- Labor Market Remains Tight
The Twin Cities’ unemployment rate of 2.7% remained 90 basis points (bps) lower than the national average. Year-over-year (YOY) the region has added 37,300 jobs as employment inched closer to 2.0 million.
- Sublease Availability Continues to Rise
New vacant sublease space grew 19.0% YOY, or nearly 495,000 square feet. While some new sublease space was the result of hybrid or fully remote workplace decisions, others were part of cost-cutting initiatives due to larger macroeconomic forces.
- Overall Vacancy Trending Up
The overall Twin Cities office vacancy rate increased 50 bps YOY to 25.4%. An indicator of the ongoing impact of vacant sublease space over the past year, the direct vacancy rate declined 10 bps YOY to 21.5%
- Leasing Activity Declines YOY
New leasing declined 10.7% YOY across the Twin Cities office market. Not all asset classes were impacted equally. Class A properties exhibited a 3.2% increase YOY while Class B experienced a 30.3% reduction.
- Asking Rates Up YOY but Declining since Year-End
The Twin Cities overall asking rates averaged $28.21 per square foot gross, a minimal YOY increase of 0.7%. Due to the ongoing increases in the sublease market, overall asking rates declined 0.6% since year-end 2022.