Quarterly Market Reports

As we get excited for Spring and look back on the past three months, we’ve seen some very interesting market indicators to watch throughout 2024. An important, early indicator was the Kickernick Building in Minneapolis’s Warehouse District selling at $3.79 million, an all-time modern-day low for the market (the building previously sold for $19.15 million, with $1 million more invested in the asset). We are starting to see increased clarity in the return to office, with most companies instituting a true hybrid schedule, but requiring a set number of days in the office.

For the broader office market, we are still in the early innings and have yet to hit bottom. More buildings are going into receivership or selling, but the majority of the downward market movement is still ahead. In the past few months, Downtown Minneapolis’s Wells Fargo Tower, Forum, Capella, Ameriprise, Kickernick and 330 have either been taken over by the lender or put on the market for sale. This trend will continue but, in the long run, this will serve as a reset for the Minneapolis office market. Outside Downtown Minneapolis, we predict that Normandale Lakes will struggle while the buildings go through the foreclosure process, and the current owner has put land leases on the properties, creating a long-term legal struggle.

Regardless of the direction your workspace needs are going, the team at Kenwood Commercial is ready to answer any questions you have.

To view or download our full report, click here.

As we look back on 2023, and anticipate the landscape of 2024, we find that commercial real estate’s office sector is experiencing significant divergence. The dynamics vary based on product type and quality, leading to notable winners and signaling impending challenges. With approximately $2.2 trillion in real estate loans reaching maturity, and nearly 217 million square feet of office leases set to expire, we find ourselves in training for the hurdles that the office market will confront in the year to come.

The Twin Cities mirror the broader market’s challenges. Presently, the overall office vacancy rate stands at 21.8%, but factoring in shadow vacancy and impending lease expirations pushes the figure well beyond 30%. Anticipating 2024 as a tipping point, we foresee a scenario where more lenders reclaim properties, leading to additional sales that will eventually establish a new benchmark for valuations. We eagerly anticipate the emergence of a new market equilibrium and the ongoing evolution of the commercial real estate landscape.

Click HERE to download the Q4 2023 report.

During the third quarter of 2023, the market experienced over 1.4 million square feet of leasing activity in 319 transactions. In direct leasing, the Minneapolis CBD markets gained an additional 66,0000 square feet of vacancy. The suburban markets posted an additional 892,000 square feet of vacancy, led by Best Buy vacating their single tenant HQ with 600,000 SF in the Southwest market. The Saint Paul CBD posted 19,000 SF positive absorption. 

Kenwood has been tracking the trends, and we’re happy to share our findings with you - click HERE to view or download the full report.

The Minneapolis office market is experiencing what we’re calling a Great Reset, from building valuations, to downsizing occupancy, lender/owner cooperation, and debt.

Class A buildings are selling at a steep discount, allowing owners to invest in their assets and also offer better deal terms; or they are selling at all-time highs, if they are highly amenitized.

Tenants are downsizing the space requirements and using the savings to move to buildings with upscale amenities. 

Many financially distressed buildings are working cooperatively with lenders and “holding on” through this rough time (‘staying alive ‘til 2025’, as it were). 

Regional banks are pulling back on real estate lending and interest rates are putting significant pressure on the market.

Click HERE to view or download our Q2 2023 report.