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(1U Ail FOUR QUARTER SURVEY REVEALS SIGNIFICANT CHANGES IN JUST SIX - MONTHS A fourth quarter 1995 office market ' survey of the metro area's two largest • sectors---the Minneapolis CBD and the Southwest Sector---revealed several ,-_ notable changes in a six-month period. First, the Minneapolis CBD fell from its position as the metro area absorption leader with negative absorption of 85,834 sq. ft. as of fourth quarter 1995. Corporate "right-sizing" contributed to the majority of this negative absorption. `"s The result was a rise in the overall Minneapolis CBD vacancy rate from 9.7% in second quarter 1995 to 10% in fourth quarter 1995. During this six- month period, all Minneapolis CBD Rendering of National City Bank's new 94,000 sq.ft.location in Gavu°dae Common,downtown Minneapolis markets, except Class C, reported nega- tive absorption. St.Paul and a handful of suburban build- to do so are St. Anthony Main in Conversely, during this same period ings reporting availability of 50,000 sq.ft. Minneapolis, Town Square in St. Paul, of conti the Southwest Sector experienced a guous space. With this shortage Diamondhead I<Iall in Burnsville, The considerable rise in absorption, report- of space, and with limited office devel- Crossroads in Eden Prairie and ing six-month net absorption of 398,339 opment on the immediate horizon, Rosedale Square North in Roseville. creative alternatives are occurring. There's plenty of elbow room in sq. ft. This lowered the sector's overall vacancy rate 2.1 percentage points,from Retail property owners are convert- St. Paul, and space is available for ing spaces for office use, especially for tenants in downtown and outside the 7.3% for second quarter 1995 to 5.1% for fourth quarter 1995. The majority of tenants looking at downtown St.Paul CBD.In fact,St.Paul has nearly the six-month absorption (74.9%) was Minneapolis. Examples of those who one-third (31.2%) of the metro area's reported by Class B buildings, which have converted some or all of their retail vacant space. Clearly, this is another • lowered its vacancy rate substantially, and entertainment space to office use are alternative for large space users who from 8. it m second quarter anti to Gaviidae Common, which leased 94,000 can't find space or the rental rate they sq. ft. to National City Bank and want in Minneapolis or the suburbs. 5.7% in fourth quarter 1995. Finally, the trend of rising rents Riverplace, which added 40,000 addi- continued, especially in the Minneapolis tional sq. ft. of office. Others who have CBD where Class A rents jumped up converted space to office or are planning another 10% in just six months to$12.51 sf. That means over°e last 18-month STATED NET RENTAL RATES period rents rose 34.3%. The Southwest Sector's Class A buildings reported a six- FOURTH QUARTER 1988 1995 month increase of 7.6% to$13.74 psf,for ©To,le Real Estate Company an 18-month total increase of 20.1%. $20 511.13 $16.45 SHORTAGE OF SPACE SPARKS $15.19 $14.61 CREATIVE ALTERNATIVES $1s S15.61 $15.30 $14.10 512.05 S11.44 S11.80 S13.14 With a total office universe of $12.33 $12.51 51 million square feet and just under $10 6 million square feet vacant, the market $8.88 $10.26 is tight,especially for tenants looking for $8.41 large blocks of space. Contiguous space $5 Of 50,000 sq. ft. or more is available in only a few Class A buildings. Even the number of Class B, Class C and 0 Renovated buildings reporting large 1988 1989 1990 1991 1992 1993 1994 1995 blocks of space is shrinking, with only MPLS CBD-CLASS A SOUTHWEST SECTOR-CLASS A • l