Occupancy costs on the rise; Amenity-rich environments and strong investment sale market lead to higher assessed values, taxes and operating costs

Research & Forecast Report

MINNEAPOLIS-ST. PAUL | OFFICEQuarter 4 2016

Vacancy and absorption trends The vacancy rate in the Minneapolis-St. Paul office market is 14.5 percent, up from 13.6 percent during the third quarter. There was negative absorption of 480,032, bringing the annual absorption total to negative 421,378. The bulk of the negative absorption was due to Wells Fargo moving out of the Baker Block and Northstar Center buildings into their new property in Downtown East.

Class B properties have the highest vacancy rate at 15.0 percent. Functionally obsolete Class B and C properties in poor locations or with few amenities have struggled to attract tenants as companies’ increasingly seek access to amenities. Fewer companies are looking for a value proposition only. Some of these properties are being converted to multi-unit housing. An example of this is in the Southwest submarket, where Opus purchased Lincoln Corporate Center in Edina and will be demolishing a 96,000-square-foot office building on the property to make way for apartments.

In the Minneapolis CBD, landlords are renovating their properties to appeal to amenity-conscious potential tenants and to provide in-demand creative spaces. The recently-renovated Washington Square has leased 150,000 square feet in recent quarters after implementing these upgrades. Additional properties undergoing remodeling include the Baker Block, TCF Building, and Fifth Street Towers.

Occupancy costs increasing Rental rates are going up, especially in buildings that have invested large amounts of capital to increase common space amenities that appeal to employee retention and recruiting strategies. Building owners want higher rental rates on their rent rolls in case they need to refinance or sell in the future to recoup their capital improvements. Landlords are more likely to provide incentives such as free rent and tenant improvement allowances in order to hold to their asking rental rates.

Vacancy

20%

15%

10%

5%

0

14.9%16.8%

17.2%16.7%

Perc

ent V

acan

t

16.1%15.6% 14.2%

13.7%

2008 2009 2010 2011 2012 2013 2014 201520072006

16.3% 15.2%

2016

14.5%

Net Absorption2,000,000

1,000,000

0

(1,000,000)

(2,000,000)

253,779

(1,661,963)

585,965

(312,099)SF A

bsor

bed 981,934

503,756750,841 1,025,689

2008 2009 2010 2011 2012 2013 2014 201520072006

966,371 929,169

2016

(421,378)

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Market IndicatorsRelative to prior period Q4 2016 VACANCY NET ABSORPTION RENTAL RATE

2 Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Office | Colliers International

Occupancy costs increasing (Con’t.) Taxes have also become a major factor in increasing occupancy costs. We have seen the real estate tax portions at some buildings increasing two to three dollars per square foot. There has been a significant number of properties selling at premium prices, which leads to rising assessed values and higher tax bills for owners. This not only affects properties that have sold, but influences assessors to increase values on neighboring comparable properties. The resulting higher taxes result in larger property tax payments for tenants.

Future Trends Functional obsolescence, particularly among Class B and C properties, will lead to the continued conversion of this product type to other uses, particularly residential.

According to a Colliers national economic report, State of the U.S. Market and 2017 Outlook, the economic recovery was over earlier in 2016, meaning the economy has broadly recovered from the Great Recession, and is firmly in an expansion phase. Property transactions remain at historically high levels with pricing following suit. Both increasing prices and the prospect of higher interest rates could reverse investor demand for property in recent years. Colliers national research predicts property fundamentals will continue to improve at a moderate pace for the near term, but investors should prepare for the inevitable end-of-cycle impacts.

Historical Office Absorption Monthly EmploymentMonthly Employment Minneapolis-St. Paul, MN

Minneapolis-St. Paul remains a strong second-tier U.S. market with steady job growth since the recession, a highly educated workforce and a strong corporate presence.

Our historical analysis going back 10 or more years includes data on multi-tenant buildings only. Beginning in 2011, we tracked an expanded universe of space that includes single-tenant properties, in addition to continuing to track our multi-tenant building data. Since then, corporations such as UnitedHealth Group and Wells Fargo built large corporate campuses and moved workers out of multi-tenant space.

A comparison of these two data sets reveals stronger absorption in the expanded market, which includes corporate campus growth. Average multi-tenant absorption for this time frame was 571,135 square feet, compared to 1,149,040 average absorption including single-tenant properties.

