The overall vacancy rate declined to 10.9 percent; all property types experienced positive absorption; and more than 1 million square feet (msf) of new construction was delivered across the market in 2014—a development rate not seen since 2009. Details on market activity in the second half of 2014 can be seen in the latest semi-annual Compass Report from Cushman & Wakefield. The complete Compass Report can be viewed at

“Strong economic fundamentals have made the Twin Cities an attractive market on many levels,” said Mike Ohmes, executive vice president, Transaction and Advisory Services. “What’s more, we fully expect the momentum gained in 2014 to continue into this year, as we anticipate robust construction and more than a million square feet of total positive absorption across all property types and nearly all submarkets.”

The final six months of 2014 saw:

  • A growing universe of investors focusing on the Twin Cities. The promise of potentially higher yields in secondary markets like the Twin Cities is attracting strong investor demand, which is outpacing the supply of available properties and resulting in new pricing records. The most favored product types include apartments; grocery-anchored retail centers; low-finish, high-clearance bulk/distribution buildings; and class A office assets. A growing pool of investors is also now considering a broader spectrum of properties including value-add and stabilized suburban office, higher-finish industrial, hotels as well as power and lifestyle retail centers.
  • Multi-family market blazing new territory. With the highest sales volume since 2005, the multi-family housing market approached $1 billion in sales at year’s end. Downtown Minneapolis continues to be a highly sought-after market as new upscale properties are delivered. Class A properties are trading at 4.5-5 percent cap rates; even class B suburban product has surpassed prior peak price levels. Approximately 5,000 new units were delivered in 2014.
  • Medical office continues rapid expansion pace. Many new projects were completed and opened in second-half 2014, with new development dominated by healthcare systems or anchored by large practice groups rather than multi-tenant medical offices that were common in the 1990s. Approximately 905,000 square feet (sf) of space is currently underway in first-half 2015, with delivery expected by the end of next year.
  • Industrial sector sees record new construction, dropping vacancies and rising rental rates. Buoyed by an improving economy, e-commerce and logistics companies are driving a significant amount of increased demand for modern, efficient distribution and manufacturing space. As a result, the Twin Cities industrial market reported absorption rates totaling 1.26 msf in the second half of the year, with vacancy rates dropping to 9.5 percent—the lowest rate since 1996. Developers broke ground on 3.48 msf of speculative and build-to-suit projects—the most new construction since the 1990s. These tight market conditions are putting upward pressure on rental rates.
  • Retail market enjoyed strong second half. With vacancy rates inching toward pre-recession levels and rental rates moving up, the Twin Cities retail market was fueled by numerous mixed-used products, Twin Cities Premium Outlets, and many small multi-tenant and freestanding buildings that redeveloped prime corners. The grocery category remains strong with many new and local players taking market share lost by Roundy’s leaving the market. While the Mall of America and Twin Cities Premium Outlets are fueling suburban development, Minneapolis’ North Loop neighborhood has emerged as the new hip neighborhood for boutique shops and chef-driving dining concepts.
  • Class A and renovated urban Class B office space in high demand. Demand for office space in the Twin Cities is gaining momentum. Companies appear more confident, committing to longer-term leases and spending more on tenant improvements. However, many companies are trimming their footprints by 10-25 percent, resulting in limited growth. Overall vacancy rates declined to 16.5 percent, the lowest since 2008 and a noticeable decline from 19.6 percent in 2009. The market reported 383,267 sf of positive absorption in the second half of 2014, with much of that occurring in renovated and repositioned urban Class B space as landlords reinvent their well-located buildings to compete with high-quality, Class A buildings. Class A space remains the tightest market, reporting a 13.1 percent vacancy rate.
  • Hotel and auto segments coming back strong. Minnesota’s hotel industry saw a healthy second-half 2014, with occupancies at a record high and rates trending up. Private investors and groups are actively buying, selling and/or developing properties throughout Minnesota. The average daily rate (ADR) year-to-date for Twin Cities hotels rose, and revenue per available room (RevPAR) increased to $74.71 overall year to date, which is comparable to the national average of $75.66. With car sales resurging, auto dealerships are looking for more space to sell and are paying a premium for prime areas in the Twin Cities market including Robert Street in West St. Paul, along I-394 in Minnetonka and St. Louis Park, and along I-494 in Bloomington. Dealerships not pursuing new sites are expanding on their existing sites.

About the Compass Report
Cushman & Wakefield’s bi-annual Compass Report compiles comprehensive market data and analysis for all commercial property types, including office, retail, industrial, multi-family and medical office. The report also features an overview of the Twin Cities economy and an analysis of the market’s commercial real estate investment trends. For more information, visit

About Cushman & Wakefield

Cushman & Wakefield is a leading global real estate services firm that helps clients transform the way people work, shop, and live. Our 45,000 employees in more than 70 countries help occupiers and investors optimize the value of their real estate by combining our global perspective and deep local knowledge with an impressive platform of real estate solutions. Cushman & Wakefield is among the largest commercial real estate services firms with revenue of $6 billion across core services of agency leasing, asset services, capital markets, facility services (C&W Services), global occupier services, investment & asset management (DTZ Investors), project & development services, tenant representation, and valuation & advisory. 2017 marks the 100-year anniversary of the Cushman & Wakefield brand. 100 years of taking our clients’ ideas and putting them into action. To learn more, visit, or follow @CushWake on Twitter.





Media Contacts

Adam Rae Voge
Cushman & Wakefield
Jean Hill
Maccabee Group