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January 2020 
Executive Summary 

Twin Cities Commercial Real Estate Ends 2019 Busy; Vacancies Continue to Tighten

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The Twin Cities multitenant commercial real estate market continued to tighten in the second half of 2019, with vacancies continuing to shrink and the war for talent heating up even more. At the end of the fourth quarter, the vacancy across office, industrial and retail properties sat at 10.5%, down from 10.8% halfway through 2018.

2.2 million square feet (msf) was absorbed by occupiers in the office, industrial and retail property types in the second half of 2019. The total absorption for 2019 came in at 4.2 msf, the market's strongest absorption year since 5.5 msf of space was absorbed in 2015 and more than 1.0 msf above 2018's total.  

Much of that absorption came in the industrial sector, where 1.5 msf of space was absorbed in the second half of the year brought the 2019 total to 2.9 msf, ahead of the 2.78 msf absorbed in the sector throughout 2018. 

The office and retail sectors each closed 2019 on a positive note, with more than 200,000 square feet (sf) absorbed in each sector. Office came in just over 750,000 sf absorbed for the year, while retail absorbed 400,000 sf.  

New construction continued to bull ahead in the second half of 2019, with industrial again leading all property types. By year’s end, 2.72 msf of space had been delivered to the market.

Other major storylines from the second half include:

Industrial Vacancy Rates Keep Tumbling
It's difficult to find enough new adjectives to explain just how robust the industrial real estate market is in the Twin Cities. Unprecedented demand is fueling the sector and pushed the vacancy rate down to the lowest ever recorded for this market. Absorption totaled 1.52 million square feet (msf) in the second half and 2.94 msf for the full-year 2019. 

Cooling Finally Hits Red-Hot Hotel Sector

Following a record-long expansion that lifted room rates and occupancy levels to record highs, it was inevitable that the Twin Cities hotel sector would cool. While demand is still growing, supply has outpaced demand following an unprecedented 6,500 new rooms delivered during this cycle.    

Healthy Prognosis Continues for Medical Office Despite 'Disruptors'
The Twin Cities medical office market remains stable as it adapts to unending changes in how healthcare is delivered. Many uncertainties or “disruptors” are impacting how space is used including the aging baby boomers’ increasing medical needs, technological advances, changes in reimbursements/regulations, uncertainty around healthcare policy, impact of mergers/acquisitions, and overall efforts to lower costs and improve efficiencies.

Retail Evolution Continues
The retail sector is more dynamic than ever, and retailers, landlords, and developers that can successfully adapt to meet changing consumer behaviors are more likely to stay relevant. National retailer bankruptcies and store closures, retailers right-sizing their footprints, and escalating e-commerce competition are impacting the market.

Despite Numbers, Twin Cities Office Market is Solid
Leasing activity in the Twin Cities office market remains very stable, even if there is not a big net effect reflected in the overall absorption and vacancy data. Increasing costs along with the continued laser-like focus on efficient use of space by tenants are both impacting leasing activity and absorption levels. While larger deals were limited, smaller users below 8,000 sf were actively taking down space. Additionally, many landlords are successfully retaining and renewing existing tenants.

Multifamily Hot Streak Continues
The Twin Cities boasts one of the tightest apartment markets nationally with vacancies hovering around 2.5%. When accounting for new buildings undergoing lease-up, vacancies are only slightly higher on an adjusted basis at 3.5%. Credit the robust demand for apartments to a diverse pool of renters who are continuing to rent either by choice or necessity – namely millennials and empty-nesters. Pricing power of landlords along with higher-priced new inventory is pushing up overall market rents.

Homebuilders, Industrial Players Remain Resolute in Quest for Land
A voracious demand for industrial, single-family residential, and multifamily land positions persists in the Twin Cities. Following a short break early in 2019 while the market absorbed new construction, the hunt for industrial land positions for the next wave took off during the second half, elevating prices to new levels. National homebuilders were also out in force pursuing big land positions while multifamily developers ramped up their pace.

Liquidity, Healthy Equilibrium Drive Active Investment Sales Market
Can you say liquidity? Some investors view Minneapolis as one of the most liquid investment markets in the Midwest. Investors are drawn to its high employment, stable economy, strong real estate fundamentals, and attractive risk-adjusted returns relative to other cities. Plenty of both debt and equity has been fueling investment transactions across all property sectors and that trend is expected to continue. 

Absorption is expected to clip forward at a similar pace in the first half of 2020, with 1.85 msf projected for the next six months. Most of that comes from the office and industrial sectors, where only one submarket is projected for a negative first half. Most of the retail world is expected to see flat absorption in early 2020.

Construction continues at a strong pace, and an additional 2.8 msf of properties expected to be complete by the end of the year. The investment sales market is also expected to be active in early 2020, with the industrial and office sectors especially busy and several trophy assets already on the market with potential first-quarter closings.


The Compass report, published since 1997, is created by Cushman & Wakefield experts using Twin Cities commercial property data from the first six months of 2018. The data used for this report has been obtained from sources which we deem reliable. While every effort has been made to report accurate data, Cushman & Wakefield cannot guarantee the accuracy of this market report. Furthermore, we cannot assume responsibility for any omission of data which may occur. It is our intent to provide the best possible information regarding the office, industrial, land, retail, multi-family and investment markets while leaving the reader the responsibility of further verification before using this report for business and/or financial decisions.

This report includes information for multi-tenant office, industrial and retail projects greater than 20,000 square feet and multifamily for-rent properties. Not included are owner-occupied, government or single-tenant buildings. Not all information and insights we've collected can be published in any given volume.

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