Another Look Minneapolis-St. Paul Boasts Strong Corporate Growth

Expanded Market

Multi-Tenant Market

(includes single-tenant)

3Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Office | Colliers International

20

15

10

5

0

12.3%

Airport/Southof the River

MinneapolisCBD

Southwest St. PaulCBD

St. PaulSuburban

West Northwest

17.7%14.1%

11.4%13.6%

8.9%

16.7%

Q4 Vacancy

Perc

ent V

acan

t

800,000

400,000

0

(400,000)

(800,000)

16,840 6,696 36,756 26,828

Airport/Southof the River

MinneapolisCBD

Southwest St. PaulCBD

St. PaulSuburban

West Northwest

(543,165)

(12,630) (11,357)

Q4 Absorption

SF A

bsor

bed

Airport/South of River

> The vacancy rate in the Airport/South of the River market is 12.3 percent, down from 12.7 percent during the third quarter. There was 16,840 square feet of absorption.

> Prime Therapeutics is planning to build a 400,000 square foot building in Eagan after conducting a metro-wide site search. The location is at Boulder Lakes Business Park near Interstate 494 and Dodd Road. They would move workers from offices in Eagan, Mendota Heights and Edina while maintaining a presence in Bloomington at Normandale Lake Office Park.

St. Paul CBD & St. Paul Suburban

> The vacancy rate in the St. Paul CBD is 11.4 percent, down slightly from 11.5 percent in the third quarter.

> There was minimal absorption for the quarter, with 6,696 square feet of positive absorption, but absorption for the year totaled 241,632 square feet, leading absorption among submarkets. In 2016, Comcast renewed and expanded, and the Pioneer Press moved their headquarters to River Park Plaza. Additionally, there has been activity at Securian Center, 375 Jackson Street, and Lawson Commons.

> There is a lack of large contiguous blocks of Class A space in the market.

> Residential growth is strong in the CBD, where the number of residential units has grown from 4,873 in 2010 to 6,024 in 2016, according to Maxfield Research.

> The vacancy rate in the St. Paul Suburban submarket is 13.6 percent, down from 14.3 percent in the third quarter. There was 36,756 square feet of absorption, and 48,575 square feet for the year.

> 3M expanded to 67,363 square feet at 500 Bielenburg Drive in Woodbury.

Submarket Summaries

Prime Therapeutics will build a 400,000 square foot headquarters facility in Eagan, moving workers out of offices in Eagan, Mendota Heights and Edina. They will continue to lease space at 8400 Normandale, pictured above.

4 Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Office | Colliers International

The Hidden Costs of Downtown Space

PARKING TAXES OPERATING EXPENSES

$

> Franklin Street Properties is completely renovating the empty TCF Bank Building, which was formerly home to TCF Financial Corp, which moved to Plymouth last year. It is a contrast to the 50-story skyscraper originally proposed at the site and will include loft-style offices and an updated atrium space.

> Fifth Street Towers are considering connecting 100 and 150 Fifth Street which will allow for larger floor plates and are adding a rooftop terrace.

> Macy’s will close its downtown Minneapolis location in March. 601W Cos. purchased the space and is planning to renovate the location into retail and office space. The project is comprised of an entire city block.

> United Properties is proposing a North Loop office building of 192,820 square feet with 408 parking spaces, Swervo development and CPM Cos. proposed at 10-story, 230,300 square foot project. Both are facing resistance from neighborhood residents and may scale back their plans.

Amazon and Zipnosis will lease space at Hines’ new T3, an all wooden building in the North Loop. Amazon will lease 100,000 square feet and Zipnosis 16,000 square feet.

Rental rates are increasing across the market, especially at buildings where significant investments have taken place to offer a strong amenity package. In the CBD, the pain is increased by skyrocketing parking costs.

Minneapolis CBD

> The vacancy rate in the Minneapolis CBD is 17.7 percent and there was a negative 543,165 square feet of absorption, as Wells Fargo moved workers out of the Baker Block and Northstar Center into its new corporate headquarters in Downtown East.

> Adding to increasing costs is the scarcity of parking, as surface lots have disappeared and downtown residential and worker populations have gone up, leading to rising costs.

> The Nicollet Mall renovation, which includes more greenspace and pedestrian-friendly access, will also add to costs at buildings in close proximity to the signature street. Properties will be charged according to their proximity to the Mall for the $50 million project.

