced the vacancy rate to After six years of declining net to $13.33 psf; the Minneapolis CBD an eleven-year low of 11.6°/%. For the rental rates, Class A rents in the reported a 22% gain to $11.37 psf; and year ending second quarter 1995, the the Southwest Sector, increased 11.6% total metropolitan absorption equaled Minneapolis CBD and the West to$12.77 psf. 955,326 sq. ft. of office space or 2.1% of and Southwest Sectors increased Average real estate taxes for most occupied base. 11-30% on average areas remained unchanged from 1994 The pace of leasing activity has with the exception of the St. Paul CBD s owed from the past two record-break- * St. Paul lowered its Class A Class A, B, and C buildings, which ing years which resulted in a total vacancy rate dramatically, reported as much as 24.6% decrease in absorption of 4.4 million square feet. improving by 7.9 percentage points property taxes.The tax abatement trend The slowdown is due to the shortage of is nearing an end since commercial and large blocks of contiguous space and no ♦ A fourth quarter survey of the industrial values are beginning to rise new office construction within the Minneapolis CBD reported again. During the last four years, marketplace.The vacancy rate continues sir-month negative absorption of millions of dollars in refunds have been to decrease because steady employment 85,834 sq.ft. awarded to owners of properties who growth is driving absorption. have successfully appealed to city For the year ending second quarter As building values climb, expect assessors that their properties were 1995, the leader for the metro area was overvalued and therefore overtaxed. the Minneapolis CBD, responsible for real estate taxes to rise Tenants facing lease renewals in the next 63.5% of the total market absorption. few years will be hit with the double Next is the the Southwest Sector with Class A buildings saw a dramatic surprise of higher net rents and higher 17.8% and Minneapolis Out-of-CBD improvement this year, decreasing its real estate taxes. with 14.7%. The highest loss was vacancy rate by 7.9 percentage points to suffered by the St. Paul Out-of- 19.4%. All combined,Class A buildings CBD with negative absorption of in the metro area absorbed 791,764 sq.ft. _ 142,685 sq. ft. of space, or 85% of the total annual Except for the St. Paul CBD, absorption of office space. i Class A buildings throughout the Twin Of the remaining 135,562 sq. ft. of Cities have vacancy rates below 8%. absorption, Renovated buildings were Again, the Minneapolis CBD led the responsible for 132,504 sq. ft., while _ �wa with a fourth quarter vacancy rate of Class B and Class C shared a total of . Though still struggling, St. Paul only 3,058 sq. ft. of positive absorption. ♦ Zeller Realty Corporation's proposed expansion of Norwest financial Center in Bloomington II