Quarterly Market Reports

Looking back on 2024, office vacancy continued to rise, but companies are starting to better understand the utilization of their office spaces, creating a new normal. Across the entire market, there was a negative absorption of -566,456 square feet as historically large occupiers of office space continued to give back space, setting a new benchmark for the market.

The good news is that there were over 227 transactions in the 4th quarter of the year, indicating that companies remain active in securing office spaces that align with their evolving workforce strategies. Tenants continue to migrate toward quality assets with strong ownership structures, creating a clear divide between high-performing and struggling properties. These buildings are transacting at all-time highs, reinforcing their desirability in the current market landscape. As we move forward, the market will continue to adjust to changing occupier demand and economic conditions, reinforcing the importance of prime properties and strategic investments in commercial real estate.

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.

As the 3rd quarter comes to an end, we’re starting to see the bottom of the market. This will be the 12th consecutive quarter of negative absorption, where more office space is being added to the market vs. being leased. The Forum building in Downtown Minneapolis sold for 91% percent less than its previous sale in 2019, which will be a historic low for the market. We’re speculating that the market will remain at the bottom of this cycle for at least another 12 months as additional landlords and lenders work through this new landscape. 

The market has some optimism with the North Loop Green opening, US Bank renewing their large Downtown footprint, and Wold Architects moving from Saint Paul to Downtown Minneapolis. We’re still seeing the ‘flight to quality’ trend as tenants downsize and upgrade their office space.

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.

Summer, 2024.

As we reach the halfway point of the year, we remain in the early stages of the current cycle. Since most leases are typically 5-10 years, more than half of all leases signed before 2019 have yet to expire. Additionally, with most tenants having reduced their space by over 30%, we project an increase in vacancy rates. High interest rates, combined with rising vacancies, will likely lead to more buildings being sold at record low prices.

On the positive side, much of this information has been anticipated for a long time. We are beginning to see opportunistic investors become excited, which will help reset the market, benefiting tenants. From a landlord perspective, there is continued strength in certain market segments, and in some cases, landlords are gaining the upper hand.

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 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.