> T3, Hines’ new construction in the North Loop made from wood, was completed during the quarter. T3, which stands for timber, transit and technology, totals 210,000 square feet. Hines has signed leases from Amazon and Zipnosis for the space.

> The Baker Center, a four-building complex that includes the Baker Building, Investors Building, Roanoke Building and the 730 Building are in the process of being renovated. The renovation will include a fitness center, conference facility and rooftop deck in addition to a built and furnished 49,000 square foot speculative suite.

5Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Office | Colliers International

Southwest

> Vacancy decreased to 14.1 percent from 15.5 percent during the third quarter.

> While absorption was negative at 12,630 square feet, the decline was due to a suburban trend of converting or razing Class B office space into alternative uses. Opus purchased the 307,000-square-foot Lincoln Corporate Center in Edina, which has sat vacant for years. They will demolish a 96,000-square-foot office building on the property and construct a 244-unit apartment property. Children’s Hospitals and Clinics leased the remaining space at the complex for a long-term lease.

> This transaction effectively reduced the vacancy in the Southwest class B market by over 300,000 square feet, contributing to a reduction in Class B vacancy in the Southwest from 19.7 percent at Quarter Three to the fourth quarter vacancy of 14.7 percent.

> Vacancy is lowest along the France Avenue Corridor while properties west of Highway 169 along Interstate 494 are not as in-demand. Tenants are attracted to the close proximity to amenities and the abundant restaurant and shopping options available on France Avenue.

> The Bloomington Port Authority issued an RFP for a vacant 1.85-acre piece of land at 700 American Boulevard near the REI store. It is seeking “non-retail development” at the location, which is also near a Home Depot, Sam’s Club and the Shops at Lyndale.

Lincoln Corporate Center Opus will convert a portion of Lincoln Corporate Center in Edina, a Class B property that sat vacant for years, into apartments.

West/Northwest

> The vacancy rate in the West submarket is 8.9 percent, down from 9.2 percent during the third quarter. There was 26,828 square feet of absorption.

> In the Northwest submarket, the vacancy rate is 16.7 percent, and there was negative absorption of 11,357 square feet.

> Thor broke ground on its new corporate headquarters in North Minneapolis at Plymouth Avenue North and Penn Avenue. The 92,000 square foot building will include both retail and office space along with a 620-stall parking garage. Target is leasing 36,000 square feet and subleasing 10,000-15,000 square feet to Thor. The remaining space will be available to sublease to other organizations.

10 West End Excelsior Group has plans for a 315,280 square foot office building in the West submarket called 10 West End featuring modern efficiencies, and a free on-site parking ramp. The West End area, at Highway 100 and Interstate 394, is a popular choice for office tenants, due to the many amenities and close proximity to downtown and would be a likely option for new office construction.

6 Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Office | Colliers International

Micro Market Analysis

Submarket Building SFDirect

Vacant SF% Vacant

Direct Sublease

Vacant SF% Vacant

W/Sublease

CoreA 13,041,205 1,575,817 12.1% 1,647,331 12.6%B 6,732,305 1,830,183 27.2% 1,858,177 27.6%C 733,626 356,535 48.6% 356,535 48.6%Totals: 20,507,136 3,762,535 18.3% 3,862,043 18.8%

EastA 172,000 172,000 100.0% 172,000 2.2%B 575,341 12,504 2.2% 12,504 23.0%C 566,918 130,500 23.0% 130,500 12.5%Totals: 1,314,259 315,004 24.0% 315,004 9.9%

NortheastA 180,739 142,919 79.1% 142,919 79.1%B 1,811,873 182,993 10.1% 182,993 10.1%C 85,000 0 0.0% 0 0.0%Totals: 2,077,612 325,912 15.7% 325,912 15.7%

North LoopA 733,509 46,605 6.4% 46,605 6.4%B 1,321,247 117,273 8.9% 117,273 8.9%C 354,311 0 0.0% 0 0.0%Totals: 2,409,067 163,878 6.8% 163,878 6.8%

WarehouseA 220,897 93,390 42.3% 93,390 42.3%B 1,430,889 143,971 10.1% 143,971 10.1%C 555,773 63,234 11.4% 63,234 11.4%Totals: 2,207,559 300,595 13.6% 300,595 13.6%

The Minneapolis CBD has distinct neighborhoods, from the trendy North Loop, to the skyscrapers in the core, to the neighborly feel of the Northeast. Each of these neighborhoods warrants a closer look. Beginning with this report, we will be tracking these distinct markets to better understand the dynamics of the CBD.

