MPLS_Office Snapshot_Q2 2015Economic Indicators
Q214
Q215
12 -Month
Forecast
Minneapolis/St. Paul Employment
1.852M
1.891M
'A,.
Minneapolis/St. Paul Unemployment
3.84%
3.57%
1W
U.S. Unemployment
6.1%
5.3%
1W
Market Indicators
Q214
Q215
12 -Month
Forecast
Overall Vacancy
16.3%
14.2%
Net Absorption
368,228
279,157
Average Asking Rent
$14.29
$14.79
Net Absorption
2Q TRAILING AVERAGE
700,000
600,000
500,000
400,000
300,000
200,000
100,000
0
(100,000)
(200,000)
(300,000)
(400,000) i
Q2 I Q3 I Q4 Q1 I Q2 I Q3 I Q4 Q1 I Q2
2013 2014 2015
Overall Vacancy
20%
19%
180 Historical Average: 17.6%
— — — — — — — — — — — — -
17%
16%
15%
14%
13%
12%
Q1 Q2 I Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2
2012 2013 2014 2015
Economy
The Minnesota economy continues the positive steps of the past
years as total employment figures continue to rise. Minnesota
already has one of the highest labor participation rates in the nation
at 70.8%, and the total employment figures are only growing. Of the
11 major industry sectors, nine have had positive job additions in the
past 12 months. The Minneapolis/ St. Paul metro area has a larger
employment growth rate than any other metro area in the state.
Minnesota unemployment rate sits at 3.6%, well below the national
average of 5.3%
Market Overview
The Twin Cities office market is seeing the positive absorption trend
continue, although at a slower pace this year than last. Year to date,
280,000 square feet has been absorbed. The total vacancy rate for
office buildings now sits at 14.2%. Class A office continues to hold
the lowest vacancy rate of any building type.
So far this year, the Class B office market is outperforming other
classes. 80% of all absorbed space in 2015 has come from the Class
B market. This trend is caused by the rising rents that have impacted
the very tight Class A office market. Some traditionally Class A
tenants are looking for location and value over building prestige. This
will be an interesting story to follow as some large Class B blocks in
downtown Minneapolis become available over the next 24 months.
New Lease Deals
In Quarter 2 we have seen a number of large leases signed by firms
relocating within the Twin Cities. Education Credit Management
Corp (ECMC) is relocating from Oakdale to the Minneapolis CBD
primarily for workforce reasons. Children's Hospitals and Clinics is
consolidating their local back-office operations into a facility in Edina.
The 200,000 square foot deal will have a move -in date of 2016.
Investment Sales
A three -building portfolio in Minneapolis CBD sold to an out-of-state
investor this quarter. The $87.5 million paid for the buildings shows
that investors are looking to enter this market, and will pay top dollar
to do so. The building in Plymouth that TCF Bank is moving its
operations into also sold in Q2, as did the C.H. Robinson
headquarters facility in Eden Prairie. IRET is in the process of selling
nearly all of their office portfolio, which spans 3 million square feet
locally. Several of their buildings have already closed, while the
remaining will most likely be packaged into a portfolio sale.
Minneapolis CBD
88
26,358,360
229,816
3,219,328
St Paul CBD
26
6,308,806
38,014
1,060,441
Southeast
65
4,921,011
18,932
(18,932)
Southwest
106
12,950,490
133,302
1,738,792
St Paul Suburban
58
4,951,108
7,123
558,099
West/ Northwest
90
9,399,883
37,575
(37,575)
••TOTALS
Class A
30,361,546
283,426
Class B
31,886,638
292,770
Class C
2,641,474
7,038
TOTAL
Office asking rents converted to Full Service
Key Lease Transactions 2Q 2015
Ameriprise 122,000 Education Credit Management
100 Washington 52,000 JAMF Software
Key Sales Transactions YTD
300 First Ave N, Colwell Building, 420,162 Swervo Development / Spear Street Capital
510 Marquette
Gateway Office Plaza 79,750 Kraus -Anderson / WH&W Realty
About DTZ
9,438
$16.01
$16.67
216,788
$13.13
$15.71
17,601
$12.73
$13.50
(126,750)
$14.63
$16.56
166,584
$15.05
$13.56
(4,504)
$14.18
$17.12
66,650
228,951
(16,444)
New MCBD
New MCBD
$87,500,000 $208.25 MCBD
$9,250,000 $115.99 SE
DTZ is a global leader in commercial real estate services providing occupiers, tenants and investors around the world with a full
spectrum of property solutions. The company's core capabilities include agency leasing, tenant representation, corporate and global
occupier services, property management, facilities management, facility services, capital markets, investment and asset management,
valuation, research, consulting, and project and development management. DTZ provides property management for 1.9 billion square
feet, or 171 million square meters, and facilities management for 1.3 billion square feet, or 124 million square meters. The company
completed $63 billion in transaction volume globally in 2014 on behalf of institutional, corporate, government and private clients.
Headquartered in Chicago, DTZ has more than 28,000 employees who operate across more than 260 offices in 50 countries and
represent the company's culture of excellence, client advocacy, integrity and collaboration.
DTZ announced an agreement to merge with Cushman & Wakefield in a May 11 press release. The new company, which will operate
under the Cushman & Wakefield brand, will have revenues over $5.5 billion, over 43,000 employees and will manage more than 4 billion
square feet globally on behalf of institutional, corporate and private clients. The agreement is subject to customary closing conditions
and is expected to close before the end of 2015. For further information, visit: www.dtz.com or follow us on Twitter @DTZ.
www.dtz.com 12