NEW TO OUR REPORT

Minneapolis CBD

94

35E

35E

35W

35E

694

494494

494

494

394

94

694

94

35W

5

77

62

5

101

41

41

55

55

100

100

2

47

65

65

120

36

36

96

244

51

156

95

95

55

55

13

47

13

149

3

110

55

10

52

52

169

169

169

10

212

12169

61

Brooklyn Park

BrooklynCenter

New Hope

Golden Valley

Plymouth

St Louis ParkUptown

50th & France

WestBloomington

Hopkins

Maple Grove

Corcoran

Wayzata

Minnetonka

Woodland

Deephaven

Orono

Medina

Greenwood

Shorewood

ChanhassenEden Prairie

Bloomington

Edina

Cottage Grove

Newport

South St Paul

MendotaHeights

Inver GroveHeights

St PaulSummit-University

Roseville

Falcon Heights

Shoreview

New Brighton

ColumbiaHeights

St Anthony

Arden Hills

VadnaisHeights Gem Lake

North St Paul

Oakdale

Mahtomedi

WhiteBear Lake

DellwoodNorth Oaks

SpringLake Park

Maplewood

Woodbury

BurnsvilleSavage

Chaska

Shakopee

Lake Elmo

Payne-PhalenMinneapolis

MinnesotaValley

NationalWildlifeRefuge

Lake ElmoPark Reserve

MississippiNational River

and RecreationArea

Lebanon HillsRegional Park

Minneapolis-Saint Paul

InternationalAirport

Mississip

pi R

iver

Spring Lake

CBD394 CORRIDOR

494 CORRIDOR

7Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Office | Colliers International

394/494 Corridors

Submarket Building SFDirect

Vacant SF% Vacant

Direct Sublease

Vacant SF% Vacant W/

Sublease

494 CorridorA 8,614,923 1,277,294 14.8% 2,795 14.9%

B 5,435,981 872,577 16.1% 46,706 16.9%

C 509,080 61,014 12.0% 0 12.0%

Totals: 14,559,984 2,210,885 15.2% 49,501 15.5%

394 CorridorA 4,176,457 409,810 9.8% 0 9.8%

B 2,882,444 276,196 9.6% 23,658 10.4%

C 238,123 10,355 4.3% 0 4.3%

Totals: 7,297,024 696,361 9.5% 23,658 9.9%

The 394 and 494 Corridors are additional Micro Markets that are worthy of additional tracking. They are hubs of office space that have different dynamics and market trends.

Micro Market Analysis

Submarket Building SFDirect

Vacant SF% Vacant

Direct Sublease

Vacant SF% Vacant

W/Sublease

CoreA 13,041,205 1,575,817 12.1% 1,647,331 12.6%B 6,732,305 1,830,183 27.2% 1,858,177 27.6%C 733,626 356,535 48.6% 356,535 48.6%Totals: 20,507,136 3,762,535 18.3% 3,862,043 18.8%

EastA 172,000 172,000 100.0% 172,000 2.2%B 575,341 12,504 2.2% 12,504 23.0%C 566,918 130,500 23.0% 130,500 12.5%Totals: 1,314,259 315,004 24.0% 315,004 9.9%

NortheastA 180,739 142,919 79.1% 142,919 79.1%B 1,811,873 182,993 10.1% 182,993 10.1%C 85,000 0 0.0% 0 0.0%Totals: 2,077,612 325,912 15.7% 325,912 15.7%

North LoopA 733,509 46,605 6.4% 46,605 6.4%B 1,321,247 117,273 8.9% 117,273 8.9%C 354,311 0 0.0% 0 0.0%Totals: 2,409,067 163,878 6.8% 163,878 6.8%

WarehouseA 220,897 93,390 42.3% 93,390 42.3%B 1,430,889 143,971 10.1% 143,971 10.1%C 555,773 63,234 11.4% 63,234 11.4%Totals: 2,207,559 300,595 13.6% 300,595 13.6%

Micro Market Analysis NEW TO OUR REPORT

8 Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Office | Colliers International

Lease Activity

TENANT PROPERTY ADDRESS CITY SF SUBMARKET

GSA Marquette Plaza 250 Marquette Ave Minnneapolis 74,000 Minneapolis CBD

3M Expansion 500 Bielenberg Dr 500 Bielenberg Dr Woodbury 67,363 St. Paul Suburban

Van Wagenen Superior Office Center 6509 Flying Cloud Dr Eden Prairie 46,946 Southwest

Ovative 729 Washington Ave. N. 729 Washington Ave. N. Minneapolis 30,000 Minneapolis CBD

When I Work - Sublease Ford Center 420 N 5th St Minneapolis 27,782 Minneapolis CBD

Cliq Studios - Sublease Normandale 8200 Tower 5600 W 83rd St Bloomington 27,447 Southwest

Clear Night Group Maytag Building 515 North Washington Avenue Minneapolis 25,000 Minneapolis CBD

BDO US Bancorp Center 800 Nicollet Mall Minneapolis 20,049 Minneapolis CBD

Ramsey County Workforce Solutions Standard Office Building 2266 N 2nd St North St. Paul 20,000 St. Paul Suburban

Newell-Rubbermaid US Bancorp Center 800 Nicollet Mall Minneapolis 16,910 Minneapolis CBD

Miller Dunwiddle 100 Washington Square 100 S Washington Ave Minneapolis 14,007 Minneapolis CBD

Zipnosis T3 323 Washington Avenue Minneapolis 16,000 Minneapolis CBD

R3 Continuum Olympic Place 7825 S Washington Ave Bloomington 12,941 Southwest

ForcePoint Broadway Ridge 3001 Broadway St. Minneapolis 12,895 Minneapolis CBD

Natures Way Butler Square 100-116 6th St Minneapolis 11,737 Minneapolis CBD

Aerotek Brookdale Corporate Center I 6300 Shingle Creek Pkwy Brooklyn Center 11,714 West/Northwest

Kantar Media Minnesota Center 7760 S France Ave Edina 11,424 Southwest

Significant Lease and Sales Activity

Marquette Plaza The office for the U.S. Citizenship and Immigration Service relocated to Marquette Plaza, where is will occupy the seventh floor, totaling 74,000 square feet.

9Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Office | Colliers International

Sales Activity

PROPERTY NAME ADDRESS CITY BUYER SELLLER PRICE PRICE PSF SF

33 South Sixth Street/City Center 33 S 6th St Minneapolis HNA Group Shorenstein $315,000,000 $195 1,618,206

Lincoln Corporate Center 5901 Lincoln Dr Edina Opus RiverSource Life Ins Co $25,300,000 $82 307,000

Pinehurst Building 4999 France Ave South Edina Scott Weber Upper Midwest

Management Corp $18,000,000 $435 41,385

Maplewood Professional Building 1655 Beam Ave Maplewood Healthcare Realty Trust HealthEast $12,600,000 $260 48,500

Whitewater Office Center I & II

12501 Whitewater Dr Minnetonka Ryan Companies Liberty Property

Trust $11,959,420 $58 207,672

One Corporate Center IV 7301 Ohms Ln Edina ICM Realty Group Ltd Lone Star Funds $10,200,000 $91 112,085

Minnetonka Corporate Campus II & III

12800 Whitewater Dr Minnetonka Ryan Companies Liberty Property

Trust $8,040,555 $58 139,622

Southdale Center I 6550 York Ave S Edina DLC Residential Wayzata Investment Partners $7,921,410 $127 62,152

City West Financial Center 6500 City West Pkwy Eden Prairie The Dakota REIT Onward Investors $7,000,000 $122 57,191

55 West Financial Center 10405 6th Ave N Plymouth The Dakota REIT Onward Investors $5,725,000 $112 51,019

1970 Christensen Ave 1970 Christensen Ave

West Saint Paul Lunieski & Assoc. Hempel Properties $4,850,000 $150 32,396

Minnetonka West Office Building 5125 County Rd 101 Minnetonka Relate Counseling Center Sara Investment $4,676,933 $142 33,000

Tamarack Hills 587 Bielenberg Dr Woodbury Ben Smith Norgen Group $4,368,882 $245 17,816

Southdale Center II 3250 W 66th St Edina DLC Residential Wayzata Investment Partners $3,928,587 $127 30,824

Brentwood III-IV 5620 Smetana Dr Minnetonka Eden Prairie Islamic Community (EPIC) Lone Star Funds $3,400,000 $45 75,992

7447 Egan Drive 7447 Egan Dr Savage Red Water Ventures LLC

Wells Fargo Bank OBO GE Business Loan Pass-Through Series 2007-1

$3,350,000 $130 25,744

33 South Sixth Street/City Center HNA Group bought 33 South Sixth Street/City Center from Shorenstein Partners for $315 million. Target leases 800,000 square feet of the 1.6 million-square-foot building. This is the highest price ever paid for a building in Minneapolis.

10 Minneapolis-St. Paul Research & Forecast Report | Quarter 4 | Office | Colliers International

The above table is summarized data on multi-tenant office buildings greater than 20,000 square feet. Not included are single-tenant, owner-occupied, medical or government buildings.

SubmarketTotal SF

Direct Vacant SF

% Vacant Direct

Sublease Vacant SF

% Vacant W/Sublease

Asking Rate

Q4 2016 Absorption

YTD Absorption

Airport/South of the RiverA 1,883,357 287,989 15.3% 5,448 15.6% $14.48 7,890 14,841

B 4,066,784 468,781 11.5% 17,044 11.9% $11.86 4,150 (7,037)C 1,273,707 134,938 10.6% 39,991 13.7% $9.23 4,800 24,321

Totals: 7,223,848 891,708 12.3% 62,483 13.2% $11.95 16,840 32,125

Minneapolis CBDA 14,573,435 2,255,816 15.5% 71,514 16.0% $18.23 (96,388) (64,695)B 12,109,377 2,338,744 19.3% 27,994 19.5% $14.35 (447,977) (639,141)C 2,363,647 553,372 23.4% 0 23.4% $13.15 1,200 (29,727)

Totals: 29,046,459 5,147,932 17.7% 99,508 18.1% $15.12 (543,165) (733,563)

SouthwestA 9,265,525 1,302,148 14.1% 2,795 14.1% $15.97 12,730 (184,360)B 6,236,128 914,509 14.7% 57,111 15.6% $12.14 (16,863) (18,790)C 870,251 89,209 10.3% 0 10.3% $9.25 (8,497) (7,938)

Totals: 16,371,904 2,305,866 14.1% 59,906 14.5% $14.02 (12,630) (211,088)

St. Paul CBDA 2,128,667 229,223 10.8% 12,095 11.3% $13.75 13,388 63,009 B 4,491,900 558,206 12.4% 1,268 12.5% $11.07 4,253 206,669 C 639,936 38,305 6.0% 0 6.0% $8.00 (10,945) (21,350)Totals: 7,260,503 825,734 11.4% 13,363 11.6% $11.87 6,696 248,328

St. Paul SuburbanA 2,172,882 398,582 18.3% 16,288 19.1% $13.95 2,405 88,814 B 6,139,087 836,790 13.6% 0 13.6% $11.96 18,885 (60,253)C 1,912,372 158,971 8.3% 2,405 8.4% $11.00 15,466 20,014 Totals: 10,224,341 1,394,343 13.6% 18,693 13.8% $12.64 36,756 48,575

West/NorthwestA 5,066,479 546,343 10.8% 11,938 11.0% $18.45 9,047 (99,647)

B 6,567,839 841,723 12.8% 23,658 13.2% $13.30 21,397 318,768

C 2,057,208 171,293 8.3% 265 8.3% $9.49 (14,973) (24,876)

Totals: 13,691,526 1,559,359 11.4% 35,861 11.7% $14.53 15,471 194,245

West A 4,038,190 415,264 10.3% 11,938 10.6% $20.41 2,185 (105,932)

B 4,427,171 355,698 8.0% 23,658 8.6% $13.94 30,624 195,720

C 790,192 49,227 6.2% 265 6.3% $9.94 (5,981) 2,636

Totals: 9,255,553 820,189 8.9% 35,861 9.2% $15.68 26,828 92,424

Northwest A 1,028,289 131,079 12.7% 0 12.7% $13.42 6,862 6,285

B 2,140,668 486,025 22.7% 0 22.7% $12.03 (9,227) 123,048

C 1,267,016 122,066 9.6% 0 9.6% $8.42 (8,992) (27,512)

Totals: 4,435,973 739,170 16.7% 0 16.7% $11.98 (11,357) 101,821

Total All MarketsA 35,090,345 5,020,101 14.3% 120,078 14.6% $16.00 (50,928) (182,038)

B 39,611,115 5,958,753 15.0% 127,075 15.4% $12.84 (416,155) (199,784)

C 9,117,121 1,146,088 12.6% 42,661 13.0% $10.65 (12,949) (39,556)

Totals: 83,818,581 12,124,942 14.5% 289,814 14.8% $13.76 (480,032) (421,378)

Market Statistics

11Minneapolis-St. Paul Research & Forecast Report | Quarter 2 | Office | Colliers International

SubmarketTotal SF

Direct Vacant SF

% Vacant Direct

Sublease Vacant SF

% Vacant W/Sublease

Asking Rate

Q4 2016 Absorption

YTD Absorption

Airport/South of the RiverA 2,538,092 362,563 14.3% 5,448 14.5% $14.18 11,931 4,441

B 7,162,735 527,403 7.4% 17,044 7.6% $11.66 18,057 9,241

C 2,620,726 151,279 5.8% 39,991 7.3% $9.23 9,787 25,780

Totals: 12,321,553 1,041,245 8.5% 62,483 9.0% $11.98 39,775 39,462

Minneapolis CBDA 17,560,327 2,517,078 14.3% 71,514 14.7% $18.23 (96,388) 1,255,305

B 14,898,322 2,601,735 17.5% 27,994 17.7% $14.34 (446,310) (650,033)

C 4,050,058 556,872 13.7% - 13.7% $13.49 1,200 (27,056)

Totals: 36,508,707 5,675,685 15.5% 99,508 15.8% $15.10 (541,498) 578,216

SouthwestA 13,221,496 1,592,255 12.0% 9,795 12.1% $16.15 14,014 (171,490)

B 9,675,523 1,101,206 11.4% 277,111 14.2% $12.33 173,964 193,518

C 3,121,872 167,763 5.4% - 5.4% $10.82 (8,603) (55,414)

Totals: 26,018,891 2,861,224 11.0% 286,906 12.1% $14.08 179,375 (33,386)

St. Paul CBDA 2,773,960 229,223 8.3% 12,095 8.7% $13.75 16,038 65,313

B 5,410,844 558,206 10.3% 1,268 10.3% $11.07 4,253 206,669

C 2,810,535 61,005 2.2% - 2.2% $8.00 (10,945) (21,350)

Totals: 10,995,339 848,434 7.7% 13,363 7.8% $11.87 9,346 250,632

St. Paul SuburbanA 3,024,944 432,422 14.3% 16,288 14.8% $17.78 15,174 107,427

B 10,581,531 1,023,049 9.7% 4,045 9.7% $13.15 80,277 (13,571)

C 6,546,070 190,077 2.9% 2,405 2.9% $9.30 15,466 19,586

Totals: 20,152,545 1,645,548 8.2% 22,738 8.3% $14.53 110,917 113,442

West/NorthwestA 9,268,471 626,450 6.8% 11,938 6.9% $16.92 5,295 (66,625)

B 10,008,299 994,866 9.9% 23,658 10.2% $13.09 40,161 192,784

C 5,339,341 196,782 3.7% 265 3.7% $10.40 (11,773) (23,018)

Totals: 24,616,111 1,818,098 7.4% 35,861 7.5% $14.02 33,683 103,141

Total All MarketsA 48,387,290 5,759,991 11.9% 127,078 12.2% $16.49 (33,936) 1,194,371

B 57,737,254 6,806,465 11.8% 351,120 12.4% $12.90 (129,598) (61,392)

C 24,488,602 1,323,778 5.4% 42,661 5.6% $10.64 (4,868) (81,472)

Totals: 130,613,146 13,890,234 10.6% 520,859 11.0% $13.88 (168,402) 1,051,507

Market Statistics (Expanded Market)

The above table is summarized data on multi- and single-tenant office buildings greater than 10,000 square feet. Owner-occupied properties are also included. Not included are government or medical buildings.

BROKERAGE SERVICES CONTACT:William M. Wardwell SIOR

Executive Vice President | Brokerage Minneapolis-St. Paul+1 952 897 7828bill.wardwell@colliers.com

FOR MORE INFORMATION:Maura Carland Director of ResearchMinneapolis-St. Paul+1 952 828 7219maura.carland@colliers.com

Copyright © 2016 Colliers International.

The information contained herein has been obtained from sources deemed reliable. While every reasonable effort has been made to ensure its accuracy, we cannot guarantee it. No responsibility is assumed for any inaccuracies. Readers are encouraged to consult their professional advisors prior to acting on any of the material contained in this report.

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